0000018349 syn:CommercialAndIndustrialMember us-gaap:InterestRateBelowMarketReductionMember 2018-01-01 2018-06-30
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
☐For the quarterly period ended June 30, 20182019
Commission file number 1-10312
SYNOVUS FINANCIAL CORP.CORP.
(Exact name of registrant as specified in its charter)
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Georgia | | 58-1134883 |
(State or other jurisdiction ofincorporation or organization) | | (I.R.S. EmployerIdentification No.) |
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1111 Bay Avenue | | |
Suite 500, | Columbus, | Georgia | | | 31901 |
(Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (706) (706) 649-2311
Securities registered pursuant to Section 12(b) of the Act:
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| | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $1.00 Par Value Series B Participating Cumulative Preferred
| SNV | New York Stock Purchase RightsExchange |
Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D | SNV - PrD | New York Stock Exchange |
Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series E | SNV - PrE | New York Stock Exchange New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO ¨Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and, “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check One):
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Large accelerated filer | x☒ | Accelerated filer | ¨☐ |
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Non-accelerated filer | ¨ (Do not check if a smaller reporting company) ☐ | Smaller reporting company | ¨☐ |
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| | Emerging growth company | ¨☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 7(a)2(B)Section 13(a) of the SecuritiesExchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO xYes��☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s class of common stock, as of the latest practicable date.
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Class | July 31, 2019 | | | August 6, 2018 |
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Common Stock, $1.00 Par Value | 154,320,484 | | | 117,348,421 |
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Table of Contents
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| | | | Page |
| Financial Information | |
| | Index of Defined Terms | |
| Item 1. | Financial Statements (Unaudited) | |
| | Consolidated Balance Sheets as of June 30, 20182019 and December 31, 20172018 | |
| | Consolidated Statements of Income for the SixThree and ThreeSix Months Ended June 30, 20182019 and 20172018 | |
| | Consolidated Statements of Comprehensive Income for the SixThree and ThreeSix Months Ended June 30, 20182019 and 20172018 | |
| | Consolidated Statements of Changes in Shareholders' Equity for the Three and Six Months Ended June 30, 20182019 and 20172018 | |
| | Consolidated Statements of Cash Flows for the Six Months Ended June 30, 20182019 and 20172018 | |
| | Notes to Unaudited Interim Consolidated Financial Statements | |
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | |
| Item 3. | | |
| Item 4. | Controls and Procedures | |
| | | | |
| Other Information | |
| Item 1. | Legal Proceedings | |
| Item 1A. | Risk Factors | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
| Item 3. | Defaults Upon Senior Securities | |
| Item 4. | Mine Safety Disclosures | |
| Item 5. | Other Information | |
| Item 6. | Exhibits | |
| Signatures | |
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SYNOVUS FINANCIAL CORP.
INDEX OF DEFINED TERMS
AICPA – American Institute of Certified Public Accountants
ALCO – Synovus' Asset Liability Management Committee
ALL – Allowance for loan losses
AOCI -– Accumulated other comprehensive income
Acquisition Date – Effective January 1, 2019, Synovus completed its acquisition of FCB Financial Holdings, Inc.
ASC – Accounting Standards Codification
ASC 310-30 loans – Loans accounted for in accordance with ASC 310 – 30, Loans and Debt Securities Acquired with Deteriorated Credit Quality
ASU – Accounting Standards Update
ATM – Automatic teller machine
Azalea Merger Sub – Azalea Merger Sub Corp., a wholly-owned subsidiary of Synovus which was formed for the express and limited purpose of the Merger
Basel III – The third Basel Accord developed by the Basel Committee on Banking Supervision to strengthen existing regulatory capital requirements
BOLI – Bank-owned life insurance
BOV – Broker’s opinion of value
bp(s) – Basis point(s)
C&I – Commercial and industrial loans
CECL –Current expected credit losses
CET1 – Common Equity Tier 1 Capital defined by Basel III capital rules
CME – Chicago Mercantile Exchange
CMO – Collateralized Mortgage Obligation
Cabela’s Transaction – The transaction completed on September 25, 2017 whereby Synovus Bank acquired certain assets and assumed certain liabilities of World's Foremost Bank ("WFB")WFB and then immediately thereafter sold WFB’s credit card assets and certain related liabilities to Capital One Bank (USA), National Association. As a part of this transaction, Synovus Bank retained WFB’s $1.10 billion brokered time deposit portfolio and received a $75.0 million fee from Cabela’s Incorporated and Capital One. Throughout this Report, we refer to this transaction as the “Cabela’s Transaction” and the associated $75.0 million fee received from Cabela’s and Capital One as the “Cabela’s Transaction Fee”
Code – Internal Revenue Code
Company – Synovus Financial Corp. and its wholly-owned subsidiaries, except where the context requires otherwise
Covered Litigation – Certain Visa litigation for which Visa is indemnified by Visa USA members
CRE – Commercial real estate
DIF – Deposit Insurance Fund
Dodd-Frank Act – The Dodd-Frank Wall Street Reform and Consumer Protection Act
EVE – Economic value of equity
Exchange Act – Securities Exchange Act of 1934, as amended
FASB – Financial Accounting Standards Board
FCB - – FCB Financial Holdings, Inc. and its wholly-owned subsidiaries, except where the context requires otherwise
FDIC – Federal Deposit Insurance Corporation
Federal Reserve Bank – The 12 banks that are the operating arms of the U.S. central bank. They implement the policies of the Federal Reserve Board and also conduct economic research
Federal Reserve Board – The 7-member Board of Governors that oversees the Federal Reserve System, establishes monetary policy (interest rates, credit, etc.), and monitors the economic health of the country. Its members are appointed by the President subject to Senate confirmation, and serve 14-year terms
Federal Reserve System – The 12 Federal Reserve Banks, with each one serving member banks in its own district. This system, supervised by the Federal Reserve Board, has broad regulatory powers over the money supply and the credit structure
Federal Tax Reform – Enactment of H.R. 1, formerly known as the Tax Cuts and Jobs Act, on December 22, 2017, legislation in which a number of changes were made under the Internal Revenue Code, including a reduction of the corporate income tax rate, significant limitations on the deductibility of interest, allowance of the expensing of capital expenditures, limitation on
deductibility of FDIC insurance premiums, and limitation of the deductibility of certain performance-based compensation, among others
FFIEC – Federal Financial Institutions Examination Council
FFIEC Retail Credit Classification Policy – FFIEC Uniform Retail Credit Classification and Account Management Policy
FHLB – Federal Home Loan Bank
FICO – Fair Isaac Corporation
FTE – Fully taxable-equivalent
GA DBF – Georgia Department of Banking and Finance
GAAP – Generally Accepted Accounting Principles in the United States of America
GGL – Government guaranteed loans
Global One – Entaire Global Companies, Inc., the parent company of Global One Financial, Inc., as acquired by Synovus on October 1, 2016. Throughout this Report, we refer to this acquisition as "Global One"
GSE – Government sponsored enterprise
HELOC – Home equity line of credit
Interagency Supervisory Guidance – Interagency Supervisory Guidance on Allowance for Loan and Lease Losses Estimation Practices for Loans and Lines of Credit Secured by Junior Liens on 1-4 Family Residential Properties
LIBOR – London Interbank Offered Rate
LIHTC – Low Income Housing Tax Credit
LTV – Loan-to-collateral value ratio
Merger Agreement – Agreement and Plan of Merger by and among Synovus, FCB and Azalea Merger Sub Corp. dated as of July 23, 2018
Merger– The proposedJanuary 1, 2019 merger of Azalea Merger Sub Corp. with and into FCB pursuant toand immediately thereafter, the terms and conditionsmerger of the Merger Agreement, with FCB continuing as the surviving entity. Immediately thereafter, FCB will merge with and into Synovus, with Synovus continuing as the surviving entity pursuant to the terms and conditions of the Merger Agreement
MPS – Merchant processing servicer(s)
NAICS – North American Industry Classification System
nm – not meaningful
NPA – Non-performing assets
NPL – Non-performing loans
NSF – Non-sufficient funds
OCI – Other comprehensive income
ORE – Other real estate
OTC– Over-the-counter
OTTI – Other-than-temporary impairment
Parent Company – Synovus Financial Corp.
ROU – Right-of-use
SBA – Small Business Administration
SEC – U.S. Securities and Exchange Commission
Securities Act – Securities Act of 1933, as amended
Series C Preferred Stock – Synovus' Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series C, $25 liquidation preference
Series D Preferred Stock – Synovus' Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D, $25 liquidation preference
Series E Preferred Stock – Synovus' Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series E, $25 liquidation preference
Synovus – Synovus Financial Corp.
Synovus Bank – A Georgia state-chartered bank and wholly-owned subsidiary of Synovus, through which Synovus conducts its banking operations
Synovus' 20172018 Form 10-K – Synovus' Annual Report on Form 10-K for the year ended December 31, 20172018
Synovus Mortgage – Synovus Mortgage Corp., a wholly-owned subsidiary of Synovus Bank
Synovus Securities – Synovus Securities, Inc., a wholly-owned subsidiary of Synovus
Synovus Trust – Synovus Trust Company, N.A., a wholly-owned subsidiary of Synovus Bank
TDR – Troubled debt restructuring (as defined in ASC 310-40)
the Treasury – United States Department of the Treasury
UPB – Unpaid principal balance
VIE – Variable interest entity as(as defined in ASC 810-10810-10)
Visa – The Visa U.S.A., Inc. card association or its affiliates, collectively
Visa Class A shares – Class A shares of common stock issued by Visa are publicly traded shares which are not subject to restrictions on sale
Visa Class B shares – Class B shares of common stock issued by Visa which are subject to restrictions with respect to sale until all of the Covered Litigation has been settled. Class B shares will be convertible into Visa Class A shares using a then currentthen-current conversion ratio upon the lifting of restrictions with respect to sale of Visa Class B shares
Visa Derivative – A derivative contract with the purchaser of Visa Class B shares which provides for settlements between the purchaser and Synovus based upon a change in the ratio for conversion of Visa Class B shares into Visa Class A shares
Warrant – A warrant issued to the Treasury by Synovus to purchase up to 2,215,820 shares of Synovus common stock at a per share exercise price of $65.52 expiring on December 19, 2018, as was issued by Synovus to Treasury in 2008 in connection with the Capital Purchase Program, promulgated under the Emergency Stabilization Act of 2008
WFB – World's Foremost Bank, a wholly-owned subsidiary of Cabela's Incorporated
PART I. FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
SYNOVUS FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(unaudited)
| | (in thousands, except share and per share data) | June 30, 2018 | | December 31, 2017 | June 30, 2019 | | December 31, 2018 |
ASSETS | | | | | | |
Cash and due from banks | $ | 404,080 |
| | $ | 397,848 |
| $ | 549,616 |
| | $ | 468,426 |
|
Interest bearing funds with Federal Reserve Bank | 613,082 |
| | 460,928 |
| |
Interest-bearing funds with Federal Reserve Bank | | 531,488 |
| | 641,476 |
|
Interest earning deposits with banks | 33,754 |
| | 26,311 |
| 20,271 |
| | 19,841 |
|
Federal funds sold and securities purchased under resale agreements | 40,872 |
| | 47,846 |
| 49,946 |
| | 13,821 |
|
Total cash, cash equivalents, restricted cash, and restricted cash equivalents(1) | 1,091,788 |
| | 932,933 |
| 1,151,321 |
| | 1,143,564 |
|
Investment securities available for sale, at fair value | | 7,007,012 |
| | 3,991,632 |
|
Mortgage loans held for sale, at fair value | 53,673 |
| | 48,024 |
| 81,855 |
| | 37,129 |
|
Investment securities available for sale, at fair value | 3,929,962 |
| | 3,987,069 |
| |
Loans, net of deferred fees and costs | 25,134,056 |
| | 24,787,464 |
| |
Loans | | 36,138,561 |
| | 25,946,573 |
|
Allowance for loan losses | (251,725 | ) | | (249,268 | ) | (257,376 | ) | | (250,555 | ) |
Loans, net | 24,882,331 |
| | 24,538,196 |
| 35,881,185 |
| | 25,696,018 |
|
Cash surrender value of bank-owned life insurance | 547,261 |
| | 540,958 |
| 766,287 |
| | 554,134 |
|
Premises and equipment, net | 428,633 |
| | 426,813 |
| 490,644 |
| | 434,307 |
|
Goodwill | 57,315 |
| | 57,315 |
| 492,390 |
| | 57,315 |
|
Other intangible assets | 10,458 |
| | 11,254 |
| 61,473 |
| | 9,875 |
|
Deferred tax asset, net | 182,983 |
| | 165,788 |
| |
Other assets | 555,901 |
| | 513,487 |
| 1,386,036 |
| | 745,218 |
|
Total assets | $ | 31,740,305 |
| | $ | 31,221,837 |
| $ | 47,318,203 |
| | $ | 32,669,192 |
|
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | |
Liabilities | | | | | | |
Deposits: | | | | | | |
Non-interest bearing deposits | $ | 7,630,491 |
| | $ | 7,686,339 |
| |
Interest bearing deposits, excluding brokered deposits | 16,961,187 |
| | 16,500,436 |
| |
Brokered deposits | 1,851,010 |
| | 1,961,125 |
| |
Non-interest-bearing deposits | | $ | 9,205,066 |
| | $ | 7,650,967 |
|
Interest-bearing deposits | | 28,761,656 |
| | 19,069,355 |
|
Total deposits | 26,442,688 |
| | 26,147,900 |
| 37,966,722 |
| | 26,720,322 |
|
Federal funds purchased and securities sold under repurchase agreements | 207,580 |
| | 161,190 |
| 273,481 |
| | 237,692 |
|
Other short-term borrowings | | 1,330,000 |
| | 650,000 |
|
Long-term debt | 1,656,647 |
| | 1,706,138 |
| 2,306,072 |
| | 1,657,157 |
|
Other liabilities | 265,696 |
| | 245,043 |
| 688,112 |
| | 270,419 |
|
Total liabilities | 28,572,611 |
| | 28,260,271 |
| 42,564,387 |
| | 29,535,590 |
|
Shareholders' Equity | | | | | | |
Series D Preferred Stock – no par value. Authorized 100,000,000 shares; 8,000,000 shares issued and outstanding at June 30, 2018 | 195,138 |
| | — |
| |
Series C Preferred Stock - no par value. 5,200,000 shares outstanding at June 30, 2018 and December 31, 2017 | 125,980 |
| | 125,980 |
| |
Common stock - $1.00 par value. Authorized 342,857,143 shares; 143,077,973 issued at June 30, 2018 and 142,677,449 issued at December 31, 2017; 117,841,369 outstanding at June 30, 2018 and 118,897,295 outstanding at December 31, 2017 | 143,078 |
| | 142,678 |
| |
Series D Preferred Stock – no par value. Authorized 100,000,000 shares; 8,000,000 shares issued and outstanding at June 30, 2019 and December 31, 2018 | | 195,140 |
| | 195,140 |
|
Common stock - $1.00 par value. Authorized 342,857,143 shares; 166,079,543 issued at June 30, 2019 and 143,300,449 issued at December 31, 2018; 156,872,026 outstanding at June 30, 2019 and 115,865,510 outstanding at December 31, 2018 | | 166,080 |
| | 143,300 |
|
Additional paid-in capital | 3,045,014 |
| | 3,043,129 |
| 3,801,748 |
| | 3,060,561 |
|
Treasury stock, at cost – 25,236,604 shares at June 30, 2018 and 23,780,154 shares at December 31, 2017 | (916,484 | ) | | (839,674 | ) | |
Accumulated other comprehensive loss | (125,720 | ) | | (54,754 | ) | |
Treasury stock, at cost – 9,207,517 shares at June 30, 2019 and 27,434,939 shares at December 31, 2018 | | (344,901 | ) | | (1,014,746 | ) |
Accumulated other comprehensive income (loss), net | | 49,289 |
| | (94,420 | ) |
Retained earnings | 700,688 |
| | 544,207 |
| 886,460 |
| | 843,767 |
|
Total shareholders’ equity | 3,167,694 |
| | 2,961,566 |
| 4,753,816 |
| | 3,133,602 |
|
Total liabilities and shareholders' equity | $ | 31,740,305 |
| | $ | 31,221,837 |
| $ | 47,318,203 |
| | $ | 32,669,192 |
|
| | | | | | |
See accompanying notes to unaudited interim consolidated financial statements.(1) See "Note 1 - Significant Accounting Policies" of this Report for information on Synovus' change in presentation of cash and cash equivalents.
SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
| | | Six Months Ended June 30, | | Three Months Ended June 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands, except per share data) | 2018 | | 2017 | | 2018 | | 2017 | 2019 | | 2018 | | 2019 | | 2018 |
Interest income: | | | | | | | | | | | | | | |
Loans, including fees | $ | 585,396 |
| | $ | 511,319 |
| | $ | 300,056 |
| | $ | 261,971 |
| $ | 457,564 |
| | $ | 300,056 |
| | $ | 905,333 |
| | $ | 585,396 |
|
Investment securities available for sale | 47,812 |
| | 40,099 |
| | 23,884 |
| | 20,266 |
| 52,794 |
| | 23,884 |
| | 102,732 |
| | 47,812 |
|
Trading account assets | 220 |
| | 49 |
| | 166 |
| | 21 |
| |
Mortgage loans held for sale | 936 |
| | 972 |
| | 557 |
| | 505 |
| 752 |
| | 557 |
| | 1,143 |
| | 936 |
|
Federal Reserve Bank balances | 4,568 |
| | 2,515 |
| | 2,818 |
| | 1,304 |
| 2,701 |
| | 2,818 |
| | 6,371 |
| | 4,568 |
|
Other earning assets | 4,036 |
| | 2,957 |
| | 2,353 |
| | 1,443 |
| 2,320 |
| | 2,519 |
| | 5,391 |
| | 4,256 |
|
Total interest income | 642,968 |
| | 557,911 |
| | 329,834 |
| | 285,510 |
| 516,131 |
| | 329,834 |
| | 1,020,970 |
| | 642,968 |
|
Interest expense: | | | | | | | | | | | | | | |
Deposits | 58,975 |
| | 35,075 |
| | 32,600 |
| | 18,118 |
| 92,700 |
| | 32,600 |
| | 180,383 |
| | 58,975 |
|
Federal funds purchased and securities sold under repurchase agreements | 310 |
| | 84 |
| | 203 |
| | 45 |
| |
Federal funds purchased, securities sold under repurchase agreements, and other short-term borrowings | | 7,294 |
| | 203 |
| | 10,757 |
| | 310 |
|
Long-term debt | 24,822 |
| | 31,728 |
| | 12,454 |
| | 16,250 |
| 18,875 |
| | 12,454 |
| | 35,392 |
| | 24,822 |
|
Total interest expense | 84,107 |
| | 66,887 |
| | 45,257 |
| | 34,413 |
| 118,869 |
| | 45,257 |
| | 226,532 |
| | 84,107 |
|
Net interest income | 558,861 |
| | 491,024 |
| | 284,577 |
| | 251,097 |
| 397,262 |
| | 284,577 |
| | 794,438 |
| | 558,861 |
|
Provision for loan losses | 24,566 |
| | 18,934 |
| | 11,790 |
| | 10,260 |
| 12,119 |
| | 11,790 |
| | 35,688 |
| | 24,566 |
|
Net interest income after provision for loan losses | 534,295 |
| | 472,090 |
| | 272,787 |
| | 240,837 |
| 385,143 |
| | 272,787 |
| | 758,750 |
| | 534,295 |
|
Non-interest income: | | | | | | | | | | | | | | |
Service charges on deposit accounts | 39,938 |
| | 40,370 |
| | 19,999 |
| | 20,252 |
| 21,994 |
| | 19,999 |
| | 42,853 |
| | 39,938 |
|
Fiduciary and asset management fees | 27,419 |
| | 24,676 |
| | 13,983 |
| | 12,524 |
| 14,478 |
| | 13,983 |
| | 28,057 |
| | 27,419 |
|
Card fees | 21,032 |
| | 19,885 |
| | 10,833 |
| | 10,041 |
| 11,161 |
| | 10,833 |
| | 22,037 |
| | 21,032 |
|
Brokerage revenue | 17,596 |
| | 14,436 |
| | 8,900 |
| | 7,210 |
| 10,052 |
| | 8,709 |
| | 19,431 |
| | 17,085 |
|
Capital markets income | | 8,385 |
| | 1,118 |
| | 13,291 |
| | 2,086 |
|
Mortgage banking income | 9,887 |
| | 11,548 |
| | 4,839 |
| | 5,784 |
| 7,907 |
| | 4,839 |
| | 12,962 |
| | 9,887 |
|
Income from bank-owned life insurance | 7,949 |
| | 6,328 |
| | 3,733 |
| | 3,272 |
| 5,176 |
| | 3,733 |
| | 10,466 |
| | 7,949 |
|
Investment securities (losses) gains, net | (1,296 | ) | | 7,667 |
| | (1,296 | ) | | (1 | ) | |
Decrease in fair value of private equity investments, net | (3,093 | ) | | (3,166 | ) | | (37 | ) | | (1,352 | ) | |
Other fee income | 9,877 |
| | 11,033 |
| | 5,259 |
| | 6,164 |
| |
Investment securities losses, net | | (1,845 | ) | | (1,296 | ) | | (1,771 | ) | | (1,296 | ) |
Other non-interest income | 11,124 |
| | 7,762 |
| | 7,174 |
| | 4,807 |
| 12,499 |
| | 11,469 |
| | 21,859 |
| | 16,333 |
|
Total non-interest income | 140,433 |
| | 140,539 |
| | 73,387 |
| | 68,701 |
| 89,807 |
| | 73,387 |
| | 169,185 |
| | 140,433 |
|
Non-interest expense: | | | | | | | | | | | | | | |
Salaries and other personnel expense | 225,583 |
| | 212,404 |
| | 111,863 |
| | 105,213 |
| 143,009 |
| | 111,863 |
| | 282,436 |
| | 225,583 |
|
Net occupancy and equipment expense | 64,134 |
| | 59,264 |
| | 32,654 |
| | 29,933 |
| 39,851 |
| | 32,654 |
| | 78,245 |
| | 64,134 |
|
Third-party processing expense | 29,012 |
| | 26,223 |
| | 15,067 |
| | 13,620 |
| 19,118 |
| | 15,067 |
| | 36,875 |
| | 29,012 |
|
Professional fees | | 9,312 |
| | 6,284 |
| | 15,660 |
| | 11,789 |
|
FDIC insurance and other regulatory fees | 13,335 |
| | 13,645 |
| | 6,543 |
| | 6,875 |
| 7,867 |
| | 6,543 |
| | 14,629 |
| | 13,335 |
|
Professional fees | 11,789 |
| | 12,907 |
| | 6,284 |
| | 7,551 |
| |
Advertising expense | 10,312 |
| | 11,258 |
| | 5,220 |
| | 5,346 |
| 5,923 |
| | 5,220 |
| | 11,045 |
| | 10,312 |
|
Valuation adjustment to Visa derivative | 2,328 |
| | — |
| | 2,328 |
| | — |
| |
Foreclosed real estate expense, net | 749 |
| | 3,582 |
| | (107 | ) | | 1,448 |
| |
Earnout liability adjustment | — |
| | 1,707 |
| | — |
| | 1,707 |
| |
Restructuring charges, net | (212 | ) | | 6,524 |
| | 103 |
| | 13 |
| |
Amortization of intangibles | | 2,410 |
| | 292 |
| | 5,802 |
| | 583 |
|
Merger-related expense | | 7,401 |
| | — |
| | 57,140 |
| | — |
|
Other operating expenses | 42,204 |
| | 41,619 |
| | 24,102 |
| | 20,041 |
| 29,235 |
| | 26,134 |
| | 54,705 |
| | 44,486 |
|
Total non-interest expense | 399,234 |
| | 389,133 |
| | 204,057 |
| | 191,747 |
| 264,126 |
| | 204,057 |
| | 556,537 |
| | 399,234 |
|
Income before income taxes | 275,494 |
| | 223,496 |
| | 142,117 |
| | 117,791 |
| 210,824 |
| | 142,117 |
| | 371,398 |
| | 275,494 |
|
Income tax expense | 61,146 |
| | 75,635 |
| | 30,936 |
| | 41,788 |
| 54,640 |
| | 30,936 |
| | 95,028 |
| | 61,146 |
|
Net income | 214,348 |
| | 147,861 |
| | 111,181 |
| | 76,003 |
| 156,184 |
| | 111,181 |
| | 276,370 |
| | 214,348 |
|
Dividends on preferred stock | 5,119 |
| | 5,119 |
| | 2,559 |
| | 2,559 |
| |
Less: Preferred stock dividends | | 3,150 |
| | 2,559 |
| | 6,300 |
| | 5,119 |
|
Net income available to common shareholders | $ | 209,229 |
| | $ | 142,742 |
| | $ | 108,622 |
| | $ | 73,444 |
| $ | 153,034 |
| | $ | 108,622 |
| | $ | 270,070 |
| | $ | 209,229 |
|
Net income per common share, basic | $ | 1.77 |
| | $ | 1.17 |
| | $ | 0.92 |
| | $ | 0.60 |
| $ | 0.97 |
| | $ | 0.92 |
| | $ | 1.70 |
| | $ | 1.77 |
|
Net income per common share, diluted | 1.75 |
| | 1.16 |
| | 0.91 |
| | 0.60 |
| 0.96 |
| | 0.91 |
| | 1.68 |
| | 1.75 |
|
Weighted average common shares outstanding, basic | 118,531 |
| | 122,251 |
| | 118,397 |
| | 122,203 |
| 157,389 |
| | 118,397 |
| | 159,148 |
| | 118,531 |
|
Weighted average common shares outstanding, diluted | 119,229 |
| | 123,043 |
| | 119,139 |
| | 123,027 |
| 159,077 |
| | 119,139 |
| | 160,908 |
| | 119,229 |
|
| | | | | | | | | | | | | | |
See accompanying notes to unaudited interim consolidated financial statements.
SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2018 | | 2017 |
(in thousands) | Before-tax Amount | | Tax (Expense) Benefit | | Net of Tax Amount | | Before-tax Amount | | Tax (Expense) Benefit | | Net of Tax Amount |
Net income | $ | 275,494 |
| | $ | (61,146 | ) | | $ | 214,348 |
| | $ | 223,496 |
| | $ | (75,635 | ) | | $ | 147,861 |
|
Net change related to cash flow hedges: | | | | | | | | | | | |
Reclassification adjustment for losses realized in net income | — |
| | — |
| | — |
| | 130 |
| | (50 | ) | | 80 |
|
Net unrealized (losses) gains on investment securities available for sale: | | | | | | | | | | | |
Reclassification adjustment for net losses (gains) realized in net income | 1,296 |
| | (336 | ) | | 960 |
| | (7,667 | ) | | 2,952 |
| | (4,715 | ) |
Net unrealized (losses) gains arising during the period | (86,921 | ) | | 22,512 |
| | (64,409 | ) | | 20,250 |
| | (7,797 | ) | | 12,453 |
|
Net unrealized (losses) gains | (85,625 | ) | | 22,176 |
| | (63,449 | ) | | 12,583 |
| | (4,845 | ) | | 7,738 |
|
Post-retirement unfunded health benefit: | | | | | | | | | | | |
Reclassification adjustment for gains realized in net income | (68 | ) | | 22 |
| | (46 | ) | | (40 | ) | | 16 |
| | (24 | ) |
Net unrealized (realized) gains | (68 | ) | | 22 |
| | (46 | ) | | (40 | ) | | 16 |
| | (24 | ) |
Other comprehensive (loss) income | $ | (85,693 | ) | | $ | 22,198 |
| | $ | (63,495 | ) | | $ | 12,673 |
| | $ | (4,879 | ) | | $ | 7,794 |
|
Comprehensive income | | | | | $ | 150,853 |
| | | | | | $ | 155,655 |
|
| | | | | | | | | | | |
| Three Months Ended June 30, |
| 2018 | | 2017 |
(in thousands) | Before-tax Amount | | Tax (Expense) Benefit | | Net of Tax Amount | | Before-tax Amount | | Tax (Expense) Benefit | | Net of Tax Amount |
Net income | $ | 142,117 |
| | $ | (30,936 | ) | | $ | 111,181 |
| | $ | 117,791 |
| | $ | (41,788 | ) | | $ | 76,003 |
|
Net change related to cash flow hedges: | | | | | | | | | | | |
Reclassification adjustment for losses realized in net income | — |
| | — |
| | — |
| | 65 |
| | (25 | ) | | 40 |
|
Net unrealized (losses) gains on investment securities available for sale: |
|
| |
|
| | | | | | | | |
Reclassification adjustment for net losses realized in net income | 1,296 |
| | (336 | ) | | 960 |
| | 1 |
| | — |
| | 1 |
|
Net unrealized (losses) gains arising during the period | (25,476 | ) | | 6,598 |
| | (18,878 | ) | | 11,150 |
| | (4,293 | ) | | 6,857 |
|
Net unrealized (losses) gains | (24,180 | ) | | 6,262 |
| | (17,918 | ) | | 11,151 |
| | (4,293 | ) | | 6,858 |
|
Post-retirement unfunded health benefit: | | |
|
| | | | | | | | |
Reclassification adjustment for gains realized in net income | (34 | ) | | 9 |
| | (25 | ) | | (20 | ) | | 8 |
| | (12 | ) |
Net unrealized (realized) gains | (34 | ) | | 9 |
| | (25 | ) | | (20 | ) | | 8 |
| | (12 | ) |
Other comprehensive (loss) income | $ | (24,214 | ) | | $ | 6,271 |
| | $ | (17,943 | ) | | $ | 11,196 |
| | $ | (4,310 | ) | | $ | 6,886 |
|
Comprehensive income | | | | | $ | 93,238 |
| | | | | | $ | 82,889 |
|
| | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, |
| 2019 | | 2018 |
(in thousands) | Before-tax Amount | | Tax Effect | | Net of Tax Amount | | Before-tax Amount | | Tax Effect | | Net of Tax Amount |
Net income | $ | 210,824 |
| | $ | (54,640 | ) | | $ | 156,184 |
| | $ | 142,117 |
| | $ | (30,936 | ) | | $ | 111,181 |
|
Net unrealized gains (losses) on investment securities available for sale: | | | | | | | | | | | |
Reclassification adjustment for net losses realized in net income | 1,845 |
| | (478 | ) | | 1,367 |
| | 1,296 |
| | (336 | ) | | 960 |
|
Net unrealized gains (losses) arising during the period | 89,459 |
| | (23,169 | ) | | 66,290 |
| | (25,476 | ) | | 6,598 |
| | (18,878 | ) |
Net unrealized gains (losses) | 91,304 |
| | (23,647 | ) | | 67,657 |
| | (24,180 | ) | | 6,262 |
| | (17,918 | ) |
Post-retirement unfunded health benefit: | | | | | | | | | | | |
Reclassification adjustment for gains realized in net income | (35 | ) | | 9 |
| | (26 | ) | | (34 | ) | | 9 |
| | (25 | ) |
Other comprehensive income (loss) | $ | 91,269 |
| | $ | (23,638 | ) | | $ | 67,631 |
| | $ | (24,214 | ) | | $ | 6,271 |
| | $ | (17,943 | ) |
Comprehensive income | | | | | $ | 223,815 |
| | | | | | $ | 93,238 |
|
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2019 | | 2018 |
(in thousands) | Before-tax Amount | | Tax Effect | | Net of Tax Amount | | Before-tax Amount | | Tax Effect | | Net of Tax Amount |
Net income | $ | 371,398 |
| | $ | (95,028 | ) | | $ | 276,370 |
| | $ | 275,494 |
| | $ | (61,146 | ) | | $ | 214,348 |
|
Net unrealized gains (losses) on investment securities available for sale: | | | | | | | | | | | |
Reclassification adjustment for net losses realized in net income | 1,771 |
| | (459 | ) | | 1,312 |
| | 1,296 |
| | (336 | ) | | 960 |
|
Net unrealized gains (losses) arising during the period | 192,241 |
| | (49,788 | ) | | 142,453 |
| | (86,921 | ) | | 22,512 |
| | (64,409 | ) |
Net unrealized gains (losses) | 194,012 |
| | (50,247 | ) | | 143,765 |
| | (85,625 | ) | | 22,176 |
| | (63,449 | ) |
Post-retirement unfunded health benefit: | | | | | | | | | | | |
Reclassification adjustment for gains realized in net income | (70 | ) | | 14 |
| | (56 | ) | | (68 | ) | | 22 |
| | (46 | ) |
Other comprehensive income (loss) | $ | 193,942 |
| | $ | (50,233 | ) | | $ | 143,709 |
| | $ | (85,693 | ) | | $ | 22,198 |
| | $ | (63,495 | ) |
Comprehensive income | | | | | $ | 420,079 |
| | | | | | $ | 150,853 |
|
| | | | | | | | | | | |
See accompanying notes to unaudited interim consolidated financial statements.
SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands, except per share data) | Series D Preferred Stock | | Series C Preferred Stock | | Common Stock | | Additional Paid-in Capital | | Treasury Stock | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | Total |
Balance at December 31, 2016 | $ | — |
| | $ | 125,980 |
| | $ | 142,026 |
| | $ | 3,028,405 |
| | $ | (664,595 | ) | | $ | (55,659 | ) | | $ | 351,767 |
| | $ | 2,927,924 |
|
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 147,861 |
| | 147,861 |
|
Other comprehensive income, net of income taxes | — |
| | — |
| | — |
| | — |
| | — |
| | 7,794 |
| | — |
| | 7,794 |
|
Cash dividends declared on common stock - $0.30 per share | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (36,696 | ) | | (36,696 | ) |
Cash dividends paid on Series C Preferred Stock | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (5,119 | ) | | (5,119 | ) |
Repurchases of common stock | — |
| | — |
| | — |
| | — |
| | (45,349 | ) | | — |
| | — |
| | (45,349 | ) |
Restricted share unit activity | — |
| | — |
| | 330 |
| | (7,850 | ) | | — |
| | — |
| | (290 | ) | | (7,810 | ) |
Stock options exercised | — |
| | — |
| | 143 |
| | 2,361 |
| | — |
| | — |
| | — |
| | 2,504 |
|
Share-based compensation expense | — |
| | — |
| | — |
| | 6,838 |
| | — |
| | — |
| | — |
| | 6,838 |
|
Balance at June 30, 2017 | $ | — |
| | $ | 125,980 |
| | $ | 142,499 |
| | $ | 3,029,754 |
| | $ | (709,944 | ) | | $ | (47,865 | ) | | $ | 457,523 |
| | $ | 2,997,947 |
|
| | | | | | | | | | | | | | | |
Balance at December 31, 2017 | $ | — |
| | $ | 125,980 |
| | $ | 142,678 |
| | $ | 3,043,129 |
| | $ | (839,674 | ) | | $ | (54,754 | ) | | $ | 544,207 |
| | $ | 2,961,566 |
|
Cumulative effect adjustment from adoption of ASU 2014-09 | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (685 | ) | | (685 | ) |
Reclassification from adoption of ASU 2018-02 | — |
| | — |
| | — |
| | — |
| | — |
| | (7,588 | ) | | 7,588 |
| | — |
|
Cumulative effect adjustment from adoption of ASU 2016-01 | — |
| | — |
| | — |
| | — |
| | — |
| | 117 |
| | (117 | ) | | — |
|
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 214,348 |
| | 214,348 |
|
Other comprehensive loss, net of income taxes | — |
| | — |
| | — |
| | — |
| | — |
| | (63,495 | ) | | — |
| | (63,495 | ) |
Cash dividends declared on common stock - $0.50 per share | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (59,185 | ) | | (59,185 | ) |
Cash dividends paid on Series C Preferred Stock | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (5,119 | ) | | (5,119 | ) |
Issuance of Series D Preferred Stock, net of issuance costs | 195,138 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 195,138 |
|
Repurchases of common stock | — |
| | — |
| | — |
| | — |
| | (76,810 | ) | | — |
| | — |
| | (76,810 | ) |
Restricted share unit activity | — |
| | — |
| | 289 |
| | (8,220 | ) | | — |
| | — |
| | (349 | ) | | (8,280 | ) |
Stock options exercised | — |
| | — |
| | 111 |
| | 1,785 |
| | — |
| | — |
| | — |
| | 1,896 |
|
Share-based compensation expense | — |
| | — |
| | — |
| | 8,320 |
| | — |
| | — |
| | — |
| | 8,320 |
|
Balance at June 30, 2018 | $ | 195,138 |
| | $ | 125,980 |
| | $ | 143,078 |
| | $ | 3,045,014 |
| | $ | (916,484 | ) | | $ | (125,720 | ) | | $ | 700,688 |
| | $ | 3,167,694 |
|
| | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands, except per share data) | Series C Preferred Stock | | Series D Preferred Stock | | Common Stock | | Additional Paid-in Capital | | Treasury Stock | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | Total |
Balance, April 1, 2019 | $ | — |
| | $ | 195,140 |
| | $ | 165,929 |
| | $ | 3,794,262 |
| | $ | (319,898 | ) | | $ | (18,342 | ) | | $ | 780,662 |
| | $ | 4,597,753 |
|
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 156,184 |
| | 156,184 |
|
Other comprehensive income (loss), net of income taxes | — |
| | — |
| | — |
| | — |
| | — |
| | 67,631 |
| | — |
| | 67,631 |
|
Cash dividends declared on common stock - $0.30 per share | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (47,236 | ) | | (47,236 | ) |
Cash dividends paid on Series D Preferred Stock - $0.39 per share | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (3,150 | ) | | (3,150 | ) |
Repurchases of common stock including costs to repurchase | — |
| | — |
| | — |
| | — |
| | (25,003 | ) | | — |
| | — |
| | (25,003 | ) |
Restricted share unit vesting and taxes paid related to net share settlement | — |
| | — |
| | 50 |
| | (281 | ) | | — |
| | — |
| | — |
| | (231 | ) |
Stock options/warrants exercised, net | — |
| | — |
| | 101 |
| | 1,786 |
| | — |
| | — |
| | — |
| | 1,887 |
|
Share-based compensation expense | — |
| | — |
| | — |
| | 5,981 |
| | — |
| | — |
| | — |
| | 5,981 |
|
Balance, June 30, 2019 | $ | — |
| | $ | 195,140 |
| | $ | 166,080 |
| | $ | 3,801,748 |
| | $ | (344,901 | ) | | $ | 49,289 |
| | $ | 886,460 |
| | $ | 4,753,816 |
|
| | | | | | | | | | | | | | | |
Balance, April 1, 2018 | $ | 125,980 |
| | $ | — |
| | $ | 143,017 |
| | $ | 3,039,757 |
| | $ | (866,407 | ) | | $ | (107,777 | ) | | $ | 621,925 |
| | $ | 2,956,495 |
|
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 111,181 |
| | 111,181 |
|
Other comprehensive income (loss), net of income taxes | — |
| | — |
| | — |
| | — |
| | — |
| | (17,943 | ) | | — |
| | (17,943 | ) |
Cash dividends declared on common stock - $0.25 per share | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (29,510 | ) | | (29,510 | ) |
Cash dividends paid on Series C Preferred Stock - $0.49 per share | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (2,559 | ) | | (2,559 | ) |
Issuance of Series D Preferred Stock, net of issuance costs | — |
| | 195,138 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 195,138 |
|
Repurchases of common stock including costs to repurchase | — |
| | — |
| | — |
| | — |
| | (50,077 | ) | | — |
| | — |
| | (50,077 | ) |
Restricted share unit vesting and taxes paid related to net share settlement | — |
| | — |
| | 23 |
| | 274 |
| | — |
| | — |
| | (349 | ) | | (52 | ) |
Stock options exercised | — |
| | — |
| | 38 |
| | 618 |
| | — |
| | — |
| | — |
| | 656 |
|
Share-based compensation expense | — |
| | — |
| | — |
| | 4,365 |
| | — |
| | — |
| | — |
| | 4,365 |
|
Balance, June 30, 2018 | $ | 125,980 |
| | $ | 195,138 |
| | $ | 143,078 |
| | $ | 3,045,014 |
| | $ | (916,484 | ) | | $ | (125,720 | ) | | $ | 700,688 |
| | $ | 3,167,694 |
|
| | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
SYNOVUS FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited) (continued) |
| | | | | | | | | | | | | | | |
(in thousands, except per share data) | Series C Preferred Stock | | Series D Preferred Stock | | Common Stock | | Additional Paid-in Capital | | Treasury Stock | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | Total |
Balance, December 31, 2018 | $ | — |
| | $ | 195,140 |
| | $ | 143,300 |
| | $ | 3,060,561 |
| | $ | (1,014,746 | ) | | $ | (94,420 | ) | | $ | 843,767 |
| | $ | 3,133,602 |
|
Cumulative-effect adjustment from adoption of ASU 2016-02 | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 4,270 |
| | 4,270 |
|
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 276,370 |
| | 276,370 |
|
Other comprehensive income (loss), net of income taxes | — |
| | — |
| | — |
| | — |
| | — |
| | 143,709 |
| | — |
| | 143,709 |
|
FCB Acquisition: | | | | | | | | | | | | | | | |
Issuance of common stock, net of issuance costs | — |
| | — |
| | 22,043 |
| | 682,103 |
| | — |
| | — |
| | — |
| | 704,146 |
|
Common stock reissued | — |
| | — |
| | — |
| | — |
| | 1,014,746 |
| | — |
| | (137,176 | ) | | 877,570 |
|
Fair value of exchanged equity awards and warrants attributed to purchase price | — |
| | — |
| | — |
| | 43,972 |
| | — |
| | — |
| | — |
| | 43,972 |
|
Cash dividends declared on common stock - $0.60 per share | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (94,471 | ) | | (94,471 | ) |
Cash dividends paid on Series D Preferred Stock - $0.78 per share | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (6,300 | ) | | (6,300 | ) |
Repurchases of common stock including costs to repurchase | — |
| | — |
| | — |
| | — |
| | (345,170 | ) | | — |
| | — |
| | (345,170 | ) |
Restricted share unit vesting and taxes paid related to net share settlement | — |
| | — |
| | 285 |
| | (8,928 | ) | | — |
| | — |
| | — |
| | (8,643 | ) |
Stock options/warrants exercised, net | — |
| | — |
| | 452 |
| | 7,815 |
| | 269 |
| | — |
| | — |
| | 8,536 |
|
Share-based compensation expense | — |
| | — |
| | — |
| | 16,225 |
| | — |
| | — |
| | — |
| | 16,225 |
|
Balance, June 30, 2019 | $ | — |
| | $ | 195,140 |
| | $ | 166,080 |
| | $ | 3,801,748 |
| | $ | (344,901 | ) | | $ | 49,289 |
| | $ | 886,460 |
| | $ | 4,753,816 |
|
| | | | | | | | | | | | | | | |
Balance, December 31, 2017 | $ | 125,980 |
| | $ | — |
| | $ | 142,678 |
| | $ | 3,043,129 |
| | $ | (839,674 | ) | | $ | (54,754 | ) | | $ | 544,207 |
| | $ | 2,961,566 |
|
Cumulative-effect adjustment from adoption of ASU 2014-09 | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (685 | ) | | (685 | ) |
Reclassification from adoption of ASU 2018-02 | — |
| | — |
| | — |
| | — |
| | — |
| | (7,588 | ) | | 7,588 |
| | — |
|
Cumulative-effect adjustment from adoption of ASU 2016-01 | — |
| | — |
| | — |
| | — |
| | — |
| | 117 |
| | (117 | ) | | — |
|
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 214,348 |
| | 214,348 |
|
Other comprehensive income (loss), net of income taxes | — |
| | — |
| | — |
| | — |
| | — |
| | (63,495 | ) | | — |
| | (63,495 | ) |
Cash dividends declared on common stock - $0.50 per share | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (59,185 | ) | | (59,185 | ) |
Cash dividends paid on Series C Preferred Stock - $0.98 per share | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (5,119 | ) | | (5,119 | ) |
Issuance of Series D Preferred Stock, net of issuance costs | — |
| | 195,138 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 195,138 |
|
Repurchases of common stock including costs to repurchase | — |
| | — |
| | — |
| | — |
| | (76,810 | ) | | — |
| | — |
| | (76,810 | ) |
Restricted share unit vesting and taxes paid related to net share settlement | — |
| | — |
| | 289 |
| | (8,220 | ) | | — |
| | — |
| | (349 | ) | | (8,280 | ) |
Stock options exercised | — |
| | — |
| | 111 |
| | 1,785 |
| | — |
| | — |
| | — |
| | 1,896 |
|
Share-based compensation expense | — |
| | — |
| | — |
| | 8,320 |
| | — |
| | — |
| | — |
| | 8,320 |
|
Balance, June 30, 2018 | $ | 125,980 |
| | $ | 195,138 |
| | $ | 143,078 |
| | $ | 3,045,014 |
| | $ | (916,484 | ) | | $ | (125,720 | ) | | $ | 700,688 |
| | $ | 3,167,694 |
|
| | | | | | | | | | | | | | | |
See accompanying notes to unaudited interim consolidated financial statements.
SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
| | | | | | | |
| Six Months Ended June 30, |
(in thousands) | 2019(1) | | 2018 |
Operating Activities | | | |
Net income | $ | 276,370 |
| | $ | 214,348 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Provision for loan losses | 35,688 |
| | 24,566 |
|
Depreciation, amortization, and accretion, net | 11,446 |
| | 28,661 |
|
Deferred income tax expense | 27,539 |
| | 5,222 |
|
Originations of mortgage loans held for sale | (325,109 | ) | | (286,070 | ) |
Proceeds from sales of mortgage loans held for sale | 287,648 |
| | 287,175 |
|
Gain on sales of mortgage loans held for sale, net | (8,286 | ) | | (6,198 | ) |
Increase in other assets | (22,191 | ) | | (54,639 | ) |
(Decrease) increase in other liabilities | (45,265 | ) | | 8,292 |
|
Investment securities losses, net | 1,771 |
| | 1,296 |
|
Share-based compensation expense | 16,225 |
| | 8,320 |
|
Net cash provided by operating activities | 255,836 |
| | 230,973 |
|
| | | |
Investing Activities | | | |
Net cash received in business combination, net of cash paid | 201,100 |
| | — |
|
Proceeds from maturities and principal collections of investment securities available for sale | 444,865 |
| | 294,152 |
|
Proceeds from sales of investment securities available for sale | 1,292,673 |
| | 35,066 |
|
Purchases of investment securities available for sale | (2,263,383 | ) | | (367,458 | ) |
Proceeds from sales of loans | 44,229 |
| | 13,954 |
|
Proceeds from sales of other real estate and other assets | 8,255 |
| | 6,737 |
|
Net increase in loans excluding loans acquired in business combination | (970,160 | ) | | (382,086 | ) |
Net (purchases) redemptions of Federal Home Loan Bank stock | (43,775 | ) | | (6,155 | ) |
Net (purchases) redemptions of Federal Reserve Bank stock | (24,239 | ) | | 8,500 |
|
Proceeds from settlements of bank-owned life insurance policies | 656 |
| | 1,783 |
|
Net increase in premises and equipment | (31,767 | ) | | (26,780 | ) |
Net cash used in investing activities | (1,341,546 | ) | | (422,287 | ) |
| | | |
Financing Activities | | | |
Net increase in deposits | 337,552 |
| | 294,516 |
|
Net increase in federal funds purchased and securities sold under repurchase agreements | 6,650 |
| | 46,390 |
|
Net change in other short-term borrowings | 680,000 |
| | — |
|
Repayments and redemption of long-term debt | — |
| | (2,330,052 | ) |
Proceeds from issuance of long-term debt, net | 497,045 |
| | 2,280,000 |
|
Dividends paid to common shareholders | (76,203 | ) | | (47,510 | ) |
Dividends paid to preferred shareholders | (6,300 | ) | | (5,119 | ) |
Proceeds from issuance of Series D Preferred Stock | — |
| | 195,138 |
|
Stock options and warrants exercised | 8,536 |
| | 1,896 |
|
Repurchase of common stock | (345,170 | ) | | (76,810 | ) |
Taxes paid related to net share settlement of equity awards | (8,643 | ) | | (8,280 | ) |
Net cash provided by financing activities | 1,093,467 |
| | 350,169 |
|
Increase in cash and cash equivalents including restricted cash | 7,757 |
| | 158,855 |
|
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period | 1,143,564 |
| | 932,933 |
|
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period | $ | 1,151,321 |
| | $ | 1,091,788 |
|
| | | |
Supplemental Disclosures: | | | |
Income taxes paid (refunded) | $ | 62,913 |
| | $ | 38,619 |
|
Interest paid | 221,475 |
| | 80,884 |
|
Non-cash Activities | | | |
Common stock issued, treasury stock reissued, equity awards/warrants exchanged to acquire FCB | 1,625,688 |
| | — |
|
Premises and equipment transferred to other assets held for sale | — |
| | 785 |
|
Loans foreclosed and transferred to other real estate | 7,586 |
| | 7,561 |
|
Loans transferred to/(from) other loans held for sale at fair value | 47,927 |
| | 5,233 |
|
Subtopic 825-10 equity investment securities available for sale transferred to other assets | — |
| | 3,162 |
|
Dividends declared on common stock during the period but paid after period-end | 47,236 |
| | 29,510 |
|
| | | |
|
| | | | | | | |
| Six Months Ended June 30, |
(in thousands) | 2018 | | 2017 |
Operating Activities | | | |
Net income | $ | 214,348 |
| | $ | 147,861 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Provision for loan losses | 24,566 |
| | 18,934 |
|
Depreciation, amortization, and accretion, net | 28,661 |
| | 29,334 |
|
Deferred income tax expense | 5,222 |
| | 70,484 |
|
Originations of mortgage loans held for sale | (286,070 | ) | | (325,094 | ) |
Proceeds from sales of mortgage loans held for sale | 287,175 |
| | 323,861 |
|
Gain on sales of mortgage loans held for sale, net | (6,198 | ) | | (7,049 | ) |
Increase in other assets | (52,294 | ) | | (4,124 | ) |
Increase (decrease) in other liabilities | 8,292 |
| | (9,667 | ) |
Investment securities losses (gains), net | 1,296 |
| | (7,667 | ) |
Share-based compensation expense | 8,320 |
| | 6,838 |
|
Net cash provided by operating activities | 233,318 |
| | 243,711 |
|
| | | |
Investing Activities | | | |
Proceeds from maturities and principal collections of investment securities available for sale | 294,152 |
| | 313,902 |
|
Proceeds from sales of investment securities available for sale | 35,066 |
| | 338,381 |
|
Purchases of investment securities available for sale | (367,458 | ) | | (748,754 | ) |
Proceeds from sales of loans | 13,954 |
| | 10,747 |
|
Proceeds from sales of other real estate | 4,631 |
| | 5,492 |
|
Net increase in loans | (382,086 | ) | | (612,309 | ) |
Purchases of bank-owned life insurance policies, net of settlements | 1,783 |
| | (73,110 | ) |
Net increase in premises and equipment | (26,780 | ) | | (15,386 | ) |
Proceeds from sales of other assets held for sale | 2,106 |
| | 3,158 |
|
Net cash used in investing activities | (424,632 | ) | | (777,879 | ) |
| | | |
Financing Activities | | | |
Net (decrease) increase in demand and savings deposits | (39,614 | ) | | 367,450 |
|
Net increase in certificates of deposit | 334,130 |
| | 202,927 |
|
Net increase (decrease) in federal funds purchased and securities sold under repurchase agreements | 46,390 |
| | (9,320 | ) |
Repayments and redemption of long-term debt | (2,330,052 | ) | | (1,128,591 | ) |
Proceeds from issuance of long-term debt | 2,280,000 |
| | 1,075,000 |
|
Dividends paid to common shareholders | (47,510 | ) | | (18,349 | ) |
Dividends paid to preferred shareholders | (5,119 | ) | | (5,119 | ) |
Proceeds from issuance of Series D Preferred Stock | 195,138 |
| | — |
|
Stock options exercised | 1,896 |
| | 2,504 |
|
Repurchase of common stock | (76,810 | ) | | (45,349 | ) |
Taxes paid related to net share settlement of equity awards | (8,280 | ) | | (7,810 | ) |
Net cash provided by financing activities | 350,169 |
| | 433,343 |
|
Increase/(decrease) in cash and cash equivalents including restricted cash | 158,855 |
| | (100,825 | ) |
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period(1) | 932,933 |
| | 999,045 |
|
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period(1) | $ | 1,091,788 |
| | $ | 898,220 |
|
| | | |
Supplemental Cash Flow Information | | | |
Cash paid during the period for: | | | |
Income tax payments, net | $ | 38,619 |
| | $ | 8,768 |
|
Interest paid | 80,884 |
| | 67,007 |
|
Non-cash Activities | | | |
Premises and equipment transferred to other assets held for sale | 785 |
| | — |
|
Other assets held for sale transferred to premises and equipment | — |
| | 4,450 |
|
Loans foreclosed and transferred to other real estate | 7,561 |
| | 5,516 |
|
Loans transferred to other loans held for sale at fair value | 5,233 |
| | 10,584 |
|
ASU 2014-09 cumulative effect adjustment to opening balance of retained earnings | (685 | ) | | — |
|
Equity investment securities available for sale transferred to other assets at fair value | 3,162 |
| | — |
|
Dividends declared on common stock during the period but paid after period-end | 29,510 |
| | 18,349 |
|
| | | |
(1) Where applicable, changes for balances as of June 30, 2019, compared to December 31, 2018, exclude amounts acquired on the Acquisition Date.See accompanying notes to unaudited interim consolidated financial statements.
(1) See "Note 1 - Significant Accounting Policies" of this Report for information on Synovus' change in presentation of cash and cash equivalents.
Notes to Unaudited Interim Consolidated Financial Statements
Note 1 - Significant Accounting PoliciesBasis of Presentation
Business OperationsGeneral
The accompanying unaudited interim consolidated financial statements of Synovus Financial Corp. include the accounts of the Parent Company and its consolidated subsidiaries. Synovus Financial Corp. is a financial services company based in Columbus, Georgia. Through its wholly-owned subsidiary, Synovus Bank, a Georgia state-chartered bank that is a member of the Federal Reserve System, the company provides commercial and retail banking in addition to a full suite of specialized products and services including private banking, treasury management, wealth management, premium finance and international banking.
Synovus Bank is positioned in some of the highest growth markets in the Southeast, with 250297 branches and 334385 ATMs in Alabama, Florida, Georgia, Alabama, South Carolina, Florida, and Tennessee.
Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the instructions to the SEC Form 10-Q and Article 10 of Regulation S-X; therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, comprehensive income, and cash flows in conformity with GAAP. All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the periods covered by this Report have been included. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes appearing in Synovus' 20172018 Form 10-K.
In connection with the adoption of ASU 2016-18, Statement of Cash Flows-Restricted Cash, Synovus changed its presentation of cash and cash equivalents, effective January 1, 2018,Reclassifications
Prior periods' consolidated financial statements are reclassified whenever necessary to include cash and due from banks as well as interest bearing funds with the Federal Reserve Bank, interest earning deposits with banks, and federal funds sold and securities purchased under resale agreements, which are inclusive of any restricted cash and restricted cash equivalents. Prior to 2018, cash and cash equivalents only included cash and due from banks. Prior periods have been revised to maintain comparability. Excluding the aforementioned presentation change, there have been no significant changesconform to the accounting policies as disclosedcurrent periods' presentation.
Use of Estimates in Synovus' 2017 Form 10-K.the Preparation of Financial Statements
In preparing the unaudited interim consolidated financial statements in accordance with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the respective consolidated balance sheets and the reported amounts of revenues and expenses for the periods presented. Actual results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses,losses; estimates of fair value; income taxes; and contingent liabilities including legal matters, among others.
Purchased loans
Purchased loans are recorded at fair value in accordance with ASC Topic 820, Fair Value Measurement, consistent with the exit price concept on the date of acquisition. Credit risk assumptions and resulting credit discounts are included in the determination of fair value; therefore, no ALL is recorded at the acquisition date.
Pursuant to an AICPA letter dated December 18, 2009, the AICPA summarized the SEC staff's view regarding the accounting in subsequent periods for discount accretion associated with loan receivables acquired in a business combination or asset purchase. Regarding the accounting for such loan receivables, in the absence of further standard setting, the AICPA understands the SEC staff would not object to an accounting policy based on contractual cash flows (ASC Topic 310-20, Nonrefundable Fees and Other Costs) or an accounting policy based on expected cash flows (ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality). Synovus analogizes to ASC Topic 310-30 to account for the fair value discount.
Purchased loans are evaluated upon acquisition as following the ASC 310-30 approach or ASC 310-20. Loans meeting the scope exception of ASC 310-30 (e.g. loans with revolving components) are not permitted to be analogized and will be accounted for in accordance with ASC 310-20. For ASC 310-30 loans, expected cash flows at the acquisition date in excess of the fair value of investment securities,loans are recorded as interest income over the life of the loans using a level yield method if the timing and amount of the future cash flows is reasonably estimable. Subsequent to the acquisition date, increases in cash flows over those expected at the acquisition date are recognized prospectively as interest income. Decreases in expected cash flows due to credit deterioration are recognized by recording an ALL. Loan removals from pools due to pay-off or charge-off are removed at their carrying amount. The difference between the carrying amount and the amount received to satisfy the loan is recorded in interest income. For ASC 310-20 loans, the difference between the fair value and UPB of private equity investments.
Cash and Cash Equivalents
Cash and cash equivalents consistthe loan at the acquisition date is amortized or accreted to interest income over the contractual life of cash and due from banks,the loans using the effective interest bearing funds withmethod. In the Federal Reserve Bank,event of prepayment, the remaining unamortized amount is recognized in interest earning deposits with banks, federal funds sold and securities purchased under resale agreements, and is inclusive of any restricted cash and restricted cash equivalents. Restricted cash and restricted cash equivalents primarily relate to cash held on deposit with the Federal Reserve to meet reserve requirements as well as cash posted as collateral for derivatives in a liability position. At June 30, 2018 and December 31, 2017, interest bearing funds with the Federal Reserve Bank included $35.7 million and $8.6 million, respectively, on deposit to meet Federal Reserve Bank requirements. Interest earning deposits with banks include $2.7 million and $5.9 million at June 30, 2018 and December 31, 2017, respectively, which are pledged as collateral in connection with certain letters of credit. Federal funds sold include $30.6 million and $43.8 million at June 30, 2018 and December 31, 2017, respectively, which are pledged to collateralize certain derivative financial instruments. Federal funds sold and securities purchased under resale agreements generally mature in one day.
Income Taxes
On December 22, 2017, Federal Tax Reform was enacted into law. The new legislation included a decreaseincome in the corporate federal income tax rate from 35%quarter of prepayment.
Due to 21% effective January 1, 2018. Underthe significant difference in accounting for ASC 740,310-30 loans, Synovus believes inclusion of these loans in certain asset quality ratios that reflect non-performing assets in the effects of the changesnumerator or denominator (or both) results in tax rates and lawssignificant distortion to these ratios. In addition, because loan level charge-offs related to ASC 310-30 loans are not recognized in the period in whichfinancial statements until the new legislationcumulative amounts exceed the original loss projections on a pool basis, the net charge-off ratio is enacted. Therefore, Synovus was required to remeasure its deferred tax assets and liabilities and recordinconsistent with the adjustment to income tax expense effective December 22, 2017. In December 2017, the SEC issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allowed companies to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Since Federal Tax Reform was enacted late in 2017, management expects that certain deferred tax assets and liabilities will continue to be evaluated in the context of Federal Tax Reform through the date of the filing of our 2017 federal income tax return, and may change as a result of evolving management interpretations, elections, and assumptions, as well as new guidance that may be issued by the Internal Revenue Service. Accordingly, the federal income tax expense of $47.2 million
recordednet charge-off ratio for other loan portfolios. The inclusion of ASC 310-30 loans in 2017 relatingcertain asset quality ratios could result in a lack of comparability across quarters or years, and could impact comparability with other portfolios that were not impacted by ASC 310-30 accounting. Synovus believes that presenting certain loan and asset quality disclosures separately for ASC 310-20 and ASC 310-30 loans, and/or excluding ASC 310-30 loans, where appropriate and indicated within each table, provides better perspective into underlying trends related to the effects from Federal Tax Reform is considered provisional. Management expects to completequality of its analysis within the measurement period in accordance with SAB 118. loan portfolio.
Recently Adopted Accounting Standards Updates
ASU 2014-09, Non-interest Income - Revenue from Contracts with Customers (Topic 606) issued bywithin the FASB in May 2014, and all subsequent ASUsscope of ASC Topic 606
Synovus' contracts with customers generally do not contain terms that modified 606. ASU 2014-09 implements a commonrequire significant judgment to determine the amount of revenue standard that establishes principlesto recognize. Synovus' policies for reporting information aboutrecognizing non-interest income within the scope of ASC Topic 606, including the nature amount,and timing of such revenue streams, are included below.
Service Charges on Deposit Accounts: Revenue from service charges on deposit accounts is earned through cash management, wire transfer, and uncertainty of revenue and cash flows arising from contracts to provide goods orother deposit-related services, to customers. The core principle of the revenue model is that a company will recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. The scope of the guidance explicitly excludes net interest income as well as manyoverdraft, non-sufficient funds, account management and other revenuesdeposit-related fees. Revenue is recognized for these services either over time, corresponding with deposit accounts' monthly cycle, or at a point in time for transaction-related services and fees. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers' accounts.
Fiduciary and Asset Management Fees: Fiduciary and asset management fees are primarily comprised of fees earned from financialthe management and administration of trusts and other customer assets. Management reviewed its revenue streamsSynovus' performance obligation is generally satisfied over time and contracts with customersthe resulting fees are recognized monthly, based upon the month-end market value of the assets under management and didthe applicable fee rate. Payment is generally received a few days after month-end through a direct charge to customers' accounts. Synovus does not identify material changes to the timing or amountearn performance-based incentives.
Card Fees: Card fees consist primarily of revenue recognition. Synovus adopted these ASUs on the required effective date of January 1, 2018 utilizing the modified retrospective method of adoption. The adoption resulted in a cumulative effect adjustment of ($685) thousand to the opening balance of retained earnings. Beginning January 1, 2018, in connection with the adoption of this standard, Synovus began includinginterchange fees from consumer credit and debit cards processed by card association networks, as well as merchant discounts, and other card-related services. Interchange rates are generally set by the credit card associations and based on purchase volumes and other factors. Interchange fees and merchant discounts are recognized concurrently with the delivery of service on a daily basis as transactions occur. Payment is typically received immediately or in card fees. Forthe following month. Card fees are reported net of certain associated expense items including loyalty program expenses and network expenses.
Brokerage Revenue: Brokerage revenue consists primarily of commissions. Additionally, brokerage revenue includes advisory fees earned from the management of customer assets. Advisory fees for brokerage services are recognized and collected monthly and are based upon the month-end market value of the assets under management at a rate predetermined in the contract. Transactional revenues are based on the size and number of transactions executed at the client's direction and are generally recognized on the trade date with payment received on the settlement date.
Insurance Revenue (included in other non-interest income on the consolidated statements of income): Insurance revenue primarily consists of commissions received on annuity and life product sales. The commissions are recognized as revenue when the customer executes an insurance policy with the insurance carrier. In some cases, Synovus receives payment of trailing commissions each year when the customer pays its annual premium.
Recently Adopted Accounting Standards
ASU 2016-02, Leases (ASC 842). Synovus adopted ASC 842 prospectively as of January 1, 2019 for existing leasing arrangements. As such, financial information was not updated and the disclosures required under the new standard are not presented for dates and periods prior to January 1, 2019.Refer to the 2018 these10-K for lease disclosures surrounding prior period information reported under ASC 840, Leases. For leases that commenced prior to the effective date of ASC 842, Synovus elected the package of practical expedients not to reassess (a) whether existing contracts contain leases, (b) lease classification for existing leases, and (c) initial direct cost for any existing leases as well as the short-term lease recognition exemption for all leases that qualify. Additionally, Synovus did not elect the practical expedient to combine lease and non-lease components for all of our leases.
Adoption of the new standard resulted in the recording of ROU assets and lease liabilities of $381.1 million and $391.0 million, respectively, as of January 1, 2019. These amounts were based on the present value of the remaining rental payments for existing leases and include consideration for renewal and termination options available that we were reasonably certain of exercising. The difference between the asset and liability balance is primarily the result of lease liabilities that existed prior to adoption of the new guidance. The adoption of the standard also resulted in a cumulative-effect adjustment, net of income taxes, to the beginning balance of retained earnings of $4.3 million ($3.9 million of which consisted of deferred gains associated with sale-leaseback transactions that previously presenteddid not qualify for recognition). The ROU assets are included in other non-interestassets (other than $4.0 million of finance leases included in premises and equipment) on the consolidated balance sheet and the lease liabilities are included in other liabilities. Adoption of the standard did not materially impact our consolidated statements of income and have been reclassified for comparability. See "Part I - Item 1. Financial Statements and Supplementary Data - Note 12 - Non-interest Income" for the required disclosureshad no impact on cash flows.
Synovus determines if an arrangement is a lease at inception in accordance with this ASU.ASC 842-10-15-3 and classifies leases as either operating or financing from a lessee perspective and operating or direct financing and sales-type from a lessor perspective based on criteria that are largely similar to those applied under ASC 840, Leases, but without explicit bright lines.
ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The determination of future minimum lease payments includes consideration for extension or termination options when it is reasonably certain Synovus will exercise that option as well as rent escalation clauses (including market or index-based escalations) and abatements, capital improvement funding or other lease concessions. As most leases in Synovus' portfolio do not provide an implicit rate, Synovus utilizes a collateralized incremental borrowing rate, referenced to the Federal Home Loan Bank rates for borrowings of similar terms, based on the information available at lease commencement date in determining the present value of future payments. Additionally, for all real estate leases, Synovus applies a portfolio approach (based on lease term) in the application of the discount rate. Determination of the ROU asset also includes prepaid lease payments and amounts recognized relating to favorable or unfavorable lease terms from leases acquired through business combinations.
For operating leases, minimum rental expense is recognized on a straight-line basis based on the fixed components of leasing arrangements. Variable lease components represent amounts that are not fixed in nature and are not tied to an index or rate, and are recognized as expense when incurred. For financing leases, rent expense is recognized as amortization expense on a straight-line basis and interest expense using the effective interest method.Additionally, leases with an initial term of 12 months or less are not recorded on the balance sheet; lease expense for these leases is recognized on a straight-line basis over the lease term. Net lease cost is recorded net of sublease income. For leases beginning in 2019 and later, lease components (e.g., base rent) are accounted for separately from non-lease components (e.g., common-area maintenance costs, real estate taxes and insurance costs).
ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated2017-04, Intangibles-Goodwill and Other, Comprehensive Income.Simplifying the Test for Goodwill Impairment: In February 2018,January 2017, the FASB issued finalASU 2017- 04, which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Therefore, any carrying amount which exceeds the reporting unit’s fair value (up to the amount of goodwill recorded) will be recognized as an impairment loss. The ASU is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those periods. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Synovus elected to early adopt the guidance, effective January 1, 2019. Synovus performed a qualitative assessment as allowed under ASC 350-20-35 during its annual impairment test as of June 30, 2019 and based on reclassificationthe assessment performed, management concluded goodwill was not impaired. As such, the adoption of tax effects stranded inthis ASU had no impact.
Recently Issued Accounting Standards Not Yet Adopted
ASU 2016-13, Financial Instruments--Credit Losses (CECL).In June 2016, the FASB issued new guidance related to credit losses. The new guidance (and all subsequent ASUs) replaces the existing incurred loss impairment guidance with an expected credit loss methodology. The new guidance will require management’s estimate of credit losses over the full remaining expected life of loans and other comprehensive income duefinancial instruments. For Synovus, the standard will apply to Federal Tax Reform.loans, unfunded loan commitments, and debt securities available for sale. The guidance provides entities the option to reclassify the tax effects that are stranded in accumulated other comprehensive income, or AOCI, as a result of Federal Tax Reform to retained earnings. The guidancestandard is effective for fiscal years beginning after December 15, 2018;2019 and interim periods within those fiscal years with early adoption is permitted. Synovus elected to early adopt ASU 2018-02 as ofpermitted on January 1, 2018 and elected to reclassify2019. Synovus will adopt the income tax effects of Federal Tax Reform from AOCI to retained earnings. For Synovus, tax effects stranded in AOCI due to Federal Tax Reform totaled $7.6 million at December 31, 2017 and primarily related to unrealized lossesguidance on the available-for-sale investment securities portfolio. The reclassification adjustment resulted in an increase to retained earnings as of January 1, 2018 of $7.6 million and a corresponding decrease to AOCI for the same amount.
ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. In January 2016, the FASB issued ASU 2016-01 that included targeted amendments to accounting guidance for recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 requires equity investments (except those accounted for under the equity method of accounting or consolidated) to be measured at fair value with changes in fair value recognized in net income. This ASU requires2020. Upon adoption, Synovus will record a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption. In addition, the amendments provide for a simplified accounting model for purchased financial assets with a more-than-insignificant amount of credit deterioration since their acquisition ("PCD assets"). The initial estimate of expected credit losses on PCD assets will be recognized through the ALL with an offset to the cost basis of the related financial asset at acquisition.
Synovus is continuing its implementation efforts which are led by a cross-functional steering committee. The team meets periodically to discuss the latest developments and ensure progress compared to the planned timeline. We continued our limited parallel testing during the second quarter of 2019. The results are being utilized to refine our models and estimation techniques. Documentation of new processes and internal controls that will be implemented as part of standard adoption is also in process. Implementation status updates are provided quarterly to reclassifyexecutive management and the cumulative changeAudit Committee of the Board.
Management expects that the allowance for loan losses will be higher under the new standard primarily for longer duration consumer loans, due to the difference between loss emergence periods currently used versus the remaining life of the asset required under CECL. However, management is still in the process of refining estimates to ultimately determine the impact on the financial statements and regulatory capital ratios. Additionally, the extent of the expected increase on the ALL will depend upon the composition of the loan portfolio upon adoption of the standard, as well as economic conditions and forecasts at that time.
Note 2 - Acquisitions
Acquisition of FCB Financial Holdings, Inc.
Effective January 1, 2019 (the "Acquisition Date"), Synovus completed its acquisition of all of the outstanding stock of FCB, a bank holding company based in Weston, Florida, for total consideration of $1.63 billion. Effective January 1, 2019, FCB's wholly-owned banking subsidiary, Florida Community Bank National Association, merged into Synovus Bank. On the Acquisition Date, the preliminary estimated fair values of FCB included approximately $12.4 billion of identifiable assets, $9.3 billion in loans, and $10.9 billion in deposits. With the addition of FCB and its 51 full service banking centers, Synovus expanded its deposit base in the Southeast. The addition of FCB elevated Synovus' growth profile through a deepened presence in high-growth Florida markets. Conversion of FCB systems occurred during the second quarter of 2019. The results of FCB's operations are included in Synovus' consolidated financial statements since the Acquisition Date.
Under the terms of the Merger Agreement, each outstanding share of FCB common stock was converted into the right to receive 1.055 Synovus common shares and cash in lieu of fractional shares. Additionally, under the terms of the Merger Agreement, certain outstanding FCB non-vested equity awards with a fair value of equity securities previously recognized$7.5 million on the Acquisition Date accelerated vesting and converted automatically into the right to receive merger consideration at the merger exchange ratio of 1.055, or an equivalent amount in AOCI. ASU 2016-01 became effective forcash, of which $3.5 million was allocated to purchase price and the remaining to merger-related compensation expense. In the aggregate, on the Acquisition Date, FCB stockholders received 49.5 million shares of Synovus on January 1, 2018. The adoptioncommon stock valued at $1.58 billion and $601 thousand in cash. Also, under the terms of the guidance resulted inMerger Agreement, FCB employee and non-employee director outstanding stock options and non-vested restricted share units as well as outstanding FCB warrants were converted into options, restricted share units, and warrants, respectively, to purchase and receive Synovus common stock. The converted options and restricted share units had a transfer of investments in mutual funds of $3.2 million, at fair value, from investment securities available for sale to other assets and a $117 thousand cumulative-effect adjustment that decreased retained earnings, with offsetting related adjustments to deferred taxes and AOCI. ASU 2016-01 also emphasizes the existing requirement to use an exit price concept to measure fair value for disclosure purposes in determining the fair value of loans. Determination$41.5 million on the Acquisition Date, of which $37.3 million was allocated to purchase price and the remaining to compensation expense and the converted warrants had a fair value of $6.7 million attributed to purchase price. The estimated fair value of the fair value under the exit price method requires judgment because substantially all of the loans within the loan portfolio do not have observable market prices. The adoption of this guidance did not have a significant impactconverted restricted share units was based on Synovus' fair value disclosures.
Reclassifications
Prior periods' consolidated financial statements are reclassified whenever necessary to conform to the current periods' presentation.
Note 2 - Acquisitions
Cabela's Transaction
On September 25, 2017, Synovus' wholly owned subsidiary, Synovus Bank, completed the acquisitionclosing stock price on December 31, 2018 of certain assets$31.99, and assumption of certain liabilities of World's Foremost Bank, or WFB. Immediately following the closing of this transaction, Synovus Bank sold WFB’s credit card assets and related liabilities to Capital One Bank (USA), National Association, a bank subsidiary of Capital One Financial Corporation.
Synovus retained WFB’s $1.10 billion brokered time deposits portfolio, which had a weighted average remaining maturity of approximately 2.53 years and a weighted average rate of 1.83% as of September 25, 2017. The transaction was accounted for as an assumption of a liability (accounted for under the asset acquisition model). In accordance with ASC 820, Fair Value Measurements and Disclosures, the brokered time deposit portfolio was recorded at $1.10 billion, which was the amount of cash received for the deposits and represented the estimated fair value of the depositsconverted stock options was determined using a Hull-White model in a binomial lattice option pricing framework. The estimated fair value of the converted warrants was determined using the Black-Scholes-Merton model.
The acquisition of FCB constituted a business combination and was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. Accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at their estimated fair value on the transaction date. Additionally,Acquisition Date. The determination of estimated fair values requires management to make certain estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and may require adjustments. Upon receipt of final fair value estimates during the measurement period, which must be within one year of the acquisition date, Synovus receivedwill record any adjustments to the preliminary fair value estimates in the reporting period in which the adjustments are determined. Fair value adjustments based on updated estimates could materially affect the goodwill recorded on the acquisition. Synovus may incur losses on the acquired loans that are materially different from losses Synovus originally projected.
Preliminary goodwill of $435.1 million was recorded as a $75.0 million transaction fee from Cabela’s Incorporated and Capital One, which was recognized into earnings on September 25, 2017 upon closingresult of the transaction and is not-deductible for tax purposes. FCB's $19.6 million of merger-based success fees payable to third-party advisors and investment bankers were accounted for as part of the business combination and an assumed liability. Since the success fees payable by FCB were contingent upon the consummation of the merger, the expense was recognized as an "on the line" expense with no expense recognition in either the pre- or post-acquisition financials of FCB or Synovus. The following table reflects the consideration transferred for FCB's net assets and the identifiable assets purchased and liabilities assumed at their estimated fair values as of January 1, 2019. These fair value measurement estimates are based on having achievedthird-party and internal valuations and reflect measurement period adjustments to the recognition criteria outlinedamounts reported as of March 31, 2019, the most significant of which consists of a decrease in SEC SABcore deposit intangibles of $10.8 million, with offsetting increases in goodwill and net deferred tax assets (the income statement impact of such adjustments was immaterial).
|
| | | | | | |
(in thousands) | | |
Consideration transferred: | | |
Synovus common stock issued and reissued from treasury attributed to purchase price(1) | $ | 1,582,133 |
|
Cash payments to FCB stockholders attributed to purchase price(2) | | 173 |
|
Fair value of exchanged employee and director equity awards and FCB warrants attributed to purchase price(1) | | 43,972 |
|
Total purchase price | | $ | 1,626,278 |
|
| | |
Statement of Net Assets Acquired at Fair Value (Preliminary): | |
|
Assets | |
|
Cash and cash equivalents | $ | 201,689 |
| |
Investment securities available for sale | 2,301,001 |
| |
Loans | 9,289,208 |
| |
Cash surrender value of bank-owned life insurance | 216,848 |
| |
Premises and equipment | 44,875 |
| |
Core deposit intangible | 57,400 |
| |
Other assets | 268,804 |
| |
Total Assets | $ | 12,379,825 |
| |
| | |
Liabilities |
|
|
Deposits | $ | 10,930,724 |
| |
Federal funds purchased and securities sold under repurchase agreements | 29,139 |
| |
Long-term debt | 153,236 |
| |
Other liabilities | 75,523 |
| |
Total Liabilities | $ | 11,188,622 |
| |
| | |
Fair value of net identifiable assets acquired | | 1,191,203 |
|
Preliminary goodwill | | $ | 435,075 |
|
| | |
(1) Based on Synovus' closing stock price of $31.99 on December 31, 2018.
(2) $173 thousand of cash payment of $601 thousand attributed to purchase price with remaining allocated to compensation expense.
The following is a description of the methods used to determine the fair values of significant assets acquired and liabilities assumed presented above.
Investment Securities Available for Sale: Fair values of securities were based on quoted market prices from multiple third-party pricing services as well as realized proceeds upon sale of certain corporate bonds.
Loans: The Income Approach was utilized in accordance with ASC Topic 13.A, Revenue Recognition.820 to estimate the fair value of the loans as of the Acquisition Date. The Income Approach utilizes a discounted cash flow method, to present value the expected cash flows using a market-based discount rate. The acquired loans were grouped together based on the terms of the loans, variable or fixed interest rate, variable index rate, interest or principal only loans, payment plans and amortizing or non-amortizing loans.
The discounted cash flow model utilized the contractual loan data and market-based assumptions for prepayment rates, loss rates, and servicing fee, at the loan group level, to project expected loan cash flows as of the Acquisition Date.
Core Deposit Intangible (CDI): This intangible asset represents the value of the relationships with deposit customers. The fair value of the core deposit intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, net maintenance cost of the deposit base, alternative costs of funds, and the interest costs associated with the customer deposits. The CDI is being amortized over its estimated useful life of approximately ten years utilizing an accelerated method. The decrease in the CDI of $10.8 million during the quarter was based on further review of the alternative cost of funds assumptions at the Acquisition Date.
Deposits: Certificates of deposit were valued by projecting out the expected cash flows based on the contractual terms of the certificates of deposit. These cash flows were discounted based on a market rate for a certificate of deposit with a corresponding
maturity. The fair values for demand and savings deposits were assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand.
Long-term Debt: Fair values for FHLB borrowings were based on market values and market rates provided by the FHLB.
The following table presents consolidated financial information included in Synovus' unaudited consolidated statements of income from the Acquisition Date (January 1, 2019) through June 30, 2019 under the column "Actual from Acquisition Date." Synovus does not provide separate summary financial information of FCB from the Acquisition Date since it would be impracticable to do so as certain systems and processes were integrated during the six months ended June 30, 2019. The following table also presents unaudited pro forma information as if the acquisition occurred on January 1, 2018 under the "Pro Forma" column. The unaudited pro forma results include the estimated impact of amortizing and accreting certain estimated purchase accounting adjustments such as intangible assets as well as fair value adjustments to loans and deposits. Merger-related expenses that occurred at the effective time of the merger or subsequent to the merger are not reflected in the unaudited pro forma amounts. Cost savings are also not reflected in the unaudited pro forma amounts for the six months ended June 30, 2018. The pro forma information does not necessarily reflect the results of operations that would have occurred had Synovus merged with FCB at the beginning of 2018.
|
| | | | | | | | |
(in thousands) | | Actual from Acquisition Date (January 1, 2019) through June 30, 2019(1) | | Pro Forma for Six Months Ended June 30, 2018 |
Net interest income | | $ | 794,438 |
| | $ | 760,304 |
|
Non-interest income | | 169,185 |
| | 155,610 |
|
Net income available to common shareholders | | 270,070 |
| | 309,786 |
|
| | | | |
(1) Actual results for the six months ended June 30, 2019 include pre-tax merger-related expense of $57.1 million.
In connection with the FCB acquisition, Synovus incurred merger-related expense totaling $7.4 million and $57.1 million for the three and six months ended June 30, 2019, primarily related to employment compensation agreements, severance, professional services, and contract termination charges, including the payment of $21.8 million related to employment agreements of certain FCB executives. Merger-related expense for the three and six months ended June 30, 2019 is presented in the table below:
|
| | | | | | | |
(in thousands) | Three Months Ended June 30, 2019 | | Six Months Ended June 30, 2019 |
Employment compensation agreements, severance, and other employee benefit costs | $ | 1,774 |
| | $ | 34,762 |
|
Professional fees | 1,791 |
| | 16,991 |
|
All other expense(1) | 3,836 |
| | 5,387 |
|
Total merger-related expense | $ | 7,401 |
| | $ | 57,140 |
|
| | | |
(1) Primarily relates to fees associated with lease exit accruals, asset impairments related to the integration, and contract termination charges.
Acquisition of Global One
On October 1, 2016, Synovus completed its acquisition of all of the outstanding stock of Global One. Prior to its acquisition, Global One was an Atlanta-based private specialty financial services company that provided financing primarily to commercial entities, with all loans fully collateralized by cash value life insurance policies and/or annuities issued by investment grade life insurance companies. Under the terms of the merger agreement, Synovus acquired Global One for an up-front payment of $30 million, consisting of the issuance of 821 thousand shares of Synovus common stock valued at $26.6 million and $3.4 million in cash, with additional payments to Global One's former shareholders over a three to five year period based on earnings from the Global One business, as further discussed below.
The acquisition of Global One constituted a business combination. Accordingly, the assets acquired and liabilities assumed were recorded at their estimated fair values on October 1, 2016. The determination of fair value required management to make estimates about discount rates, future expected earnings and cash flows, market conditions, future loan growth, and other future events that are highly subjective in nature and subject to change. During the three months ended September 30, 2017, Synovus completed the determination of the final allocation of the purchase price with respect to the assets acquired and liabilities assumed.
Under the terms of the merger agreement, the purchase price includesincluded additional annual payments ("Earnout Payments") to Global One's former shareholders over a three to five yearyears period, with amounts based on a percentage of "Global One Earnings," as defined in the merger agreement. The Earnout Payments consist of shares of Synovus common stock as well as a smaller cash consideration component. The firstDuring 2018, Synovus recorded an $11.7 million increase to the earnout liability driven by increased earnings projections of Global One and issued the second annual Earnout Payment of 199 thousand shares of Synovus common stock and cash valued at $6.4$7.4 million was made during November 2017.and $1.2 million in cash. The balancetotal fair value of the earnout liability at June 30, 20182019 was $11.3$14.4 million based on the estimated fair value of the remaining Earnout Payments.
Note 3 - Share Repurchase Program
On January 23, 2018, Synovus announced a share repurchase program of up to $150 million to be completed during 2018. As of June 30, 2018, Synovus had repurchased under this program a total of $76.8 million, or 1.5 million shares of its common stock, at an average price of $52.72 per share.
Note 43 - Investment Securities Available for Sale
The amortized cost, gross unrealized gains and losses, and estimated fair values of investment securities available for sale at June 30, 20182019 and December 31, 20172018 are summarized below.
|
| | | | | | | | | | | | | | | | |
| | June 30, 2019 |
(in thousands) | | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
U.S. Treasury securities | | $ | 19,689 |
| | $ | — |
| | $ | — |
| | $ | 19,689 |
|
U.S. Government agency securities | | 64,070 |
| | 1,617 |
| | — |
| | 65,687 |
|
Mortgage-backed securities issued by U.S. Government agencies | | 88,677 |
| | 367 |
| | (767 | ) | | 88,277 |
|
Mortgage-backed securities issued by U.S. Government sponsored enterprises | | 4,873,285 |
| | 84,794 |
| | (9,408 | ) | | 4,948,671 |
|
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | | 859,235 |
| | 6,391 |
| | (3,093 | ) | | 862,533 |
|
Commercial mortgage-backed securities issued by U.S. Government sponsored enterprises | | 354,104 |
| | 14,339 |
| | — |
| | 368,443 |
|
State and municipal securities | | 2,107 |
| | — |
| | (7 | ) | | 2,100 |
|
Asset-backed securities | | 501,713 |
| | 4,044 |
| | (640 | ) | | 505,117 |
|
Corporate debt securities | | 144,401 |
| | 2,124 |
| | (30 | ) | | 146,495 |
|
Total investment securities available for sale | | $ | 6,907,281 |
| | $ | 113,676 |
| | $ | (13,945 | ) | | $ | 7,007,012 |
|
| | | | | | | | |
| | December 31, 2018 |
(in thousands) | | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
U.S. Treasury securities | | $ | 123,436 |
| | $ | — |
| | $ | (1,359 | ) | | $ | 122,077 |
|
U.S. Government agency securities | | 38,021 |
| | 361 |
| | — |
| | 38,382 |
|
Mortgage-backed securities issued by U.S. Government agencies | | 100,060 |
| | 172 |
| | (3,027 | ) | | 97,205 |
|
Mortgage-backed securities issued by U.S. Government sponsored enterprises | | 2,460,498 |
| | 1,981 |
| | (63,829 | ) | | 2,398,650 |
|
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | | 1,215,406 |
| | 2,997 |
| | (29,885 | ) | | 1,188,518 |
|
Commercial mortgage-backed securities issued by U.S. Government sponsored enterprises | | 131,492 |
| | 613 |
| | (2,240 | ) | | 129,865 |
|
Corporate debt securities | | 17,000 |
| | 150 |
| | (215 | ) | | 16,935 |
|
Total investment securities available for sale | | $ | 4,085,913 |
| | $ | 6,274 |
| | $ | (100,555 | ) | | $ | 3,991,632 |
|
| | | | | | | | |
|
| | | | | | | | | | | | | | | | |
| | June 30, 2018 |
(in thousands) | | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
U.S. Treasury securities | | $ | 122,800 |
| | $ | — |
| | $ | (2,167 | ) | | $ | 120,633 |
|
U.S. Government agency securities | | 40,753 |
| | 181 |
| | — |
| | 40,934 |
|
Mortgage-backed securities issued by U.S. Government agencies | | 111,406 |
| | 107 |
| | (3,569 | ) | | 107,944 |
|
Mortgage-backed securities issued by U.S. Government sponsored enterprises | | 2,614,668 |
| | 59 |
| | (87,882 | ) | | 2,526,845 |
|
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | | 1,159,859 |
| | 139 |
| | (43,550 | ) | | 1,116,448 |
|
State and municipal securities | | 115 |
| | — |
| | — |
| | 115 |
|
Corporate debt and other debt securities | | 17,000 |
| | 186 |
| | (143 | ) | | 17,043 |
|
Total investment securities available for sale | | $ | 4,066,601 |
| | $ | 672 |
| | $ | (137,311 | ) | | $ | 3,929,962 |
|
| | | | | | | | |
| | December 31, 2017 |
(in thousands) | | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
U.S. Treasury securities | | $ | 83,608 |
| | $ | — |
| | $ | (934 | ) | | $ | 82,674 |
|
U.S. Government agency securities | | 10,771 |
| | 91 |
| | — |
| | 10,862 |
|
Mortgage-backed securities issued by U.S. Government agencies | | 121,283 |
| | 519 |
| | (1,362 | ) | | 120,440 |
|
Mortgage-backed securities issued by U.S. Government sponsored enterprises | | 2,666,818 |
| | 5,059 |
| | (31,354 | ) | | 2,640,523 |
|
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | | 1,135,259 |
| | 144 |
| | (23,404 | ) | | 1,111,999 |
|
State and municipal securities | | 180 |
| | — |
| | — |
| | 180 |
|
Corporate debt and other securities | | 20,320 |
| | 294 |
| | (223 | ) | | 20,391 |
|
Total investment securities available for sale | | $ | 4,038,239 |
| | $ | 6,107 |
| | $ | (57,277 | ) | | $ | 3,987,069 |
|
| | | | | | | | |
At June 30, 20182019 and December 31, 2017,2018, investment securities with a carrying value of $1.351.59 billion and $2.00$1.56 billion, respectively, were pledged to secure certain deposits and securities sold under repurchase agreements as required by law and contractual agreements.
Synovus has reviewedevaluated investment securities that are in an unrealized loss position as of June 30, 20182019 and December 31, 20172018 for OTTI and does not consider any securities in an unrealized loss position to be other-than-temporarily impaired. If Synovus intended to sell a security in an unrealized loss position, the entire unrealized loss would be reflected in earnings. Synovus does not intend to sell investment securities in an unrealized loss position prior to the recovery of the unrealized loss, which may not be until maturity, and has the ability and intent to hold those securities for that period of time. Additionally, Synovus is not currently aware of any circumstances which will require it to sell any of the securities that are in an unrealized loss position prior to the respective securities' recovery of all such unrealized losses.
Declines inFor investment securities that Synovus does not expect to sell, or it is not more likely than not it will be required to sell prior to recovery of its amortized cost basis, the fair valuecredit component of available for sale securities below their cost that are deemed to havean OTTI are reflectedwould be recognized in earnings as realized losses toand the extent the impairment is related to credit losses. The amount of the impairment related to other factors isnon-credit component would be recognized in other comprehensive income.OCI. Currently, unrealized losses on debt securities are attributable to increases in interest rates on comparable securities from the date of purchase. Synovus regularly evaluates its investment securities portfolio to ensure that there are no conditions that would indicate that unrealized losses represent OTTI. These factors include the length of time the security has been in a loss position, the extent that the fair value is below amortized cost, and the credit standing of the issuer.
As of June 30, 2018,2019, Synovus had 8021 investment securities in a loss position for less than twelve months and 5569 investment securities in a loss position for twelve months or longer.
Asset-backed securities and corporate bonds and other debt securities acquired as part of the FCB acquisition were generally underwritten in accordance with Synovus' credit extension standards, without relying on a bond issuer's guarantee in making the investment decision. These investments are investment grade and will continue to be monitored as part of Synovus' ongoing impairment analysis, but are expected to perform in accordance with their terms.
Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 20182019 and December 31, 20172018 are presented below.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2019 |
| Less than 12 Months | | 12 Months or Longer | | Total |
(in thousands) | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
Mortgage-backed securities issued by U.S. Government agencies | $ | 626 |
| | $ | (4 | ) | | $ | 61,656 |
| | $ | (763 | ) | | $ | 62,282 |
| | $ | (767 | ) |
Mortgage-backed securities issued by U.S. Government sponsored enterprises | 10,523 |
| | (15 | ) | | 1,213,574 |
| | (9,393 | ) | | 1,224,097 |
| | (9,408 | ) |
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | 44,539 |
| | (21 | ) | | 345,169 |
| | (3,072 | ) | | 389,708 |
| | (3,093 | ) |
State and municipal securities | 1,599 |
| | (7 | ) | | — |
| | — |
| | 1,599 |
| | (7 | ) |
Asset-backed securities | 124,312 |
| | (640 | ) | | — |
| | — |
| | 124,312 |
| | (640 | ) |
Corporate debt securities | 9,478 |
| | (30 | ) | | — |
| | — |
| | 9,478 |
| | (30 | ) |
Total | $ | 191,077 |
| | $ | (717 | ) | | $ | 1,620,399 |
| | $ | (13,228 | ) | | $ | 1,811,476 |
| | $ | (13,945 | ) |
| | | | | | | | | | | |
| December 31, 2018 |
| Less than 12 Months | | 12 Months or Longer | | Total |
(in thousands) | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
U.S. Treasury securities | $ | 39,031 |
| | $ | (118 | ) | | $ | 63,570 |
| | $ | (1,241 | ) | | $ | 102,601 |
| | $ | (1,359 | ) |
Mortgage-backed securities issued by U.S. Government agencies | 2,059 |
| | (2 | ) | | 79,736 |
| | (3,025 | ) | | 81,795 |
| | (3,027 | ) |
Mortgage-backed securities issued by U.S. Government sponsored enterprises | 130,432 |
| | (700 | ) | | 2,105,358 |
| | (63,129 | ) | | 2,235,790 |
| | (63,829 | ) |
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | — |
| | — |
| | 964,732 |
| | (29,885 | ) | | 964,732 |
| | (29,885 | ) |
Commercial mortgage-backed securities issued by U.S. Government sponsored enterprises | 58,998 |
| | (1,298 | ) | | 44,220 |
| | (942 | ) | | 103,218 |
| | (2,240 | ) |
Corporate debt securities | — |
| | — |
| | 1,785 |
| | (215 | ) | | 1,785 |
| | (215 | ) |
Total | $ | 230,520 |
| | $ | (2,118 | ) | | $ | 3,259,401 |
| | $ | (98,437 | ) | | $ | 3,489,921 |
| | $ | (100,555 | ) |
| | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2018 |
| Less than 12 Months | | 12 Months or Longer | | Total |
(in thousands) | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
U.S. Treasury securities | $ | 72,386 |
| | $ | 1,378 |
| | $ | 29,255 |
| | $ | 789 |
| | $ | 101,641 |
| | $ | 2,167 |
|
Mortgage-backed securities issued by U.S. Government agencies | 23,240 |
| | 632 |
| | 67,765 |
| | 2,937 |
| | 91,005 |
| | 3,569 |
|
Mortgage-backed securities issued by U.S. Government sponsored enterprises | 1,703,526 |
| | 49,197 |
| | 812,767 |
| | 38,685 |
| | 2,516,293 |
| | 87,882 |
|
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | 609,505 |
| | 21,190 |
| | 412,961 |
| | 22,360 |
| | 1,022,466 |
| | 43,550 |
|
Corporate debt and other debt securities | — |
| | — |
| | 1,857 |
| | 143 |
| | 1,857 |
| | 143 |
|
Total | $ | 2,408,657 |
| | $ | 72,397 |
| | $ | 1,324,605 |
| | $ | 64,914 |
| | $ | 3,733,262 |
| | $ | 137,311 |
|
| | | | | | | | | | | |
| December 31, 2017 |
| Less than 12 Months | | 12 Months or Longer | | Total |
(in thousands) | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
U.S. Treasury securities | $ | 34,243 |
| | $ | 443 |
| | $ | 29,562 |
| | $ | 491 |
| | $ | 63,805 |
| | $ | 934 |
|
Mortgage-backed securities issued by U.S. Government agencies | 36,810 |
| | 357 |
| | 55,740 |
| | 1,005 |
| | 92,550 |
| | 1,362 |
|
Mortgage-backed securities issued by U.S. Government sponsored enterprises | 1,271,012 |
| | 10,263 |
| | 929,223 |
| | 21,091 |
| | 2,200,235 |
| | 31,354 |
|
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | 653,781 |
| | 9,497 |
| | 426,237 |
| | 13,907 |
| | 1,080,018 |
| | 23,404 |
|
Corporate debt and other securities | — |
| | — |
| | 5,097 |
| | 223 |
| | 5,097 |
| | 223 |
|
Total | $ | 1,995,846 |
| | $ | 20,560 |
| | $ | 1,445,859 |
| | $ | 36,717 |
| | $ | 3,441,705 |
| | $ | 57,277 |
|
| | | | | | | | | | | |
The amortized cost and fair value by contractual maturity of investment securities available for sale at June 30, 20182019 are shown below. The expected life of mortgage-backed securities or CMOs may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. For purposes of the maturity table, mortgage-backed securities and CMOs, which are not due at a single maturity date, have been classified based on the final contractual maturity date.
|
| | | | | | | | | | | | | | | | | | | |
| Distribution of Maturities at June 30, 2019 |
(in thousands) | Within One Year | | 1 to 5 Years | | 5 to 10 Years | | More Than 10 Years | | Total |
Amortized Cost | | | | | | | | | |
U.S. Treasury securities | $ | 19,689 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 19,689 |
|
U.S. Government agency securities | 791 |
| | 2,100 |
| | 61,179 |
| | — |
| | 64,070 |
|
Mortgage-backed securities issued by U.S. Government agencies | — |
| | 809 |
| | 16,111 |
| | 71,757 |
| | 88,677 |
|
Mortgage-backed securities issued by U.S. Government sponsored enterprises | — |
| | 43,477 |
| | 467,320 |
| | 4,362,488 |
| | 4,873,285 |
|
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | — |
| | — |
| | 370 |
| | 858,865 |
| | 859,235 |
|
Commercial mortgage-backed securities issued by U.S. Government sponsored enterprises | — |
| | 22,699 |
| | 236,738 |
| | 94,667 |
| | 354,104 |
|
State and municipal securities | — |
| | — |
| | 1,084 |
| | 1,023 |
| | 2,107 |
|
Asset-backed securities | — |
| | 4,496 |
| | 324,224 |
| | 172,993 |
| | 501,713 |
|
Corporate debt securities | — |
| | 109,216 |
| | 33,185 |
| | 2,000 |
| | 144,401 |
|
Total amortized cost | $ | 20,480 |
| | $ | 182,797 |
| | $ | 1,140,211 |
| | $ | 5,563,793 |
| | $ | 6,907,281 |
|
| | | | | | | | | |
Fair Value | | | | | | | | | |
U.S. Treasury securities | $ | 19,689 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 19,689 |
|
U.S. Government agency securities | 793 |
| | 2,107 |
| | 62,787 |
| | — |
| | 65,687 |
|
Mortgage-backed securities issued by U.S. Government agencies | — |
| | 810 |
| | 16,022 |
| | 71,445 |
| | 88,277 |
|
Mortgage-backed securities issued by U.S. Government sponsored enterprises | — |
| | 43,479 |
| | 469,441 |
| | 4,435,751 |
| | 4,948,671 |
|
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | — |
| | — |
| | 377 |
| | 862,156 |
| | 862,533 |
|
Commercial mortgage-backed securities issued by U.S. Government sponsored enterprises | — |
| | 23,158 |
| | 246,337 |
| | 98,948 |
| | 368,443 |
|
State and municipal securities | — |
| | — |
| | 1,078 |
| | 1,022 |
| | 2,100 |
|
Asset-backed securities | — |
| | 4,607 |
| | 327,521 |
| | 172,989 |
| | 505,117 |
|
Corporate debt securities | — |
| | 110,354 |
| | 34,124 |
| | 2,017 |
| | 146,495 |
|
Total fair value | $ | 20,482 |
| | $ | 184,515 |
| | $ | 1,157,687 |
| | $ | 5,644,328 |
| | $ | 7,007,012 |
|
| | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| Distribution of Maturities at June 30, 2018 |
(in thousands) | Within One Year | | 1 to 5 Years | | 5 to 10 Years | | More Than 10 Years | | Total |
Amortized Cost | | | | | | | | | |
U.S. Treasury securities | $ | 18,993 |
| | $ | 103,807 |
| | $ | — |
| | $ | — |
| | $ | 122,800 |
|
U.S. Government agency securities | 2,330 |
| | 6,437 |
| | 31,986 |
| | — |
| | 40,753 |
|
Mortgage-backed securities issued by U.S. Government agencies | — |
| | — |
| | 27,725 |
| | 83,681 |
| | 111,406 |
|
Mortgage-backed securities issued by U.S. Government sponsored enterprises | 1 |
| | 1,471 |
| | 615,334 |
| | 1,997,862 |
| | 2,614,668 |
|
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | — |
| | — |
| | 17,355 |
| | 1,142,504 |
| | 1,159,859 |
|
State and municipal securities | 115 |
| | — |
| | — |
| | — |
| | 115 |
|
Corporate debt and other debt securities | — |
| | — |
| | 15,000 |
| | 2,000 |
| | 17,000 |
|
Total amortized cost | $ | 21,439 |
| | $ | 111,715 |
| | $ | 707,400 |
| | $ | 3,226,047 |
| | $ | 4,066,601 |
|
| | | | | | | | | |
Fair Value | | | | | | | | | |
U.S. Treasury securities | $ | 18,993 |
| | $ | 101,640 |
| | $ | — |
| | $ | — |
| | $ | 120,633 |
|
U.S. Government agency securities | 2,337 |
| | 6,455 |
| | 32,142 |
| | — |
| | 40,934 |
|
Mortgage-backed securities issued by U.S. Government agencies | — |
| | — |
| | 27,266 |
| | 80,678 |
| | 107,944 |
|
Mortgage-backed securities issued by U.S. Government sponsored enterprises | 1 |
| | 1,520 |
| | 596,366 |
| | 1,928,958 |
| | 2,526,845 |
|
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | — |
| | — |
| | 16,855 |
| | 1,099,593 |
| | 1,116,448 |
|
State and municipal securities | 115 |
| | — |
| | — |
| | — |
| | 115 |
|
Corporate debt and other debt securities | — |
| | — |
| | 15,186 |
| | 1,857 |
| | 17,043 |
|
Total fair value | $ | 21,446 |
| | $ | 109,615 |
| | $ | 687,815 |
| | $ | 3,111,086 |
| | $ | 3,929,962 |
|
| | | | | | | | | |
Proceeds from sales, gross gains, and gross losses on sales of securities available for sale for the sixthree and threesix months ended June 30, 20182019 and 20172018 are presented below. The specific identification method is used to reclassify gains and losses out of other comprehensive income at the time of sale. On January 1, 2018, Synovus transferred $3.2 million, at fair value, from investment securities available for sale to other assets upon adoption of ASU 2016-01.
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | 2019 | | 2018 | | 2019 | | 2018 |
Proceeds from sales of investment securities available for sale | $ | 104,434 |
| | $ | 35,066 |
| | $ | 1,292,673 |
| | $ | 35,066 |
|
Gross realized gains on sales | — |
| | — |
| | 9,129 |
| | — |
|
Gross realized losses on sales | (1,845 | ) | | (1,296 | ) | | (10,900 | ) | | (1,296 | ) |
Investment securities losses, net | $ | (1,845 | ) | | $ | (1,296 | ) | | $ | (1,771 | ) | | $ | (1,296 | ) |
| | | | | | | |
|
| | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, | | Three Months Ended June 30, |
(in thousands) | | 2018 | | 2017 | | 2018 | | 2017 |
Proceeds from sales of investment securities available for sale | | $ | 35,066 |
| | $ | 338,381 |
| | $ | 35,066 |
| | $ | 55,752 |
|
Gross realized gains on sales | | — |
| | 7,942 |
| | — |
| | 239 |
|
Gross realized losses on sales | | (1,296 | ) | | (275 | ) | | (1,296 | ) | | (240 | ) |
Investment securities (losses) gains, net | | $ | (1,296 | ) | | $ | 7,667 |
| | $ | (1,296 | ) | | $ | (1 | ) |
| | | | | | | | |
Note 5 - Restructuring Charges
For the six and three months ended June 30, 2018 and 2017, total restructuring charges consist of the following components:
|
| | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | Three Months Ended June 30, |
(in thousands) | 2018 | | 2017 | | 2018 | | 2017 |
Severance charges | $ | — |
| | $ | 6,453 |
| | $ | — |
| | $ | — |
|
Other charges, net | (212 | ) | | 71 |
| | 103 |
| | 13 |
|
Total restructuring charges, net | $ | (212 | ) | | $ | 6,524 |
| | $ | 103 |
| | $ | 13 |
|
| | | | | | | |
For the six months ended June 30, 2018, Synovus recorded net lease termination accrual reversals of $377 thousand related to branches closed in prior years offset somewhat by other property related charges of $165 thousand. During the six months ended June 30, 2017, Synovus recorded severance charges of $6.5 million including $6.2 million for termination benefits incurred in conjunction with a voluntary early retirement program offered to Synovus employees during the first quarter of 2017.
The following tables present aggregate activity within the accrual for restructuring charges for the six and three months ended June 30, 2018 and 2017:
|
| | | | | | | | | | | |
(in thousands) | Severance Charges | | Lease Termination Charges | | Total |
Balance at December 31, 2017 | $ | 336 |
| | $ | 3,276 |
| | $ | 3,612 |
|
Accruals for lease terminations | — |
| | (377 | ) | | (377 | ) |
Payments | (336 | ) | | (1,031 | ) | | (1,367 | ) |
Balance at June 30, 2018 | $ | — |
| | $ | 1,868 |
| | $ | 1,868 |
|
| | | | | |
Balance at April 1, 2018 | — |
| | 2,506 |
| | 2,506 |
|
Payments | — |
| | (638 | ) | | (638 | ) |
Balance at June 30, 2018 | $ | — |
| | $ | 1,868 |
| | $ | 1,868 |
|
| | | | | |
|
| | | | | | | | | | | |
(in thousands) | Severance Charges | | Lease Termination Charges | | Total |
Balance at December 31, 2016 | $ | 81 |
| | $ | 3,968 |
| | $ | 4,049 |
|
Accrual for voluntary and involuntary termination benefits | 6,453 |
| | — |
| | 6,453 |
|
Payments | (2,803 | ) | | (438 | ) | | (3,241 | ) |
Balance at June 30, 2017 | $ | 3,731 |
| | $ | 3,530 |
| | $ | 7,261 |
|
| | | | | |
Balance at April 1, 2017 | 6,315 |
| | 3,689 |
| | 10,004 |
|
Payments | (2,584 | ) | | (159 | ) | | (2,743 | ) |
Balance at June 30, 2017 | $ | 3,731 |
| | $ | 3,530 |
| | $ | 7,261 |
|
| | | | | |
All other charges were paid in the quarters in which they were incurred. No other restructuring charges resulted in payment accruals.
Note 64 - Loans and Allowance for Loan Losses
The following istables provide a summary of current, accruing past due, and non-accrual loans separately reported by originated (loans originated, renewed, refinanced, modified, or otherwise underwritten by Synovus) and acquired loans from business combinations by portfolio class as of June 30, 20182019 and December 31, 2017.2018. See "Part I - Item 1. Financial Statements and Supplementary Data - Note 1 - Basis of Presentation" in this Report for more information on Synovus' accounting for purchased loans. | | Current, Accruing Past Due, and Non-accrual Loans | | |
Current, Accruing Past Due, and Non-accrual Originated Loans | | Current, Accruing Past Due, and Non-accrual Originated Loans | |
| June 30, 2018 | | June 30, 2019 | |
(in thousands) | Current | | Accruing 30-89 Days Past Due | | Accruing 90 Days or Greater Past Due | | Total Accruing Past Due | | Non-accrual | | Total | | Current | | Accruing 30-89 Days Past Due | | Accruing 90 Days or Greater Past Due | | Total Accruing Past Due | | Non-accrual | | Total | |
Commercial, financial and agricultural | $ | 7,170,877 |
| | $ | 18,425 |
| | $ | 547 |
| | $ | 18,972 |
| | $ | 81,231 |
| | $ | 7,271,080 |
| | $ | 7,712,371 |
| | $ | 19,804 |
| | $ | 462 |
| | $ | 20,266 |
| | $ | 68,573 |
| | $ | 7,801,210 |
| |
Owner-occupied | 4,994,038 |
| | 4,180 |
| | 98 |
| | 4,278 |
| | 6,076 |
| | 5,004,392 |
| | 5,348,232 |
| | 6,331 |
| | 284 |
| | 6,615 |
| | 11,557 |
| | 5,366,404 |
| |
Total commercial and industrial | 12,164,915 |
| | 22,605 |
| | 645 |
| | 23,250 |
| | 87,307 |
| | 12,275,472 |
| | 13,060,603 |
| | 26,135 |
| | 746 |
| | 26,881 |
| | 80,130 |
| | 13,167,614 |
| |
Investment properties | 5,505,409 |
| | 1,838 |
| | 611 |
| | 2,449 |
| | 1,738 |
| | 5,509,596 |
| | 5,924,501 |
| | 1,525 |
| | 881 |
| | 2,406 |
| | 799 |
| | 5,927,706 |
| |
1-4 family properties | 715,154 |
| | 2,309 |
| | — |
| | 2,309 |
| | 3,247 |
| | 720,710 |
| | 639,534 |
| | 2,296 |
| | — |
| | 2,296 |
| | 1,618 |
| | 643,448 |
| |
Land and development | 407,639 |
| | 1,602 |
| | — |
| | 1,602 |
| | 4,624 |
| | 413,865 |
| | 359,921 |
| | 1,874 |
| | 158 |
| | 2,032 |
| | 2,735 |
| | 364,688 |
| |
Total commercial real estate | 6,628,202 |
| | 5,749 |
| | 611 |
| | 6,360 |
| | 9,609 |
| | 6,644,171 |
| | 6,923,956 |
| | 5,695 |
| | 1,039 |
| | 6,734 |
| | 5,152 |
| | 6,935,842 |
| |
Consumer mortgages | | 3,175,355 |
| | 4,494 |
| | 550 |
| | 5,044 |
| | 13,628 |
| | 3,194,027 |
| |
Home equity lines | 1,430,778 |
| | 8,450 |
| | 362 |
| | 8,812 |
| | 14,265 |
| | 1,453,855 |
| | 1,569,312 |
| | 4,783 |
| | 265 |
| | 5,048 |
| | 13,494 |
| | 1,587,854 |
| |
Consumer mortgages | 2,741,064 |
| | 4,805 |
| | 244 |
| | 5,049 |
| | 4,822 |
| | 2,750,935 |
| | |
Credit cards | 235,406 |
| | 1,793 |
| | 1,225 |
| | 3,018 |
| | — |
| | 238,424 |
| | 253,331 |
| | 2,503 |
| | 2,449 |
| | 4,952 |
| | — |
| | 258,283 |
| |
Other consumer loans | 1,783,466 |
| | 8,990 |
| | 135 |
| | 9,125 |
| | 1,325 |
| | 1,793,916 |
| | 2,213,665 |
| | 18,272 |
| | 802 |
| | 19,074 |
| | 4,667 |
| | 2,237,406 |
| |
Total consumer | 6,190,714 |
| | 24,038 |
| | 1,966 |
| | 26,004 |
| | 20,412 |
| | 6,237,130 |
| | 7,211,663 |
| | 30,052 |
| | 4,066 |
| | 34,118 |
| | 31,789 |
| | 7,277,570 |
| |
Total loans | $ | 24,983,831 |
| | $ | 52,392 |
| | $ | 3,222 |
| | $ | 55,614 |
| | $ | 117,328 |
| | $ | 25,156,773 |
| (1 | ) | $ | 27,196,222 |
| | $ | 61,882 |
| | $ | 5,851 |
| | $ | 67,733 |
| | $ | 117,071 |
| | $ | 27,381,026 |
| (1) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2017 | | | | | | | | | | | | | |
(in thousands) | Current | | Accruing 30-89 Days Past Due | | Accruing 90 Days or Greater Past Due | | Total Accruing Past Due | | Non-accrual | | Total | | |
Commercial, financial and agricultural | $ | 7,097,127 |
| | $ | 11,214 |
| | $ | 1,016 |
| | $ | 12,230 |
| | $ | 70,130 |
| | $ | 7,179,487 |
| | |
Owner-occupied | 4,830,150 |
| | 6,880 |
| | 479 |
| | 7,359 |
| | 6,654 |
| | 4,844,163 |
| | |
Total commercial and industrial | 11,927,277 |
| | 18,094 |
| | 1,495 |
| | 19,589 |
| | 76,784 |
| | 12,023,650 |
| | |
Investment properties | 5,663,665 |
| | 2,506 |
| | 90 |
| | 2,596 |
| | 3,804 |
| | 5,670,065 |
| | |
1-4 family properties | 775,023 |
| | 3,545 |
| | 202 |
| | 3,747 |
| | 2,849 |
| | 781,619 |
| | |
Land and development | 476,131 |
| | 1,609 |
| | 67 |
| | 1,676 |
| | 5,797 |
| | 483,604 |
| | |
Total commercial real estate | 6,914,819 |
| | 7,660 |
| | 359 |
| | 8,019 |
| | 12,450 |
| | 6,935,288 |
| | |
Home equity lines | 1,490,808 |
| | 5,629 |
| | 335 |
| | 5,964 |
| | 17,455 |
| | 1,514,227 |
| | |
Consumer mortgages | 2,622,061 |
| | 3,971 |
| | 268 |
| | 4,239 |
| | 7,203 |
| | 2,633,503 |
| | |
Credit cards | 229,015 |
| | 1,930 |
| | 1,731 |
| | 3,661 |
| | — |
| | 232,676 |
| | |
Other consumer loans | 1,461,223 |
| | 10,333 |
| | 226 |
| | 10,559 |
| | 1,669 |
| | 1,473,451 |
| | |
Total consumer | 5,803,107 |
| | 21,863 |
| | 2,560 |
| | 24,423 |
| | 26,327 |
| | 5,853,857 |
| | |
Total loans | $ | 24,645,203 |
| | $ | 47,617 |
| | $ | 4,414 |
| | $ | 52,031 |
| | $ | 115,561 |
| | $ | 24,812,795 |
| (2 | ) | |
| | | | | | | | | | | | | |
(1) Total before net deferred fees and costs of $22.7 million.
(2) Total before net deferred fees and costs of $25.3 million. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current, Accruing Past Due, and Non-accrual Acquired Loans | |
| June 30, 2019 | |
(in thousands) | Current | | Accruing 30-89 Days Past Due(2) | | Accruing 90 Days or Greater Past Due(2) | | Total Accruing Past Due(2) | | Non-accrual(2) | | ASC 310-30 Loans | | Discount/Premium | | Total | |
Commercial, financial and agricultural | $ | 754,672 |
| | $ | 317 |
| | $ | — |
| | $ | 317 |
| | $ | — |
| | $ | 1,177,713 |
| | $ | (16,166 | ) | | $ | 1,916,536 |
| |
Owner-occupied | 69,569 |
| | — |
| | — |
| | — |
| | — |
| | 1,098,670 |
| | (4,846 | ) | | 1,163,393 |
| |
Total commercial and industrial | 824,241 |
| | 317 |
| | — |
| | 317 |
| | — |
| | 2,276,383 |
| | (21,012 | ) | | 3,079,929 |
| |
Investment properties | 991,090 |
| | — |
| | — |
| | — |
| | — |
| | 2,105,867 |
| | (19,563 | ) | | 3,077,394 |
| |
1-4 family properties | 49,695 |
| | — |
| | — |
| | — |
| | 174 |
| | 55,192 |
| | (1,119 | ) | | 103,942 |
| |
Land and development | 125,101 |
| | — |
| | — |
| | — |
| | — |
| | 109,342 |
| | (3,174 | ) | | 231,269 |
| |
Total commercial real estate | 1,165,886 |
| | — |
| | — |
| | — |
| | 174 |
| | 2,270,401 |
| | (23,856 | ) | | 3,412,605 |
| |
Consumer mortgages | 132,011 |
| | — |
| | — |
| | — |
| | — |
| | 2,165,966 |
| | (84,242 | ) | | 2,213,735 |
| |
Home equity lines | 65,112 |
| | 155 |
| | — |
| | 155 |
| | 55 |
| | 5,088 |
| | (7,519 | ) | | 62,891 |
| |
Other consumer loans | 308 |
| | — |
| | — |
| | — |
| | — |
| | 12,902 |
| | (1,279 | ) | | 11,931 |
| |
Total consumer | 197,431 |
| | 155 |
| | — |
| | 155 |
| | 55 |
| | 2,183,956 |
| | (93,040 | ) | | 2,288,557 |
| |
Total loans | $ | 2,187,558 |
| | $ | 472 |
| | $ | — |
| | $ | 472 |
| | $ | 229 |
| | $ | 6,730,740 |
| | $ | (137,908 | ) | | $ | 8,781,091 |
| (3) |
| | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Current, Accruing Past Due, and Non-accrual Loans | |
| December 31, 2018 | |
(in thousands) | Current | | Accruing 30-89 Days Past Due | | Accruing 90 Days or Greater Past Due | | Total Accruing Past Due | | Non-accrual | | Total | |
Commercial, financial and agricultural | $ | 7,372,301 |
| | $ | 7,988 |
| | $ | 114 |
| | $ | 8,102 |
| | $ | 69,295 |
| | $ | 7,449,698 |
| |
Owner-occupied | 5,317,023 |
| | 5,433 |
| | 81 |
| | 5,514 |
| | 8,971 |
| | 5,331,508 |
| |
Total commercial and industrial | 12,689,324 |
| | 13,421 |
| | 195 |
| | 13,616 |
| | 78,266 |
| | 12,781,206 |
| |
Investment properties | 5,557,224 |
| | 1,312 |
| | 34 |
| | 1,346 |
| | 2,381 |
| | 5,560,951 |
| |
1-4 family properties | 674,648 |
| | 2,745 |
| | 96 |
| | 2,841 |
| | 2,381 |
| | 679,870 |
| |
Land and development | 319,978 |
| | 739 |
| | — |
| | 739 |
| | 2,953 |
| | 323,670 |
| |
Total commercial real estate | 6,551,850 |
| | 4,796 |
| | 130 |
| | 4,926 |
| | 7,715 |
| | 6,564,491 |
| |
Consumer mortgages | 2,922,136 |
| | 7,150 |
| | — |
| | 7,150 |
| | 4,949 |
| | 2,934,235 |
| |
Home equity lines | 1,496,562 |
| | 7,092 |
| | 28 |
| | 7,120 |
| | 12,114 |
| | 1,515,796 |
| |
Credit cards | 252,832 |
| | 3,066 |
| | 2,347 |
| | 5,413 |
| | — |
| | 258,245 |
| |
Other consumer loans | 1,894,352 |
| | 17,604 |
| | 1,098 |
| | 18,702 |
| | 3,689 |
| | 1,916,743 |
| |
Total consumer | 6,565,882 |
| | 34,912 |
| | 3,473 |
| | 38,385 |
| | 20,752 |
| | 6,625,019 |
| |
Total loans | $ | 25,807,056 |
| | $ | 53,129 |
| | $ | 3,798 |
| | $ | 56,927 |
| | $ | 106,733 |
| | $ | 25,970,716 |
| (4) |
| | | | | | | | | | | | |
| |
(1) | Total before net deferred fees and costs of $23.6 million. |
| |
(2) | For purposes of this table, non-performing and past due loans exclude acquired loans accounted for under ASC 310-30. |
| |
(3) | Represents $9.29 billion (at fair value) of loans acquired from FCB, net of paydowns and payoffs since acquisition date. |
| |
(4) | Total before net deferred fees and costs of $24.1 million. |
Loans with carrying values of $12.16 billion and $8.40 billion were pledged as collateral for borrowings and capacity at June 30, 2019 and December 31, 2018, respectively, to the FHLB and Federal Reserve Bank.
The credit quality of the loan portfolio is reviewed and updated no less frequently than quarterly using the standard asset classification system utilized by the federal banking agencies. These classifications are divided into three groups – Not Criticized (Pass), Special Mention, and Classified or Adverse rating (Substandard, Doubtful, and Loss) and are defined as follows:
Pass - loans which are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell in a timely manner, of any underlying collateral.
Special Mention - loans which have potential weaknesses that deserve management's close attention. These loans are not adversely classified and do not expose an institution to sufficient risk to warrant an adverse classification.
Substandard - loans which are inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Loans with this classification are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful - loans which have all the weaknesses inherent in loans classified as Substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently known facts, conditions, and values.
Loss - loans which are considered by management to be uncollectible and of such little value that their continuance on the institution's books as an asset, without establishment of a specific valuation allowance or charge-off, is not warranted. Synovus fully reserves for any loans rated as Loss.
In the following tables, consumer loans are generally assigned a risk grade similar to the classifications described above; however, upon reaching 90 days and 120 days past due, they are generally downgraded to Substandard and Loss, respectively, in accordance with the FFIEC Uniform Retail Credit Classification and Account Management Policy. Additionally, in accordance with the Interagency Supervisory Guidance, on Allowance for Loan and Lease Losses Estimation Practices for Loans and Lines of Credit Secured by Junior Liens on 1-4 Family Residential Properties, the risk grade classifications of consumer loans (consumer mortgages and home equity lines and consumer mortgageslines) secured by junior liens on 1-4 family residential properties also consider available information on the payment status of any associated senior liens with other financial institutions.
| | Loan Portfolio Credit Exposure by Risk Grade | | |
Originated Loan Portfolio Credit Exposure by Risk Grade | | Originated Loan Portfolio Credit Exposure by Risk Grade | |
| June 30, 2018 | | June 30, 2019 | |
(in thousands) | Pass | | Special Mention | | Substandard(1) | | Doubtful(2) | | Loss | | Total | | Pass | | Special Mention | | Substandard(1) | | Doubtful(2) | | Loss(3) | | Total | |
Commercial, financial and agricultural | $ | 6,996,081 |
| | $ | 107,251 |
| | $ | 164,581 |
| | $ | 3,167 |
| | $ | — |
| | $ | 7,271,080 |
| | $ | 7,534,124 |
| | $ | 117,878 |
| | $ | 144,660 |
| | $ | 4,548 |
| | $ | — |
| | $ | 7,801,210 |
| |
Owner-occupied | 4,873,936 |
| | 63,373 |
| | 67,010 |
| | 73 |
| | — |
| | 5,004,392 |
| | 5,268,926 |
| | 17,844 |
| | 79,561 |
| | 73 |
| | — |
| | 5,366,404 |
| |
Total commercial and industrial | 11,870,017 |
| | 170,624 |
| | 231,591 |
| | 3,240 |
| | — |
| | 12,275,472 |
| | 12,803,050 |
| | 135,722 |
| | 224,221 |
| | 4,621 |
| | — |
| | 13,167,614 |
| |
Investment properties | 5,422,727 |
| | 51,279 |
| | 35,590 |
| | — |
| | — |
| | 5,509,596 |
| | 5,860,735 |
| | 22,206 |
| | 44,765 |
| | — |
| | — |
| | 5,927,706 |
| |
1-4 family properties | 698,532 |
| | 9,245 |
| | 12,933 |
| | — |
| | — |
| | 720,710 |
| | 631,648 |
| | 3,610 |
| | 8,190 |
| | — |
| | — |
| | 643,448 |
| |
Land and development | 369,071 |
| | 29,612 |
| | 12,053 |
| | 3,129 |
| | — |
| | 413,865 |
| | 342,427 |
| | 9,880 |
| | 12,381 |
| | — |
| | — |
| | 364,688 |
| |
Total commercial real estate | 6,490,330 |
| | 90,136 |
| | 60,576 |
| | 3,129 |
| | — |
| | 6,644,171 |
| | 6,834,810 |
| | 35,696 |
| | 65,336 |
| | — |
| | — |
| | 6,935,842 |
| |
Consumer mortgages | | 3,179,300 |
| | — |
| | 13,708 |
| | 943 |
| | 76 |
|
| 3,194,027 |
| |
Home equity lines | 1,435,724 |
| | — |
| | 16,599 |
| | 175 |
| | 1,357 |
| (3) | 1,453,855 |
| | 1,572,002 |
| | — |
| | 14,362 |
| | 21 |
| | 1,469 |
|
| 1,587,854 |
| |
Consumer mortgages | 2,743,245 |
| | — |
| | 7,588 |
| | 102 |
| | — |
| (3) | 2,750,935 |
| | |
Credit cards | 237,198 |
| | — |
| | 447 |
| | — |
| | 779 |
| (4) | 238,424 |
| | 255,836 |
| | — |
| | 934 |
| | — |
| | 1,513 |
| (4) | 258,283 |
| |
Other consumer loans | 1,792,568 |
| | — |
| | 1,087 |
| | 257 |
| | 4 |
| (3) | 1,793,916 |
| | 2,232,459 |
| | — |
| | 4,947 |
| | — |
| | — |
|
| 2,237,406 |
| |
Total consumer | 6,208,735 |
| | — |
| | 25,721 |
| | 534 |
| | 2,140 |
| | 6,237,130 |
| | 7,239,597 |
| | — |
| | 33,951 |
| | 964 |
| | 3,058 |
| | 7,277,570 |
| |
Total loans | $ | 24,569,082 |
| | $ | 260,760 |
| | $ | 317,888 |
| | $ | 6,903 |
| | $ | 2,140 |
| | $ | 25,156,773 |
| (5 | ) | $ | 26,877,457 |
| | $ | 171,418 |
| | $ | 323,508 |
| | $ | 5,585 |
| | $ | 3,058 |
| | $ | 27,381,026 |
| (5) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Acquired Loan Portfolio Credit Exposure by Risk Grade | | Acquired Loan Portfolio Credit Exposure by Risk Grade | |
| December 31, 2017 | | June 30, 2019 | |
(in thousands) | Pass | | Special Mention | | Substandard(1) | | Doubtful(2) | | Loss | | Total | | Pass | | Special Mention | | Substandard(1) | | Doubtful | | Loss | | Total | |
Commercial, financial and agricultural | $6,929,506 | | $115,912 | | $132,818 | | $1,251 | | $ | — |
| | $7,179,487 | | $ | 1,881,798 |
| | $ | 19,981 |
| | $ | 14,757 |
| | $ | — |
| | $ | — |
| | $ | 1,916,536 |
| |
Owner-occupied | 4,713,877 |
| | 50,140 |
| | 80,073 |
| | 73 |
| | — |
| | 4,844,163 |
| | 1,153,900 |
| | 5,686 |
| | 3,807 |
| | — |
| | — |
| | 1,163,393 |
| |
Total commercial and industrial | 11,643,383 |
| | 166,052 |
| | 212,891 |
| | 1,324 |
| | — |
| | 12,023,650 |
| | 3,035,698 |
| | 25,667 |
| | 18,564 |
| | — |
| | — |
| | 3,079,929 |
| |
Investment properties | 5,586,792 |
| | 64,628 |
| | 18,645 |
| | — |
| | — |
| | 5,670,065 |
| | 3,035,213 |
| | 6,439 |
| | 35,742 |
| | — |
| | — |
| | 3,077,394 |
| |
1-4 family properties | 745,299 |
| | 19,419 |
| | 16,901 |
| | — |
| | — |
| | 781,619 |
| | 101,480 |
| | — |
| | 2,462 |
| | — |
| | — |
| | 103,942 |
| |
Land and development | 431,759 |
| | 33,766 |
| | 14,950 |
| | 3,129 |
| | — |
| | 483,604 |
| | 231,141 |
| | 128 |
| | — |
| | — |
| | — |
| | 231,269 |
| |
Total commercial real estate | 6,763,850 |
| | 117,813 |
| | 50,496 |
| | 3,129 |
| | — |
|
| 6,935,288 |
| | 3,367,834 |
| | 6,567 |
| | 38,204 |
| | — |
| | — |
| | 3,412,605 |
| |
Consumer mortgages | | 2,213,735 |
| | — |
| | — |
| | — |
| | — |
| | 2,213,735 |
| |
Home equity lines | 1,491,105 |
| | — |
| | 21,079 |
| | 285 |
| | 1,758 |
| (3) | 1,514,227 |
| | 62,746 |
| | — |
| | 145 |
| | — |
| | — |
| | 62,891 |
| |
Consumer mortgages | 2,622,499 |
| | — |
| | 10,607 |
| | 291 |
| | 106 |
| (3) | 2,633,503 |
| | |
Credit cards | 230,945 |
| | — |
| | 399 |
| | — |
| | 1,332 |
| (4) | 232,676 |
| | |
Other consumer loans | 1,470,944 |
| | — |
| | 2,168 |
| | 329 |
| | 10 |
| (3) | 1,473,451 |
| | 11,931 |
| | — |
| | — |
| | — |
| | — |
| | 11,931 |
| |
Total consumer | 5,815,493 |
| | — |
| | 34,253 |
| | 905 |
| | 3,206 |
| | 5,853,857 |
| | 2,288,412 |
| | — |
| | 145 |
| | — |
| | — |
| | 2,288,557 |
| |
Total loans | $ | 24,222,726 |
| | $ | 283,865 |
| | $ | 297,640 |
| | $ | 5,358 |
| | $ | 3,206 |
| | $ | 24,812,795 |
| (6 | ) | $ | 8,691,944 |
| | $ | 32,234 |
| | $ | 56,913 |
| | $ | — |
| | $ | — |
| | $ | 8,781,091 |
| (6) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
(1) Includes $209.6
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Loan Portfolio Credit Exposure by Risk Grade | |
| December 31, 2018 | |
(in thousands) | Pass | | Special Mention | | Substandard(1) | | Doubtful(2) | | Loss(3) | | Total | |
Commercial, financial and agricultural | $ | 7,190,517 |
| | $ | 118,188 |
| | $ | 140,218 |
| | $ | 775 |
| | $ | — |
| | $ | 7,449,698 |
| |
Owner-occupied | 5,212,473 |
| | 55,038 |
| | 63,572 |
| | 425 |
| | — |
| | 5,331,508 |
| |
Total commercial and industrial | 12,402,990 |
| | 173,226 |
| | 203,790 |
| | 1,200 |
| | — |
| | 12,781,206 |
| |
Investment properties | 5,497,344 |
| | 40,516 |
| | 23,091 |
| | — |
| | — |
| | 5,560,951 |
| |
1-4 family properties | 663,692 |
| | 6,424 |
| | 9,754 |
| | — |
| | — |
| | 679,870 |
| |
Land and development | 297,855 |
| | 12,786 |
| | 13,029 |
| | — |
| | — |
| | 323,670 |
| |
Total commercial real estate | 6,458,891 |
| | 59,726 |
| | 45,874 |
| | — |
| | — |
|
| 6,564,491 |
| |
Consumer mortgages | 2,926,712 |
| | — |
| | 7,425 |
| | 98 |
| | — |
|
| 2,934,235 |
| |
Home equity lines | 1,501,316 |
| | — |
| | 13,130 |
| | 174 |
| | 1,176 |
|
| 1,515,796 |
| |
Credit cards | 255,904 |
| | — |
| | 858 |
| | — |
| | 1,483 |
| (4) | 258,245 |
| |
Other consumer loans | 1,912,902 |
| | — |
| | 3,841 |
| | — |
| | — |
|
| 1,916,743 |
| |
Total consumer | 6,596,834 |
| | — |
| | 25,254 |
| | 272 |
| | 2,659 |
| | 6,625,019 |
| |
Total loans | $ | 25,458,715 |
| | $ | 232,952 |
| | $ | 274,918 |
| | $ | 1,472 |
| | $ | 2,659 |
| | $ | 25,970,716 |
| (7) |
| | | | | | | | | | | | |
| |
(1) | Includes $265.0 million and $172.3 million of Substandard accruing loans at June 30, 2019 and December 31, 2018, respectively. |
| |
(2) | The loans within this risk grade are on non-accrual status and $190.6 million of Substandard accruing loans at June 30, 2018 and December 31, 2017, respectively.(2) The loans within this risk grade are on non-accrual status. Commercial loans generally have an allowance for loan losses in accordance with ASC 310, and retail loans generally have an allowance for loan losses equal to 50% of the loan amount.
|
| |
(3) | The loans within this risk grade are on non-accrual status and have an allowance for loan losses equal to the full loan amount. |
| |
(4) | Represent amounts that were 120 days past due. These credits are downgraded to the Loss category with an allowance for loan losses equal to the full loan amount and are generally charged off upon reaching 181 days past due in accordance with the FFIEC Retail Credit Classification Policy. |
| |
(5) | Total before net deferred fees and costs of $23.6 million. |
| |
(6) | Represents $9.29 billion (at fair value) of loans acquired from FCB, net of paydowns and payoffs since acquisition date. |
| |
(7) | Total before net deferred fees and costs of $24.1 million. |
Acquired loans
As discussed in "Part I - Item 1. Financial Statements and Supplementary Data - Note 2 - Acquisitions", on January 1, 2019, Synovus acquired loans from FCB with fair values of $9.29 billion net of total discount of $168.0 million.
At the Acquisition Date, the contractual required payments receivable on the purchased loans accounted for under ASC 310-20 totaled $2.45 billion, with a corresponding fair value of $2.15 billion. The estimated cash flows not expected to be collected at the Acquisition Date were $39.5 million.
Information about the acquired FCB loan portfolio accounted for under ASC 310-30 as of the loan amount.Acquisition Date is in the following table.
(3) The loans within this risk grade are on non-accrual status and have an allowance for loan losses equal to the full loan amount. |
| | | |
(in thousands) | ASC 310-30 Loans |
Contractually required principal and interest at acquisition | $ | 8,377,942 |
|
Non-accretable difference (expected losses and foregone interest) | (163,147 | ) |
Cash flows expected to be collected at acquisition | 8,214,795 |
|
Accretable yield | (1,066,689 | ) |
Basis in ASC 310-30 loans at acquisition | $ | 7,148,106 |
|
| |
(4) Represent amounts that were 120 days past due. These credits are downgraded to the Loss category with an allowance for loan losses equal to the full loan amount and are generally charged off upon reaching 181 days past due in accordance with the FFIEC Uniform Retail Credit Classification and Account Management Policy.
(5) Total before net deferred fees and costs of $22.7 million.
(6) Total before net deferred fees and costs of $25.3 million.
The following table detailsis a summary of changes in the accretable difference for all loans accounted for under ASC 310-30 for the six months ended June 30, 2019.
|
| | | |
(in thousands) | Six Months Ended June 30, 2019 |
Beginning balance | $ | — |
|
Additions | 1,066,689 |
|
Transfers from non-accretable difference to accretable yield(1) | 13,516 |
|
Accretion | (182,944 | ) |
Changes in expected cash flows not affecting non-accretable differences(2) | 24,929 |
|
Ending balance | $ | 922,190 |
|
| |
(1) Represents improvement in the credit component of expected cash flows.
(2) Includes changes in cash flows expected to be collected due to the impact of changes in actual or expected timing of liquidation events, modifications, changes in interest rates and changes in prepayment assumptions.
The following tables detail the changes in the allowance for loan losses by loan segment for the sixthree and three months ended June 30, 2018 and 2017.
|
| | | | | | | | | | | | | | | |
Allowance for Loan Losses and Recorded Investment in Loans
|
| As Of and For The Six Months Ended June 30, 2018 |
(in thousands) | Commercial & Industrial | | Commercial Real Estate | | Consumer | | Total |
Allowance for loan losses: | | | | | | | |
Beginning balance | $ | 126,803 |
| | $ | 74,998 |
| | $ | 47,467 |
| | $ | 249,268 |
|
Charge-offs | (23,786 | ) | | (2,446 | ) | | (9,894 | ) | | (36,126 | ) |
Recoveries | 3,995 |
| | 6,964 |
| | 3,058 |
| | 14,017 |
|
Provision for loan losses | 23,323 |
| | (4,311 | ) | | 5,554 |
| | 24,566 |
|
Ending balance(1) | $ | 130,335 |
| | $ | 75,205 |
| | $ | 46,185 |
|
| $ | 251,725 |
|
Ending balance: individually evaluated for impairment | $ | 9,474 |
| | $ | 4,687 |
| | $ | 771 |
| | $ | 14,932 |
|
Ending balance: collectively evaluated for impairment | $ | 120,861 |
| | $ | 70,518 |
| | $ | 45,414 |
| | $ | 236,793 |
|
Loans: | | | | | | | |
Ending balance: total loans(1)(2) | $ | 12,275,472 |
| | $ | 6,644,171 |
| | $ | 6,237,130 |
| | $ | 25,156,773 |
|
Ending balance: individually evaluated for impairment | $ | 107,544 |
| | $ | 53,805 |
| | $ | 27,676 |
| | $ | 189,025 |
|
Ending balance: collectively evaluated for impairment | $ | 12,167,928 |
| | $ | 6,590,366 |
| | $ | 6,209,454 |
| | $ | 24,967,748 |
|
| | | | | | | |
| As Of and For The Six Months Ended June 30, 2017 |
(in thousands) | Commercial & Industrial | | Commercial Real Estate | | Consumer | | Total |
Allowance for loan losses: | | | | | | | |
Beginning balance | $ | 125,778 |
| | $ | 81,816 |
| | $ | 44,164 |
| | $ | 251,758 |
|
Charge-offs | (19,535 | ) | | (3,207 | ) | | (9,656 | ) | | (32,398 | ) |
Recoveries | 3,282 |
| | 3,648 |
| | 2,871 |
| | 9,801 |
|
Provision for loan losses | 13,912 |
| | (4,730 | ) | | 9,752 |
| | 18,934 |
|
Ending balance(1) | $ | 123,437 |
| | $ | 77,527 |
| | $ | 47,131 |
| | $ | 248,095 |
|
Ending balance: individually evaluated for impairment | $ | 7,226 |
| | $ | 4,386 |
| | $ | 1,038 |
| | $ | 12,650 |
|
Ending balance: collectively evaluated for impairment | $ | 116,211 |
| | $ | 73,141 |
| | $ | 46,093 |
| | $ | 235,445 |
|
Loans: | | | | | | | |
Ending balance: total loans(1)(3) | $ | 11,742,945 |
| | $ | 7,422,234 |
| | $ | 5,291,371 |
| | $ | 24,456,550 |
|
Ending balance: individually evaluated for impairment | $ | 122,889 |
| | $ | 73,638 |
| | $ | 31,688 |
| | $ | 228,215 |
|
Ending balance: collectively evaluated for impairment | $ | 11,620,056 |
| | $ | 7,348,596 |
| | $ | 5,259,683 |
| | $ | 24,228,335 |
|
| | | | | | | |
(1)As of and for the six months ended June 30, 20182019 and 2017, there were no purchased credit-impaired loans and no allowance for loan losses for purchased credit-impaired loans.
(2) Total before net deferred fees and costs of $22.7 million.
(3) Total before net deferred fees and costs of $26.0 million.
2018.
| | Allowance for Loan Losses and Recorded Investment in Loans
| Allowance for Loan Losses and Recorded Investment in Loans
| Allowance for Loan Losses and Recorded Investment in Loans
|
| As Of and For The Three Months Ended June 30, 2018 | As Of and For The Three Months Ended June 30, 2019 |
(in thousands) | Commercial & Industrial | | Commercial Real Estate | | Consumer | | Total | Commercial & Industrial | | Commercial Real Estate | | Consumer | | Total |
Allowance for loan losses: | | | | | | | | | | | | | | |
Beginning balance | $ | 134,745 |
| | $ | 73,991 |
| | $ | 49,028 |
| | $ | 257,764 |
| $ | 135,639 |
| | $ | 69,009 |
| | $ | 52,388 |
| | $ | 257,036 |
|
Charge-offs | (15,770 | ) | | (523 | ) | | (5,211 | ) | | (21,504 | ) | (11,095 | ) | | (861 | ) | | (4,909 | ) | | (16,865 | ) |
Recoveries | 1,635 |
| | 480 |
| | 1,560 |
| | 3,675 |
| 1,821 |
| | 1,954 |
| | 1,311 |
| | 5,086 |
|
Provision for loan losses | 9,725 |
| | 1,257 |
| | 808 |
| | 11,790 |
| |
Provision for (reversal of) loan losses | | 11,639 |
| | (6,639 | ) | | 7,119 |
| | 12,119 |
|
Ending balance(1) | $ | 130,335 |
| | $ | 75,205 |
| | $ | 46,185 |
| | $ | 251,725 |
| $ | 138,004 |
| | $ | 63,463 |
| | $ | 55,909 |
| | $ | 257,376 |
|
Ending balance: individually evaluated for impairment | $ | 9,474 |
| | $ | 4,687 |
| | $ | 771 |
| | $ | 14,932 |
| $ | 16,126 |
| | $ | 1,229 |
| | $ | 811 |
| | $ | 18,166 |
|
Ending balance: collectively evaluated for impairment | $ | 120,861 |
| | $ | 70,518 |
| | $ | 45,414 |
| | $ | 236,793 |
| $ | 121,878 |
| | $ | 62,234 |
| | $ | 55,098 |
| | $ | 239,210 |
|
Loans: | | | | | | | | | | | | | | |
Ending balance: total loans(1)(2) | $ | 12,275,472 |
| | $ | 6,644,171 |
| | $ | 6,237,130 |
| | $ | 25,156,773 |
| |
Ending balance: total loans(2) | | $ | 16,247,543 |
| | $ | 10,348,447 |
| | $ | 9,566,127 |
| | $ | 36,162,117 |
|
Ending balance: individually evaluated for impairment | $ | 107,544 |
| | $ | 53,805 |
| | $ | 27,676 |
| | $ | 189,025 |
| $ | 135,548 |
| | $ | 28,231 |
| | $ | 31,713 |
| | $ | 195,492 |
|
Ending balance: collectively evaluated for impairment | $ | 12,167,928 |
| | $ | 6,590,366 |
| | $ | 6,209,454 |
| | $ | 24,967,748 |
| |
Ending balance: collectively evaluated for impairment(3) | | $ | 13,857,183 |
| | $ | 8,070,437 |
| | $ | 7,433,959 |
| | $ | 29,361,579 |
|
Ending balance: acquired loans accounted for under ASC 310-30(4) | | $ | 2,254,812 |
| | $ | 2,249,779 |
| | $ | 2,100,455 |
| | $ | 6,605,046 |
|
| | | | | | | | | | | | | | |
| As Of and For The Three Months Ended June 30, 2017 | As Of and For The Three Months Ended June 30, 2018 |
(in thousands) | Commercial & Industrial | | Commercial Real Estate | | Consumer | | Total | Commercial & Industrial | | Commercial Real Estate | | Consumer | | Total |
Allowance for loan losses: | | | | | | | | | | | | | | |
Beginning balance | $ | 127,096 |
| | $ | 78,314 |
| | $ | 48,104 |
| | $ | 253,514 |
| $ | 134,745 |
| | $ | 73,991 |
| | $ | 49,028 |
| | $ | 257,764 |
|
Charge-offs | (12,642 | ) | | (1,299 | ) | | (5,722 | ) | | (19,663 | ) | (15,770 | ) | | (523 | ) | | (5,211 | ) | | (21,504 | ) |
Recoveries | 1,458 |
| | 759 |
| | 1,767 |
| | 3,984 |
| 1,635 |
| | 480 |
| | 1,560 |
| | 3,675 |
|
Provision for loan losses | 7,525 |
| | (247 | ) | | 2,982 |
| | 10,260 |
| 9,725 |
| | 1,257 |
| | 808 |
| | 11,790 |
|
Ending balance(1) | $ | 123,437 |
| | $ | 77,527 |
| | $ | 47,131 |
| | $ | 248,095 |
| |
Ending balance | | $ | 130,335 |
| | $ | 75,205 |
| | $ | 46,185 |
| | $ | 251,725 |
|
Ending balance: individually evaluated for impairment | $ | 7,226 |
| | $ | 4,386 |
| | $ | 1,038 |
| | $ | 12,650 |
| $ | 9,474 |
| | $ | 4,687 |
| | $ | 771 |
| | $ | 14,932 |
|
Ending balance: collectively evaluated for impairment | $ | 116,211 |
| | $ | 73,141 |
| | $ | 46,093 |
| | $ | 235,445 |
| $ | 120,861 |
| | $ | 70,518 |
| | $ | 45,414 |
| | $ | 236,793 |
|
Loans: | | | | | | | | | | | | | | |
Ending balance: total loans(1)(3) | $ | 11,742,945 |
| | $ | 7,422,234 |
| | $ | 5,291,371 |
| | $ | 24,456,550 |
| |
Ending balance: total loans(5)(6) | | $ | 12,275,472 |
| | $ | 6,644,171 |
| | $ | 6,237,130 |
| | $ | 25,156,773 |
|
Ending balance: individually evaluated for impairment | $ | 122,889 |
| | $ | 73,638 |
| | $ | 31,688 |
| | $ | 228,215 |
| $ | 107,544 |
| | $ | 53,805 |
| | $ | 27,676 |
| | $ | 189,025 |
|
Ending balance: collectively evaluated for impairment | $ | 11,620,056 |
| | $ | 7,348,596 |
| | $ | 5,259,683 |
| | $ | 24,228,335 |
| $ | 12,167,928 |
| | $ | 6,590,366 |
| | $ | 6,209,454 |
| | $ | 24,967,748 |
|
| | | | | | | | | | | | | | |
(1(1) )As of and for the three months ended June 30, 2018 and 2017,2019, there were no purchased credit-impaired loans andwas no allowance for loan losses for purchased credit-impaired loans.acquired loans accounted for under ASC 310-30.
| |
(2) | Total before net deferred fees and costs of $23.6 million. |
| |
(3) | These loans are presented net of the remaining fair value discount of $12.2 million at June 30, 2019. |
| |
(4) | These loans are presented net of the remaining fair value discount of $125.7 million at June 30, 2019. |
| |
(5) | Total before net deferred fees and costs of $22.7 million. |
| |
(6) | As of and for the three months ended June 30, 2018, there were no purchased credit-impaired loans and no allowance for loan losses for purchased credit-impaired loans. |
(2) Total before net deferred fees and costs of $22.7 million.
(3) Total before net deferred fees and costs of $26.0 million.
|
| | | | | | | | | | | | | | | |
Allowance for Loan Losses and Recorded Investment in Loans
|
| As Of and For The Six Months Ended June 30, 2019 |
(in thousands) | Commercial & Industrial | | Commercial Real Estate | | Consumer | | Total |
Allowance for loan losses: | | | | | | | |
Beginning balance | $ | 133,123 |
| | $ | 68,796 |
| | $ | 48,636 |
| | $ | 250,555 |
|
Charge-offs | (24,133 | ) | | (2,093 | ) | | (11,337 | ) | | (37,563 | ) |
Recoveries | 3,810 |
| | 2,298 |
| | 2,588 |
| | 8,696 |
|
Provision for (reversal of) loan losses | 25,204 |
| | (5,538 | ) | | 16,022 |
| | 35,688 |
|
Ending balance(1) | $ | 138,004 |
| | $ | 63,463 |
| | $ | 55,909 |
| | $ | 257,376 |
|
Ending balance: individually evaluated for impairment | $ | 16,126 |
| | $ | 1,229 |
| | $ | 811 |
| | $ | 18,166 |
|
Ending balance: collectively evaluated for impairment | $ | 121,878 |
| | $ | 62,234 |
| | $ | 55,098 |
| | $ | 239,210 |
|
Loans: | | | | | | | |
Ending balance: total loans(2) | $ | 16,247,543 |
| | $ | 10,348,447 |
| | $ | 9,566,127 |
| | $ | 36,162,117 |
|
Ending balance: individually evaluated for impairment | $ | 135,548 |
| | $ | 28,231 |
| | $ | 31,713 |
| | $ | 195,492 |
|
Ending balance: collectively evaluated for impairment(3) | $ | 13,857,183 |
| | $ | 8,070,437 |
| | $ | 7,433,959 |
| | $ | 29,361,579 |
|
Ending balance: acquired loans accounted for under ASC 310-30(4) | $ | 2,254,812 |
| | $ | 2,249,779 |
| | $ | 2,100,455 |
| | $ | 6,605,046 |
|
| | | | | | | |
| As Of and For The Six Months Ended June 30, 2018 |
(in thousands) | Commercial & Industrial | | Commercial Real Estate | | Consumer | | Total |
Allowance for loan losses: | | | | | | | |
Beginning balance | $ | 126,803 |
| | $ | 74,998 |
| | $ | 47,467 |
| | $ | 249,268 |
|
Charge-offs | (23,786 | ) | | (2,446 | ) | | (9,894 | ) | | (36,126 | ) |
Recoveries | 3,995 |
| | 6,964 |
| | 3,058 |
| | 14,017 |
|
Provision for (reversal of) loan losses | 23,323 |
| | (4,311 | ) | | 5,554 |
| | 24,566 |
|
Ending balance | $ | 130,335 |
| | $ | 75,205 |
| | $ | 46,185 |
| | $ | 251,725 |
|
Ending balance: individually evaluated for impairment | $ | 9,474 |
| | $ | 4,687 |
| | $ | 771 |
| | $ | 14,932 |
|
Ending balance: collectively evaluated for impairment | $ | 120,861 |
| | $ | 70,518 |
| | $ | 45,414 |
| | $ | 236,793 |
|
Loans: | | | | | | | |
Ending balance: total loans(5)(6) | $ | 12,275,472 |
| | $ | 6,644,171 |
| | $ | 6,237,130 |
| | $ | 25,156,773 |
|
Ending balance: individually evaluated for impairment | $ | 107,544 |
| | $ | 53,805 |
| | $ | 27,676 |
| | $ | 189,025 |
|
Ending balance: collectively evaluated for impairment | $ | 12,167,928 |
| | $ | 6,590,366 |
| | $ | 6,209,454 |
| | $ | 24,967,748 |
|
| | | | | | | |
| |
(1) | As of and for the six months ended June 30, 2019, there was no allowance for loan losses for acquired loans accounted for under ASC 310-30. |
| |
(2) | Total before net deferred fees and costs of $23.6 million. |
| |
(3) | These loans are presented net of the remaining fair value discount of $12.2 million at June 30, 2019. |
| |
(4) | These loans are presented net of the remaining fair value discount of $125.7 million at June 30, 2019. |
| |
(5) | Total before net deferred fees and costs of $22.7 million. |
| |
(6) | As of and for the six months ended June 30, 2018 , there were no purchased credit-impaired loans and no allowance for loan losses for purchased credit-impaired loans. |
The tables below summarizeBelow is a detailed summary of impaired loans (including accruing TDRs) by class as of June 30, 20182019 and December 31, 2017.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Impaired Loans (including accruing TDRs) |
| June 30, 2018 | | Six Months Ended June 30, 2018 | | Three Months Ended June 30, 2018 |
(in thousands) | Recorded Investment | | Unpaid Principal Balance | | Related Allowance | | Average Recorded Investment | | Interest Income Recognized | | Average Recorded Investment | | Interest Income Recognized |
With no related allowance recorded | | | | | | | | | | | | | |
Commercial, financial and agricultural | $ | 21,549 |
| | $ | 32,458 |
| | $ | — |
| | $ | 11,129 |
| | $ | — |
| | $ | 13,575 |
| | $ | — |
|
Owner-occupied | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Total commercial and industrial | 21,549 |
| | 32,458 |
| | — |
| | 11,129 |
| | — |
| | 13,575 |
| | — |
|
Investment properties | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
1-4 family properties | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Land and development | — |
| | — |
| | — |
| | 19 |
| | — |
| | — |
| | — |
|
Total commercial real estate | — |
| | — |
| | — |
| | 19 |
| | — |
| | — |
| | — |
|
Home equity lines | — |
| | — |
| | — |
| | 1,423 |
| | — |
| | 724 |
| | — |
|
Consumer mortgages | 62 |
| | 87 |
| | — |
| | 1,330 |
| | — |
| | 1,780 |
| | — |
|
Credit cards | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Other consumer loans | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Total consumer | 62 |
| | 87 |
| | — |
| | 2,753 |
| | — |
| | 2,504 |
| | — |
|
Total impaired loans with no related allowance recorded | $ | 21,611 |
| | $ | 32,545 |
| | $ | — |
| | $ | 13,901 |
| | $ | — |
| | $ | 16,079 |
|
| $ | — |
|
With allowance recorded | | | | | | | | | | | | | |
Commercial, financial and agricultural | $ | 45,171 |
| | $ | 45,385 |
| | $ | 6,813 |
| | $ | 62,564 |
| | $ | 428 |
| | $ | 57,930 |
| | $ | 155 |
|
Owner-occupied | 40,824 |
| | 40,884 |
| | 2,660 |
| | 38,073 |
| | 730 |
| | 38,432 |
| | 373 |
|
Total commercial and industrial | 85,995 |
| | 86,269 |
| | 9,473 |
| | 100,637 |
| | 1,158 |
| | 96,362 |
| | 528 |
|
Investment properties | 24,218 |
| | 24,218 |
| | 1,659 |
| | 23,604 |
| | 418 |
| | 24,439 |
| | 220 |
|
1-4 family properties | 10,458 |
| | 10,458 |
| | 309 |
| | 11,466 |
| | 442 |
| | 11,217 |
| | 226 |
|
Land and development | 19,129 |
| | 20,869 |
| | 2,720 |
| | 18,280 |
| | 150 |
| | 18,428 |
| | 74 |
|
Total commercial real estate | 53,805 |
| | 55,545 |
| | 4,688 |
| | 53,350 |
| | 1,010 |
| | 54,084 |
| | 520 |
|
Home equity lines | 3,915 |
| | 3,915 |
| | 174 |
| | 3,822 |
| | 76 |
| | 3,262 |
| | 30 |
|
Consumer mortgages | 18,767 |
| | 18,767 |
| | 350 |
| | 19,283 |
| | 394 |
| | 19,459 |
| | 199 |
|
Credit cards | — |
| | — |
| | — |
| | — |
| | — |
| | 4,985 |
| | — |
|
Other consumer loans | 4,932 |
| | 4,938 |
| | 248 |
| | 5,188 |
| | 143 |
| | — |
| | 72 |
|
Total consumer | 27,614 |
| | 27,620 |
|
| 772 |
| | 28,293 |
| | 613 |
| | 27,706 |
| | 301 |
|
Total impaired loans with allowance recorded | $ | 167,414 |
| | $ | 169,434 |
| | $ | 14,933 |
| | $ | 182,280 |
| | $ | 2,781 |
| | $ | 178,152 |
| | $ | 1,349 |
|
Total impaired loans | | | | | | | | | | | | | |
Commercial, financial and agricultural | $ | 66,720 |
| | $ | 77,843 |
| | $ | 6,813 |
| | $ | 73,693 |
| | $ | 428 |
| | $ | 71,505 |
| | $ | 155 |
|
Owner-occupied | 40,824 |
| | 40,884 |
| | 2,660 |
| | 38,073 |
| | 730 |
| | 38,432 |
| | 373 |
|
Total commercial and industrial | 107,544 |
| | 118,727 |
| | 9,473 |
| | 111,766 |
| | 1,158 |
| | 109,937 |
| | 528 |
|
Investment properties | 24,218 |
| | 24,218 |
|
| 1,659 |
| | 23,604 |
| | 418 |
|
| 24,439 |
| | 220 |
|
1-4 family properties | 10,458 |
| | 10,458 |
|
| 309 |
| | 11,466 |
| | 442 |
|
| 11,217 |
| | 226 |
|
Land and development | 19,129 |
| | 20,869 |
|
| 2,720 |
| | 18,299 |
| | 150 |
|
| 18,428 |
| | 74 |
|
Total commercial real estate | 53,805 |
| | 55,545 |
|
| 4,688 |
| | 53,369 |
| | 1,010 |
|
| 54,084 |
| | 520 |
|
Home equity lines | 3,915 |
| | 3,915 |
|
| 174 |
| | 5,245 |
| | 76 |
|
| 3,986 |
| | 30 |
|
Consumer mortgages | 18,829 |
| | 18,854 |
|
| 350 |
| | 20,613 |
| | 394 |
|
| 21,239 |
| | 199 |
|
Credit cards | — |
| | — |
|
| — |
| | — |
| | — |
|
| 4,985 |
| | — |
|
Other consumer loans | 4,932 |
| | 4,938 |
|
| 248 |
| | 5,188 |
| | 143 |
|
| — |
| | 72 |
|
Total consumer | 27,676 |
| | 27,707 |
|
| 772 |
| | 31,046 |
| | 613 |
|
| 30,210 |
| | 301 |
|
Total impaired loans | $ | 189,025 |
| | $ | 201,979 |
|
| $ | 14,933 |
| | $ | 196,181 |
| | $ | 2,781 |
|
| $ | 194,231 |
| | $ | 1,349 |
|
| | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
Impaired Loans (including accruing TDRs) |
| December 31, 2017 | | Year Ended December 31, 2017 |
(in thousands) | Recorded Investment | | Unpaid Principal Balance | | Related Allowance | | Average Recorded Investment | | Interest Income Recognized |
With no related allowance recorded | | | | | | | | | |
Commercial, financial and agricultural | $ | 8,220 |
| | $ | 9,576 |
| | $ | — |
| | $ | 21,686 |
| | $ | — |
|
Owner-occupied | — |
| | — |
| | — |
| | 6,665 |
| | — |
|
Total commercial and industrial | 8,220 |
| | 9,576 |
| | — |
| | 28,351 |
| | — |
|
Investment properties | — |
| | — |
| | — |
| | 123 |
| | — |
|
1-4 family properties | — |
| | — |
| | — |
| | 323 |
| | — |
|
Land and development | 56 |
| | 1,740 |
| | — |
| | 1,816 |
| | — |
|
Total commercial real estate | 56 |
| | 1,740 |
| | — |
| | 2,262 |
| | — |
|
Home equity lines | 2,746 |
| | 2,943 |
| | — |
| | 1,205 |
| | — |
|
Consumer mortgages | — |
| | — |
| | — |
| | 496 |
| | — |
|
Credit cards | — |
| | — |
| | — |
| | — |
| | — |
|
Other consumer loans | — |
| | — |
| | — |
| | — |
| | — |
|
Total consumer | 2,746 |
| | 2,943 |
| | — |
| | 1,701 |
| | — |
|
Total impaired loans with no related allowance recorded | $ | 11,022 |
| | $ | 14,259 |
| | $ | — |
| | $ | 32,314 |
| | $ | — |
|
With allowance recorded | | | | | | | | | |
Commercial, financial and agricultural | $ | 65,715 |
| | $ | 65,851 |
| | $ | 7,406 |
| | $ | 50,468 |
| | $ | 1,610 |
|
Owner-occupied | 37,399 |
| | 37,441 |
| | 2,109 |
| | 40,498 |
| | 1,382 |
|
Total commercial and industrial | 103,114 |
| | 103,292 |
| | 9,515 |
| | 90,966 |
| | 2,992 |
|
Investment properties | 23,364 |
| | 23,364 |
| | 1,100 |
| | 28,749 |
| | 1,144 |
|
1-4 family properties | 15,056 |
| | 15,056 |
| | 504 |
| | 16,257 |
| | 925 |
|
Land and development | 18,420 |
| | 18,476 |
| | 2,636 |
| | 23,338 |
| | 404 |
|
Total commercial real estate | 56,840 |
| | 56,896 |
| | 4,240 |
| | 68,344 |
| | 2,473 |
|
Home equity lines | 5,096 |
| | 5,096 |
| | 114 |
| | 7,476 |
| | 334 |
|
Consumer mortgages | 18,668 |
| | 18,668 |
| | 569 |
| | 19,144 |
| | 896 |
|
Credit cards | — |
| | — |
| | — |
| | — |
| | — |
|
Other consumer loans | 5,546 |
| | 5,546 |
| | 470 |
| | 4,765 |
| | 266 |
|
Total consumer | 29,310 |
| | 29,310 |
| | 1,153 |
| | 31,385 |
| | 1,496 |
|
Total impaired loans with allowance recorded | $ | 189,264 |
| | $ | 189,498 |
| | $ | 14,908 |
| | $ | 190,695 |
| | $ | 6,961 |
|
Total impaired loans | | | | | | | | | |
Commercial, financial and agricultural | $ | 73,935 |
| | $ | 75,427 |
| | $ | 7,406 |
| | $ | 72,154 |
| | $ | 1,610 |
|
Owner-occupied | 37,399 | | 37,441 | | 2,109 | | 47,163 | | 1,382 |
Total commercial and industrial | 111,334 | | 112,868 | | 9,515 | | 119,317 | | 2,992 |
Investment properties | 23,364 | | 23,364 | | 1,100 | | 28,872 | | 1,144 |
1-4 family properties | 15,056 |
| | 15,056 |
| | 504 |
| | 16,580 |
| | 925 |
|
Land and development | 18,476 |
| | 20,216 |
| | 2,636 |
| | 25,154 |
| | 404 |
|
Total commercial real estate | 56,896 |
| | 58,636 |
| | 4,240 |
| | 70,606 |
| | 2,473 |
|
Home equity lines | 7,842 |
| | 8,039 |
| | 114 |
| | 8,681 |
| | 334 |
|
Consumer mortgages | 18,668 |
| | 18,668 |
| | 569 |
| | 19,640 |
| | 896 |
|
Credit cards | — |
| | — |
| | — |
| | — |
| | — |
|
Other consumer loans | 5,546 |
| | 5,546 |
| | 470 |
| | 4,765 |
| | 266 |
|
Total consumer | 32,056 |
| | 32,253 |
| | 1,153 |
| | 33,086 |
| | 1,496 |
|
Total impaired loans | $ | 200,286 |
| | $ | 203,757 |
| | $ | 14,908 |
| | $ | 223,009 |
| | $ | 6,961 |
|
| | | | | | | | | |
The average recorded investment in impaired loans was $233.8 million2018 and $232.5 million respectively for the sixthree and threesix months ended June 30, 2017. Excluding accruing TDRs, there was no interest income recognized for the investment in impaired loans for the six2019 and three months ended June 30, 2017. Interest income recognized for accruing TDRs was $3.5 million and $1.8 million respectively for the six and three months ended June 30, 2017. 2018.At June 30, 20182019 and December 31, 2017,2018, impaired loans of $63.7$69.1 million and $49.0$51.3 million, respectively, were on non-accrual status.
Concessions provided
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
Impaired Loans (including accruing TDRs) |
| June 30, 2019 | | December 31, 2018 |
| | Recorded Investment | | | | Recorded Investment | |
(in thousands) | Unpaid Principal Balance | Without an ALL | With an ALL | Related Allowance | | Unpaid Principal Balance | Without an ALL | With an ALL | Related Allowance |
Commercial, financial and agricultural | $ | 94,581 |
| $ | 24,420 |
| $ | 59,760 |
| $ | 13,248 |
| | $ | 65,150 |
| $ | 22,298 |
| $ | 34,222 |
| $ | 7,133 |
|
Owner-occupied | 53,576 |
| 116 |
| 51,252 |
| 2,878 |
| | 49,588 |
| — |
| 48,902 |
| 3,074 |
|
Total commercial and industrial | 148,157 |
| 24,536 |
| 111,012 |
| 16,126 |
| | 114,738 |
| 22,298 |
| 83,124 |
| 10,207 |
|
Investment properties | 12,493 |
| — |
| 12,494 |
| 585 |
| | 13,916 |
| — |
| 13,916 |
| 1,523 |
|
1-4 family properties | 5,369 |
| — |
| 5,369 |
| 181 |
| | 5,586 |
| — |
| 5,586 |
| 131 |
|
Land and development | 11,636 |
| 1,055 |
| 9,313 |
| 463 |
| | 16,283 |
| 265 |
| 13,431 |
| 944 |
|
Total commercial real estate | 29,498 |
| 1,055 |
| 27,176 |
| 1,229 |
| | 35,785 |
| 265 |
| 32,933 |
| 2,598 |
|
Consumer mortgages | 19,988 |
| 883 |
| 18,814 |
| 268 |
| | 19,506 |
| — |
| 19,506 |
| 343 |
|
Home equity lines | 5,666 |
| — |
| 5,604 |
| 335 |
| | 3,264 |
| — |
| 3,235 |
| 224 |
|
Other consumer loans | 6,412 |
| — |
| 6,412 |
| 208 |
| | 5,565 |
| — |
| 5,565 |
| 177 |
|
Total consumer | 32,066 |
| 883 |
| 30,830 |
| 811 |
| | 28,335 |
| — |
| 28,306 |
| 744 |
|
Total loans | $ | 209,721 |
| $ | 26,474 |
| $ | 169,018 |
| $ | 18,166 |
| | $ | 178,858 |
| $ | 22,563 |
| $ | 144,363 |
| $ | 13,549 |
|
| | | | | | | | | |
|
| | | | | | | | | | | | | |
| Three Months Ended June 30, 2019 | | Three Months Ended June 30, 2018 |
(in thousands) | Average Recorded Investment | Interest Income Recognized(1) | | Average Recorded Investment | Interest Income Recognized(1) |
Commercial, financial and agricultural | $ | 86,393 |
| $ | 384 |
| | $ | 71,505 |
| $ | 452 |
|
Owner-occupied | 51,549 |
| 614 |
| | 38,432 |
| 444 |
|
Total commercial and industrial | 137,942 |
| 998 |
| | 109,937 |
| 896 |
|
Investment properties | 12,929 |
| 157 |
| | 24,439 |
| 220 |
|
1-4 family properties | 5,096 |
| 134 |
| | 11,217 |
| 226 |
|
Land and development | 11,061 |
| 34 |
| | 18,428 |
| 74 |
|
Total commercial real estate | 29,086 |
| 325 |
| | 54,084 |
| 520 |
|
Consumer mortgages | 19,565 |
| 217 |
| | 3,986 |
| 200 |
|
Home equity lines | 4,849 |
| 37 |
| | 21,239 |
| 56 |
|
Other consumer loans | 5,940 |
| 81 |
| | 4,985 |
| 71 |
|
Total consumer | 30,354 |
| 335 |
| | 30,210 |
| 327 |
|
Total loans | $ | 197,382 |
| $ | 1,658 |
| | $ | 194,231 |
| $ | 1,743 |
|
| | | | | |
| |
(1) | Of the interest income recognized during the three months ended June 30, 2019 and 2018, cash-basis interest income was $290 thousand and $394 thousand, respectively. |
|
| | | | | | | | | | | | | |
| Six Months Ended June 30, 2019 | | Six Months Ended June 30, 2018 |
(in thousands) | Average Recorded Investment | Interest Income Recognized(1) | | Average Recorded Investment | Interest Income Recognized(1) |
Commercial, financial and agricultural | $ | 81,373 |
| $ | 938 |
| | $ | 73,693 |
| $ | 851 |
|
Owner-occupied | 50,794 |
| 1,140 |
| | 38,073 |
| 814 |
|
Total commercial and industrial | 132,167 |
| 2,078 |
| | 111,766 |
| 1,665 |
|
Investment properties | 12,984 |
| 298 |
| | 23,604 |
| 418 |
|
1-4 family properties | 5,302 |
| 265 |
| | 11,466 |
| 442 |
|
Land and development | 11,062 |
| 69 |
| | 18,299 |
| 150 |
|
Total commercial real estate | 29,348 |
| 632 |
| | 53,369 |
| 1,010 |
|
Consumer mortgages | 19,801 |
| 429 |
| | 5,245 |
| 395 |
|
Home equity lines | 4,076 |
| 73 |
| | 20,613 |
| 102 |
|
Other consumer loans | 5,701 |
| 159 |
| | 5,188 |
| 143 |
|
Total consumer | 29,578 |
| 661 |
| | 31,046 |
| 640 |
|
Total loans | $ | 191,093 |
| $ | 3,371 |
| | $ | 196,181 |
| $ | 3,315 |
|
| | | | | |
| |
(1) | Of the interest income recognized during the six months ended June 30, 2019 and 2018, cash-basis interest income was $690 thousand and $535 thousand, respectively. |
Information about Synovus' TDRs is presented in the following tables. Modifications of loans that are accounted for within a pool under ASC Topic 310-30 are excluded as TDRs. Accordingly, such modifications do not result in the removal of those loans from the pool, even if the modification of those loans would otherwise be considered a TDR. As a result, all such acquired loans that would otherwise meet the criteria for classification as a TDR are primarily inexcluded from the form of providing a below market interest rate given the borrower's credit risk, a period of time generally less than one year with a reduction of required principal and/or interest payments (e.g., interest only for a period of time), or an extension of the maturity of the loan generally for less than one year. Insignificant periods of reduction of principal and/or interest payments, or one-time deferrals of 3 months or less, are generally not considered to be financial concessions.
tables below. The following tables represent, by concession type, the post-modification balance for loans modified or renewed during the sixthree and threesix months ended June 30, 20182019 and 20172018 that were reported as accruing or non-accruing TDRs.
|
| | | | | | | | | | | | | | | | | | | | |
TDRs by Concession Type | | |
| Six Months Ended June 30, 2018 | |
(in thousands, except contract data) | Number of Contracts | | Principal Forgiveness | | Below Market Interest Rate | | Term Extensions and/or Other Concessions | | Total | |
Commercial, financial and agricultural | 14 |
| | $ | — |
| | $ | — |
| | $ | 1,565 |
| | $ | 1,565 |
| |
Owner-occupied | 6 |
| | — |
| | 4,799 |
| | 684 |
| | 5,483 |
| |
Total commercial and industrial | 20 |
| | — |
| | 4,799 |
| | 2,249 |
| | 7,048 |
| |
Investment properties | 3 |
| | — |
| | 6,011 |
| | 2,215 |
| | 8,226 |
| |
1-4 family properties | 7 |
| | — |
| | 965 |
| | 492 |
| | 1,457 |
| |
Land and development | 3 |
| | — |
| | — |
| | 1,786 |
| | 1,786 |
| |
Total commercial real estate | 13 |
| | — |
| | 6,976 |
| | 4,493 |
| | 11,469 |
| |
Home equity lines | 3 |
| | — |
| | 172 |
| | 148 |
| | 320 |
| |
Consumer mortgages | 14 |
| | — |
| | 4,695 |
| | 87 |
| | 4,782 |
| |
Credit cards | — |
| | — |
| | — |
| | — |
| | — |
| |
Other consumer loans | 31 |
| | — |
| | 925 |
| | 821 |
| | 1,746 |
| |
Total consumer | 48 |
| | — |
| | 5,792 |
| | 1,056 |
| | 6,848 |
| |
Total TDRs | 81 |
| | $ | — |
| | $ | 17,567 |
| | $ | 7,798 |
| | $ | 25,365 |
| (1 | ) |
| | | | | | | | | | |
| Three Months Ended June 30, 2018 | |
(in thousands, except contract data) | Number of Contracts | | Principal Forgiveness | | Below Market Interest Rate | | Term Extensions and/or Other Concessions | | Total | |
Commercial, financial and agricultural | 5 |
| | $ | — |
| | $ | — |
| | $ | 576 |
| | $ | 576 |
| |
Owner-occupied | 4 |
| | — |
| | 2,094 |
| | 592 |
| | 2,686 |
| |
Total commercial and industrial | 9 |
| | — |
| | 2,094 |
| | 1,168 |
| | 3,262 |
| |
Investment properties | 2 |
| | — |
| | 6,011 |
| | 256 |
| | 6,267 |
| |
1-4 family properties | 1 |
| | — |
| | — |
| | 492 |
| | 492 |
| |
Land and development | 3 |
| | — |
| | — |
| | 1,786 |
| | 1,786 |
| |
Total commercial real estate | 6 |
| | — |
| | 6,011 |
| | 2,534 |
| | 8,545 |
| |
Home equity lines | 3 |
| | — |
| | 172 |
| | 148 |
| | 320 |
| |
Consumer mortgages | 7 |
| | — |
| | 2,963 |
| | 87 |
| | 3,050 |
| |
Credit cards | — |
| | — |
| | — |
| | — |
| | — |
| |
Other consumer loans | 17 |
| | — |
| | 388 |
| | 313 |
| | 701 |
| |
Total consumer | 27 |
| | — |
| | 3,523 |
| | 548 |
| | 4,071 |
| |
Total TDRs | 42 |
| | $ | — |
| | $ | 11,628 |
| | $ | 4,250 |
| | $ | 15,878 |
| (1 | ) |
| | | | | | | | | | |
|
| | | | | | | | | | | | | | | |
TDRs by Concession Type | | |
| Three Months Ended June 30, 2019 | |
(in thousands, except contract data) | Number of Contracts | | Below Market Interest Rate | | Other Concessions(1) | | Total | |
Commercial, financial and agricultural | 21 |
| | $ | 1,343 |
| | $ | 1,589 |
| | $ | 2,932 |
| |
Owner-occupied | 4 |
| | 1,082 |
| | — |
| | 1,082 |
| |
Total commercial and industrial | 25 |
| | 2,425 |
| | 1,589 |
| | 4,014 |
| |
Investment properties | 1 |
| | 180 |
| | — |
| | 180 |
| |
1-4 family properties | 4 |
| | 514 |
| | — |
| | 514 |
| |
Land and development | 2 |
| | 169 |
| | — |
| | 169 |
| |
Total commercial real estate | 7 |
| | 863 |
| | — |
| | 863 |
| |
Consumer mortgages | 1 |
| | 109 |
| | — |
| | 109 |
| |
Home equity lines | 24 |
| | 2,321 |
| | — |
| | 2,321 |
| |
Other consumer loans | 34 |
| | 586 |
| | 1,332 |
| | 1,918 |
| |
Total consumer | 59 |
| | 3,016 |
| | 1,332 |
| | 4,348 |
| |
Total TDRs | 91 |
| | $ | 6,304 |
| | $ | 2,921 |
| | $ | 9,225 |
| (2) |
| | |
| Three Months Ended June 30, 2018 | |
(in thousands, except contract data) | Number of Contracts | | Below Market Interest Rate | | Other Concessions(1) | | Total | |
Commercial, financial and agricultural | 5 |
| | $ | — |
| | $ | 576 |
| | $ | 576 |
| |
Owner-occupied | 4 |
| | 2,094 |
| | 592 |
| | 2,686 |
| |
Total commercial and industrial | 9 |
| | 2,094 |
| | 1,168 |
| | 3,262 |
| |
Investment properties | 2 |
| | 6,011 |
| | 256 |
| | 6,267 |
| |
1-4 family properties | 1 |
| | — |
| | 492 |
| | 492 |
| |
Land and development | 3 |
| | — |
| | 1,786 |
| | 1,786 |
| |
Total commercial real estate | 6 |
| | 6,011 |
| | 2,534 |
| | 8,545 |
| |
Consumer mortgages | 7 |
| | 2,963 |
| | 87 |
| | 3,050 |
| |
Home equity lines | 3 |
| | 172 |
| | 148 |
| | 320 |
| |
Other consumer loans | 17 |
| | 388 |
| | 313 |
| | 701 |
| |
Total consumer | 27 |
| | 3,523 |
| | 548 |
| | 4,071 |
| |
Total TDRs | 42 |
| | $ | 11,628 |
| | $ | 4,250 |
| | $ | 15,878 |
| (3) |
| | |
(1) Other concessions generally include term extensions, interest only payments for a period of time, or principal forgiveness, but there was no principal forgiveness for each of the three months ended June 30, 2019 and 2018.
(2) No net charge-offs were recorded during the six andthree months ended June 30, 2019 upon restructuring of these loans.
(3) No net charge-offs were recorded during the three months ended June 30, 2018 upon restructuring of these loans.
|
| | | | | | | | | | | | | | | | |
TDRs by Concession Type | Six Months Ended June 30, 2019 | |
(in thousands, except contract data) | Number of Contracts | | Below Market Interest Rate | | Other Concessions(1) | | Total | |
Commercial, financial and agricultural | 34 |
| | $ | 3,126 |
| | $ | 2,488 |
| | $ | 5,614 |
| |
Owner-occupied | 6 |
| | 2,031 |
| | — |
| | 2,031 |
| |
Total commercial and industrial | 40 |
| | 5,157 |
| | 2,488 |
| | 7,645 |
| |
Investment properties | 2 |
| | 663 |
| | — |
| | 663 |
| |
1-4 family properties | 10 |
| | 1,307 |
| | — |
| | 1,307 |
| |
Land and development | 2 |
| | 169 |
| | — |
| | 169 |
| |
Total commercial real estate | 14 |
| | 2,139 |
| | — |
| | 2,139 |
| |
Consumer mortgages | 5 |
| | 237 |
| | 1,214 |
| | 1,451 |
| |
Home equity lines | 25 |
| | 2,321 |
| | 105 |
| | 2,426 |
| |
Other consumer loans | 52 |
| | 694 |
| | 2,377 |
| | 3,071 |
| |
Total consumer | 82 |
| | 3,252 |
| | 3,696 |
| | 6,948 |
| |
Total TDRs | 136 |
| | $ | 10,548 |
| | $ | 6,184 |
| | $ | 16,732 |
| (2 | ) |
| | |
| Six Months Ended June 30, 2018 | |
(in thousands, except contract data) | Number of Contracts | | Below Market Interest Rate | | Other Concessions(1) | | Total | |
Commercial, financial and agricultural | 14 |
| | $ | — |
| | $ | 1,565 |
| | $ | 1,565 |
| |
Owner-occupied | 6 |
| | 4,799 |
| | 684 |
| | 5,483 |
| |
Total commercial and industrial | 20 |
| | 4,799 |
| | 2,249 |
| | 7,048 |
| |
Investment properties | 3 |
| | 6,011 |
| | 2,215 |
| | 8,226 |
| |
1-4 family properties | 7 |
| | 965 |
| | 492 |
| | 1,457 |
| |
Land and development | 3 |
| | — |
| | 1,786 |
| | 1,786 |
| |
Total commercial real estate | 13 |
| | 6,976 |
| | 4,493 |
| | 11,469 |
| |
Consumer mortgages | 14 |
| | 4,695 |
| | 87 |
| | 4,782 |
| |
Home equity lines | 3 |
| | 172 |
| | 148 |
| | 320 |
| |
Other consumer loans | 31 |
| | 925 |
| | 821 |
| | 1,746 |
| |
Total consumer | 48 |
| | 5,792 |
| | 1,056 |
| | 6,848 |
| |
Total TDRs | 81 |
| | $ | 17,567 |
| | $ | 7,798 |
| | $ | 25,365 |
| (3) |
| | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | |
TDRs by Concession Type | | |
| Six Months Ended June 30, 2017 | |
(in thousands, except contract data) | Number of Contracts | | Principal Forgiveness | | Below Market Interest Rate | | Term Extensions and/or Other Concessions | | Total | |
Commercial, financial and agricultural | 28 |
| | $ | — |
| | $ | 5,760 |
| | $ | 6,279 |
| | $ | 12,039 |
| |
Owner-occupied | 1 |
| | — |
| | — |
| | 22 |
| | 22 |
| |
Total commercial and industrial | 29 |
| | — |
| | 5,760 |
| | 6,301 |
| | 12,061 |
| |
Investment properties | — |
| | — |
| | — |
| | — |
| | — |
| |
1-4 family properties | 16 |
| | — |
| | 2,089 |
| | 513 |
| | 2,602 |
| |
Land and development | 1 |
| | — |
| | — |
| | 135 |
| | 135 |
| |
Total commercial real estate | 17 |
| | — |
| | 2,089 |
| | 648 |
| | 2,737 |
| |
Home equity lines | — |
| | — |
| | — |
| | — |
| | — |
| |
Consumer mortgages | 1 |
| | — |
| | — |
| | 9 |
| | 9 |
| |
Credit cards | — |
| | — |
| | — |
| | — |
| | — |
| |
Other consumer loans | 8 |
| | — |
| | — |
| | 570 |
| | 570 |
| |
Total consumer | 9 |
| | — |
| | — |
| | 579 |
| | 579 |
| |
Total TDRs | 55 |
| | $ | — |
| | $ | 7,849 |
| | $ | 7,528 |
| | $ | 15,377 |
| (2 | ) |
| | | | | | | | | | |
| Three Months Ended June 30, 2017 | |
(in thousands, except contract data) | Number of Contracts | | Principal Forgiveness | | Below Market Interest Rate | | Term Extensions and/or Other Concessions | | Total | |
Commercial, financial and agricultural | 10 |
| | $ | — |
| | $ | 1,895 |
| | $ | 740 |
| | $ | 2,635 |
| |
Owner-occupied | 1 |
| | — |
| | — |
| | 22 |
| | 22 |
| |
Total commercial and industrial | 11 |
| | — |
| | 1,895 |
| | 762 |
| | 2,657 |
| |
Investment properties | — |
| | — |
| | — |
| | — |
| | — |
| |
1-4 family properties | 8 |
| | — |
| | 478 |
| | 196 |
| | 674 |
| |
Land and development | 1 |
| | — |
| | — |
| | 135 |
| | 135 |
| |
Total commercial real estate | 9 |
| | — |
| | 478 |
| | 331 |
| | 809 |
| |
Home equity lines | — |
| | — |
| | — |
| | — |
| | — |
| |
Consumer mortgages | 1 |
| | — |
| | — |
| | 9 |
| | 9 |
| |
Credit cards | — |
| | — |
| | — |
| | — |
| | — |
| |
Other consumer loans | 5 |
| | — |
| | — |
| | 295 |
| | 295 |
| |
Total consumer | 6 |
| | — |
| | — |
| | 304 |
| | 304 |
| |
Total TDRs | 26 |
| | $ | — |
| | $ | 2,373 |
| | $ | 1,397 |
| | $ | 3,770 |
| (2 | ) |
| | | | | | | | | | |
(1) Other concessions generally include term extensions, interest only payments for a period of time, or principal forgiveness, but there was no principal forgiveness for each of the six months ended June 30, 2019 and 2018.(2) No net charge-offs were recorded during the six and three months ended June 30, 20172019 upon restructuring of these loans.
For both(3) No net charge-offs were recorded during the six and three months ended June 30, 2018 upon restructuring of these loans.
For both the three and six months ended June 30, 2019 there were eight defaultswas one default with a recorded investment of $10.5 million$5 thousand on accruing TDRs restructured during the previous twelve months (defaults are defined as the earlier of the TDR being placed on non-accrual status or reaching 90 days past due with respect to principal and/or interest payments) compared to threeeight defaults for both the six and three months ended June 30, 2017 with a recorded investment of $292 thousand.$10.5 million for both the three and six months ended June 30, 2018.
If, at the time a loan was designated as a TDR, the loan was not already impaired, the measurement of impairment that resulted from the TDR designation closely approximates the reserve derived through specific loan measurement of impairment in accordance with ASC 310-10-35. Generally, the change in the allowance for loan losses resulting from such TDR designation is not significant. At June 30, 2018,2019, the allowance for loan losses allocated to accruing TDRs totaling $125.3$126.4 million was $6.5$5.7 million compared to accruing TDRs of $151.3$115.6 million with an allocated allowance for loan losses of $8.7$6.1 million at December 31, 2017.2018. Non-accrual, non-homogeneous loans (commercial-type impaired loans greater than $1 million) that are designated as TDRs are individually measured for the amount of impairment, if any, both before and after the TDR designation.designation.As of June 30, 2019 and December 31, 2018, there were no commitments to lend a material amount of additional funds to any customer whose loan was classified as a TDR.
Note 75 - Goodwill and Other Intangible Assets
Changes to the carrying amount of goodwill by reporting unit for the six months ended June 30, 2019 are provided in the following table. There were no changes to the carrying amount of goodwill during the year ended December 31, 2018.
|
| | | | | | | | | | | | |
(in thousands) | | Synovus Bank Reporting Unit | | Trust Services Reporting Unit | | Total |
Balance as of December 31, 2018 | | $ | 32,884 |
| | $ | 24,431 |
| | $ | 57,315 |
|
Goodwill acquired during the year (preliminary allocation) and adjustments | | 435,075 |
| | — |
| | 435,075 |
|
Balance as of June 30, 2019 | | $ | 467,959 |
| | $ | 24,431 |
| | $ | 492,390 |
|
| | | | | | |
Effective January 1, 2019, Synovus acquired FCB. In connection with the acquisition, Synovus recorded $435.1 million of goodwill based on Acquisition Date preliminary fair value estimates of the assets acquired and liabilities assumed in the business combination, including measurement period adjustments recorded during the three months ended June 30, 2019, the most significant of which consisted of a decrease in core deposit intangible assets of $10.8 million, with offsetting increases in goodwill and net deferred tax assets. Additionally, Synovus recorded a $57.4 million core deposit intangible asset on the Acquisition Date, including the aforementioned measurement period adjustment recorded during the three months ended June 30, 2019. See "Part I - Item 1. Financial Statements and Supplementary Data - Note 2 - Acquisitions" in this Report for additional information on the FCB acquisition.
As of June 30, 2019, Synovus completed its annual goodwill impairment evaluation applying ASC 350-20-35-3A, Goodwill Subsequent Measurement - Qualitative Assessment Approach based on the preliminary allocation of goodwill to the reporting units shown above and concluded that goodwill was not impaired.
The following table shows the gross carrying amount and accumulated amortization of other intangible assets as of June 30, 2019 and December 31, 2018, which primarily consist of core deposit intangible assets acquired in the FCB acquisition. Core deposit intangible assets were $52.2 million at June 30, 2019. The CDI is being amortized over its estimated useful life of approximately ten years utilizing an accelerated method. Amortization expense recognized on intangible assets for the three and six months ended June 30, 2019, was $2.4 million and $5.8 million, respectively. Amortization expense recognized on intangible assets for the three and six months ended June 30, 2018 was $292 thousand and $583 thousand, respectively.
|
| | | | | | | | |
(in thousands) | | June 30, 2019 | | December 31, 2018 |
Other intangible assets, gross carrying amount | | $ | 70,328 |
| | $ | 12,928 |
|
Other intangible assets, accumulated amortization | | (8,855 | ) | | (3,053 | ) |
Other intangible assets, net carrying amount | | $ | 61,473 |
| | $ | 9,875 |
|
| | | | |
Note 6 - Shareholders' Equity and Other Comprehensive Income (Loss)
Stock issued for acquisition of FCB
On January 1, 2019, as part of the FCB acquisition, Synovus issued 22.0 million shares of common stock and reissued 27.4 million shares of treasury stock and incurred $417 thousand in costs related to the issuance. FCB stockholders received 1.055 shares of Synovus common stock for each outstanding share of FCB common stock. Also, under the terms of the Merger Agreement, outstanding stock options, non-vested restricted share units, and warrants were converted into options, restricted share units, and warrants, respectively, to purchase and receive Synovus common stock. The total value of the acquisition consideration transferred by Synovus was $1.63 billion. See "Part I - Item 1. Financial Statements and Supplementary Data - Note 2 - Acquisitions" in this Report for more information on the FCB acquisition.
Repurchases of Common Stock
On June 17, 2019, Synovus announced that the Board of Directors increased its prior $400 million share repurchase authorization to $725 million for the year 2019. As of June 30, 2019, Synovus had repurchased under this program a total of $345.0 million, or 9.2 million shares of its common stock, at an average price of $37.43 per share.
Changes in Accumulated Other Comprehensive Income (Loss) by Component (Net of Income Taxes)
The following tables illustrate activity within the balances in accumulated other comprehensive income (loss) by component
for the sixthree and threesix months ended June 30, 20182019 and 2017.2018.
|
| | | | | | | | | | | | | | | |
Changes in Accumulated Other Comprehensive Income (Loss) by Component (Net of Income Taxes) |
(in thousands) | Net unrealized losses on cash flow hedges(1) | | Net unrealized gains (losses) on investment securities available for sale(1) | | Post-retirement unfunded health benefit | | Total |
Balance, April 1, 2019 | $ | (12,137 | ) | | $ | (7,071 | ) | | $ | 866 |
| | $ | (18,342 | ) |
Other comprehensive income (loss) before reclassifications | — |
| | 66,290 |
| | — |
| | 66,290 |
|
Amounts reclassified from AOCI | — |
| | 1,367 |
| | (26 | ) | | 1,341 |
|
Net current period other comprehensive income (loss) | — |
| | 67,657 |
| | (26 | ) | | 67,631 |
|
Balance, June 30, 2019 | $ | (12,137 | ) | | $ | 60,586 |
| | $ | 840 |
| | $ | 49,289 |
|
| | | | | | | |
Balance, April 1, 2018 | $ | (12,137 | ) | | $ | (96,647 | ) | | $ | 1,007 |
| | $ | (107,777 | ) |
Other comprehensive income (loss) before reclassifications | — |
| | (18,878 | ) | | — |
| | (18,878 | ) |
Amounts reclassified from AOCI | — |
| | 960 |
| | (25 | ) | | 935 |
|
Net current period other comprehensive income (loss) | — |
| | (17,918 | ) | | (25 | ) | | (17,943 | ) |
Balance, June 30, 2018 | $ | (12,137 | ) | | $ | (114,565 | ) | | $ | 982 |
| | $ | (125,720 | ) |
| | | | | | | |
Balance, January 1, 2019 | $ | (12,137 | ) | | $ | (83,179 | ) | | $ | 896 |
| | $ | (94,420 | ) |
Other comprehensive income (loss) before reclassifications | — |
| | 142,453 |
| | — |
| | 142,453 |
|
Amounts reclassified from AOCI | — |
| | 1,312 |
| | (56 | ) | | 1,256 |
|
Net current period other comprehensive income (loss) | — |
| | 143,765 |
| | (56 | ) | | 143,709 |
|
Balance, June 30, 2019 | $ | (12,137 | ) | | $ | 60,586 |
| | $ | 840 |
| | $ | 49,289 |
|
| | | | | | | |
Balance, December 31, 2017 | $ | (12,137 | ) | | $ | (43,470 | ) | | $ | 853 |
| | $ | (54,754 | ) |
Reclassification from adoption of ASU 2018-02 | — |
| | (7,763 | ) | | 175 |
| | (7,588 | ) |
Cumulative-effect adjustment from adoption of ASU 2016-01 | — |
| | 117 |
| | — |
| | 117 |
|
Other comprehensive income (loss) before reclassifications | — |
| | (64,409 | ) | | — |
| | (64,409 | ) |
Amounts reclassified from AOCI | — |
| | 960 |
| | (46 | ) | | 914 |
|
Net current period other comprehensive income (loss) | — |
| | (63,449 | ) | | (46 | ) | | (63,495 | ) |
Balance, June 30, 2018 | $ | (12,137 | ) | | $ | (114,565 | ) | | $ | 982 |
| | $ | (125,720 | ) |
| | | | | | | |
|
| | | | | | | | | | | | | | | |
Changes in Accumulated Other Comprehensive Income (Loss) by Component (Net of Income Taxes) |
(in thousands) | Net unrealized gains (losses) on cash flow hedges | | Net unrealized gains (losses) on investment securities available for sale | | Post-retirement unfunded health benefit | | Total |
Balance at December 31, 2017 | $ | (12,137 | ) | | $ | (43,470 | ) | | $ | 853 |
| | $ | (54,754 | ) |
Other comprehensive income (loss) before reclassifications | — |
| | (64,409 | ) | | — |
| | (64,409 | ) |
Amounts reclassified from accumulated other comprehensive income (loss) | — |
| | 960 |
| | (46 | ) | | 914 |
|
Net current period other comprehensive loss | — |
| | (63,449 | ) | | (46 | ) | | (63,495 | ) |
Reclassification from adoption of ASU 2018-02 | — |
| | (7,763 | ) | | 175 |
| | (7,588 | ) |
Cumulative-effect adjustment from adoption of ASU 2016-01 | — |
| | 117 |
| | — |
| | 117 |
|
Balance as of June 30, 2018 | $ | (12,137 | ) | | $ | (114,565 | ) | | $ | 982 |
| | $ | (125,720 | ) |
| | | | | | | |
Balance as of April 1, 2018 | $ | (12,137 | ) | | $ | (96,647 | ) | | $ | 1,007 |
| | $ | (107,777 | ) |
Other comprehensive income (loss) before reclassifications | — |
| | (18,878 | ) | | — |
| | (18,878 | ) |
Amounts reclassified from accumulated other comprehensive income (loss) | — |
| | 960 |
| | (25 | ) | | 935 |
|
Net current period other comprehensive income | — |
| | (17,918 | ) | | (25 | ) | | (17,943 | ) |
Balance as of June 30, 2018 | $ | (12,137 | ) | | $ | (114,565 | ) | | $ | 982 |
| | $ | (125,720 | ) |
| | | | | | | |
|
| | | | | | | | | | | | | | | |
(in thousands) | Net unrealized gains (losses) on cash flow hedges | | Net unrealized gains (losses) on investment securities available for sale | | Post-retirement unfunded health benefit | | Total |
Balance at December 31, 2016 | $ | (12,217 | ) | | $ | (44,324 | ) | | $ | 882 |
| | $ | (55,659 | ) |
Other comprehensive income before reclassifications | — |
| | 12,453 |
| | — |
| | 12,453 |
|
Amounts reclassified from accumulated other comprehensive income (loss) | 80 |
| | (4,715 | ) | | (24 | ) | | (4,659 | ) |
Net current period other comprehensive income | 80 |
| | 7,738 |
| | (24 | ) | | 7,794 |
|
Balance as of June 30, 2017 | $ | (12,137 | ) | | $ | (36,586 | ) | | $ | 858 |
| | $ | (47,865 | ) |
| | | | | | | |
Balance as of April 1, 2017 | $ | (12,177 | ) | | $ | (43,444 | ) | | $ | 870 |
| | $ | (54,751 | ) |
Other comprehensive income before reclassifications | — |
| | 6,857 |
| | — |
| | 6,857 |
|
Amounts reclassified from accumulated other comprehensive income (loss) | 40 |
| | 1 |
| | (12 | ) | | 29 |
|
Net current period other comprehensive income (loss) | 40 |
| | 6,858 |
| | (12 | ) | | 6,886 |
|
Balance as of June 30, 2017 | $ | (12,137 | ) | | $ | (36,586 | ) | | $ | 858 |
| | (47,865 | ) |
| | | | | | | |
(1) In accordance with ASC 740-20-45-11(b), a deferred tax asset valuation allowance associated with unrealized gains and losses not recognized in income is charged directly to other comprehensive income (loss). During the years 2010 and 2011, Synovus recorded a deferred tax asset valuation allowance associated with net unrealized losses not recognized in income directly to other comprehensive income (loss) by applying the portfolio approach for allocation of the valuation allowance. Synovus has consistently applied the portfolio approach which treats derivative instruments and available for sale securities as a single portfolio. As of June 30, 2018,For all periods presented, the ending balance in net unrealized gains (losses) on cash flow hedges and net unrealized gains (losses) on investment securities available for sale includes unrealized losses of $12.1 million and $13.3 million, respectively, related to the residual tax effects remaining in OCI due to the previously established deferred tax asset valuation allowance. Under the portfolio approach, these unrealized losses are realized at the time the entire portfolio is sold or disposed.
|
| | | | | | | | | | |
Reclassifications out of Accumulated Other Comprehensive Income (Loss) |
Details About Accumulated Other Comprehensive Income (Loss) Components | | Amount Reclassified from Accumulated Other Comprehensive Income (Loss) | | Affected Line Item in the Statement Where Net Income is Presented |
| | For the Six Months Ended June 30, | | |
| | 2018 | | 2017 | | |
Net unrealized gains (losses) on cash flow hedges: | | | | | | |
Amortization of deferred losses | | $ | — |
| | $ | (130 | ) | | Interest expense |
| | — |
| | 50 |
| | Income tax (expense) benefit |
| | $ | — |
| | $ | (80 | ) | | Reclassifications, net of income taxes |
| | | | | | |
Net unrealized gains on investment securities available for sale: | | | | | | |
Realized (losses) gains on sale of securities | | $ | (1,296 | ) | | $ | 7,667 |
| | Investment securities gains, net |
| | 336 |
| | (2,952 | ) | | Income tax (expense) benefit |
| | $ | (960 | ) | | $ | 4,715 |
| | Reclassifications, net of income taxes |
Post-retirement unfunded health benefit: | | | | | | |
Amortization of actuarial gains | | $ | 68 |
| | $ | 40 |
| | Salaries and other personnel expense |
| | (22 | ) | | (16 | ) | | Income tax (expense) benefit |
| | $ | 46 |
| | $ | 24 |
| | Reclassifications, net of income taxes |
| | | | | | |
|
| | | | | | | | | | |
Details About Accumulated Other Comprehensive Income (Loss) Components | | Amount Reclassified from Accumulated Other Comprehensive Income (Loss) | | Affected Line Item in the Statement Where Net Income is Presented |
| | For the Three Months Ended June 30, | | |
| | 2018 | | 2017 | | |
Net unrealized gains (losses) on cash flow hedges: | | | | | | |
Amortization of deferred losses | | $ | — |
| | $ | (65 | ) | | Interest expense |
| | — |
| | 25 |
| | Income tax (expense) benefit |
| | $ | — |
| | $ | (40 | ) | | Reclassifications, net of income taxes |
| | | | | | |
Net unrealized gains on investment securities available for sale: | | | | | | |
Realized losses on sale of securities | | $ | (1,296 | ) | | $ | (1 | ) | | Investment securities gains, net |
| | 336 |
| | — |
| | Income tax (expense) benefit |
| | $ | (960 | ) | | $ | (1 | ) | | Reclassifications, net of income taxes |
Post-retirement unfunded health benefit: | | | | | | |
Amortization of actuarial gains | | $ | 34 |
| | $ | 20 |
| | Salaries and other personnel expense |
| | (9 | ) | | (8 | ) | | Income tax (expense) benefit |
| | $ | 25 |
| | $ | 12 |
| | Reclassifications, net of income taxes |
| | | | | | |
Note 87 - Fair Value Accounting
Synovus carries various assets and liabilities at fair value based on the fair value accounting guidance under ASC 820, Fair Value Measurements, and ASC 825, Financial Instruments. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an “exit price”) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
Fair Value Hierarchy
Synovus determines the fair value of its financial instruments based on the fair value hierarchy established under ASC 820-10, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the financial instrument's fair value measurement in its entirety. There are three levels of inputs that may be used to measure fair value. The three levels of inputs of the valuation hierarchy are defined below:
|
| |
Level 1 | Quoted prices (unadjusted) in active markets for identical assets and liabilities for the instrument or security to be valued. Level 1 assets include U.S. Treasury securities and mutual funds. |
Level 2 | Observable inputs other than Level 1 quoted prices, such as quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active or model-based valuation techniques for which all significant assumptions are derived principally from or corroborated by observable market data. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined by using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. U.S. Government sponsored agency securities, mortgage-backed securities issued by GSEs and agencies, obligations of states and municipalities, collateralized mortgage obligations issued by GSEs, and mortgage loans held-for-sale are generally included in this category. |
Level 3 | Unobservable inputs that are supported by little, if any, market activity for the asset or liability. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow models and similar techniques, and may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability. These methods of valuation may result in a significant portion of the fair value being derived from unobservable assumptions that reflect Synovus' own estimates for assumptions that market participants would use in pricing the asset or liability. This category primarily includes collateral-dependent impaired loans, other loans held for sale, other real estate, certain corporate securities, private equity investments, GGL/SBA loan servicing assets, and the earnout liability. |
See "Part II - Item 8. Financial Statements and Supplementary Data - Note 151 - Fair Value Accounting"Summary of Significant Accounting Policies" to the consolidated financial statements of Synovus' 20172018 Form 10-K for a description of the fair value hierarchy and valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presentstables present all financial instruments measured at fair value on a recurring basis as of June 30, 20182019 and December 31, 2017, according to the valuation hierarchy included in ASC 820-10. For debt securities, class was determined based on the nature and risks of the investments. Synovus did not have any transfers between levels during the six and three months ended June 30, 2018 and year ended December 31, 2017.2018.
|
| | | | | | | | | | | | | | | |
| June 30, 2019 |
(in thousands) | Level 1 | | Level 2 | | Level 3 | | Total Assets and Liabilities at Fair Value |
Assets | | | | | | | |
Trading securities: | | | | | | | |
U.S. Government agency securities | $ | — |
| | $ | 31 |
| | $ | — |
| | $ | 31 |
|
Mortgage-backed securities issued by U.S. Government agencies | — |
| | 3,504 |
| | — |
| | 3,504 |
|
Collateralized mortgage obligations issued by U.S. Government sponsored enterprises | — |
| | 999 |
| | — |
| | 999 |
|
Other mortgage-backed securities | — |
| | 1,464 |
| | — |
| | 1,464 |
|
State and municipal securities | — |
| | 382 |
| | — |
| | 382 |
|
Corporate debt securities | — |
| | 77 |
| | — |
| | 77 |
|
Total trading securities | $ | — |
| | $ | 6,457 |
| | $ | — |
| | $ | 6,457 |
|
Investment securities available for sale: | | | | | | | |
U.S. Treasury securities | $ | 19,689 |
| | $ | — |
| | $ | — |
| | $ | 19,689 |
|
U.S. Government agency securities | — |
| | 65,687 |
| | — |
| | 65,687 |
|
Mortgage-backed securities issued by U.S. Government agencies | — |
| | 88,277 |
| | — |
| | 88,277 |
|
Mortgage-backed securities issued by U.S. Government sponsored enterprises | — |
| | 4,948,671 |
| | — |
| | 4,948,671 |
|
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | — |
| | 862,533 |
| | — |
| | 862,533 |
|
Commercial mortgage-backed securities issued by U.S. Government sponsored enterprises | — |
| | 368,443 |
| | — |
| | 368,443 |
|
State and municipal securities | — |
| | 2,100 |
| | — |
| | 2,100 |
|
Asset-backed securities | — |
| | 505,117 |
| | — |
| | 505,117 |
|
Corporate debt securities | — |
| | 144,478 |
| | 2,017 |
| | 146,495 |
|
Total investment securities available for sale | $ | 19,689 |
| | $ | 6,985,306 |
| | $ | 2,017 |
| | $ | 7,007,012 |
|
Mortgage loans held for sale | — |
| | 81,855 |
| | — |
| | 81,855 |
|
Private equity investments | — |
| | — |
| | 13,341 |
| | 13,341 |
|
Mutual funds | 16,390 |
| | — |
| | — |
| | 16,390 |
|
Mutual funds held in rabbi trusts | 14,816 |
| | — |
| | — |
| | 14,816 |
|
GGL/SBA loans servicing asset | — |
| | — |
| | 3,326 |
| | 3,326 |
|
Derivative assets: | | | | | | | |
Interest rate contracts | $ | — |
| | $ | 134,504 |
| | $ | — |
| | $ | 134,504 |
|
Mortgage derivatives(1) | — |
| | 1,892 |
| | — |
| | 1,892 |
|
Total derivative assets | $ | — |
| | $ | 136,396 |
| | $ | — |
| | $ | 136,396 |
|
Liabilities | | | | | | | |
Earnout liability(2) | — |
| | — |
| | 14,353 |
| | 14,353 |
|
Derivative liabilities: | | | | | | | |
Interest rate contracts | $ | — |
| | $ | 32,193 |
| | $ | — |
| | $ | 32,193 |
|
Mortgage derivatives(1) | — |
| | 1,049 |
| | — |
| | 1,049 |
|
Visa derivative | — |
| | — |
| | 1,049 |
| | 1,049 |
|
Total derivative liabilities | $ | — |
| | $ | 33,242 |
| | $ | 1,049 |
| | $ | 34,291 |
|
| | | | | | | |
|
| | | | | | | | | | | | | | | |
| June 30, 2018 |
(in thousands) | Level 1 | | Level 2 | | Level 3 | | Total Assets and Liabilities at Fair Value |
Assets | | | | | | | |
Trading securities: | | | | | | | |
U.S. Government agency securities | $ | — |
| | $ | 17,164 |
| | $ | — |
| | $ | 17,164 |
|
Mortgage-backed securities issued by U.S. Government agencies | — |
| | 577 |
| | — |
| | 577 |
|
Collateralized mortgage obligations issued by U.S. Government sponsored enterprises | — |
| | 409 |
| | — |
| | 409 |
|
State and municipal securities | — |
| | 2,495 |
| | — |
| | 2,495 |
|
Other investments | 906 |
| | — |
| | — |
| | 906 |
|
Total trading securities | $ | 906 |
| | $ | 20,645 |
| | $ | — |
| | $ | 21,551 |
|
Mortgage loans held for sale | — |
| | 53,673 |
| | — |
| | 53,673 |
|
Investment securities available for sale: | | | | | | | |
U.S. Treasury securities | 120,633 |
| | — |
| | — |
| | 120,633 |
|
U.S. Government agency securities | — |
| | 40,934 |
| | — |
| | 40,934 |
|
Mortgage-backed securities issued by U.S. Government agencies | — |
| | 107,944 |
| | — |
| | 107,944 |
|
Mortgage-backed securities issued by U.S. Government sponsored enterprises | — |
| | 2,526,845 |
| | — |
| | 2,526,845 |
|
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | — |
| | 1,116,448 |
| | — |
| | 1,116,448 |
|
State and municipal securities | — |
| | 115 |
| | — |
| | 115 |
|
Corporate debt and other debt securities(1) | — |
| | 15,186 |
| | 1,857 |
| | 17,043 |
|
Total investment securities available for sale | $ | 120,633 |
| | $ | 3,807,472 |
| | $ | 1,857 |
| | $ | 3,929,962 |
|
Private equity investments | — |
| | — |
| | 12,678 |
| | 12,678 |
|
Mutual funds | 3,124 |
| | — |
| | — |
| | 3,124 |
|
Mutual funds held in rabbi trusts | 13,638 |
| | — |
| | — |
| | 13,638 |
|
GGL/SBA loans servicing asset | — |
| | — |
| | 4,186 |
| | 4,186 |
|
Derivative assets: | | | | | | | |
Interest rate contracts | — |
| | 10,034 |
| | — |
| | 10,034 |
|
Mortgage derivatives(2) | — |
| | 1,302 |
| | — |
| | 1,302 |
|
Total derivative assets | $ | — |
| | $ | 11,336 |
| | $ | — |
| | $ | 11,336 |
|
Liabilities | | | | | | | |
Trading account liabilities | — |
| | 12,328 |
| | — |
| | 12,328 |
|
Earnout liability(3) | — |
| | — |
| | 11,348 |
| | 11,348 |
|
Derivative liabilities: | | | | | | | |
Interest rate contracts | — |
| | 19,303 |
| | — |
| | 19,303 |
|
Mortgage derivatives(2) | — |
| | 248 |
| | — |
| | 248 |
|
Visa derivative | — |
| | — |
| | 5,943 |
| | 5,943 |
|
Total derivative liabilities | $ | — |
| | $ | 19,551 |
| | $ | 5,943 |
| | $ | 25,494 |
|
| | | | | | | |
|
| | | | | | | | | | | | | | | |
| December 31, 2018 |
(in thousands) | Level 1 | | Level 2 | | Level 3 | | Total Assets and Liabilities at Fair Value |
Assets | | | | | | | |
Trading securities: | | | | | | | |
U.S. Government agency securities | $ | — |
| | $ | 44 |
| | $ | — |
| | $ | 44 |
|
State and municipal securities | — |
| | 1,064 |
| | — |
| | 1,064 |
|
Other investments | 1,128 |
| | 894 |
| | — |
| | 2,022 |
|
Total trading securities | $ | 1,128 |
| | $ | 2,002 |
| | $ | — |
| | $ | 3,130 |
|
Investment securities available for sale: | | | | | | | |
U.S. Treasury securities | $ | 122,077 |
| | $ | — |
| | $ | — |
| | $ | 122,077 |
|
U.S. Government agency securities | — |
| | 38,382 |
| | — |
| | 38,382 |
|
Mortgage-backed securities issued by U.S. Government agencies | — |
| | 97,205 |
| | — |
| | 97,205 |
|
Mortgage-backed securities issued by U.S. Government sponsored enterprises | — |
| | 2,398,650 |
| | — |
| | 2,398,650 |
|
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | — |
| | 1,188,518 |
| | — |
| | 1,188,518 |
|
Commercial mortgage-backed securities issued by U.S. Government sponsored enterprises | — |
| | 129,865 |
| | — |
| | 129,865 |
|
Corporate debt securities | — |
| | 15,150 |
| | 1,785 |
| | 16,935 |
|
Total investment securities available for sale | $ | 122,077 |
| | $ | 3,867,770 |
| | $ | 1,785 |
| | $ | 3,991,632 |
|
Mortgage loans held for sale | — |
| | 37,129 |
| | — |
| | 37,129 |
|
Private equity investments | — |
| | — |
| | 11,028 |
| | 11,028 |
|
Mutual funds | 3,168 |
| | — |
| | — |
| | 3,168 |
|
Mutual funds held in rabbi trusts | 12,844 |
| | — |
| | — |
| | 12,844 |
|
GGL/SBA loans servicing asset | — |
| | — |
| | 3,729 |
| | 3,729 |
|
Derivative assets: | | | | | | | |
Interest rate contracts | $ | — |
| | $ | 18,388 |
| | $ | — |
| | $ | 18,388 |
|
Mortgage derivatives(1) | — |
| | 944 |
| | — |
| | 944 |
|
Total derivative assets | $ | — |
| | $ | 19,332 |
| | $ | — |
| | $ | 19,332 |
|
Liabilities | | | | | | | |
Earnout liability(2) | — |
| | — |
| | 14,353 |
| | 14,353 |
|
Derivative liabilities: | | | | | | | |
Interest rate contracts | $ | — |
| | $ | 15,716 |
| | $ | — |
| | $ | 15,716 |
|
Mortgage derivatives(1) | — |
| | 819 |
| | — |
| | 819 |
|
Visa derivative | — |
| | — |
| | 1,673 |
| | 1,673 |
|
Total derivative liabilities | $ | — |
| | $ | 16,535 |
| | $ | 1,673 |
| | $ | 18,208 |
|
| | | | | | | |
|
| | | | | | | | | | | | | | | |
| December 31, 2017 |
(in thousands) | Level 1 | | Level 2 | | Level 3 | | Total Assets and Liabilities at Fair Value |
Assets | | | | | | | |
Trading securities: | | | | | | | |
Mortgage-backed securities issued by U.S. Government agencies | $ | — |
| | $ | 3,002 |
| | $ | — |
| | $ | 3,002 |
|
Collateralized mortgage obligations issued by U.S. Government sponsored enterprises | — |
| | 296 |
| | — |
| | 296 |
|
Other investments | 522 |
| | — |
| | — |
| | 522 |
|
Total trading securities | $ | 522 |
| | $ | 3,298 |
| | $ | — |
| | $ | 3,820 |
|
Mortgage loans held for sale | — |
| | 48,024 |
| | — |
| | 48,024 |
|
| | | | | | | |
Investment securities available for sale: | | | | | | | |
U.S. Treasury securities | 82,674 |
| | — |
| | — |
| | 82,674 |
|
U.S. Government agency securities | — |
| | 10,862 |
| | — |
| | 10,862 |
|
Mortgage-backed securities issued by U.S. Government agencies | — |
| | 120,440 |
| | — |
| | 120,440 |
|
Mortgage-backed securities issued by U.S. Government sponsored enterprises | — |
| | 2,640,523 |
| | — |
| | 2,640,523 |
|
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | — |
| | 1,111,999 |
| | — |
| | 1,111,999 |
|
State and municipal securities | — |
| | 180 |
| | — |
| | 180 |
|
Corporate debt and other securities(1) | 3,162 |
| | 15,294 |
| | 1,935 |
| | 20,391 |
|
Total investment securities available for sale | $ | 85,836 |
| | $ | 3,899,298 |
| | $ | 1,935 |
| | $ | 3,987,069 |
|
Private equity investments | — |
| | — |
| | 15,771 |
| | 15,771 |
|
Mutual funds held in rabbi trusts | 14,140 |
| | — |
| | — |
| | 14,140 |
|
GGL/SBA loan servicing asset | — |
| | — |
| | 4,101 |
| | 4,101 |
|
Derivative assets: | | | | | | | |
Interest rate contracts | — |
| | 10,786 |
| | — |
| | 10,786 |
|
Mortgage derivatives(2) | — |
| | 936 |
| | — |
| | 936 |
|
Total derivative assets | $ | — |
| | $ | 11,722 |
| | $ | — |
| | $ | 11,722 |
|
Liabilities | | | | | | | |
Trading account liabilities | — |
| | 1,000 |
| | — |
| | 1,000 |
|
Earnout liability(3) | — |
| | — |
| | 11,348 |
| | 11,348 |
|
Derivative liabilities: | | | | | | | |
Interest rate contracts | — |
| | 12,638 |
| | — |
| | 12,638 |
|
Mortgage derivatives(2) | — |
| | 129 |
| | — |
| | 129 |
|
Visa derivative | — |
| | — |
| | 4,330 |
| | 4,330 |
|
Total derivative liabilities | $ | — |
| | $ | 12,767 |
| | $ | 4,330 |
| | $ | 17,097 |
|
| | | | | | | |
(1) Based on an analysis of the nature and risks of these investments, Synovus has determined that presenting these investments as a single asset class is appropriate.
(2) Mortgage derivatives consist of customer interest rate lock commitments that relate to the potential origination of mortgage loans, which would be classified as held for sale and forward loan sales commitments with third-party investors.
(3)(2) Earnout liability consists of contingent consideration obligation related to the Global One acquisition.
Fair Value Option
Synovus has elected the fair value option for mortgage loans held for sale primarily to ease the operational burden required to maintain hedge accounting for these loans. Synovus is still able to achieve effective economic hedges on mortgage loans held for sale without the time and expense needed to manage a hedge accounting program.
The following table summarizes the difference between the fair value and the unpaid principal balance of mortgage loans held for sale measured at fair value and the changes in fair value of these loans. Mortgage loans held for sale are initially measured at fair value with subsequent changes in fair value recognized in earnings. Changes in fair value are recorded as a component of mortgage banking income in the consolidated statements of income. An immaterial portion of these changes in fair value was attributable to changes in instrument-specific credit risk.
|
| | | | | | | |
Mortgage Loans Held for Sale | |
(in thousands) | As of June 30, 2019 | | As of December 31, 2018 |
Fair value | $ | 81,855 |
| | $ | 37,129 |
|
Unpaid principal balance | 79,873 |
| | 35,848 |
|
Fair value less aggregate unpaid principal balance | $ | 1,982 |
| | $ | 1,281 |
|
| | | |
|
| | | | | | | | | | | | | | | |
Changes in Fair Value Included in Net Income | | | | | | | |
| For the Six Months Ended June 30, | | For the Three Months Ended June 30, |
(in thousands) | 2018 | | 2017 | | 2018 | | 2017 |
Mortgage loans held for sale | $ | 155 |
| | $ | 954 |
| | $ | 40 |
| | $ | (249 | ) |
| | | | | | | |
|
| | | | | | | | | | | | | | | |
Changes in Fair Value Included in Net Income | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | 2019 | | 2018 | | 2019 | | 2018 |
Mortgage loans held for sale | $ | 345 |
| | $ | 40 |
| | $ | 701 |
| | $ | 155 |
|
| | | | | | | |
|
| | | | | | | |
Mortgage Loans Held for Sale | |
(in thousands) | As of June 30, 2018 | | As of December 31, 2017 |
Fair value | $ | 53,673 |
| | $ | 48,024 |
|
Unpaid principal balance | 52,333 |
| | 46,839 |
|
Fair value less aggregate unpaid principal balance | $ | 1,340 |
| | $ | 1,185 |
|
| | | |
Changes in Level 3 Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
During the three and Quantitative Information about Level 3 Fair Value Measurements
As noted above,six months ended June 30, 2019 and 2018, Synovus uses significant unobservable inputsdid not have any transfers in determining the fair valueor out of assets and liabilities classified as Level 3 in the fair value hierarchy. The table below includes a roll-forward ofFor the amounts on the consolidated balance sheet for thethree and six and three months ended June 30, 2018 and 2017 (including the change in fair value) for financial instruments of a material nature that are classified by Synovus within Level 3 of the fair value hierarchy and are measured at fair value on a recurring basis. Transfers between fair value levels are recognized at the end of the reporting period in which the associated changes in inputs occur. During the six and three months ended June 30, 2018 and 2017, Synovus did not have any transfers between levels in the fair value hierarchy. For the six and three months ended June 30, 2018,2019, total net lossesgains/(losses) included in earnings attributable to the change in unrealized lossesgains/(losses) relating to assets/liabilities still held at June 30, 2019 were a $1.5 million gain and a $2.3 million gain, respectively. For the three and six months ended June 30, 2018, total net gains/(losses) included in earnings attributable to the change in unrealized gains/(losses) relating to assets/liabilities still held at June 30, 2018 was $6.2 million and $2.7 million, respectively. For the six and three months ended June 30, 2017, total net losses included in earnings attributable to the change in unrealized losses relating to assets/liabilities still held at June 30, 2017 waswere a $2.4 million loss and $2.1a $5.4 million loss, respectively.
|
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2019 |
(in thousands) | Investment Securities Available for Sale | | Private Equity Investments | | GGL / SBA Loans Servicing Asset | | Earnout Liability | | Visa Derivative |
Beginning balance, April 1, 2019 | $ | 1,981 |
| | $ | 11,886 |
| | $ | 3,447 |
| | $ | (14,353 | ) | | $ | (1,366 | ) |
Total gains (losses) realized/unrealized: | | | | | | | | | |
Included in earnings | — |
| | 1,455 |
| | (305 | ) | | — |
| | — |
|
Unrealized gains (losses) included in OCI | 36 |
| | — |
| | — |
| | — |
| | — |
|
Additions | — |
| | — |
| | 184 |
| | — |
| | — |
|
Settlements | — |
| | — |
| | — |
| | — |
| | 317 |
|
Ending balance, June 30, 2019 | $ | 2,017 |
| | $ | 13,341 |
| | $ | 3,326 |
| | $ | (14,353 | ) | | $ | (1,049 | ) |
Total net gains for the period included in earnings attributable to the change in unrealized gains/(losses) relating to assets/liabilities still held at June 30, 2019 | $ | — |
| | $ | 1,455 |
| | $ | — |
| | $ | — |
| | $ | — |
|
| |
| Three Months Ended June 30, 2018 |
(in thousands) | Investment Securities Available for Sale | | Private Equity Investments | | GGL / SBA Loans Servicing Asset | | Earnout Liability | | Visa Derivative |
Beginning balance, April 1, 2018 | $ | 1,852 |
| | $ | 12,715 |
| | $ | 3,971 |
| | $ | (11,348 | ) | | $ | (3,974 | ) |
Total (losses) gains realized/unrealized: | | | | | | | | | |
Included in earnings | — |
| | (37 | ) | | (312 | ) | | — |
| | (2,328 | ) |
Unrealized gains (losses) included in OCI | 5 |
| | — |
| | — |
| | — |
| | — |
|
Additions | — |
| | — |
| | 527 |
| | — |
| | — |
|
Settlements | — |
| | — |
| | — |
| | — |
| | 359 |
|
Ending balance, June 30, 2018 | $ | 1,857 |
| | $ | 12,678 |
| | $ | 4,186 |
| | $ | (11,348 | ) | | $ | (5,943 | ) |
Total net losses for the period included in earnings attributable to the change in unrealized losses relating to assets/liabilities still held at June 30, 2018 | $ | — |
| | $ | (37 | ) | | $ | — |
| | $ | — |
| | $ | (2,328 | ) |
| | | | | | | | | |
| Six Months Ended June 30, 2019 |
(in thousands) | Investment Securities Available for Sale | | Private Equity Investments | | GGL / SBA Loans Servicing Asset | | Earnout Liability | | Visa Derivative |
Beginning balance, January 1, 2019 | $ | 1,785 |
| | $ | 11,028 |
| | $ | 3,729 |
| | $ | (14,353 | ) | | $ | (1,673 | ) |
Total gains (losses) realized/unrealized: | | | | | | | | | |
Included in earnings | — |
| | 2,313 |
| | (793 | ) | | — |
| | — |
|
Unrealized gains (losses) included in OCI | 232 |
| | — |
| | — |
| | — |
| | — |
|
Additions | — |
| | — |
| | 390 |
| | — |
| | — |
|
Settlements | — |
| | — |
| | — |
| | — |
| | 624 |
|
Ending balance, June 30, 2019 | $ | 2,017 |
| | $ | 13,341 |
| | $ | 3,326 |
| | $ | (14,353 | ) | | $ | (1,049 | ) |
Total net losses for the period included in earnings attributable to the change in unrealized losses relating to assets/liabilities still held at June 30, 2019 | $ | — |
| | $ | 2,313 |
| | $ | — |
| | $ | — |
| | $ | — |
|
| | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| |
| Six Months Ended June 30, 2018 |
(in thousands) | Investment Securities Available for Sale | | Private Equity Investments | | Visa Derivative | | Earnout Liability(1) | | GGL / SBA Loans Servicing Asset(2) |
Beginning balance, January 1, 2018 | $ | 1,935 |
| | $ | 15,771 |
| | $ | (4,330 | ) | | $ | (11,348 | ) | | $ | 4,101 |
|
Total (losses) gains realized/unrealized: | | | | | | | | | |
Included in earnings | — |
| | (3,093 | ) | | (2,328 | ) | | — |
| | (734 | ) |
Unrealized losses included in other comprehensive income | (78 | ) | | — |
| | — |
| | — |
| | — |
|
Additions | — |
| | — |
| | — |
| | — |
| | 819 |
|
Settlements | — |
| | — |
| | 715 |
| | — |
| | — |
|
Ending balance, June 30, 2018 | $ | 1,857 |
| | $ | 12,678 |
| | $ | (5,943 | ) | | $ | (11,348 | ) | | $ | 4,186 |
|
Total net losses for the period included in earnings attributable to the change in unrealized losses relating to assets/liabilities still held at June 30, 2018 | $ | — |
| | $ | (3,093 | ) | | $ | (2,328 | ) | | $ | — |
| | $ | (734 | ) |
| | | | | | | | | |
| Three Months Ended June 30, 2018 |
(in thousands) | Investment Securities Available for Sale | | Private Equity Investments | | Visa Derivative | | Earnout Liability(1) | | GGL / SBA Loans Servicing Asset |
Beginning balance, April 1, 2018 | $ | 1,852 |
| | $ | 12,715 |
| | $ | (3,974 | ) | | $ | (11,348 | ) | | $ | 3,971 |
|
Total (losses) gains realized/unrealized: | | | | | | | | | |
Included in earnings | — |
| | (37 | ) | | (2,328 | ) | | — |
| | (312 | ) |
Unrealized gains included in other comprehensive income | 5 |
| | — |
| | — |
| | — |
| | — |
|
Additions | — |
| | — |
| | — |
| | — |
| | 527 |
|
Settlements | — |
| | — |
| | 359 |
| | — |
| | — |
|
Ending balance, June 30, 2018 | $ | 1,857 |
| | $ | 12,678 |
| | $ | (5,943 | ) | | $ | (11,348 | ) | | $ | 4,186 |
|
Total net losses for the period included in earnings attributable to the change in unrealized losses relating to assets/liabilities still held at June 30, 2018 | $ | — |
| | $ | (37 | ) | | $ | (2,328 | ) | | $ | — |
| | $ | (312 | ) |
| | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2018 |
(in thousands) | Investment Securities Available for Sale | | Private Equity Investments | | GGL / SBA Loans Servicing Asset | | Earnout Liability | | Visa Derivative |
Beginning balance, January 1, 2018 | $ | 1,935 |
| | $ | 15,771 |
| | $ | 4,101 |
| | $ | (11,348 | ) | | $ | (4,330 | ) |
Total (losses) gains realized/unrealized: | | | | | | | | | |
Included in earnings | — |
| | (3,093 | ) | | (734 | ) | | — |
| | (2,328 | ) |
Unrealized gains (losses) included in OCI | (78 | ) | | — |
| | — |
| | — |
| | — |
|
Additions | — |
| | — |
| | 819 |
| | — |
| | — |
|
Sales and settlements | — |
| | — |
| | — |
| | — |
| | 715 |
|
Ending balance, June 30, 2018 | $ | 1,857 |
| | $ | 12,678 |
| | $ | 4,186 |
| | $ | (11,348 | ) | | $ | (5,943 | ) |
Total net losses for the period included in earnings attributable to the change in unrealized losses relating to assets/liabilities still held at June 30, 2018 | $ | — |
| | $ | (3,093 | ) | | $ | — |
| | $ | — |
| | $ | (2,328 | ) |
| | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| | | | | |
| Six Months Ended June 30, 2017 |
(in thousands) | Investment Securities Available for Sale | | Private Equity Investments | | Visa Derivative | | Earnout Liability(1) | | GGL / SBA Loans Servicing Asset(2) |
Beginning balance, January 1, 2017 | $ | 1,796 |
| | $ | 25,493 |
| | $ | (5,768 | ) | | $ | (14,000 | ) | | $ | — |
|
Total (losses) gains realized/unrealized: | | | | | | | | | |
Included in earnings | — |
| | (3,166 | ) | | — |
| | (1,707 | ) | | (694 | ) |
Unrealized gains (losses) included in other comprehensive income | 131 |
| |
|
| | — |
| | — |
| | — |
|
Additions | — |
| | — |
| | — |
| | — |
| | 539 |
|
Sales and settlements | — |
| | (6,629 | ) | | 715 |
| | — |
| | — |
|
Transfer from amortization method to fair value | — |
| | — |
| | — |
| | — |
| | 4,452 |
|
Measurement period adjustments related to Global One acquisition | — |
| | — |
| | — |
| | 1,766 |
| | — |
|
Ending balance, June 30, 2017 | $ | 1,927 |
| | $ | 15,698 |
| | $ | (5,053 | ) | | $ | (13,941 | ) | | $ | 4,297 |
|
Total net losses for the period included in earnings attributable to the change in unrealized losses relating to assets/liabilities still held at June 30, 2017 | $ | — |
| | $ | — |
| | $ | — |
| | $ | (1,707 | ) | | $ | (694 | ) |
| | | | | | | | | |
| Three Months Ended June 30, 2017 |
(in thousands) | Investment Securities Available for Sale | | Private Equity Investments | | Visa Derivative | | Earnout Liability(1) | | GGL / SBA Loans Servicing Asset(2) |
Beginning balance, April 1, 2017 | $ | 1,851 |
| | $ | 23,679 |
| | $ | (5,412 | ) | | $ | (11,421 | ) | | $ | 4,178 |
|
Total (losses) gains realized/unrealized: | | | | | | | | | |
Included in earnings | — |
| | (1,352 | ) | | — |
| | (1,707 | ) | | (376 | ) |
Unrealized gains included in other comprehensive income | 76 |
| | — |
| | — |
| | — |
| | — |
|
Additions | — |
| | — |
| | — |
| | — |
| | 495 |
|
Sales and settlements | — |
| | (6,629 | ) | | 359 |
| | — |
| | — |
|
Measurement period adjustments related to Global One acquisition | — |
| | — |
| | — |
| | (813 | ) | | — |
|
Ending balance, June 30, 2017 | $ | 1,927 |
| | $ | 15,698 |
| | $ | (5,053 | ) | | $ | (13,941 | ) | | $ | 4,297 |
|
Total net losses for the period included in earnings attributable to the change in unrealized losses relating to assets/liabilities still held at June 30, 2017 | $ | — |
| | $ | — |
| | $ | — |
| | $ | (1,707 | ) | | $ | (376 | ) |
| | | | | | | | | |
(1) Earnout liability consists of contingent consideration obligation related to the Global One acquisition.
(2)Effective January 1, 2017, Synovus elected the fair value option for determining the value of the GGL/SBA loans servicing asset. Prior to 2017, Synovus accounted for the GGL/SBA loans servicing asset using the amortization method.
The table below provides an overview of the valuation techniques and significant unobservable inputs used in those techniques to measure financial instruments that are classified within Level 3 of the valuation hierarchy and are measured at fair value on a recurring basis.
|
| | | | | | | | | | |
| | | | June 30, 2018 | | December 31, 2017 |
| | Valuation Technique | Significant Unobservable Input | Level 3 Fair Value | | Range or Weighted Average | | Level 3 Fair Value | | Range or Weighted Average |
Assets and liabilities measured at fair value on a recurring basis | | | | | | | | | | |
| | | | | | | | | | |
Investment Securities Available for Sale - Other Investments: | | | | | | | | | | |
| | | | | | | | | | |
Trust preferred securities | | Discounted cash flow analysis | Credit spread embedded in discount rate | $1,857 | | 438 bps | | $1,935 | | 398 bps |
| | | | | | | | | | |
Private equity investments | | Individual analysis of each investee company | Multiple factors, including but not limited to, current operations, financial condition, cash flows, evaluation of business management and financial plans, and recently executed financing transactions related to the investee companies | 12,678 | | N/A | | 15,771 | | N/A |
| | | | | | | | | | |
GGL/SBA loans servicing asset | | Discounted cash flow analysis | Discount rate Prepayment speeds | 4,186 | | 13.40% 8.64% | | 4,101 | | 13.16% 7.50% |
| | | | | | | | | | |
Earnout liability | | Option pricing methods and Monte Carlo simulation | Financial projections of Global One | 11,348 | | N/A | | 11,348 | | N/A |
| | | | | | | | | | |
Visa derivative liability | | Discounted cash flow analysis | Estimated timing of resolution of covered litigation, future cumulative deposits to the litigation escrow for settlement of the covered litigation, and estimated future monthly fees payable to the derivative counterparty | 5,943 | | 1-3 years | | 4,330 | | 1-4 years |
| | | | | | | | | | |
Assets Measured at Fair Value on a Non-recurring Basis
Certain assets are recorded at fair value on a non-recurring basis. These assets are not measured at fair value on an ongoing basis. Non-recurring fair value adjustments typically are a result of the application of lower of cost or fair value accounting occurring during the period recorded as a charge-off with associated provision expense or a write-down occurring during the period.in non-interest expense. For example, if the fair value of an asset in these categories falls below its cost basis, it is considered to be at fair value at the end of the period of the adjustment. The following table presents assets measured at fair value on a non-recurring basis as of the dates indicated for which there was a fair value adjustment during the six months ended June 30, 2018 and year ended December 31, 2017.period.
| |
| June 30, 2018 | | December 31, 2017 | June 30, 2019 | | December 31, 2018 |
(in thousands) | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
Impaired loans* | $ | — |
| | $ | — |
| | $ | 12,820 |
| | $ | 12,820 |
| | $ | — |
| | $ | — |
| | $ | 3,603 |
| | $ | 3,603 |
| |
Impaired loans(1) | | $ | — |
| | $ | — |
| | $ | 1,540 |
| | $ | 1,540 |
| | $ | — |
| | $ | — |
| | $ | 21,742 |
| | $ | 21,742 |
|
Other loans held for sale | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 10,197 |
| | 10,197 |
| — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1,494 |
| | 1,494 |
|
Other real estate | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 3,363 |
| | 3,363 |
| — |
| | — |
| | 2,332 |
| | 2,332 |
| | — |
| | — |
| | 3,827 |
| | 3,827 |
|
Other assets held for sale | — |
| | — |
| | 695 |
| | 695 |
| | — |
| | — |
| | 5,334 |
| | 5,334 |
| — |
| | — |
| | 350 |
| | 350 |
| | — |
| | — |
| | 1,104 |
| | 1,104 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
* (1) Collateral-dependent impaired loans that were written down to fair value during the period.
Other real estate (ORE) properties are included in other assets on the consolidated balance sheet.sheets. The carrying value of ORE at June 30, 20182019 and December 31, 20172018 was $6.3$14.8 million and $3.8$6.2 million, respectively.
The following table presents fair value adjustments recognized in earnings for the sixthree and threesix months ended June 30, 20182019 and 20172018 for assets measured at fair value on a non-recurring basis still held at period-end.
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | 2019 | | 2018 | | 2019 | | 2018 |
Impaired loans(1) | $ | — |
| | $ | 6,828 |
| | $ | 2,625 |
| | $ | 7,548 |
|
Other real estate | 612 |
| | — |
| | 624 |
| | — |
|
Other assets held for sale | — |
| | 499 |
| | 91 |
| | 499 |
|
| | | | | | | |
|
| | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | Three Months Ended June 30, |
(in thousands) | 2018 | | 2017 | | 2018 | | 2017 |
Impaired loans* | $ | 7,548 |
| | $ | 5,808 |
| | $ | 6,828 |
| | $ | 5,776 |
|
Other loans held for sale | — |
| | 3,519 |
| | — |
| | — |
|
Other real estate | — |
| | 518 |
| | — |
| | 280 |
|
Other assets held for sale | 499 |
| | 238 |
| | 499 |
| | — |
|
| | | | | | | |
*(1) Collateral-dependent impaired loans that were written down to fair value during the period.
The table below provides an overview of the valuation techniques and significant unobservable inputs used in those techniques to measure financial instruments that are classified within Level 3 of the valuation hierarchy and are measured at fair value on a non-recurring basis. The range of sensitivities that management utilized in its fair value calculations is deemed acceptable in the industry with respect to the identified financial instruments.
|
| | | | | | |
| | | | June 30, 2018 | | December 31, 2017 |
| | Valuation Technique | Significant Unobservable Input | Range
(Weighted Average)(1)
| | Range
(Weighted Average)(1)
|
Assets measured at fair
value on a non-recurring basis
| | | | | | |
| | | | | | |
Collateral dependent impaired loans | | Third-party appraised value of collateral less estimated selling costs | Discount to appraised value (2)
Estimated selling costs
| 0% - 68% (38%)
0% - 10% (7%)
| | 0%-50% (15%)
0%-10% (7%)
|
| | | | | | |
Other loans held for sale | | Third-party appraised value of collateral less estimated selling costs | Discount to appraised value (2)
Estimated selling costs
| N/A
N/A
| | 5% - 99% (54%)
0% - 10% (2%)
|
| | | | | | |
Other real estate | | Third-party appraised value of real estate less estimated selling costs | Discount to appraised value (2)
Estimated selling costs
| N/A
N/A
| | 0%-85% (35%)
0%-10% (7%)
|
| | | | | | |
Other assets held for sale | | Third-party appraised value less estimated selling costs or BOV | Discount to appraised value (2)
Estimated selling costs
| 27%-43% (42%)
0%-10% (7%)
| | 21%-52% (25%)
0%-10% (7%)
|
| | | | | | |
(1) The range represents management's estimate of the high and low of the value that would be assigned to a particular input. For assets measured at fair value on a non-recurring basis, the weighted average is the measure of central tendencies; it is not the value that management is using for the asset or liability.
(2) Synovus also makes adjustments to the values of the assets listed above for reasons including age of the appraisal, information known by management about the property, such as occupancy rates, changes to the physical condition of the property, and other factors.
Fair Value of Financial Instruments
The following table presentstables present the carrying and fair values of financial instruments at June 30, 20182019 and December 31, 2017.2018. The fair values represent management’s estimates based on various methodologies and assumptions. ForSee "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" to the consolidated financial instruments that are not recorded atstatements of Synovus' 2018 Form 10-K for a description of how fair value on the balance sheet, such as loans held for investment, interest bearing deposits (including brokered deposits), and long-term debt, the fair value amounts should not be taken as an estimate of the amount that would be realized if all such financial instruments were to be settled immediately.
The carrying and estimated fair values of financial instruments, as well as the level within the fair value hierarchy, as of June 30, 2018 and December 31, 2017measurements are as follows:determined.
| | | June 30, 2018 | June 30, 2019 |
(in thousands) | Carrying Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 | Carrying Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 |
Financial assets | | | | | | | | | | | | | | | | | | |
Total cash, cash equivalents, restricted cash, and restricted cash equivalents | $ | 1,091,788 |
| | $ | 1,091,788 |
| | $ | 1,091,788 |
| | $ | — |
| | $ | — |
| $ | 1,151,321 |
| | $ | 1,151,321 |
| | $ | 1,151,321 |
| | $ | — |
| | $ | — |
|
Trading account assets | 21,551 |
| | 21,551 |
| | 906 |
| | 20,645 |
| | — |
| |
Trading securities | | 6,457 |
| | 6,457 |
| | — |
| | 6,457 |
| | — |
|
Investment securities available for sale | | 7,007,012 |
| | 7,007,012 |
| | 19,689 |
| | 6,985,306 |
| | 2,017 |
|
Mortgage loans held for sale | 53,673 |
| | 53,673 |
| | — |
| | 53,673 |
| | — |
| 81,855 |
| | 81,855 |
| | — |
| | 81,855 |
| | — |
|
Other loans held for sale | 2,733 |
| | 2,733 |
| | — |
| | — |
| | 2,733 |
| 4,861 |
| | 4,861 |
| | — |
| | — |
| | 4,861 |
|
Investment securities available for sale | 3,929,962 |
| | 3,929,962 |
| | 120,633 |
| | 3,807,472 |
| | 1,857 |
| |
Private equity investments | 12,678 |
| | 12,678 |
| | — |
| | — |
| | 12,678 |
| 13,341 |
| | 13,341 |
| | — |
| | — |
| | 13,341 |
|
Mutual funds | 3,124 |
| | 3,124 |
| | 3,124 |
| | — |
| | — |
| 16,390 |
| | 16,390 |
| | 16,390 |
| | — |
| | — |
|
Mutual funds held in rabbi trusts | 13,638 |
| | 13,638 |
| | 13,638 |
| | — |
| | — |
| 14,816 |
| | 14,816 |
| | 14,816 |
| | — |
| | — |
|
Loans, net | 24,882,331 |
| | 24,732,689 |
| | — |
| | — |
| | 24,732,689 |
| 35,881,185 |
| | 35,674,964 |
| | — |
| | — |
| | 35,674,964 |
|
GGL/SBA loans servicing asset | 4,186 |
| | 4,186 |
| | — |
| | — |
| | 4,186 |
| 3,326 |
| | 3,326 |
| | — |
| | — |
| | 3,326 |
|
Derivative assets | 11,336 |
| | 11,336 |
| | — |
| | 11,336 |
| | — |
| 136,396 |
| | 136,396 |
| | — |
| | 136,396 |
| | — |
|
| | | | | | | | | | | | | | | | | | |
Financial liabilities |
| |
| |
| |
| | |
| |
| |
| |
| | |
Trading account liabilities | 12,328 |
| | 12,328 |
| | — |
| | 12,328 |
| | — |
| |
| | | | | | | | | | |
Non-interest bearing deposits | 7,630,491 |
| | 7,630,491 |
| | — |
| | 7,630,491 |
| | — |
| |
Non-time interest bearing deposits | 13,958,048 |
| | 13,958,048 |
| | — |
| | 13,958,048 |
| | — |
| |
Non-interest-bearing deposits | | $ | 9,205,066 |
| | $ | 9,205,066 |
| | $ | — |
| | $ | 9,205,066 |
| | $ | — |
|
Non-time interest-bearing deposits | | 18,264,053 |
| | 18,264,053 |
| | — |
| | 18,264,053 |
| | — |
|
Time deposits | 4,854,149 |
| | 4,826,356 |
| | — |
| | 4,826,356 |
| | — |
| 10,497,603 |
| | 10,542,659 |
| | — |
| | 10,542,659 |
| | — |
|
Total deposits | $ | 26,442,688 |
| | $ | 26,414,895 |
| | $ | — |
| | $ | 26,414,895 |
| | $ | — |
| $ | 37,966,722 |
| | $ | 38,011,778 |
| | $ | — |
| | $ | 38,011,778 |
| | $ | — |
|
Federal funds purchased, other short-term borrowings and other short-term liabilities | 207,580 |
| | 207,580 |
| | 207,580 |
| | — |
| | — |
| |
Federal funds purchased and securities sold under repurchase agreements | | 273,481 |
| | 273,481 |
| | 273,481 |
| | — |
| | — |
|
Other short-term borrowings | | 1,330,000 |
| | 1,330,000 |
| | — |
| | 1,330,000 |
| | — |
|
Long-term debt | 1,656,647 |
| | 1,658,790 |
| | — |
| | 1,658,790 |
| | — |
| 2,306,072 |
| | 2,334,573 |
| | — |
| | 2,334,573 |
| | — |
|
Earnout liabilities | 11,348 |
| | 11,348 |
| | — |
| | — |
| | 11,348 |
| |
Earnout liability | | 14,353 |
| | 14,353 |
| | — |
| | — |
| | 14,353 |
|
Derivative liabilities | 25,494 |
| | 25,494 |
| | — |
| | 19,551 |
| | 5,943 |
| 34,291 |
| | 34,291 |
| | — |
| | 33,242 |
| | 1,049 |
|
| | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| December 31, 2018 |
(in thousands) | Carrying Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 |
Financial assets | | | | | | | | | |
Total cash, cash equivalents, restricted cash, and restricted cash equivalents | $ | 1,143,564 |
| | $ | 1,143,564 |
| | $ | 1,143,564 |
| | $ | — |
| | $ | — |
|
Trading securities | 3,130 |
| | 3,130 |
| | 1,128 |
| | 2,002 |
| | — |
|
Investment securities available for sale | 3,991,632 |
| | 3,991,632 |
| | 122,077 |
| | 3,867,770 |
| | 1,785 |
|
Mortgage loans held for sale | 37,129 |
| | 37,129 |
| | — |
| | 37,129 |
| | — |
|
Other loans for sale | 1,506 |
| | 1,506 |
| | — |
| | — |
| | 1,506 |
|
Private equity investments | 11,028 |
| | 11,028 |
| | — |
| | — |
| | 11,028 |
|
Mutual funds | 3,168 |
| | 3,168 |
| | 3,168 |
| | — |
| | — |
|
Mutual funds held in rabbi trusts | 12,844 |
| | 12,844 |
| | 12,844 |
| | — |
| | — |
|
Loans, net | 25,696,018 |
| | 25,438,890 |
| | — |
| | — |
| | 25,438,890 |
|
GGL/SBA loans servicing asset | 3,729 |
| | 3,729 |
| | — |
| | — |
| | 3,729 |
|
Derivative assets | 19,332 |
| | 19,332 |
| | — |
| | 19,332 |
| | — |
|
| | | | | | | | | |
Financial liabilities | | | | | | | | | |
Non-interest-bearing deposits | $ | 7,650,967 |
| | $ | 7,650,967 |
| | $ | — |
| | $ | 7,650,967 |
| | $ | — |
|
Non-time interest-bearing deposits | 14,065,959 |
| | 14,065,959 |
| | — |
| | 14,065,959 |
| | — |
|
Time deposits | 5,003,396 |
| | 4,989,570 |
| | — |
| | 4,989,570 |
| | — |
|
Total deposits | $ | 26,720,322 |
| | $ | 26,706,496 |
| | $ | — |
| | $ | 26,706,496 |
| | $ | — |
|
Federal funds purchased and securities sold under repurchase agreements | 237,692 |
| | 237,692 |
| | 237,692 |
| | — |
| | — |
|
Other short-term borrowings | 650,000 |
| | 650,000 |
| | — |
| | 650,000 |
| | — |
|
Long-term debt | 1,657,157 |
| | 1,649,642 |
| | — |
| | 1,649,642 |
| | — |
|
Earnout liability | 14,353 |
| | 14,353 |
| | — |
| | — |
| | 14,353 |
|
Derivative liabilities | 18,208 |
| | 18,208 |
| | — |
| | 16,535 |
| | 1,673 |
|
| | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| December 31, 2017 |
(in thousands) | Carrying Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 |
Financial assets | | | | | | | | | |
Total cash, cash equivalents, restricted cash, and restricted cash equivalents | $ | 932,933 |
| | $ | 932,933 |
| | $ | 932,933 |
| | $ | — |
| | $ | — |
|
Trading account assets | 3,820 |
| | 3,820 |
| | 522 |
| | 3,298 |
| | — |
|
Mortgage loans held for sale | 48,024 |
| | 48,024 |
| | — |
| | 48,024 |
| | — |
|
Other loans for sale | 11,356 |
| | 11,356 |
| | — |
| | — |
| | 11,356 |
|
Investment securities available for sale | 3,987,069 |
| | 3,987,069 |
| | 85,836 |
| | 3,899,298 |
| | 1,935 |
|
Private equity investments | 15,771 |
| | 15,771 |
| | — |
| | — |
| | 15,771 |
|
Mutual funds held in rabbi trusts | 14,140 |
| | 14,140 |
| | 14,140 |
| | — |
| | — |
|
Loans, net | 24,538,196 |
| | 24,507,141 |
| | — |
| | — |
| | 24,507,141 |
|
GGL/SBA loans servicing asset | 4,101 |
| | 4,101 |
| | — |
| | — |
| | 4,101 |
|
Derivative assets | 11,722 |
| | 11,722 |
| | — |
| | 11,722 |
| | — |
|
| | | | | | | | | |
Financial liabilities | | | | | | | | | |
Trading account liabilities | 1,000 |
| | 1,000 |
| | — |
| | 1,000 |
| | — |
|
| | | | | | | | | |
Non-interest bearing deposits | 7,686,339 |
| | 7,686,339 |
| | — |
| | 7,686,339 |
| | — |
|
Non-time interest bearing deposits | 13,941,814 |
| | 13,941,814 |
| | — |
| | 13,941,814 |
| | — |
|
Time deposits | 4,519,747 |
| | 4,523,661 |
| | — |
| | 4,523,661 |
| | — |
|
Total deposits | $ | 26,147,900 |
| | $ | 26,151,814 |
| | $ | — |
| | $ | 26,151,814 |
| | $ | — |
|
Federal funds purchased, other short-term borrowings and other short-term liabilities | 161,190 |
| | 161,190 |
| | 161,190 |
| | — |
| | — |
|
Long-term debt | 1,706,138 |
| | 1,721,814 |
| | — |
| | 1,721,814 |
| | — |
|
Earnout liabilities | 11,348 |
| | 11,348 |
| | — |
| | — |
| | 11,348 |
|
Derivative liabilities | 17,097 |
| | 17,097 |
| | — |
| | 12,767 |
| | 4,330 |
|
| | | | | | | | | |
Note 98 - Derivative Instruments
As part of its overall interest rate risk management activities, Synovus utilizes derivative instruments to manage its exposure to various types of interest rate risk. Theserisk, exposures related to liquidity and credit risk, and to facilitate customer transactions. The primary types of derivative instruments generallyutilized by Synovus consist of interest rate swaps, interest rate lock commitments made to prospective mortgage loan customers, and commitments to sell fixed-rate mortgage loans. Interest rate lock commitments represent derivative instruments since it is intended that such loans will be sold.
Synovus may also utilize interest rate swaps to manage interest rate risks primarily arising from its core banking activities. These interest rate swap transactions generally involve the exchange of fixed and floating interest rate payment obligations without the exchange of underlying principal amounts. Swaps may be designated as either cash flow hedges or fair value hedges, as discussed below. As of June 30, 20182019 and December 31, 2017,2018, Synovus had no outstanding interest rate swap contracts utilized to manage interest rate risk related to core banking activities.
Synovus is party to master netting arrangements with its dealer counterparties; however, Synovus does not offset assets and liabilities under these arrangements for financial statement presentation purposes.
Counterparty Credit Risk and Collateral
Entering into derivative contracts potentially exposes Synovus to the risk of counterparties’ failure to fulfill their legal obligations, including, but not limited to, potential amounts due or payable under each derivative contract. Notional principal amounts are often used to express the volume of these transactions, but the amounts potentially subject to credit risk are much smaller. Synovus assesses the credit risk of its dealer counterparties by regularly monitoring publicly available credit rating information, evaluating other market indicators, and periodically reviewing detailed financials. Dealer collateral requirements are determined via risk-based policies and procedures and in accordance with existing agreements. Synovus seeks to minimize dealer credit risk by dealing with highly rated counterparties and by obtaining collateral for exposures above certain predetermined limits. Management closely monitors credit conditions within the customer swap portfolio, which management deems to be of higher risk than dealer counterparties. Collateral is secured at origination and credit relatedcredit-related fair value adjustments are recorded against the asset value of the derivative as deemed necessary based upon an analysis, which includes consideration of the current asset value of the swap, customer credit rating, collateral value, and customer standing with regards to its swap contractual obligations and other related matters. Such asset values fluctuate based upon changes in interest rates regardless of changes in notional amounts and changes in customer specific risk.
Customer Related Derivative Positions
Synovus enters into interest rate swap agreements to facilitate the risk management strategies of a small number of commercial banking customers. Synovus mitigates this risk by entering into equal and offsetting interest rate swap agreements with highly rated counterparties. The interest rate swap agreements are free-standing derivatives and are recorded at fair value on Synovus' consolidated balance sheet. Fair value changes are recorded as a component of non-interest income. As of June 30, 2018, the notional amount of customer related interest rate derivative financial instruments, including both the customer position and the offsetting position, was $1.67 billion, an increase of $201.4 million compared to December 31, 2017.
Visa Derivative
In conjunction with the sale of Class B shares of common stock issued by Visa to Synovus as a Visa USA member, Synovus entered into a derivative contract with the purchaser, which provides for settlements between the parties based upon a change in the ratio for conversion of Visa Class B shares to Visa Class A shares. The conversion ratio changes when Visa deposits funds to a litigation escrow established by Visa to pay settlements for certain litigation, for which Visa is indemnified by Visa USA members. The litigation escrow is funded by proceeds from Visa’s conversion of Class B shares. The fair value of the derivative contract was $5.9 million and $4.3 million at June 30, 2018 and December 31, 2017, respectively. The fair value of the derivative contract is determined based on management's estimate of the timing and amount of the Covered Litigation settlement, and the resulting payments due to the counterparty under the terms of the contract. During the three months ended June 30, 2018, Synovus recorded a $2.3 million valuation adjustment to the Visa derivative following Visa's announcement on June 26, 2018 that it would deposit $600 million into its litigation escrow account. Management believes that the estimate of Synovus' exposure to the Visa indemnification and fees associated with the Visa derivative is adequate based on current information, including Visa's recent announcements and disclosures. However, future developments in the litigation could require potentially significant changes to Synovus' estimate. See "Part II - Item 8. Financial Statements and Supplementary Data - Note 18 - Visa Shares and Related Agreements" of Synovus' 2017 Form 10-K for further information.
Mortgage Derivatives
Synovus originates first lien residential mortgage loans for sale into the secondary market. Mortgage loans are sold by Synovus for conversion to securities and the servicing of these loans is generally sold to a third-party servicing aggregator, or Synovus sells the mortgage loans as whole loans to investors either individually or in bulk on a servicing released basis.
Synovus enters into interest rate lock commitments for residential mortgage loans which commits it to lend funds to a potential borrower at a specific interest rate and within a specified period of time. Interest rate lock commitments that relate to the origination of mortgage loans that, if originated, will be held for sale, are considered derivative financial instruments under applicable accounting guidance. Outstanding interest rate lock commitments expose Synovus to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan.
At June 30, 2018 and December 31, 2017, Synovus had commitments to fund at a locked interest rate, primarily fixed-rate mortgage loans to customers in the amount of $69.7 million and $49.3 million, respectively. Fair value adjustments related to these commitments resulted in a gain of $366 thousand and a loss of $(416) thousand for the six months ended June 30, 2018 and 2017, respectively, which was recorded as a component of mortgage banking income in the consolidated statements of income.
At June 30, 2018 and December 31, 2017, outstanding commitments to sell primarily fixed-rate mortgage loans amounted to $86.0 million and $72.5 million, respectively. Such commitments are entered into to reduce the exposure to market risk arising from potential changes in interest rates, which could affect the fair value of mortgage loans held for sale and outstanding rate lock commitments, which guarantee a certain interest rate if the loan is ultimately funded or granted by Synovus as a mortgage loan held for sale. The commitments to sell mortgage loans are at fixed prices and are scheduled to settle at specified dates that generally do not exceed 90 days. Fair value adjustments related to these outstanding commitments to sell mortgage loans resulted in a loss of $(119) thousand and $(1.7) million for the six months ended June 30, 2018 and 2017, respectively, which were recorded as a component of mortgage banking income in the consolidated statements of income.
Collateral Requirements
Pursuant to the Dodd-Frank Act, certain derivative transactions have collateral requirements, both at the inception of the trade and as the value of each derivative position changes. As of June 30, 2018,2019, collateral totaling $30.6$77.4 million of federal funds sold was pledged to the derivative counterparties to comply with collateral requirements. Effective January 3, 2017,For derivatives cleared through central clearing houses, the CME amended its rulebook to legally characterize variation margin cash payments for cleared OTC derivativesmade are legally characterized as settlement rather than as collateral.settlements of the derivatives. As a result, these variation margin payments are netted against the fair value of the respective derivative contracts in 2017, Synovus began reducing the corresponding derivative assetbalance sheet and liability balances for CME-cleared OTC derivatives to reflect the settlement of those positions via the exchange of variation margin.related disclosures. At June 30, 20182019 and December 31, 2017,2018, Synovus had a variation margin of $8.9$103.0 million and $1.5$3.1 million respectively, each reducing the derivative asset.
liability.
The impactfollowing table reflects the notional amount and fair value of derivative instruments included on the Consolidated Balance Sheetsconsolidated balance sheets.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2019 | | December 31, 2018 |
| | | Fair Value | | | | Fair Value |
(in thousands) | Notional Amount | | Derivative Assets (1) | | Derivative Liabilities (2) | | Notional Amount | | Derivative Assets (1) | | Derivative Liabilities (2) |
Derivatives not designated as hedging instruments: | | | | | | | | | | | |
Interest rate contracts(3) | $ | 5,799,682 |
| | $ | 134,504 |
| | $ | 32,193 |
| | $ | 1,840,288 |
| | 18,388 |
| | $ | 15,716 |
|
Mortgage derivatives - interest rate lock commitments | 119,590 |
| | 1,892 |
| | — |
| | 52,420 |
| | 944 |
| | — |
|
Mortgage derivatives - forward commitments to sell fixed-rate mortgage loans | 127,519 |
| | — |
| | 1,049 |
| | 65,500 |
| | — |
| | 819 |
|
Visa derivative | — |
| | — |
| | 1,049 |
| | — |
| | — |
| | 1,673 |
|
Total derivatives not designated as hedging instruments | | | $ | 136,396 |
| | $ | 34,291 |
| | | | $ | 19,332 |
| | $ | 18,208 |
|
| | | | | | | | | | | |
(1) Derivative assets are recorded in other assets on the consolidated balance sheets.
(2) Derivative liabilities are recorded in other liabilities on the consolidated balance sheets.
(3) Includes interest rate contracts for customer swaps and offsetting positions, net of variation margin payments.
Synovus has entered into risk participation agreements with counterparties to transfer or assume credit exposures related to interest rate derivatives. The notional amounts of risk participation agreements sold were $102.2 million and $69.9 million at June 30, 20182019 and December 31, 2017 is presented below.
|
| | | | | | | | | | | | | | | | | | | |
| Fair Value of Derivative Assets | | Fair Value of Derivative Liabilities |
(in thousands) | Location on Consolidated Balance Sheets | | June 30, 2018 | | December 31, 2017 | | Location on Consolidated Balance Sheets | | June 30, 2018 | | December 31, 2017 |
Derivatives not designated as hedging instruments: | | | | | | | | | | | |
Interest rate contracts | Other assets | | $ | 10,034 |
| | $ | 10,786 |
| | Other liabilities | | $ | 19,303 |
| | $ | 12,638 |
|
Mortgage derivatives | Other assets | | 1,302 |
| | 936 |
| | Other liabilities | | 248 |
| | 129 |
|
Visa derivative | | | — |
| | — |
| | Other liabilities | | 5,943 |
| | 4,330 |
|
Total derivatives not designated as hedging instruments | | | $ | 11,336 |
| | $ | 11,722 |
| | | | $ | 25,494 |
| | $ | 17,097 |
|
| | | | | | | | | | | |
2018, respectively. Assuming all underlying third-party customers referenced in the swap contracts defaulted at June 30, 2019 and December 31, 2018, the exposure from these agreements would not be material based on the fair value of the underlying swaps.The pre-tax effect of changes in fair value hedgesfrom derivative instruments not designated as hedging instruments on the consolidated statements of income for the sixthree and threesix months ended June 30, 20182019 and 20172018 is presented below.
|
| | | | | | | | | | |
| | Location of Gain (Loss) Recognized in Income | | Gain (Loss) Recognized in Income |
(in thousands) | | | Six Months Ended June 30, |
Derivatives not designated as hedging instruments | | | 2018 | | 2017 |
Interest rate contracts(1) | | Other non-interest income | | $ | (9 | ) | | $ | (1 | ) |
Mortgage derivatives(2) | | Mortgage banking income | | 247 |
| | (2,073 | ) |
Total | | | | $ | 238 |
| | $ | (2,074 | ) |
| | | | | | |
| | Location of Gain (Loss) Recognized in Income | | Gain (Loss) Recognized in Income |
(in thousands) | | | Three Months Ended June 30, |
Derivatives not designated as hedging instruments | | | 2018 | | 2017 |
Interest rate contracts(1) | | Other non-interest income | | $ | (16 | ) | | $ | — |
|
Mortgage derivatives(2) | | Mortgage banking income | | (680 | ) | | (289 | ) |
Total | | | | $ | (696 | ) | | $ | (289 | ) |
| | | | | | |
|
| | | | | | | | | | | | | | | | | | |
| | | | Gain (Loss) Recognized in Consolidated Statements of Income |
| | | | Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | | Location in Consolidated Statements of Income | | 2019 | | 2018 | | 2019 | | 2018 |
Derivatives not designated as hedging instruments: | | | | | | | | | | |
Interest rate contracts(1) | | Capital markets income | | $ | 221 |
| | $ | (16 | ) | | $ | 91 |
| | $ | (9 | ) |
Mortgage derivatives - interest rate lock commitments | | Mortgage banking income | | 255 |
| | (369 | ) | | 948 |
| | 366 |
|
Mortgage derivatives - forward commitments to sell fixed-rate mortgage loans | | Mortgage banking income | | (243 | ) | | (311 | ) | | (229 | ) | | (119 | ) |
Total derivatives not designated as hedging instruments | | | | $ | 233 |
| | $ | (696 | ) | | $ | 810 |
| | $ | 238 |
|
| | | | | | | | | | |
| |
(1) | Gain (loss) represents net fair value adjustments (including credit-related adjustments and interest settlements on variation margin payments) for customer swaps and offsetting positions. |
(1) Gain (loss) represents net fair value adjustments (including credit related adjustments) for customer swaps and offsetting positions.
(2) Gain (loss) represents net fair value adjustments recorded for interest rate lock commitments and commitments to sell mortgage loans to third-party investors.
Note 109 - Net Income Per Common Share
The following table displays a reconciliation of the information used in calculating basic and diluted earnings per common share for the sixthree and threesix months ended June 30, 20182019 and 2017.2018.
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands, except per share data) | 2019 | | 2018 | | 2019 | | 2018 |
Basic Net Income Per Common Share: | | | | | | | |
Net income available to common shareholders | $ | 153,034 |
| | $ | 108,622 |
| | $ | 270,070 |
| | $ | 209,229 |
|
Weighted average common shares outstanding | 157,389 |
| | 118,397 |
| | 159,148 |
| | 118,531 |
|
Net income per common share, basic | $ | 0.97 |
| | $ | 0.92 |
| | $ | 1.70 |
| | $ | 1.77 |
|
Diluted Net Income Per Common Share: | | | | | | | |
Net income available to common shareholders | $ | 153,034 |
| | $ | 108,622 |
| | $ | 270,070 |
| | $ | 209,229 |
|
Weighted average common shares outstanding | 157,389 |
| | 118,397 |
| | 159,148 |
| | 118,531 |
|
Effect of dilutive outstanding equity-based awards, warrants, and earnout payments | 1,688 |
| | 742 |
| | 1,760 |
| | 698 |
|
Weighted average diluted common shares | 159,077 |
| | 119,139 |
| | 160,908 |
| | 119,229 |
|
Net income per common share, diluted | $ | 0.96 |
| | $ | 0.91 |
| | $ | 1.68 |
| | $ | 1.75 |
|
| | | | | | | |
|
| | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | Three Months Ended June 30, |
(in thousands, except per share data) | 2018 | | 2017 | | 2018 | | 2017 |
Basic Net Income Per Common Share: | | | | | | | |
Net income available to common shareholders | $ | 209,229 |
| | $ | 142,742 |
| | $ | 108,622 |
| | $ | 73,444 |
|
Weighted average common shares outstanding | 118,531 |
| | 122,251 |
| | 118,397 |
| | 122,203 |
|
Net income per common share, basic | $ | 1.77 |
| | $ | 1.17 |
| | $ | 0.92 |
| | $ | 0.60 |
|
Diluted Net Income Per Common Share: | | | | | | | |
Net income available to common shareholders | $ | 209,229 |
| | $ | 142,742 |
| | $ | 108,622 |
| | $ | 73,444 |
|
Weighted average common shares outstanding | 118,531 |
| | 122,251 |
| | 118,397 |
| | 122,203 |
|
Potentially dilutive shares from outstanding equity-based awards and Earnout Payments | 698 |
| | 792 |
| | 742 |
| | 824 |
|
Weighted average diluted common shares | 119,229 |
| | 123,043 |
| | 119,139 |
| | 123,027 |
|
Net income per common share, diluted | $ | 1.75 |
| | $ | 1.16 |
| | $ | 0.91 |
| | $ | 0.60 |
|
| | | | | | | |
Basic net income per common share is computed by dividing net income available to common shareholders by the average common shares outstanding for the period. Diluted net income per common share reflects the dilution that could occur if securities or other contracts to issue common stock were exercised or converted. The dilutive effect of outstanding stock options, and restricted share units, and warrants is reflected in diluted net income per common share, unless the impact is anti-dilutive, by application of the treasury stock method.
As of June 30, 20182019, there were 40 thousand potentially dilutive shares related to stock options to purchase shares of common stock that were outstanding during 2019, and 2017,as of June 30, 2018, there were 2.2 million potentially dilutive shares related to the Warrant to purchase shares of common stock that were outstanding during 2018 and 2017 but were not included in the computation of diluted net income per common share because the effect would have been anti-dilutive.
Note 1110 - Share-based Compensation
General Description of Share-based Plans
Synovus hasAs a long-term incentive plan under which the Compensation Committeeresult of the BoardFCB acquisition on January 1, 2019, Synovus assumed 3.2 million outstanding FCB stock option awards and 136 thousand outstanding FCB restricted stock unit awards. Pursuant to the Merger Agreement, each stock option and restricted share unit outstanding on the Acquisition Date was assumed and converted into a stock option or restricted stock unit award relating to shares of Directors hasSynovus common stock, with the authoritysame terms and conditions as were applicable under such award prior to grant share-based awards to Synovus employees.the acquisition. The 2013 Omnibus Plan authorizes 8.6 million common share equivalents available for grant, where grants ofconverted options count as one share equivalent and grants of full value awards (e.g., restricted share units markethad a fair value of $41.5 million on the Acquisition Date, of which $4.2 million was allocated to compensation expense and the remaining to purchase price. The estimated fair value of the converted restricted share units was based on Synovus' closing stock price on December 31, 2018, and performance share units) count as two share equivalents. Any restricted share units that are forfeited andthe estimated fair value of the converted stock options that expire unexercised will again become available for issuancewas determined using a Hull-White model in a binomial lattice option pricing framework. Additionally, under the Plan. At June 30, 2018, Synovus hadterms of the Merger Agreement, certain outstanding FCB non-vested equity awards with a totalfair value of 4.9$7.5 million shareson the Acquisition Date, accelerated vesting and converted automatically into the right to receive merger consideration at the merger exchange ratio of its authorized but unissued common stock reserved for future grants under1.055, or an equivalent amount in cash, of which $3.9 million was allocated to merger-related compensation expense consisting of $3.5 million settled in equity and $400 thousand settled in cash with the 2013 Omnibus Plan. remaining $3.5 million allocated to purchase price.
The Plan permits grantsfollowing tables summarize the status of share-based compensation includingSynovus' stock options, restricted share units, market restricted share units, and performance share units. The grants generally include vesting periods ranging from three to five years and contractual termsunits as of ten years. Vesting for grants made in 2018 accelerates upon retirement for plan participants who have reached age 65 and who also have no less than 10 years of service at the date of their election to retire. Market restricted share units and performance share units are granted at a defined target level and are compared annually to required market and performance metrics to determine actual units vested and compensation expense. Synovus has historically issued new shares to satisfy share option exercises and share unit conversions. Dividend equivalents are paid on outstanding restricted share units, market restricted share units, and performance share units in the form of additional restricted share units that vest over the same vesting period or the vesting period left on the original restricted share unit grant.
Share-based Compensation Expense
Total share-based compensation expense was $8.3 million and $4.4 million for the six and three months ended June 30, 2018, respectively,2019, and $6.8 million and $3.5 millionactivity for the six and three months ended June 30, 2017, respectively. Accelerated share-based compensation expense associated with the provision in 2018 of a retirement vesting provision was approximately $200 thousand and $30 thousand for the six and three months ended June 30, 2018 for retirement eligible employees.
Stock Options
No stock option grants were made during the six months ended June 30, 2018. At2019.
|
| | | | | | | |
| | Stock Options |
(in thousands, except per share amounts) | | Quantity | | Weighted-Average Exercise Price Per Share |
Outstanding at January 1, 2019 | | 640 |
| | $ | 16.93 |
|
Assumed | | 3,230 |
| | 23.22 |
|
Exercised | | (461 | ) | | 19.23 |
|
Outstanding at June 30, 2019 | | 3,409 |
| | $ | 22.58 |
|
| | | | |
|
| | | | | | | | | | | | | | | | | | | | | |
| | Restricted Share Units | | Market Restricted Share Units | | Performance Share Units |
(in thousands, except per share amounts) | | Quantity | | Weighted-Average Grant Date Fair Value Per Share | | Quantity | | Weighted-Average Grant Date Fair Value Per Share | | Quantity | | Weighted-Average Grant Date Fair Value Per Share |
Non-vested at January 1, 2019 | | 526 |
| | $ | 41.18 |
| | 144 |
| | $ | 41.91 |
| | 248 |
| | $ | 38.29 |
|
Granted | | 537 |
| | 36.26 |
| | 151 |
| | 36.96 |
| | 140 |
| | 37.34 |
|
Assumed | | 136 |
| | 31.99 |
| | — |
| | — |
| | — |
| | — |
|
Quantity change by TSR factor | | — |
| | — |
| | (18 | ) | | 38.06 |
| | — |
| | — |
|
Dividend equivalents granted | | 10 |
| | 36.26 |
| | 2 |
| | 36.96 |
| | 10 |
| | 37.34 |
|
Vested | | (292 | ) | | 36.78 |
| | (55 | ) | | 38.06 |
| | (93 | ) | | 26.35 |
|
Forfeited | | (82 | ) | | 36.14 |
| | (19 | ) | | 40.94 |
| | (31 | ) | | 40.65 |
|
Non-vested at June 30, 2019 | | 835 |
| | $ | 38.49 |
| | 205 |
| | $ | 39.68 |
| | 274 |
| | $ | 41.56 |
|
| | | | | | | | | | | | |
Total share-based compensation expense recognized for the three and six months ended June 30, 2019 and 2018 there were 655 thousand outstanding stockis presented in the following table by its classification within total non-interest expense.
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | 2019 | | 2018 | | 2019 | | 2018 |
Salaries and other personnel expense | $ | 5,405 |
| | $ | 3,976 |
| | $ | 11,713 |
| | $ | 7,749 |
|
Merger-related expense | 413 |
| | — |
| | 4,219 |
| | — |
|
Other operating expenses | 163 |
| | 389 |
| | 293 |
| | 571 |
|
Total share-based compensation expense included in non-interest expense | $ | 5,981 |
| | $ | 4,365 |
| | $ | 16,225 |
| | $ | 8,320 |
|
| | | | | | | |
Note 11 - Leases
Synovus’ leasing activities are primarily comprised of real estate leases used for retail branch locations and office space for core administrative and operating activities of Synovus’ banking and financial services business, and to a significantly lesser extent, certain equipment. The majority of these leases provide for fixed lease payments, including periodic escalators which are fixed at lease inception, however, a number of leases provide for variable lease payments where periodic increases in payment amounts are indexed to a consumer price index. Many leases include one or more options to renew which generally range from one to five years. Optional extension periods which are reasonably certain to be exercised in the future were included in the measurement of ROU assets and lease liabilities. Synovus’ leasing arrangements do not contain any material residual value guarantees, material restrictive covenants, or material end of lease purchase sharesoptions.
The following table presents the lease balances within the consolidated balance sheet as of common stock with aJune 30, 2019. The difference between the asset and liability balance is primarily the result of lease liabilities that existed prior to the January 1, 2019 adoption of the new accounting guidance for leases.
|
| | | | | |
Leases | | | |
(in thousands) | Classification | | June 30, 2019 |
Assets | | | |
Operating | Other Assets | | $ | 373,675 |
|
Finance | Premises and Equipment, net(1) | | 3,233 |
|
Total leased assets | | | $ | 376,908 |
|
Liabilities | | | |
Operating | Other Liabilities | | 381,345 |
|
Finance | Other Liabilities | | 3,050 |
|
Total lease liabilities | | | $ | 384,395 |
|
| | | |
(1) Finance lease assets are recorded net of accumulated amortization of $448 thousand as of June 30, 2019.
For the three and six months ended June 30, 2019, the components of lease expense were as follows:
|
| | | | | | | | | |
Lease Cost | | | | | |
(in thousands) | Classification | | Three Months Ended June 30, 2019 | | Six Months Ended June 30, 2019 |
Operating lease cost, net(1) | Net occupancy and equipment expense | | $ | 8,137 |
| | $ | 16,309 |
|
Finance lease cost | | | | | |
Amortization of leased assets | Net occupancy and equipment expense | | 224 |
| | 448 |
|
Interest on lease liabilities | Net occupancy and equipment expense | | 19 |
| | 39 |
|
Sublease income(2) | Net occupancy and equipment expense | | (157 | ) | | (323 | ) |
Net lease cost | | | $ | 8,223 |
| | $ | 16,473 |
|
| | | | | |
(1)Excludes variable and short-term lease costs, which are not material.
(2) Sublease income excludes rental income from owned properties of $639 thousand and $1.2 million, respectively, for the three and six months ended June 30, 2019, which is also included in net occupancy and equipment expenses.
The following table presents the weighted average exercise priceremaining lease term and weighted average discount rates related to Synovus' leases as of $16.92 per share.June 30, 2019:
Restricted Share Units, Performance Share Units, and Market Restricted Share Units |
| | | | |
Lease Term and Discount Rate | | | |
| Weighted-average remaining lease term (years) | | Weighted-average discount rate (percentage) |
Operating leases | 21.5 | | 3.55 | % |
Finance leases | 4.2 | | 2.44 |
|
| | | |
During
Supplemental cash flow information related to the Company's leasing activities for the six months ended June 30, 2018, Synovus awarded 234 thousand restricted share units that have a service-based vesting period of three years and awarded 87 thousand performance share units that vest upon service and performance conditions. Synovus also granted 58 thousand market restricted share units during the six months ended June 30, 2018. The weighted average grant-date fair value of the awarded restricted share units, performance share units and market restricted share units was $47.67 per share. Market restricted share units and performance share units2019 are granted at target and are compared annually to required market and performance metrics. The performance share units vest upon meeting certain service and performance conditions. Return on average assets (ROAA) and return on average tangible common equity (ROATCE) performance is evaluated each year over a three-year performance period, with share distribution determined at the end of the three years. The number of performance share units that will ultimately vest ranges from 0% to 150% of target based on Synovus' three-year weighted average ROAA (as defined) and ROATCE (as defined). The market restricted share units have a three-year service-based vesting component as well as a total shareholder return multiplier. The number of market restricted share units that will ultimately vest ranges from 75% to 125% of target based on Synovus' total shareholder return. At June 30, 2018, including dividend equivalents granted, there were 910 thousand restricted share units, performance share units and market restricted share units outstanding with a weighted average grant-date fair value of $40.82 per share.follows:
|
| | | |
Other Information | |
(in thousands) | Six Months Ended June 30, 2019 |
Cash paid for amounts included in the measurement of lease liabilities |
|
Operating cash flows from operating leases | $ | (14,893 | ) |
Operating cash flows from finance leases | (39 | ) |
Financing cash flows from finance leases | (357 | ) |
| |
Note 12 - Non-interest Income
The following table reflects revenue disaggregated by revenue type and linepresents the maturity of business for the six and three months endedCompany’s lease liabilities as of June 30, 2018 and 2017.
2019:
|
| | | | | | | | | | | |
Maturity of Lease Liabilities | | | | | |
(in thousands) | Operating Leases | | Finance Leases | | Total |
2019 | $ | 14,732 |
| | $ | 494 |
| | $ | 15,226 |
|
2020 | 29,437 |
| | 871 |
| | 30,308 |
|
2021 | 28,104 |
| | 839 |
| | 28,943 |
|
2022 | 27,369 |
| | 465 |
| | 27,834 |
|
2023 | 25,711 |
| | 180 |
| | 25,891 |
|
After 2023 | 434,340 |
| | 343 |
| | 434,683 |
|
Total lease payments | $ | 559,693 |
| | $ | 3,192 |
| | $ | 562,885 |
|
Less: Imputed interest | 178,348 |
| | 142 |
| | 178,490 |
|
Present value of lease liabilities | $ | 381,345 |
| | $ | 3,050 |
| | $ | 384,395 |
|
| | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
Non-interest Income by Line of Business
| For the Six Months Ended June 30, 2018 |
(in thousands) | Total | | Community Banking | | Corporate Banking | | Retail Banking | | Financial Management Services | | Other |
Service charges on deposit accounts | $ | 39,938 |
| | $ | 11,404 |
| | $ | 985 |
| | $ | 26,518 |
| | $ | — |
| | $ | 1,031 |
|
Fiduciary and asset management fees | 27,419 |
| | — |
| | — |
| | — |
| | 27,419 |
| | — |
|
Card fees | 21,032 |
| | 420 |
| | — |
| | 20,612 |
| | — |
| | — |
|
Brokerage revenue | 17,596 |
| | — |
| | — |
| | — |
| | 17,596 |
| | — |
|
Insurance revenue | 3,092 |
| | — |
| | — |
| | — |
| | 3,092 |
| | — |
|
Other fees | 1,588 |
| | — |
| | — |
| | 1,033 |
| | — |
| | 555 |
|
| $ | 110,665 |
| | $ | 11,824 |
| | $ | 985 |
| | $ | 48,163 |
| | $ | 48,107 |
| | $ | 1,586 |
|
| | | | | | | | | | | |
Other revenues(1) | 29,768 |
| | 5,841 |
| | 3,581 |
| | 3,242 |
| | 11,408 |
| | 5,696 |
|
Total non-interest income | $ | 140,433 |
| | $ | 17,665 |
| | $ | 4,566 |
| | $ | 51,405 |
| | $ | 59,515 |
| | $ | 7,282 |
|
| | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Six Months Ended June 30, 2017 |
(in thousands) | Total | | Community Banking | | Corporate Banking | | Retail Banking | | Financial Management Services | | Other |
Service charges on deposit accounts | $ | 40,370 |
| | $ | 11,415 |
| | $ | 887 |
| | $ | 26,970 |
| | $ | — |
| | $ | 1,098 |
|
Fiduciary and asset management fees | 24,676 |
| | — |
| | — |
| | — |
| | 24,676 |
| | — |
|
Card fees | 19,885 |
| | 437 |
| | — |
| | 19,448 |
| | — |
| | — |
|
Brokerage revenue | 14,436 |
| | — |
| | — |
| | — |
| | 14,436 |
| | — |
|
Insurance revenue | 2,364 |
| | — |
| | — |
| | — |
| | 2,364 |
| | — |
|
Other fees | 1,590 |
| | — |
| | — |
| | 1,060 |
| | — |
| | 530 |
|
| $ | 103,321 |
| | $ | 11,852 |
| | $ | 887 |
| | $ | 47,478 |
| | $ | 41,476 |
| | $ | 1,628 |
|
| | | | | | | | | | | |
Other revenues(1) | 37,218 |
| | 4,641 |
| | 4,376 |
| | 3,183 |
| | 13,413 |
| | 11,605 |
|
Total non-interest income | $ | 140,539 |
| | $ | 16,493 |
| | $ | 5,263 |
| | $ | 50,661 |
| | $ | 54,889 |
| | $ | 13,233 |
|
| | | | | | | | | | | |
(1) Other revenues primarily relate to revenues not derived from contracts with customers.
|
| | | | | | | | | | | | | | | | | | | | | | |
Non-interest Income by Line of Business
| For the Three Months Ended June 30, 2018 |
(in thousands) | Total | Community Banking | | Corporate Banking | | Retail Banking | | Financial Management Services | | Other |
Service charges on deposit accounts | $ | 19,999 |
| $ | 5,724 |
| | $ | 453 |
| | $ | 13,096 |
| | $ | — |
| | $ | 726 |
|
Fiduciary and asset management fees | 13,983 |
| — |
| | — |
| | — |
| | 13,983 |
| | — |
|
Card fees | 10,833 |
| 215 |
| | — |
| | 10,618 |
| | — |
| | — |
|
Brokerage revenue | 8,900 |
| — |
| | — |
| | — |
| | 8,900 |
| | — |
|
Insurance revenue | 1,879 |
| — |
| | — |
| | — |
| | 1,879 |
| | — |
|
Other fees | 756 |
| — |
| | — |
| | 474 |
| | — |
| | 282 |
|
| $ | 56,350 |
| $ | 5,939 |
| | $ | 453 |
| | $ | 24,188 |
| | $ | 24,762 |
| | $ | 1,008 |
|
| | | | | | | | | | |
Other revenues(1) | 17,037 |
| 3,390 |
| | 1,848 |
| | 1,713 |
| | 5,565 |
| | 4,521 |
|
Total non-interest income | $ | 73,387 |
| $ | 9,329 |
|
| $ | 2,301 |
|
| $ | 25,901 |
|
| $ | 30,327 |
|
| $ | 5,529 |
|
| | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended June 30, 2017 |
(in thousands) | Total | Community Banking | | Corporate Banking | | Retail Banking | | Financial Management Services | | Other |
Service charges on deposit accounts | $ | 20,252 |
| $ | 5,644 |
| | $ | 428 |
| | $ | 13,533 |
| | $ | — |
| | $ | 647 |
|
Fiduciary and asset management fees | 12,524 |
| — |
| | — |
| | — |
| | 12,524 |
| | — |
|
Card fees | 10,041 |
| 218 |
| | — |
| | 9,823 |
| | — |
| | — |
|
Brokerage revenue | 7,210 |
| — |
| | — |
| | — |
| | 7,210 |
| | — |
|
Insurance revenue | 1,060 |
| — |
| | — |
| | — |
| | 1,060 |
| | — |
|
Other fees | 748 |
| — |
| | — |
| | 486 |
| | — |
| | 262 |
|
| $ | 51,835 |
| $ | 5,862 |
| | $ | 428 |
| | $ | 23,842 |
| | $ | 20,794 |
| | $ | 909 |
|
| | | | | | | | | | |
Other revenues(1) | 16,866 |
| 2,993 |
| | 2,758 |
| | 1,618 |
| | 6,816 |
| | 2,681 |
|
Total non-interest income | $ | 68,701 |
| $ | 8,855 |
| | $ | 3,186 |
| | $ | 25,460 |
| | $ | 27,610 |
| | $ | 3,590 |
|
| | | | | | | | | | |
(1) Other revenues primarily relate to revenues not derived from contracts with customers.
Following is a discussion of key revenues within the scope of the new revenue guidance:
Service Charges on Deposit Accounts: Revenue from service charges on deposit accounts is earned through cash management, wire transfer, and other deposit-related services, as well as overdraft, non-sufficient funds, account management and other deposit-related fees. Revenue is recognized for these services either over time, corresponding with deposit accounts' monthly cycle, or at a point in time for transaction related services and fees. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers' accounts.
Fiduciary and Asset Management Fees: Fiduciary and asset management fees are primarily comprised of fees earned from the management and administration of trusts and other customer assets. Synovus' performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month-end through a direct charge to customers' accounts. Synovus does not earn performance-based incentives.
Card Fees: Card fees consist primarily of interchange fees from consumer credit and debit cards processed by card association networks, as well as merchant discounts, and other card related services. Interchange rates are generally set by the credit card associations and based on purchase volumes and other factors. Interchange fees and merchant discounts are recognized concurrently with the delivery of service on a daily basis as transactions occur. Payment is typically received immediately or in the following month. Card fees are reported net of certain associated expense items including loyalty program expenses and network expenses.
Brokerage Revenue: Brokerage revenue consists primarily of commissions. Additionally, brokerage revenue includes advisory fees earned from the management of customer assets. Advisory fees for brokerage services are recognized and collected monthly and are based upon the month-end market value of the assets under management at a rate predetermined in the contract. Transactional revenues are based on the size and number of transactions executed at the client's direction and are generally recognized on the trade date with payment received on the settlement date.
Insurance Revenue: Insurance revenue primarily consists of commissions received on annuity and life product sales. The commissions are recognized as revenue when the customer executes an insurance policy with the insurance carrier. In some cases, Synovus receives payment of trailing commissions each year when the customer pays its annual premium. For the six and three months ended June 30, 2018, Synovus recognized an immaterial amount of insurance trailing commissions related to performance obligations satisfied in prior periods.
Other Fees: Other fees primarily consist of revenues generated from safe deposit box rental fees and lockbox services. Fees are recognized over time, on a monthly basis, as Synovus' performance obligation for services is satisfied. Payment is received upfront for safe deposit box rentals and in the following month for lockbox services.
Contract Balances
A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity's obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. Synovus' non-interest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values. Consideration is often received immediately or shortly after Synovus satisfies its performance obligation and revenue is recognized. Synovus does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of June 30, 2018 and December 31, 2017, Synovus did2019, minimum lease payments related to operating leases that had not have any significant contract balances.yet commenced were $20.8 million.
Note 1312 - Commitments and Contingencies
In the normal course of business, Synovus enters into commitments to extend credit such as loan commitments and letters of credit to meet the financing needs of its customers. Synovus uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Synovus also has commitments to fund certain low income housing investments.
The contractual amount of these financial instruments represents Synovus' maximum credit risk should the counterparty draw upon the commitment, and should the counterparty subsequently fail to perform according to the terms of the contract. Since many of the commitments are expected to expire without being drawn upon, total commitment amounts do not necessarily represent future cash requirements. Additionally, certain commitments (primarily consumer) maycan generally be canceled by providing notice to the borrower.
The allowance for credit losses associated with unfunded commitments and letters of credit is a component of the unfunded commitments reserve recorded within other liabilities on the consolidated balance sheet.sheets. Additionally, unearned fees relating to letters of credit are recorded within other liabilities on the consolidated balance sheet.sheets. These amounts are not material to Synovus' consolidated balance sheet.sheets.
Unfunded lettersSynovus invests in certain low income housing tax credit partnerships which are engaged in the development and operation of creditaffordable multi-family housing utilizing the LIHTC pursuant to Section 42 of the Code. Synovus typically acts as a limited partner in these investments and lending commitmentsdoes not exert control over the operating or financial policies of the partnerships and as such, is not considered the primary beneficiary of the partnership. Synovus typically provides financing during the construction and development of the properties and is at June 30, 2018risk for the amount of its equity investment plus the outstanding amount of any construction loans in excess of the fair value of the collateral for the loan but has no obligation to fund the operations or working capital of the
partnerships and December 31, 2017is not exposed to losses beyond Synovus’ investment. Synovus receives tax credits related to these investments which are presented below.subject to recapture by taxing authorities based on compliance features required to be met at the project level.
| | (in thousands) | June 30, 2018 | | December 31, 2017 | June 30, 2019 | | December 31, 2018 |
Letters of credit* | $ | 179,860 |
| | $ | 153,372 |
| $ | 216,304 |
| | $ | 157,675 |
|
Commitments to fund commercial and industrial loans | 5,361,671 |
| | 5,090,827 |
| 6,065,365 |
| | 5,527,017 |
|
Commitments to fund commercial real estate, construction, and land development loans | 1,652,834 |
| | 1,567,583 |
| 3,020,509 |
| | 2,034,223 |
|
Commitments under home equity lines of credit | 1,179,074 |
| | 1,137,714 |
| 1,419,312 |
| | 1,258,657 |
|
Unused credit card lines | 743,376 |
| | 779,254 |
| 857,536 |
| | 775,003 |
|
Other loan commitments | 365,861 |
| | 351,358 |
| 473,824 |
| | 400,983 |
|
Total unfunded lending commitments and letters of credit | $ | 9,482,676 |
| | $ | 9,080,108 |
| $ | 12,052,850 |
| | $ | 10,153,558 |
|
| | | | |
|
| | | | | | | |
Investments in low income housing tax credit partnerships: | | | |
Carrying amount included in other assets | $ | 79,541 |
| | $ | 83,736 |
|
Amount of future funding commitments included in carrying amount | 28,382 |
| | 47,123 |
|
Short-term construction loans and letter of credit commitments | 259 |
| | 1,585 |
|
Funded portion of short-term loans and letters of credit | 2,822 |
| | 5,595 |
|
| | | |
* Represent the contractual amount net of risk participations of approximately $70$34 million and $77$46 million at June 30, 20182019 and December 31, 2017,2018, respectively.
Merchant Services
In accordance with credit and debit card association rules, Synovus sponsors merchant processing servicersvarious MPS businesses that process credit and debit card transactions on behalf of various merchants. In connection with these services, a liability may arise in the event of a billing dispute between the merchant and a cardholder that is ultimately resolved in the cardholder's favor. If the merchant defaults on its obligation to reimburse the cardholder,obligations, the cardholder, through its issuing bank, generally has until six months after the date of the transaction to present a chargeback to the merchant processor,MPS, which is primarily liable for any losses on covered transactions. However, if the merchant processorMPS fails to meet its obligation to reimburse the cardholder for disputed transactions,obligations, then Synovus, as the sponsor, could be held liable for the disputed amount. Synovus mitigatesseeks to mitigate this risk through its contractual arrangements with the merchant processing servicersMPS and the merchants and by withholding future settlements, by retaining cash reserve accounts and/or by obtaining other security. DuringFor the three and six months ended June 30, 2019, the sponsored entities processed and settled $18.88 billion and $36.59 billion of transactions, respectively. For the three and six months ended June 30, 2018, and 2017, the sponsored entities processed and settled $17.63 billion and $34.35 billion of transactions, respectively.
Synovus began covering and $30.42 billion, respectively, in total transactions. Forhas continued to cover chargebacks related to a particular MPS during 2019 and 2018 where the six months endedMPS’s cash reserve account was unavailable to support the chargebacks. As of June 30, 2018 and 2017,2019, Synovus incurred an immaterial amount of losses in connection withhad advanced approximately $22.6 million to the MPS to cover these chargebacks. During July 2018,While Synovus began to accrue a receivable for chargebacks associated with one merchant processing relationship.
has contractual protections against loss, repayment of such amounts will depend upon the continued financial viability and/or valuation of the MPS and the availability of any cash reserve accounts.
Legal Proceedings
Synovus and its subsidiaries are subject to various legal proceedings and claims that arise in the ordinary course of its business. Additionally, in the ordinary course of business, Synovus and its subsidiaries are subject to regulatory examinations, information gathering requests, tax matters, inquiries and investigations. Synovus, like many other financial institutions, has been the target of numerous legal actions and other proceedings asserting claims for damages and related relief for losses. These actions include claims and counterclaims asserted by individual borrowersindividuals related to their loans and allegations of violations of state and federal laws and regulations relating to banking practices, including putative class action matters.matters and also claims asserted by shareholders or purported shareholders against Synovus, members of Synovus' Board of Directors, and members of Synovus' management team. In addition to actual damages, if Synovus does not prevail in asserted legal actions, credit-related litigation could result in additional write-downs or charge-offs of loans, which could adversely affect Synovus' results of operations during the period in which the write-down or charge-off were to occur.
Synovus carefully examines and considers each legal matter, and, in those situations where Synovus determines that a particular legal matter presents loss contingencies that are both probable and reasonably estimable, Synovus establishes an appropriate accrual.reserve. An event is considered to be probable if the future event is likely to occur. While the final outcome of any legal proceeding is inherently uncertain, based on the information currently available, advice of counsel and available insurance coverage, management believes that the amounts accrued with respect to legal matters as of June 30, 20182019 are adequate. The actual costs of resolving legal claims may be higher or lower than the amounts accrued.
In addition, where Synovus determines that there is a reasonable possibility of a loss in respect of legal matters, Synovus considers whether it is able to estimate the total reasonably possible loss or range of loss. An event is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely.” An event is “remote” if “the chance of the future event or events occurring is more than slight but less than reasonably possible." In many situations, Synovus may be unable to estimate reasonably possible losses due to the preliminary nature of the legal matters, as well as a variety of other factors and uncertainties. For those legal matters where Synovus is able to estimate a range of reasonably possible losses,
management currently estimates the aggregate range from our outstanding litigation is from zero to $5 million in excess of the amounts accrued, if any, related to those matters. This estimated aggregate range is based upon information currently available to Synovus, and the actual losses could prove to be lower or higher. As there are further developments in these legal matters, Synovus will reassess these matters, and the estimated range of reasonably possible losses may change as a result of this assessment. Based on Synovus' current knowledge and advice of counsel, management presently does not believe that the liabilities arising from these legal matters will have a material adverse effect on Synovus' consolidated financial condition, results of operations or cash flows. However, it is possible that the ultimate resolution of these legal matters could have a material adverse effect on Synovus' results of operations for any particular period.
Synovus intends to vigorously pursue all available defenses to these legal matters, but will also consider other alternatives, including settlement, in situations where there is an opportunity to resolve such legal matters on terms that Synovus considers to be favorable, including in light of the continued expense and distraction of defending such legal matters. Synovus maintains insurance coverage, which may be available to cover legal fees, or potential losses that might be incurred in connection with such legal matters. The above-noted estimated range of reasonably possible losses does not take into consideration insurance coverage which may or may not be available for the respective legal matters.
Note 1413 - Subsequent EventsEvent
Pending AcquisitionIssuance of FCB Financial Holdings, Inc.
Series E Preferred Stock
On July 23, 2018,1, 2019, Synovus entered into the Merger Agreement by and among Synovus, FCB and Azalea Merger Sub Corp. pursuant to which Synovus will acquire FCB incompleted a reverse triangular merger. At the effective time of the Merger, each outstanding share of FCB Class A common stock, par value $0.001 per share, will be converted into the right to receive, without interest, 1.055 shares of Synovus common stock, par value $1.00 per share. The Merger Agreement has been unanimously approved by both companies’ Board of Directors. The transaction is subject to customary closing conditions, including approval of Synovus and FCB shareholders and approval of state and federal regulators, and is expected to close by the first quarter of 2019.
FCB operates 50 full service banking centers through its wholly-owned banking subsidiary, Florida Community Bank. Following closing, Florida Community Bank will merge with and into Synovus Bank and operate under the Synovus brand.
Redemption$350 million public offering of Series CE Preferred Stock
On AugustStock. The offering generated net proceeds of $341.5 million. Dividends on the shares are non-cumulative and, if declared, will accrue and be payable, in arrears, quarterly at a rate per annum equal to 5.875% for each dividend period from the original issue date to, but excluding, July 1, 2018, Synovus redeemed all 5,200,000 outstanding shares of2024. From and including July 1, 2024, the dividend rate will change and reset every five years on July 1 at a rate equal to the five-year U.S. Treasury Rate plus 4.127% per annum. The Series CE Preferred Stock foris redeemable at Synovus' option in whole or in part, from time to time, on July 1, 2024 or any subsequent reset date, or in whole but not in part, at any time within 90 days following a cashregulatory capital treatment event, in each case at a redemption price ofequal to $25.00 per share, plus any declared and unpaid dividends, without interest, for an aggregate redemption priceaccumulation of $130 million and paid a dividend of $2.6 million onany undeclared dividends. The Series E Preferred Stock has no preemptive or conversion rights. Except in limited circumstances, the Series C Preferred Stock. The redemption of the Series CE Preferred Stock was funded primarily with proceeds from Synovus' public offering of $200 million of Series D Preferred Stock completed on June 21, 2018. Concurrent with the redemption, Synovus will recognize an extinguishment loss of $4.1 million to net income available to common shareholders. The $4.1 million extinguishment loss will be recognized in a manner similar to the treatment of dividends paid on preferred stock during the three months ending September 30, 2018.does not have any voting rights.
ITEM 2. – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In this Report, the words “Synovus,” “the Company,” “we,” “us,” and “our” refer to Synovus Financial Corp. together with Synovus Bank and Synovus' other wholly-owned subsidiaries, except where the context requires otherwise.
FORWARD-LOOKING STATEMENTS
Certain statements made or incorporated by reference in this Report which are not statements of historical fact, including those under "Management's“Management's Discussion and Analysis of Financial Condition and Results of Operations,"” and elsewhere in this Report, constitute forward-looking statements within the meaning of, and subject to the protections of, Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements include statements with respect to Synovus' beliefs, plans, objectives, goals, targets, expectations, anticipations, assumptions, estimates, intentions and future performance and involve known and unknown risks, many of which are beyond Synovus' control and which may cause Synovus' actual results, performance or achievements or the commercial bankingfinancial services industry or economy generally, to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.
All statements other than statements of historical fact are forward-looking statements. You can identify these forward-looking statements through Synovus' use of words such as “believes,” “anticipates,” “expects,” “may,” “will,” “assumes,” “predicts,” “could,” “should,” “would,” “intends,” “targets,” “estimates,” “projects,” “plans,” “potential” and other similar words and expressions of the future or otherwise regarding the outlook for Synovus' future business and financial performance and/or the performance of the commercial bankingfinancial services industry and economy in general. Forward-looking statements are based on the current beliefs and expectations of Synovus' management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statements in this document. Many of these factors are beyond Synovus' ability to control or predict. These factors include, but are not limited to:
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(1) | | the risk that competition in the financial services industry may adversely affect our future earnings and growth; |
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(2) | | the risk that we may not realize the expected benefits from our efficiency and growth initiatives, which could negatively impact our future profitability; |
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(3) | | that we may fail to realize all of the anticipated benefits of the Merger, or those benefits may take longer to realize than expected, and that we may encounter significant difficulties in integrating and managing FCB and its businesses; |
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(4) | | the risk that our current and future information technology system enhancements and operational initiatives may not be successfully implemented, which could negatively impact our operations; |
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(4)(5) | | the risk that our enterprise risk management framework, our compliance program, or our corporate governance and supervisory oversight functions may not identify or address risks adequately, which may result in unexpected losses; |
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(5)(6) | | the risk that our asset quality may deteriorate, our allowance for loan losses may prove to be inadequate or may be negatively affected by credit risk exposures;exposures, and the risk that we may be unable to obtain full payment in respect of any trade or other receivables; |
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(6)(7) | | the risk that any future economic downturn could have a material adverse effect on our capital, financial condition, results of operations and future growth; |
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(7) | | changes in the interest rate environment, including changes to the federal funds rate, and competition in our primary market area may result in increased funding costs or reduced earning assets yields, thus reducing margins and net interest income; |
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(8) | | our ability to attract and retain key employees; |
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(9) | | the risk that we may be required to make substantial expenditures to keep pace with regulatory initiatives and the rapid technological changes in the financial services market; |
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(10) | | risks related to our business relationships with, and reliance onupon, third parties tothat have strategic partnerships with us or that provide key components of our business infrastructure, including the costs of services and products provided to us by third parties, and risks related to disruptions in service or financial difficulties ofwith a third-party vendor;vendor or business relationship; |
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(11) | | risks related to the ability of our operational framework to identify and manage risks associated with our business such as credit risk, compliance risk, reputational risk, and operational risk, including third-party vendors and other service providers, which could among other things, result in a breach of operating or security systems as a result of cyber attacks or similar acts;providers; |
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(12) | | our ability to identify and address cyber-security risks such as data security breaches, malware, "denial of service" attacks, "ransomware", "hacking" and identity theft, a failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage of our systems, increased costs, significant losses, or adverse effects to our reputation; |
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(13) | | the risk related to our implementation of new lines of business or new products and services; |
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(14) | | changes in interest rate environment, including changes to the federal funds rate, and competition in our primary market area may result in increased funding costs or reduced earning assets yields, thus reducing margins and net interest income; |
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(15) | | the impact of recent and proposed changes in governmental policy, laws and regulations, including proposed and recently enacted changes in the regulation and taxation of banks and financial institutions, or the interpretation or application thereof and the uncertainty of future implementation and enforcement of these regulations; |
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(14) | | the risk that Federal Tax Reform could have an adverse impact on our business or our customers, including with respect to demand and pricing for our loan products; |
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(15) | | the risk that we could realize losses if we sell non-performing assets and the proceeds we receive are lower than the carrying value of such assets; |
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(16) | | the risk that we may be exposed to potential losses in the event of fraud and/or theft, or in the event that a third partythird-party vendor, obligor, or obligorbusiness partner fails to pay amounts due to us under that relationship;relationship or under any arrangement that we enter into with them; |
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(17) | | the risk that we may not be able to identify suitable bank and non-bank acquisition targets or strategic partnersopportunities as part of our growth strategy and even if we are able to identify suitableattractive acquisition counterparties,opportunities, we may not be able to complete such transactions on favorable terms if at all, or successfully integrate acquired bank or nonbank operations into our existing operations or realize anticipated benefits from such transactions; |
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(18) | | the impact on our financial results, reputation, and business if we are unable to comply with all applicable federal and state regulations or other supervisory actions or directives and any necessary capital initiatives; |
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(19) | | changes in the cost and availability of funding due to changes in the deposit market and credit market; |
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(20) | | the risks that if economic conditions worsen or regulatory capital rules are modified, we may be required to undertake initiatives to improve our capital position; |
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(20) | | changes in the cost and availability of funding due to changes in the deposit market and credit market; |
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(21) | | restrictions or limitations on access to funds from historical and alternative sources of liquidity could adversely affect our overall liquidity, which could restrict our ability to make payments on our obligations and our ability to support asset growth and sustain our operations and the operations of Synovus Bank; |
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(22) | | the risk that we could realize losses if we sell non-performing assets and the proceeds we receive are lower than the carrying value of such assets; |
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(23) | | our ability to receive dividends from our subsidiaries could affect our liquidity, including our ability to pay dividends or take other capital actions; |
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(23)(24) | | risks related to regulatory approval to take certain actions, including any dividends on our common stock or Series D Preferred Stock,preferred stock, any repurchases of common stock or any issuance or redemption of any other regulatory capital instruments, as well as any applications in respect of expansionary initiatives; |
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(24) | | risks related to recent and proposed changes in the mortgage banking industry, including the risk that we may be required to repurchase mortgage loans sold to third parties and the impact of the “ability to pay” and “qualified mortgage” rules on our loan origination process and foreclosure proceedings; |
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(25) | | risks related to the risk that we may be required to take additional charges with respect to our deferred tax assets as a resultcontinued use, availability and reliability of Federal Tax Reform in the event our estimates prove inaccurate;LIBOR and other "benchmark" rates; |
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(26) | | the risk that Federal Tax Reform could have an adverse impact on our business or our customers, including with respect to demand and pricing for our loan products; |
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(27) | | the costs and effects of litigation, investigations, inquiries or similar matters, or adverse facts and developments related thereto; |
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(27)(28) | | risks related to the fluctuation in our stock price; |
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(28)(29) | | the effects of any damages to our reputation resulting from developments related to any of the items identified above; |
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(29) | | the risk that the required shareholder approvals of the Merger with FCB may not be obtained; and |
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(30) | | the risk that Synovus or FCB may be unable to obtain all of the regulatory approvals required to complete the Merger; |
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(31) | | the risk that the other conditions to closing the Merger with FCB may not be satisfied; |
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(32) | | the risk that the length of time necessary to consummate the Merger with FCB may be longer than anticipated for various reasons; |
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(33) | | the risk that the businesses of Synovus and FCB will not be integrated successfully or that the integration may take longer than expected; |
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(34) | | the risk that the cost savings, synergies, growth, and other benefits from the Merger with FCB may not be fully realized or may take longer to realize than expected; |
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(35) | | the risk that management’s time and attention will be diverted to issues associated with the Merger with FCB rather than our ongoing businesses; |
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(36) | | the risk that costs associated with the integration of the businesses of Synovus and FCB will be higher than anticipated; |
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(37) | | the risk of litigation arising in connection with the Merger and that could cause the transaction to be more costly than expected or delay its completion; |
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(38) | | the risk that events could lead to the termination of the Merger Agreement (or otherwise result in payment of termination fee); |
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(39) | | the risk of business disruption following the Merger; and |
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(40) | | other factors and other information contained in this Report and in other reports and filings that we make with the SEC under the Exchange Act, including, without limitation, those found in "Part I - Item 1A. Risk Factors" of this Report. |
For a discussion of these and other risks that may cause actual results to differ from expectations, refer to “Part I-Item 1A. Risk Factors” and other information contained in Synovus' 20172018 Form 10-K and our other periodic filings, including quarterly reports on Form 10-Q and current reports on Form 8-K, that we file from time to time with the SEC. All written or oral forward-looking statements that are made by or are attributable to Synovus are expressly qualified by this cautionary notice. You should not place undue reliance on any forward-looking statements since those statements speak only as of the date on which the statements are made. Synovus undertakes no obligation to update any forward-looking information and statements, whether writtenoral or oral,written, to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of new information or unanticipated events, except as may otherwise be required by law.
INTRODUCTION AND CORPORATE PROFILE
Synovus Financial Corp. is a financial services company and a registered bank holding company headquartered in Columbus, Georgia. Through its wholly-owned subsidiary, Synovus Bank, a Georgia state-chartered bank that is a member of the Federal Reserve System, the companyCompany provides commercial and retail banking in addition to a full suite of specialized products and services including private banking, treasury management, wealth management, premium finance and international banking. Synovus also provides mortgage services, financial planning, and investment advisory services through its wholly-owned subsidiaries, Synovus Mortgage, Synovus Trust, and Synovus Securities, as well as its GLOBALT and Creative Financial Group divisions.
Synovus Bank is positioned in some of the highest growth markets in the Southeast, with 250297 branches and 334 ATMs in Alabama, Florida, Georgia, Alabama, South Carolina, Florida, and Tennessee.
The following financial review summarizes the significant trends, changes in our business, transactions, and other matters affecting Synovus’ results of operations for the sixthree and threesix months ended June 30, 20182019 and financial condition as of June 30, 20182019 and December 31, 2017.2018. This discussion supplements, and should be read in conjunction with, the unaudited interim consolidated financial statements and notes thereto contained elsewhere in this Report and the consolidated financial statements of Synovus, the notes thereto, and management’s discussion and analysis contained in Synovus’ 20172018 Form 10-K.
Management's Discussion and Analysis of Financial Condition and Results of Operations consists of:
ŸDiscussion of Results of Operations - Reviews Synovus' financial performance, as well as selected balance sheet items,
items from the statements of income, significant transactions, and certain key ratios that illustrate Synovus' performance.
ŸCredit Quality, Capital Resources and Liquidity - Discusses credit quality, market risk, capital resources, and liquidity,
as well as performance trends. It also includes a discussion of liquidity policies, how Synovus obtains funding, and related
performance.
ŸAdditional Disclosures - Discusses additional important matters including critical accounting policies and non-GAAP
financial measures used within this Report.
A reading of each section is important to understand fully our financial performance.
DISCUSSION OF RESULTS OF OPERATIONS
Consolidated Financial Highlights | | Table 1 - Consolidated Financial Highlights | | | | | | | | | | | | |
| Six Months Ended June 30, | | Three Months Ended June 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
(dollars in thousands, except per share data) | 2018 | | 2017 | | Change | | 2018 | | 2017 | | Change | 2019 | | 2018 | | Change | | 2019 | | 2018 | | Change |
Net interest income | $ | 558,861 |
| | $ | 491,024 |
| | 13.8 | % | | $ | 284,577 |
| | $ | 251,097 |
| | 13.3 | % | $ | 397,262 |
| | $ | 284,577 |
| | 39.6 | % | | $ | 794,438 |
| | $ | 558,861 |
| | 42.2 | % |
Provision for loan losses | 24,566 |
| | 18,934 |
| | 29.7 | | 11,790 |
| | 10,260 |
| | 14.9 |
| 12,119 |
| | 11,790 |
| | 2.8 |
| | 35,688 |
| | 24,566 |
| | 45.3 |
|
Non-interest income | 140,433 |
| | 140,539 |
| | (0.1) | | 73,387 |
| | 68,701 |
| | 6.8 |
| 89,807 |
| | 73,387 |
| | 22.4 |
| | 169,185 |
| | 140,433 |
| | 20.5 |
|
Adjusted non-interest income(1) | 144,822 |
| | 136,038 |
| | 6.5 | | 74,720 |
| | 70,054 |
| | 6.7 |
| 90,197 |
| | 74,720 |
| | 20.7 |
| | 168,643 |
| | 144,822 |
| | 16.4 |
|
Total revenues (2) | 700,590 |
| | 623,896 |
| | 12.3 | | 359,260 |
| | 319,799 |
| | 12.3 |
| |
Total FTE revenues | | 487,880 |
| | 358,084 |
| | 36.2 |
| | 965,064 |
| | 699,530 |
| | 38.0 |
|
Adjusted total revenues(1) | | 488,270 |
| | 359,417 |
| | 35.9 |
| | 964,522 |
| | 703,919 |
| | 37.0 |
|
Non-interest expense | 399,234 |
| | 389,133 |
| | 2.6 | | 204,057 |
| | 191,747 |
| | 6.4 |
| 264,126 |
| | 204,057 |
| | 29.4 |
| | 556,537 |
| | 399,234 |
| | 39.4 |
|
Adjusted non-interest expense(1) | 400,561 |
| | 382,048 |
| | 4.8 | | 202,734 |
| | 191,442 |
| | 5.9 |
| 256,707 |
| | 203,026 |
| | 26.4 |
| | 499,360 |
| | 401,144 |
| | 24.5 |
|
Income before income taxes | 275,494 |
| | 223,496 |
| | 23.3 | | 142,117 |
| | 117,791 |
| | 20.7 |
| 210,824 |
| | 142,117 |
| | 48.3 |
| | 371,398 |
| | 275,494 |
| | 34.8 |
|
Net income | 214,348 |
| | 147,861 |
| | 45.0 | | 111,181 |
| | 76,003 |
| | 46.3 |
| 156,184 |
| | 111,181 |
| | 40.5 |
| | 276,370 |
| | 214,348 |
| | 28.9 |
|
Net income available to common shareholders | 209,229 |
| | 142,742 |
| | 46.6 | | 108,622 |
| | 73,444 |
| | 47.9 |
| 153,034 |
| | 108,622 |
| | 40.9 |
| | 270,070 |
| | 209,229 |
| | 29.1 |
|
Net income per common share, basic | 1.77 |
| | 1.17 |
| | 51.2 | | 0.92 |
| | 0.60 |
| | 52.7 |
| 0.97 |
| | 0.92 |
| | 6.0 |
| | 1.70 |
| | 1.77 |
| | (3.9 | ) |
Net income per common share, diluted | 1.75 |
| | 1.16 |
| | 51.3 | | 0.91 |
| | 0.60 |
| | 52.7 |
| 0.96 |
| | 0.91 |
| | 5.5 |
| | 1.68 |
| | 1.75 |
| | (4.4 | ) |
Adjusted net income per common share, diluted(1) | 1.78 |
| | 1.17 |
| | 52.1 | | 0.92 |
| | 0.61 |
| | 52.6 |
| 1.00 |
| | 0.92 |
| | 8.4 |
| | 1.98 |
| | 1.78 |
| | 11.6 |
|
Net interest margin(3) | 3.82 | % | | 3.46 | % | | 36 | bps | | 3.86 | % | | 3.51 | % | | 35 | bps | |
Net charge-off ratio(3) | 0.18 |
| | 0.19 |
| | (1 | ) | | 0.29 |
| | 0.26 |
| | 3 |
| |
Return on average assets(3) | 1.38 |
| | 0.98 |
| | 40 |
| | 1.42 |
| | 1.00 |
| | 42 |
| |
Adjusted return on average assets(1)(3) | 1.40 |
| | 0.99 |
| | 41 |
| | 1.43 |
| | 1.01 |
| | 42 |
| |
Efficiency ratio | 56.97 |
| | 62.31 |
| | (534 | ) | | 56.78 |
| | 59.90 |
| | (312 | ) | |
Adjusted efficiency ratio(1) | 56.90 |
| | 60.87 |
| | (397 | ) | | 56.41 |
| | 59.56 |
| | (315 | ) | |
Net interest margin(2) | | 3.69 | % | | 3.86 | % | | (17 | ) bps | | 3.74 | % | | 3.82 | % | | (8 | ) bps |
Net charge-off ratio(2) | | 0.13 |
| | 0.29 |
| | (16 | ) | | 0.16 |
| | 0.18 |
| | (2 | ) |
Return on average assets(2) | | 1.34 |
| | 1.42 |
| | (8 | ) | | 1.21 |
| | 1.38 |
| | (17 | ) |
Adjusted return on average assets(1)(2) | | 1.39 |
| | 1.43 |
| | (4 | ) | | 1.42 |
| | 1.39 |
| | 3 |
|
Efficiency ratio-FTE | | 54.14 |
| | 56.99 |
| | (285 | ) | | 57.67 |
| | 57.07 |
| | 60 |
|
Adjusted tangible efficiency ratio(1) | | 52.08 |
| | 56.41 |
| | (433 | ) | | 51.17 |
| | 56.90 |
| | (573 | ) |
| | | | | | | | | | | | | | | | | | | | | | |
(1) See “Non-GAAP Financial Measures” in this Report for the applicable reconciliation to the most comparable GAAP measure.(2) Consists of net interest income and non-interest income excluding investment securities gains (losses), net.
| | | June 30, 2018 | | March 31, 2018 | | Sequential Quarter Change | | June 30, 2017 | | Year-Over-Year Change | June 30, 2019 | | March 31, 2019 | | Sequential Quarter Change | | June 30, 2018 | | Year-Over-Year Change |
(dollars in thousands, except per share data) |
(dollars in thousands) | | June 30, 2019 | | March 31, 2019 | | Sequential Quarter Change | | June 30, 2018 | | Year-Over-Year Change |
Loans, net of deferred fees and costs | $ | 25,134,056 |
| | $ | 24,883,037 |
| | $ | 251,019 |
| | $ | 24,430,512 |
| | $ | 703,544 |
|
Total average loans | 24,946,307 |
| | 24,852,399 |
| | 93,908 |
| | 24,350,004 |
| | 596,303 |
| 35,777,127 |
| | 35,320,014 |
| | 457,113 |
| | 24,946,307 |
| | 10,830,820 |
|
Total deposits | 26,442,688 |
| | 26,253,507 |
| | 189,181 |
| | 25,218,816 |
| | 1,223,872 |
| 37,966,722 |
| | 38,075,190 |
| | (108,468 | ) | | 26,442,688 |
| | 11,524,034 |
|
Core deposits(1) | | 34,963,178 |
| | 35,366,186 |
| | (403,008 | ) | | 24,591,678 |
| | 10,371,500 |
|
Core transaction deposits(1) | | 23,268,923 |
| | 23,168,085 |
| | 100,838 |
| | 19,091,115 |
| | 4,177,808 |
|
Total average deposits | 26,268,074 |
| | 25,788,073 |
| | 480,001 |
| | 24,991,708 |
| | 1,276,366 |
| 37,899,662 |
| | 37,826,952 |
| | 72,710 |
| | 26,268,074 |
| | 11,631,588 |
|
Average core deposits (1) | 24,345,157 |
| | 23,836,163 |
| | 508,994 |
| | 23,612,149 |
| | 733,008 |
| |
| | | | | | | | | | |
Non-performing assets ratio(3) | 0.50 | % | | 0.53 | % | | (3 | ) bps | | 0.73 | % | | (23 | ) bps | 0.39 | % | | 0.44 | % | | (5 | )bps | | 0.50 | % | | (11 | )bps |
Non-performing loans ratio(3) | 0.47 |
| | 0.48 |
| | (1 | ) | | 0.65 |
| | (18 | ) | 0.34 |
| | 0.40 |
| | (6 | ) | | 0.47 |
| | (13 | ) |
Past due loans over 90 days | 0.01 |
| | 0.02 |
| | (1 | ) | | 0.02 |
| | (1 | ) | 0.02 |
| | 0.01 |
| | 1 |
| | 0.01 |
| | 1 |
|
| | | | | | | | | | |
Common equity Tier 1 capital (transitional) | $ | 2,838,616 |
| | $ | 2,801,073 |
| | $ | 37,543 |
| | $ | 2,734,983 |
| | $ | 103,633 |
| |
CET1 capital (transitional) | | $ | 3,899,532 |
| | $ | 3,790,395 |
| | $ | 109,137 |
| | $ | 2,838,616 |
| | $ | 1,060,916 |
|
Tier 1 capital | 3,156,805 |
| | 2,924,109 |
| | 232,696 |
| | 2,829,340 |
| | 327,465 |
| 4,094,672 |
| | 3,985,535 |
| | 109,137 |
| | 3,156,805 |
| | 937,867 |
|
Total risk-based capital | 3,668,904 |
| | 3,442,921 |
| | 225,983 |
| | 3,340,155 |
| | 328,749 |
| 4,913,043 |
| | 4,803,641 |
| | 109,402 |
| | 3,668,904 |
| | 1,244,139 |
|
Common equity Tier 1 capital ratio (transitional) | 10.12 | % | | 10.09 | % | | 3 | bps | | 10.02 | % | | 10 | bps | |
CET1 capital ratio (transitional) | | 9.61 | % | | 9.52 | % | | 9 | bps | | 10.12 | % | | (51 | )bps |
Tier 1 capital ratio | 11.25 |
| | 10.53 |
| | 72 |
| | 10.37 |
| | 88 |
| 10.09 |
| | 10.01 |
| | 8 |
| | 11.25 |
| | (116 | ) |
Total risk-based capital ratio | 13.08 |
| | 12.40 |
| | 68 |
| | 12.24 |
| | 84 |
| 12.11 |
| | 12.06 |
| | 5 |
| | 13.08 |
| | (97 | ) |
Total shareholders’ equity to total assets ratio | 9.98 |
| | 9.39 |
| | 59 |
| | 9.77 |
| | 21 |
| 10.05 |
| | 9.86 |
| | 19 |
| | 9.98 |
| | 7 |
|
Tangible common equity ratio(1) | 8.77 |
| | 8.79 |
| | (2 | ) | | 9.15 |
| | (38 | ) | 8.56 |
| | 8.34 |
| | 22 |
| | 8.77 |
| | (21 | ) |
Return on average common equity(2) | 15.39 |
| | 14.62 |
| | 77 |
| | 10.34 |
| | 505 |
| 13.90 |
| | 10.98 |
| | 292 |
| | 15.39 |
| | (149 | ) |
Adjusted return on average common equity(1)(2) | 15.59 |
| | 14.86 |
| | 73 |
| | 10.49 |
| | 510 |
| 14.43 |
| | 15.03 |
| | (60 | ) | | 15.56 |
| | (113 | ) |
Adjusted return on average tangible common equity(1)(2) | 15.97 |
| | 15.23 |
| | 74 |
| | 10.75 |
| | 522 |
| 16.70 |
| | 17.52 |
| | (82 | ) | | 15.97 |
| | 73 |
|
| | | | | | | | | | | | | | | | | | |
(1) See “Non-GAAP Financial Measures” in this Report for the applicable reconciliation to the most comparable GAAP measure.
(2) Quarter annualized
(3)For purposes of this table, 2019 non-performing loans exclude acquired loans accounted for under ASC 310-30 that are currently accruing income.
Executive Summary
Net income available to common shareholders for the Sixsecond quarter of 2019 was $153.0 million, or $0.96 per diluted common share, an increase of 40.9% and Three Months Ended June 30, 2018
5.5%, respectively, compared to the second quarter of 2018. Adjusted net income per common share, diluted(1) was $1.00 for the second quarter of 2019, up 8.4% compared to $0.92 for the second quarter of 2018. Net income available to common shareholders for the first six months of 20182019 was $209.2$270.1 million, or $1.75$1.68 per diluted common share, an increase of 46.6%29.1% and 51.3%decrease of 4.4%, respectively, compared to the first six months of 2017. Net2018. Adjusted net income availableper common share, diluted(1) was $1.98 for the first six months of 2019, up 11.6% compared to common shareholders$1.78 for the first six months of 2018. Results for 2019 include the impact of the Merger with FCB, which closed on January 1, 2019. Synovus incurred $7.4 million and $57.1 million in merger-related expense associated with the FCB acquisition for the second quarter and year-to-date 2019, respectively. On the Acquisition Date, the preliminary estimated fair values of 2018 was $108.6 million, or $0.91 per diluted common share, an increaseFCB included approximately $12.4 billion of 47.9%identifiable assets, $9.3 billion in loans, and 52.7%, respectively, compared to the second quarter of 2017.$10.9 billion in deposits. Return on average assets for the first six months of 2019 was 1.21%, down 17 basis points from the first six months of 2018, and the adjusted return on average assets(1) was 1.42% for the first six months of 2019, up 3 basis points from the first six months of 2018.
Net interest income was $397.3 million for the three months ended June 30, 2019, and $794.4 million for the six months ended June 30, 2018 was 1.38%2019, up 39.6% and 42.2%, up 40 basis points fromrespectively, over the same periodcomparable periods of 2017,2018. Both quarter-over-quarter and return on average assets for the second quarter of 2018 was 1.42%, up 42 basis points from the second quarter of 2017. Results for the first half of 2018year-over-year increases were driven primarily by revenue growth and also reflect the benefit from a lower effective tax rate, due to the reduction of the Federal tax rate.
Total revenues, excluding investment securities losses, for the first half of 2018 were $700.6 million, up 12.3% compared to the same period in 2017. Total revenues, excluding investment securities losses, for the second quarter were $359.3 million, up 12.3% compared to the second quarter a year ago.FCB acquisition. Net interest income for the first half of 2018 was $558.9 million, an increase of $67.8 million, or 13.8%, compared to $491.0 million for the same period in 2017. The net interest margin was 3.82% fordown 17 basis points and 8 basis points over the six months endedcomparable three and six-month periods to 3.69% and 3.74%, respectively, impacted by the FCB acquisition, the continued deposit shift to time deposits, and the issuance of subordinated debt. Year-to-date June 30, 2018, an increase of 36 basis points from 3.46% for2019, the six months ended June 30, 2017. The yield on earning assets was 4.39%4.80%, up 46an increase of 41 basis points compared to the six months ended June 30, 2017 and2018, while the effectivetotal cost of funds increased 1051 basis points to 0.57%1.11%. The yield on loans was 4.79%, an increase of 48 basis points from the six months ended June 30, 2017 and the yield on investment securities was 2.34%, an increase of 25 basis points from the six months ended June 30, 2017. On a sequential quarter basis, net interest
Non-interest income increased by $10.3 million and the net interest margin increased by 8 basis points to 3.86%. The yield on earning assets was 4.47%, up 16 basis points from the first quarter of 2018. This increase was driven by an 18 basis point increase in loan yields. The effective cost of funds was 0.61% for the second quarter of 2018,2019 was $89.8 million, up 8 basis points from$16.4 million, or 22.4%, compared to the firstsecond quarter of 2018. The recent rate increases favorably impacted net interestOn a year-to-date basis, non-interest income and net interest margin for 2018.
Non-interest incomewas $169.2 million compared to $140.4 million for the first six months of 2018, was $140.4up $28.8 million, compared to $140.5 million foror 20.5%. These increases were primarily driven by the first six months of 2017. FCB acquisition with growth in most revenue categories.
Non-interest incomeexpense for the second quarter of 20182019 was $73.4$264.1 million, up $4.7$60.1 million, or 6.8%29.4%, compared to the second quarter of 2017. Adjusted2018. On a year-to-date basis, non-interest income, which excludes investment securities gains (losses) and decrease in fair value of private equity investments,expense was up $8.8$157.3 million, or 6.5%39.4%, versus the same period a year ago. Comparisons to prior year are impacted by the FCB acquisition and merger-related expense. The efficiency ratio-FTE for the first six months of 20182019 was 57.67%, compared to 201757.07% for the first six months of 2018. The adjusted tangible efficiency ratio(1) for the first six months of 2019 was 51.17%, down 573 basis points compared to the same period a year ago.
Synovus continued to benefit from a stable credit environment with the non-performing assets ratio at 39 basis points, non-performing loans ratio at 34 basis points, and up $4.7 million, or 6.7%,total past due loans at 22 basis points. Net charge-offs for the second quarter of 2018 compared to2019 were 13 basis points, annualized, down from 19 basis points in the first quarter of 2019. Year-to-date, net charge-offs are 16 basis points, well within Synovus' guidance of 15-20 basis points. For the second quarter of 2017. Synovus experienced2019, the provision for loan losses was $12.1 million, a decline of $11.5 million, or 48.6%, compared to the first quarter of 2019, primarily due to lower charge-offs and reduction of impaired reserves. The allowance for loan losses at June 30, 2019 was $257.4 million, or 0.71% of total loans, compared to $250.6 million, or 0.97% of total loans, at December 31, 2018, reflecting a lower ratio at June 30, 2019 due to the impact of acquisition date accounting for acquired loans.
Sequential quarter loan growth of $504.1 million, or 5.7% annualized, was broad-based across all categories. At June 30, 2019, total loans were $36.14 billion, an increase of $10.19 billion, or39.2%, compared to December 31, 2018, including acquired loan balances from FCB of $9.29 billion. On a year-to-date basis, organic loan growth was $902.8 million, or 5.2% annualized, with growth of $463.5 million in consumer loans, $238.7 million in CRE loans, and $200.0 million in C&I loans.
Total deposits of $37.97 billion at June 30, 2019 declined slightly by $108.5 million, or 1.1% annualized, compared to the first quarter of 2019, from decreases in public funds and other time deposits of $278.7 million and $225.1 million, respectively. The decline in these deposits was offset partially by growth in multiple categoriesbrokered deposits of $294.5 million, which largely replaced maturing time deposits at a shorter duration, and growth in core transaction deposits(1), which increased $100.8 million during the quarter. Compared to December 31, 2018, total period-end deposits increased $11.25 billion, or 42.1%, including $10.93 billion in deposits acquired from FCB and $315.7 million of organic growth.
On June 17, 2019, the Company announced that the Board of Directors increased its prior $400 million share repurchase authorization to $725 million for the year 2019, of which $345.0 million was repurchased during the first halfsix months of 2018 compared2019. On July 1, 2019, Synovus completed a $350 million public offering of Series E Preferred Stock. Proceeds from the preferred stock offering will be used for general corporate purposes, including share repurchases under the new authorization. At June 30, 2019, Synovus' regulatory capital levels continue to be well above regulatory capital requirements.
More detail on Synovus' financial results for the same time periodthree and six months ended June 30, 2019 may be found in 2017 including an increasesubsequent sections of $6.6 million, or 16.0%, in combined fiduciary and asset management fees, brokerage, and insurance revenues. See "Part II - Item 7."Item 2. – Management's Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures"Operations" of this Report for applicable reconciliation to GAAP measure.Report.
Non-interest expense for
2019 Outlook
For the first six months of 2018 increased $10.1 million, or 2.6%,full year 2019, compared to 2018(2), previously stated guidance has been updated for deposit growth and effective income tax rate, considering the first six months of 2017interest rate environment, other macroeconomic factors, and non-interest expense for the second quarter of 2018 increased $12.3 million, or 6.4%, compared to the second quarter of 2017. The second quarter of 2018 included a $2.3 million expense for a valuation adjustment to the Visa derivative, offset in part by a $1.4 million benefit from a recovery of litigation settlement expense. The first quarter of 2018 included a $2.6 million reduction in litigation contingency accruals and the first quarter of 2017 included $6.5 million in restructuring charges. Adjusted non-interest expense, which excludes valuation adjustment to Visa derivative, restructuring charges, net, amortization of intangibles, and litigation settlement/contingency expense, increased $18.5 million, or 4.8%, for the first half of 2018 compared to the first half of 2017. Strong operating leverage for the first half of 2018 resulted in an efficiency ratio of 56.97%, improved from 62.31% for the first half of 2017. The adjusted efficiency ratio for the first six months of 2018 was 56.90%, down 397 basis points from the same period a year ago. See "Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures" of this Report for applicable reconciliation to GAAP measures.
Credit quality metrics continuedinternal initiatives. Additionally, Synovus expects revenue growth to be favorable duringat the second quarterlower end of 2018 with a reduction in both the non-performing loan ratio and non-performing asset ratio. Non-performing loans were $117.3 million at June 30, 2018, down $2.8 million, or 2.3%, from the prior quarter and down $42.0 million from June 30, 2017. The non-performing loan ratio was 0.47% at June 30, 2018, as compared to 0.48% in the prior quarter and 0.65% a year ago. Total non-performing assets were $126.3 million at June 30, 2018, down $4.8 million, or 3.7%, from the prior quarter and down $52.6 million, or 29.4%, from a year ago. The non-performing assets ratio was 0.50% at June 30, 2018, down 3 basis points from the prior quarter and down 23 basis points from a year ago. Net charge-offs for the six months ended June 30, 2018 were $22.1 million, or 0.18% as a percentage of average loans annualized, compared to $22.6 million, or 0.19%, as a percentage of average loans annualized for the six months ended June 30, 2017. Loans past due over 90 days were 0.01% of total loans at June 30, 2018 as compared to 0.02% at June 30, 2017. For the six months ended June 30, 2018, the provision for loan losses was $24.6 million, an increase of $5.6 million, or 29.7%, compared to the six months ended June 30, 2017. The increase in provision expense for the six months ended June 30, 2018 compared to the six months ended June 30, 2017 is primarily due to loan growth as well as a slightly increased level of charge-offs above reserves.The allowance for loan losses at June 30, 2018 was $251.7 million, or 1.00% of total loans, compared to $249.3 million, or 1.01% of total loans, at December 31, 2017 and $248.1 million, or 1.02% of total loans, at June 30, 2017.
At June 30, 2018, total loans were $25.13 billion, an increase of $346.6 million, or 2.8% annualized, and $703.5 million or 2.9%, compared to December 31, 2017 and June 30, 2017, respectively. Year-over-year loan growth was driven by a $532.5 million or 4.5% increase in C&I loans and a $945.8 million or 17.9% increase in consumer loans, with our lending partnerships growing $744.4 million and mortgage loans growing $280.3 million. This growth was partially offset by a $778.1 million or 10.5% decline in CRE loans.
During the second quarter of 2018, total average deposits increased $480.0 million, or 7.5% annualized, compared to the first quarter of 2018, and increased $1.28 billion, or 5.1%, compared to the second quarter of 2017. Average brokered deposits declined $29.0 million compared to the prior quarter. Average core deposits, during the second quarter of 2018, increased $509.0 million, or 8.6% annualized, compared to the prior quarter, and increased $733.0 million, or 3.1%, compared to the second quarter of 2017. During the first quarter of 2018, Synovus obtained FDIC approval to report deposits related to our sweep money market product, offered by Synovus Securities, as a component of core deposits. This product was reported as a brokered deposit through February of 2018. The second quarter average balance in these accounts totaled $310.0 million, and resulted in an increase of $198.0 million in average core deposits for the quarter,guidance range provided, due to the reclassification.interest rate environment.
Loan growth of 5.5% to 7.5%
Deposit growth of 3.0% to 5.0%
Revenue growth of 5.5% to 7.5%
Adjusted tangible non-interest expense growth of 2% to 4%
Effective income tax rate of 24% to 25%
Net charge-off ratio of 15 to 20 basis points
(1) See “Non-GAAP Financial Measures” in this Report for the applicable reconciliation to the most comparable GAAP measure.
On June 21, 2018, Synovus completed a public offering of $200 million of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D. The offering generated net proceeds of $195 million, which were largely used to fund the redemption of all of the outstanding shares of Series C Preferred Stock on August 1, 2018 for an aggregate redemption price of $130 million.
On January 23, 2018, Synovus announced a share repurchase program of up to $150 million to be completed during 2018. As of June 30, 2018, Synovus had repurchased under this program a total of $76.8 million, or 1.5 million shares of its common stock, at an average price of $52.72 per share. Additionally, during the first quarter of 2018, Synovus increased the quarterly common stock dividend by 67% to $0.25 per share effective with the quarterly dividend declared during the first quarter of 2018. Total shareholders’ equity was $3.17 billion at June 30, 2018 and $3.0 billion at December 31, 2017. Return on average common equity annualized for the second quarter of 2018 was 15.39%, an increase of 505 basis points from the same period in 2017. Adjusted return on average common equity annualized for the second quarter of 2018 was 15.59%, an improvement of 510 basis points from the same period in 2017. Adjusted return on average tangible common equity annualized for the second quarter of 2018 was 15.97%, an increase of 522 basis points from the same period in 2017. See Non-GAAP"Non-GAAP Financial Measures" in this Report for applicable reconciliation to the most comparable GAAP measures.measure.
(2)2018 Expectations
For the full year 2018 as compared to the full year 2017, management expectationsresults are noted below:
Average loan growth of 4% to 6%
Average total deposits growth of 4% to 6%
Net interest income growth of 11% to 13%
| |
• | Adjusted non-interest income(1) growth of 4% to 6%
|
Total non-interest expense growth of 0% to 3%
Effective income tax rate of 23% to 24%
Net charge-off ratio of 15 to 25 bps
Common share repurchases of up to $150 million
(1)See Non-GAAP Financial Measures" in this Reporton a pro forma combined basis for applicable reconciliation to the most comparable GAAP measure.
Synovus and FCB.
Changes in Financial Condition
During the six months ended June 30, 2018,2019, total assets increased $518.5 million$14.65 billion from $31.22$32.67 billion at December 31, 20172018 to $31.74 billion. The principal components$47.32 billion, due primarily to the acquisition of this increase were an increaseFCB on January 1, 2019. On the Acquisition Date, the preliminary estimated fair values of FCB included $12.4 billion of identifiable assets, $9.3 billion in loans, netand $10.9 billion in deposits. Additionally, based on preliminary purchase price allocations, goodwill increased by $435.1 million. Excluding the acquired balances of deferred fees and costs, of $346.6FCB, loans increased $902.8 million and an increase in interest bearing funds withinvestment securities available for sale increased $714.4 million while cash and cash equivalents declined $193.9 million. Excluding the Federal Reserveacquired balances of $152.2 million. An increaseFCB, increases of $294.8$680.0 million in depositsother short-term borrowings, $495.7 million in long-term debt, and Synovus' $200$315.7 million preferred stock issuance completed on June 21, 2018in deposits provided the funding source for the growth in assets. The loan to deposit ratio was 95.2% at June 30, 2019, compared to 97.1% at December 31, 2018, and 95.1% at June 30, 2018.
Loans
The following table compares the composition of the loan portfolio at June 30, 2018,2019, December 31, 2017,2018, and June 30, 2017.2018.
| | Table 2 - Loans by Portfolio Class | | Table 2 - Loans by Portfolio Class | | | | | | | | | | |
| | | | | | | | | | | | June 30, 2019 | | December 31, 2018 | | June 30, 2019 vs. December 31, 2018 % Change | | June 30, 2018 | | June 30, 2019 vs. June 30, 2018 % Change |
(dollars in thousands) | June 30, 2018 | | December 31, 2017 | | June 30, 2018 vs. December 31, 2017 % Change(1) | | June 30, 2017 | | June 30, 2018 vs. June 30, 2017 % Change | Total Loans | | Total Originated Loans | | Total Acquired(1) Loans | | Total Loans | | Total Loans | |
Commercial, financial and agricultural | $ | 7,271,080 |
| | $ | 7,179,487 |
| | 2.6 | % | | $ | 6,993,817 |
| | 4.0 | % | $ | 9,717,746 |
| | $ | 7,801,210 |
| | $ | 1,916,536 |
| | $ | 7,449,698 |
| | 30.4 | % | | $ | 7,271,080 |
| | 33.6 | % |
Owner-occupied | 5,004,392 |
| | 4,844,163 |
| | 6.7 |
| | 4,749,128 |
| | 5.4 |
| 6,529,797 |
| | 5,366,404 |
| | 1,163,393 |
| | 5,331,508 |
| | 22.5 |
| | 5,004,392 |
| | 30.5 |
|
Total commercial and industrial | 12,275,472 |
| | 12,023,650 |
| | 4.2 |
| | 11,742,945 |
| | 4.5 |
| 16,247,543 |
| | 13,167,614 |
| | 3,079,929 |
| | 12,781,206 |
| | 27.1 |
| | 12,275,472 |
| | 32.4 |
|
Investment properties | 5,509,596 |
| | 5,670,065 |
| | (5.7 | ) | | 6,035,664 |
| | (8.7 | )% | 9,005,100 |
| | 5,927,706 |
| | 3,077,394 |
| | 5,560,951 |
| | 61.9 |
| | 5,509,596 |
| | 63.4 |
|
1-4 family properties | 720,710 |
| | 781,619 |
| | (15.7 | ) | | 836,826 |
| | (13.9 | ) | 747,390 |
| | 643,448 |
| | 103,942 |
| | 679,870 |
| | 9.9 |
| | 720,710 |
| | 3.7 |
|
Land and development | 413,865 |
| | 483,604 |
| | (29.1 | ) | | 549,744 |
| | (24.7 | ) | 595,957 |
| | 364,688 |
| | 231,269 |
| | 323,670 |
| | 84.1 |
| | 413,865 |
| | 44.0 |
|
Total commercial real estate | 6,644,171 |
| | 6,935,288 |
| | (8.5 | ) | | 7,422,234 |
| | (10.5 | ) | 10,348,447 |
| | 6,935,842 |
| | 3,412,605 |
| | 6,564,491 |
| | 57.6 |
| | 6,644,171 |
| | 55.8 |
|
Consumer mortgages | | 5,407,762 |
| | 3,194,027 |
| | 2,213,735 |
| | 2,934,235 |
| | 84.3 |
| | 2,750,935 |
| | 96.6 |
|
Home equity lines | 1,453,855 |
| | 1,514,227 |
| | (8.0 | ) | | 1,563,167 |
| | (7.0 | ) | 1,650,745 |
| | 1,587,854 |
| | 62,891 |
| | 1,515,796 |
| | 8.9 |
| | 1,453,855 |
| | 13.5 |
|
Consumer mortgages | 2,750,935 |
| | 2,633,503 |
| | 9.0 |
| | 2,470,665 |
| | 11.3 |
| |
Credit cards | 238,424 |
| | 232,676 |
| | 5.0 |
| | 225,900 |
| | 5.5 |
| 258,283 |
| | 258,283 |
| | — |
| | 258,245 |
| | — |
| | 238,424 |
| | 8.3 |
|
Other consumer loans | 1,793,916 |
| | 1,473,451 |
| | 43.9 |
| | 1,031,639 |
| | 73.9 |
| 2,249,337 |
| | 2,237,406 |
| | 11,931 |
| | 1,916,743 |
| | 17.4 |
| | 1,793,916 |
| | 25.4 |
|
Total consumer | 6,237,130 |
| | 5,853,857 |
| | 13.2 |
| | 5,291,371 |
| | 17.9 |
| 9,566,127 |
| | 7,277,570 |
| | 2,288,557 |
| | 6,625,019 |
| | 44.4 |
| | 6,237,130 |
| | 53.4 |
|
Deferred fees and costs, net | | (23,556 | ) | | (23,556 | ) | | — |
| | (24,143 | ) | | (2.4 | ) | | (22,717 | ) | | 3.7 |
|
Total loans | 25,156,773 |
| | 24,812,795 |
| | 2.8 |
| | 24,456,550 |
| | 2.9 |
| $ | 36,138,561 |
| | $ | 27,357,470 |
| | $ | 8,781,091 |
| | $ | 25,946,573 |
| | 39.3 | % | | $ | 25,134,056 |
| | 43.8 | % |
Deferred fees and costs, net | (22,717 | ) | | (25,331 | ) | | (20.8 | ) | | (26,038 | ) | | (12.8 | ) | |
Total loans, net of deferred fees and costs | $ | 25,134,056 |
| | $ | 24,787,464 |
| | 2.8 | % | | $ | 24,430,512 |
| | 2.9 | % | |
| | | | | | | | | | | | | | | | | | | | | | |
(1) Percentage changes are annualizedRepresents $9.29 billion (at fair value) of loans acquired from FCB, net of paydowns and payoffs since acquisition date.
At June 30, 2018,2019, total loans were $25.13$36.14 billion, an increase of $346.6 million,$10.19 billion, or 2.8% annualized,39.3%, and $703.5 million$11.00 billion, or 2.9%43.8%, compared to December 31, 20172018 and June 30, 2017, respectively. Year-over-year2018, respectively, including acquired loan growth was driven by a $532.5balances from FCB of $9.29 billion.
Excluding acquired FCB balances, period-end loans increased $902.8 million, or 4.5% increase in C&I loans and a $945.85.2% annualized, compared to December 31, 2018, with growth of $463.5 million, or 17.9% increase10.3% annualized, in consumer loans, with our lending partnerships growing $744.4 million and mortgage loans growing $280.3 million. This growth was partially offset by a $778.1$238.7 million, or 10.5% decline4.8% annualized, in CRE loans, and $200.0 million, or 2.5% annualized, in C&I loans.The mix within the loan portfolio has shifted slightly as a result of the consolidation with FCB, but it remains in-line with the targets indicated in our strategic plan. C&I loans remain the largest component of our balance sheet representing 44.9% of total loans, while CRE and consumer loans represent 28.6%, and 26.5%, respectively.
Commercial Loans
Total commercial loans (which are comprised of C&I and CRE loans) at June 30, 20182019 were $18.92$26.60 billion, or 75.3%73.5% of the total loan portfolio, compared to $18.96$19.35 billion, or 76.5%74.5%, at December 31, 20172018 and $19.17$18.92 billion, or 78.4%75.2%, at June 30, 2017.2018.
At June 30, 2018 and December 31, 2017,2019, Synovus had 30 and 25, respectively,six commercial loan relationships with total commitments of $50$100 million or more (including amounts funded). The average funded balance of these relationships was approximately $35, with no single relationship exceeding $125 million for both June 30, 2018 and December 31, 2017.in commitments.
Commercial and Industrial Loans
The C&I loan portfolio represents the largest category of Synovus' total loan portfolio. The following table shows the composition of the C&I loan portfolio aggregated by NAICS code. The portfolio is relationship focused and, as a result, Synovus' lenders have in-depth knowledge of the borrowers, most of which have guaranty arrangements. C&I loans are originated through Synovus' local markets and the Corporate Banking Group to commercial customers primarily to finance capital expenditures, including real property, plant and equipment, or as a source of working capital. In accordance with Synovus' lending policy, each loan undergoes a detailed underwriting process which incorporates uniform underwriting standards and oversight in proportion to the size and complexity of the lending relationship.As of June 30, 2018,2019, approximately 93%92% of Synovus' C&I loans are secured by real estate, business equipment, inventory, and other types of collateral. C&I loans of $12.28$16.25 billion, representing 48.8%44.9% of the total loan portfolio, grew $251.8 million,$3.47 billion, or 4.2% annualized,27.1%, from December 31, 2017 and$532.52018 including acquired loan balances from FCB of $3.27 billion. Excluding acquired FCB balances, growth was $200.0 million, or 4.5%, from June 30, 2017. The growth in C&I loans2.5% annualized, compared to December 31, 2018 and was broad-based, driven by small business, premium finance,continued strong contributions across a number of markets, lending specialties, and senior housing.
industries.
| | Commercial and Industrial Loans by Industry | June 30, 2018 | | December 31, 2017 | |
Table 3 - Commercial and Industrial Loans by Industry | | Table 3 - Commercial and Industrial Loans by Industry |
| | June 30, 2019 | | December 31, 2018 |
(dollars in thousands) | Amount | | %(1) | | Amount | | %(1) | Amount | | %(1) | | Amount | | %(1) |
Health care and social assistance | $ | 2,863,586 |
| | 23.3 | % | | $ | 2,764,907 |
| | 23.0 | % | $ | 2,995,374 |
| | 18.4 | % | | $ | 3,044,132 |
| | 23.8 | % |
Retail trade | | 1,227,234 |
| | 7.6 |
| | 903,965 |
| | 7.1 |
|
Manufacturing | 1,015,076 |
| | 8.3 |
| | 930,751 |
| | 7.7 |
| 1,216,021 |
| | 7.5 |
| | 1,077,460 |
| | 8.4 |
|
Retail trade | 840,398 |
| | 6.8 |
| | 857,348 |
| | 7.1 |
| |
Finance and insurance | | 1,192,218 |
| | 7.3 |
| | 906,955 |
| | 7.1 |
|
Wholesale trade | | 1,098,361 |
| | 6.8 |
| | 693,920 |
| | 5.4 |
|
Other services | | 948,847 |
| | 5.8 |
| | 793,948 |
| | 6.2 |
|
Arts, entertainment and recreation | | 916,433 |
| | 5.6 |
| | 234,310 |
| | 1.8 |
|
Accommodation and food services | | 888,969 |
| | 5.5 |
| | 663,106 |
| | 5.2 |
|
Real estate and rental and leasing | 828,961 |
| | 6.8 |
| | 851,303 |
| | 7.1 |
| 888,531 |
| | 5.5 |
| | 675,824 |
| | 5.3 |
|
Finance and insurance | 782,753 |
| | 6.4 |
| | 780,279 |
| | 6.5 |
| |
Other services | 778,208 |
| | 6.3 |
| | 761,916 |
| | 6.3 |
| |
Professional, scientific, and technical services | 727,213 |
| | 5.9 |
| | 771,809 |
| | 6.4 |
| 872,600 |
| | 5.4 |
| | 844,929 |
| | 6.6 |
|
Wholesale trade | 687,157 |
| | 5.6 |
| | 675,741 |
| | 5.6 |
| |
Transportation and warehousing | | 834,626 |
| | 5.1 |
| | 477,386 |
| | 3.7 |
|
Construction | | 726,359 |
| | 4.5 |
| | 615,903 |
| | 4.8 |
|
Other industries | | 555,118 |
| | 3.4 |
| | 235,143 |
| | 2.0 |
|
Real estate other | 597,073 |
| | 4.9 |
| | 586,707 |
| | 4.9 |
| 517,983 |
| | 3.2 |
| | 452,360 |
| | 3.5 |
|
Accommodation and food services | 586,609 |
| | 4.8 |
| | 562,877 |
| | 4.7 |
| |
Construction | 536,779 |
| | 4.4 |
| | 500,091 |
| | 4.2 |
| |
Transportation and warehousing | 494,487 |
| | 4.0 |
| | 427,608 |
| | 3.6 |
| |
Other industries | 452,432 |
| | 3.7 |
| | 438,312 |
| | 3.6 |
| |
Educational services | | 359,202 |
| | 2.2 |
| | 284,840 |
| | 2.2 |
|
Agriculture, forestry, fishing, and hunting | 322,286 |
| | 2.6 |
| | 349,181 |
| | 2.9 |
| 356,959 |
| | 2.2 |
| | 344,136 |
| | 2.7 |
|
Information | | 329,746 |
| | 2.0 |
| | 251,208 |
| | 2.0 |
|
Administration, support, waste management, and remediation | 263,902 |
| | 2.1 |
| | 273,189 |
| | 2.3 |
| 322,962 |
| | 2.0 |
| | 281,681 |
| | 2.2 |
|
Educational services | 259,170 |
| | 2.1 |
| | 259,367 |
| | 2.2 |
| |
Information | 239,382 |
| | 2.0 |
| | 232,264 |
| | 1.9 |
| |
Total commercial and industrial loans | $ | 12,275,472 |
| | 100.0 | % | | $ | 12,023,650 |
| | 100.0 | % | $ | 16,247,543 |
| | 100.0 | % | | $ | 12,781,206 |
| | 100.0 | % |
| | | | | | | | | | | | | | |
(1) Loan balance in each category expressed as a percentage of total C&I loans.
At June 30, 2018, $7.272019, $9.72 billion of C&I loans, or 28.9%26.9% of the total loan portfolio, represented loans originated for the purpose of financing commercial, financial, and agricultural business activities. The primary source of repayment on these loans is revenue generated from products or services offered by the business or organization. The secondary source of repayment is the collateral, which consists primarily of equipment, inventory, accounts receivable, time deposits, cash surrender value of life insurance, and other business assets.
At June 30, 2018, $5.002019, $6.53 billion of C&I loans, or 19.9%18.0% of the total loan portfolio, represented loans originated for the purpose of financing owner-occupied properties. The financing of owner-occupied facilities is considered a C&I loan even though there is improved real estate as collateral. This treatment is a result of the credit decision process, which focuses on cash flow from operations of the business to repay the debt. The secondary source of repayment on these loans is the underlying real estate. These loans are predominately secured by owner-occupied and other real estate, and to a lesser extent, other types of collateral.
Commercial Real Estate Loans
Total CRE loans consist of investment properties loans, 1-4 family properties loans, as well as land and development loans. These loans are subject to the same uniform lending policies referenced above.Total CRE loans of $6.64were $10.35 billion, representing 26.4%28.6% of the total loan portfolio, decreased $291.1 million,and increased $3.78 billion, or 8.5% annualized,57.6%, from December 31, 2017 and decreased $778.12018, driven by the FCB acquisition, which included $3.55 billion of CRE loans on the Acquisition Date. Excluding the acquisition, CRE loans grew $238.7 million, or 10.5%, from June 30, 2017. The $291.1 million decline was driven4.8% annualized, as compared to December 31, 2018, led by a $160.5 million decreasegrowth in the Investment Properties portfolio and a $69.7 million decrease in the non-strategic Land and Development portfolio. The decline in CRE is largely the result of the continued higher velocity of pay-off activity across the portfolio.investment properties.
Investment Properties Loans
Investment properties loans consist of construction and mortgage loans for income producingincome-producing properties and are primarily made to finance multi-family properties, hotels, office buildings, shopping centers, warehouses and other commercial development properties. Total investment properties loans as of June 30, 20182019 were $5.51$9.01 billion, or 82.9%87.0% of the total CRE loan portfolio and 21.9%24.9% of the total loan portfolio, compared to $5.67$5.56 billion, or 81.8%84.7% of the total CRE loan portfolio and 22.9%21.4% of the total loan portfolio, at December 31, 2017, a decrease2018. The increase in investment properties was primarily driven by FCB which included $3.15 billion of $160.5acquired investment properties loans. Excluding the Merger, investment properties loans grew $291.7 million, or 5.7%6.8% annualized, primarily duecompared to a declineDecember 31, 2018, driven by increases in most sub-categories including multi-family, office buildings, and multi-family properties. Synovus' investment properties portfolio is well diversified by property type, geography (primarily within Synovus' primary market areas of Georgia, Alabama, South Carolina, Florida, and Tennessee), and tenants. The investment properties loans are primarily secured by the property being financed by the loans; however, these loans may also be secured by real estate or other assets beyond the property being financed.hotels.
1-4 Family Properties Loans
1-4 family properties loans include construction loans to homebuilders and commercial mortgage loans to real estate investors and are almost always secured by the underlying property being financed by such loans. These properties are primarily located
in the markets served by Synovus. Construction loans are generally interest-only loans and typically have maturities of three years or less, and commercial mortgage loans generally have maturities of three to five years, with amortization periods of up to fifteen to twenty years. At June 30, 2018,2019, 1-4 family properties loans totaled $720.7$747.4 million, or 10.8%7.2% of the total CRE loan portfolio and 2.9%2.1% of the total loan portfolio, compared to $781.6$679.9 million, or 11.3%10.4% of the total CRE loan portfolio and 3.2%2.6% of the total loan portfolio, at December 31, 2017.2018. Outside of $112.0 million loans acquired from FCB, 1-4 family properties loans declined by $44.5 million, or 11.3% annualized, compared to December 31, 2018.
Land and Development Loans
Land and development loans include commercial and residential development as well as land acquisition loans and are secured by land held for future development, typically in excess of one year. These loans have short-term maturities and are typically unamortized. Properties securing these loans are substantially within themarkets served by Synovus, footprint, and loan terms generally include personal guarantees from the principals. Loans in this portfolio are underwritten based on the LTV of the collateral and the capacity of the guarantor(s). Total land and development loans were $413.9$596.0 million at June 30, 2018,2019, or 1.6% of the total loan portfolio, a declinean increase of $69.7$272.3 million, or 29.1% annualized,84.1% from December 31, 2017. Synovus continues2018, which was driven by $280.9 million of loans acquired from FCB. Outside of the acquisition, land and development loans declined slightly by $8.6 million, or 2.9% annualized, compared to strategically reduce its exposure to these types of loans.December 31, 2018.
Consumer Loans
The consumer loan portfolio consists of a wide variety of loan products offered through Synovus' banking network as well as third-party lending partnerships, including first and second residential mortgages, home equity lines, credit card loans, home improvement loans, student loans, and other consumer loans. The majority of Synovus' consumer loans are consumer mortgages and home equity lines secured by first and second liens on residential real estate primarily located in the markets served by Synovus.
Consumer loans at June 30, 20182019 totaled $6.24$9.57 billion, representing 24.8%26.5% of the total loan portfolio, compared to $5.85$6.63 billion, or 23.6%25.5% of the total loan portfolio, at December 31, 2017, and $5.29 billion, or 21.7% of the total loan portfolio at June 30, 2017.2018. Consumer loans increased $383.3 million,$2.94 billion, or 13.2% annualized,44.4%, from December 31, 2017 and $945.82018, primarily driven by $2.48 billion of loans acquired from FCB. Excluding the acquisition, consumer loans grew $463.5 million, or 17.9%, from June 30, 2017. 10.3% annualized, compared to December 31, 2018.
Consumer mortgages grew $117.4 million$2.47 billion, or 9.0% annualized,84.3%, from December 31, 2017, and $280.32018. Excluding the $2.40 billion in consumer mortgages acquired in the FCB acquisition, year-to-date growth of $76.9 million, or 11.3%, from June 30, 2017 given2.9% annualized, was driven by solid production in the private wealth, managementphysician and physician categoriesaffordable mortgage products as well as the continued addition ofproduction added by mortgage loan originators. originators hired in 2018 and 2019. HELOCs decreased $60.4increased $134.9 million, or 8.0%8.9%, from December 31, 2017. 2018, driven primarily by the FCB acquisition. Excluding FCB acquired loans, HELOCs increased $69.1 million, or 8.8% annualized, compared to December 31, 2018.Credit card loans totaled $238.4$258.3 million at June 30, 2018,2019, including $67.8$72.1 million of commercial credit card loans.
loans, and increased slightly compared to $258.2 million at December 31, 2018. Other consumer loans increased $320.5$332.6 million, or 43.9% annualized,17.4%, from December 31, 2017, and $762.3 million, or 73.9%, from June 30, 2017
2018, primarily due to our two consumer-based lending partnerships. One lending partnership, which began in the third quarter of 2015, is a program that provides merchants and contractors nationwide with the ability to offer term financing to their customers for major purchases and home improvement projects. The other lending partnership, which began in the second quarter of 2016, primarily provides qualified borrowers the ability to refinance student loan debt. As of June 30, 2018,2019, these partnerships had combined balances of $1.4$1.91 billion, or 5.7%5.3% of the total loan portfolio.
Consumer loans including those through our lending partnerships, are subject to uniform lending policies and consist primarily of loans with strong borrower credit scores. Synovus makes consumer lending decisions based upon a number of key credit risk determinants including FICO scores as well as loan-to-value and debt-to-income ratios. Risk levels 1-6 (descending) are assigned to consumer loans based upon a risk score matrix. At least annually, the consumer loan portfolio data is sent to a consumer credit reporting agency for a refresh of customers' credit scores so that management can evaluate ongoing consistency or negative migration in the quality of the portfolio, which impacts the allowance for loan losses. The most recent credit score refresh was completed as of December 31, 2017. Revolving lines of credit wereare reviewed for any material change in financial circumstances, and when appropriate, the line of credit may be suspended for further advances. FICO scores within the residential real estate portfolio have generally remained stable over the last several years.
As of the most recent FICO score refresh on March 31, 2018,June 30, 2019, weighted-average FICO scores within the residential real estate portfolio based on committed balances were 774784 for HELOCs and 785 for consumer mortgages. HELOC utilization rates (total amount outstanding as a percentage of total available lines) were 53.7% and 55.6% at June 30, 2018 and December 31, 2017, respectively. Additionally, we maintained loan-to-value ratios based upon prudent guidelines to ensure consistency with Synovus' overall risk philosophy. At June 30, 2018, 35% of home equity line balances were secured by a first lien, and 65% were secured by a second lien. Apart from credit card loans and unsecured loans, Synovus does not originate loans with LTV ratios greater than 100% at origination except for infrequent situations provided that certain underwriting requirements are met. Additionally, at origination, loan maturities are determined based on the borrower's ability to repay (cash flow or earning power that represents the primary source of repayment) and the collateralization of the loan, including the economic life of the asset being pledged. Collateral securing these loans provides a secondary source of repayment in that the collateral may be liquidated. Synovus determines the need for collateral on a case-by-case basis. Factors considered include the purpose of the loan, current and prospective credit-worthiness of the customer, terms of the loan, and economic conditions.
Higher-risk consumer loans as defined by the FDIC are consumer loans (excluding consumer loans defined as nontraditional mortgage loans) where, as of the origination date or, if the loan has been refinanced, as of the refinance date, the probability of
default within two years is greater than 20%, as determined using a defined historical stress period. These loans are not a part of Synovus' consumer lending strategy, and Synovus does not currently develop or offer specific sub-prime, alt-A, no documentation or stated income residential real estate loan products. Synovus estimates that, as of June 30, 2018, it had $83.7 million of higher-risk consumer loans (1.3% of the consumer portfolio and 0.3% of the total loan portfolio) compared to $100.7 million as of June 30, 2017. Included in these amounts as of June 30, 2018 and 2017 are approximately $9 million and $12 million, respectively, of accruing TDRs.Consumer Mortgages.
Deposits
Deposits provide the most significant funding source for interest earning assets. The following table shows the relative composition of average deposits foras of the time periodsdates indicated.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Composition of Average Deposits |
|
| (dollars in thousands) | June 30, 2018 | | %(1) | | March 31, 2018 | | %(1) | | December 31, 2017 | | %(1) | | June 30, 2017 | | %(1) |
| Non-interest bearing demand deposits | $ | 7,539,451 |
| | 28.7 | % | | $ | 7,391,696 |
| | 28.7 | % | | $ | 7,621,147 |
| | 29.0 | % | | $ | 7,298,845 |
| | 29.2 | % |
| Interest bearing demand deposits | 5,001,825 |
| | 19.0 |
| | 5,032,000 |
| | 19.5 |
| | 4,976,239 |
| | 18.9 |
| | 4,837,053 |
| | 19.4 |
|
| Money market accounts, excluding brokered deposits | 7,791,107 |
| | 29.7 |
| | 7,561,554 |
| | 29.3 |
| | 7,514,992 |
| | 28.6 |
| | 7,427,562 |
| | 29.7 |
|
| Savings deposits | 829,800 |
| | 3.2 |
| | 811,588 |
| | 3.1 |
| | 804,853 |
| | 3.0 |
| | 805,019 |
| | 3.2 |
|
| Time deposits, excluding brokered deposits | 3,182,974 |
| | 12.1 |
| | 3,039,325 |
| | 11.8 |
| | 3,170,445 |
| | 12.1 |
| | 3,243,670 |
| | 13.0 |
|
| Brokered deposits | 1,922,917 |
| | 7.3 |
| | 1,951,910 |
| | 7.6 |
| | 2,198,333 |
| | 8.4 |
| | 1,379,559 |
| | 5.5 |
|
| Total average deposits | $ | 26,268,074 |
| | 100.0 | % | | $ | 25,788,073 |
| | 100.0 | % | | $ | 26,286,009 |
| | 100.0 | % | | $ | 24,991,708 |
| | 100.0 | % |
| Average core deposits (2) | $ | 24,345,157 |
| | 92.7 | % | | $ | 23,836,163 |
| | 92.4 | % | | $ | 24,087,676 |
| | 91.6 | % | | $ | 23,612,149 |
| | 94.5 | % |
| | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Table 4 - Composition of Period-end Deposits | | | | | | | | | | |
(dollars in thousands) | June 30, 2019 | | %(1) | | March 31, 2019 | | %(1) | | December 31, 2018 | | %(1) | | June 30, 2018 | | %(1) |
Non-interest-bearing demand deposits, excluding public funds | $ | 8,577,612 |
| | 22.6 | % | | $ | 8,440,520 |
| | 22.2 | % | | $ | 6,926,513 |
| | 25.9 | % | | $ | 6,820,002 |
| | 25.8 | % |
Interest-bearing demand deposits, excluding public funds | 4,847,242 |
| | 12.8 |
| | 4,911,215 |
| | 12.8 |
| | 3,690,689 |
| | 13.9 |
| | 4,060,293 |
| | 15.4 |
|
Money market accounts, excluding brokered deposits and public funds | 8,952,875 |
| | 23.6 |
| | 8,912,528 |
| | 23.4 |
| | 7,681,836 |
| | 28.7 |
| | 7,388,202 |
| | 27.9 |
|
Savings deposits, excluding public funds | 891,194 |
| | 2.3 |
| | 903,822 |
| | 2.4 |
| | 812,495 |
| | 3.0 |
| | 822,618 |
| | 3.1 |
|
Public funds | 4,351,304 |
| | 11.5 |
| | 4,630,022 |
| | 12.2 |
| | 2,374,892 |
| | 8.9 |
| | 2,224,631 |
| | 8.4 |
|
Time deposits, excluding brokered deposits and public funds | 7,342,951 |
| | 19.3 |
| | 7,568,079 |
| | 19.9 |
| | 3,685,867 |
| | 13.8 |
| | 3,275,932 |
| | 12.4 |
|
Brokered deposits | 3,003,544 |
| | 7.9 |
| | 2,709,004 |
| | 7.1 |
| | 1,548,030 |
| | 5.8 |
| | 1,851,010 |
| | 7.0 |
|
Total deposits | $ | 37,966,722 |
| | 100.0 | % | | $ | 38,075,190 |
| | 100.0 | % | | $ | 26,720,322 |
| | 100.0 | % | | $ | 26,442,688 |
| | 100.0 | % |
Core deposits(2) | $ | 34,963,178 |
| | 92.1 | % | | $ | 35,366,186 |
| | 92.9 | % | | $ | 25,172,292 |
| | 94.2 | % | | $ | 24,591,678 |
| | 93.0 | % |
Core transaction deposits(3) | $ | 23,268,923 |
| | 61.3 | % | | $ | 23,168,085 |
| | 60.8 | % | | $ | 19,111,533 |
| | 71.5 | % | | $ | 19,091,115 |
| | 72.2 | % |
| | | | | | | | | | | | | | | |
Time deposits greater than $100,000, including brokered deposits and public funds | $ | 8,290,297 |
| | 21.8 | % | | $ | 8,318,082 |
| | 21.8 | % | | $ | 3,749,928 |
| | 14.0 | % | | $ | 3,667,029 |
| | 13.9 | % |
| | | | | | | | | | | | | | | |
Brokered time deposits | $ | 2,095,240 |
| | 5.5 | % | | $ | 1,902,962 |
| | 5.0 | % | | $ | 1,199,670 |
| | 4.5 | % | | $ | 1,507,996 |
| | 5.7 | % |
| | | | | | | | | | | | | | | |
(1) Deposits balance in each category expressed as percentage of total deposits.
(2) Core deposits exclude brokered deposits. See “Non-GAAP Financial Measures” in this Report for the applicable reconciliation to the most comparable GAAP measure.reconciliation.
During the second quarter of 2018, total average(3) Core transaction deposits increased $480.0 million, or 7.5% annualized, compared to the first quarter of 2018, and increased $1.28 billion, or 5.1%, compared to the second quarter of 2017. Averageexclude brokered deposits declined $29.0 million compared to the prior quarter. Average core deposits, during the second quarter of 2018, increased $509.0 million, or 8.6% annualized, compared to the prior quarter, and increased $733.0 million, or 3.1%, compared to the second quarter of 2017. During the first quarter of 2018, Synovus obtained FDIC approval to report deposits related to our sweep money market product, offered by Synovus Securities, as a component of core deposits. This product was reported as a brokered deposit through February of 2018. The second quarter average balance in these accounts totaled $310.0 million, and resulted in an increase of $198.0 million in average core deposits for the quarter, due to the reclassification.public funds. See “Non-GAAP Financial Measures” in this Report for the applicable reconciliationreconciliation.
Total period-end deposits decreased $108.5 million, or 1.1% annualized, compared to the most comparable GAAP measure.
Average non-interest bearing demand deposits as a percentagefirst quarter of total average deposits were 28.7% for both the three months ended June 30, 20182019. The quarterly decline resulted from decreases in public funds and three months ended March 31, 2018 and 29.2% for the three months ended June 30, 2017.
Averageother time deposits of $100,000$278.7 million and greater for$225.1 million, respectively. The decline in these deposits was offset partially by growth in brokered deposits of $294.5 million, which largely replaced maturing time deposits at a shorter duration, and growth in core transaction deposits, which increased $100.8 million during the three months ended June 30, 2018, Marchquarter. Compared to December 31, 2018, and June 30, 2017 were $3.68total period-end deposits increased $11.25 billion, $3.42or 42.1%, driven by the acquisition of FCB which contributed $10.93 billion and $2.86in total deposits, including $9.67 billion respectively, and included average brokered timein core deposits of $1.66 billion, $1.53 billion, and $815.5on the Acquisition Date. Excluding the acquired balances, total deposits grew $315.7 million respectively. These larger deposits represented 14.0%, 13.3%, and 11.4% of total average deposits for the three months ended June 30, 2018, March 31, 2018, and June 30, 2017, respectively, and included brokered time deposits which represented 6.3%, 5.9%, and 3.3% of total average deposits for the three months ended June 30, 2018, March 31, 2018, and June 30, 2017, respectively.
During the second quarter of 2018, total average brokered deposits represented 7.3% of total average deposits compared to 7.6% and 5.5% of total average deposits the previous quarter and the second quarter a year ago, respectively.December 31, 2018.
Non-interest Income
Non-interest income for the first six monthssecond quarter of 2019 was $89.8 million, up $16.4 million, or 22.4%, compared to the second quarter of 2018 including the impact of the acquisition of FCB. On a year-to-date basis, non-interest income was $140.4$169.2 million compared to $140.5$140.4 million for the first six months of 2017. Non-interest income for the second quarter of 2018 was $73.4 million, up $4.72018. The $28.8 million, or 6.8%20.5%, compared toincrease is impacted by the second quarter of 2017.FCB acquisition. Adjusted non-interest income, which excludes net investment securities gains (losses)losses and decreasechanges in fair value of private equity investments, was up $8.8$15.5 million, or 6.5%20.7%, for the second quarter of 2019 compared to the second quarter of 2018, and year-to-date, adjusted non-interest income was up $23.8 million, or 16.4%, compared to the first six months of 2018, compared to 2017 and up $4.7 million, or 6.7%, for the second quarter of 2018 compared to the second quarter of 2017. Synovus experiencedwith growth in multiple categories during the first half of 2018 compared to the same time period in 2017 including an increase of $6.6 million, or 16.0%, in combined fiduciary and asset management fees, brokerage, and insurance revenues.most revenue categories. See "Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures" of this Report for applicable reconciliation to GAAP measure.measures.
The following table shows the principal components of non-interest income.
| | Non-interest income | Six Months Ended June 30, | | Three Months Ended June 30, | |
(in thousands) | 2018 | | 2017 | | % Change | | 2018 | | 2017 | | % Change | |
Table 5 - Non-interest income | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
(dollars in thousands) | | 2019 | | 2018 | | % Change | | 2019 | | 2018 | | % Change |
Service charges on deposit accounts | $ | 39,938 |
| | $ | 40,370 |
| | (1.1 | )% | | $ | 19,999 |
| | $ | 20,252 |
| | (1.2 | )% | $ | 21,994 |
| | $ | 19,999 |
| | 10.0 | % | | $ | 42,853 |
| | $ | 39,938 |
| | 7.3 | % |
Fiduciary and asset management fees | 27,419 |
| | 24,676 |
| | 11.1 |
| | 13,983 |
| | 12,524 |
| | 11.6 |
| 14,478 |
| | 13,983 |
| | 3.5 |
| | 28,057 |
| | 27,419 |
| | 2.3 |
|
Card fees | 21,032 |
| | 19,885 |
| | 5.8 |
| | 10,833 |
| | 10,041 |
| | 7.9 |
| 11,161 |
| | 10,833 |
| | 3.0 |
| | 22,037 |
| | 21,032 |
| | 4.8 |
|
Brokerage revenue | 17,596 |
| | 14,436 |
| | 21.9 |
| | 8,900 |
| | 7,210 |
| | 23.4 |
| 10,052 |
| | 8,709 |
| | 15.4 |
| | 19,431 |
| | 17,085 |
| | 13.7 |
|
Capital markets income | | 8,385 |
| | 1,118 |
| | 650.0 |
| | 13,291 |
| | 2,086 |
| | 537.2 |
|
Mortgage banking income | 9,887 |
| | 11,548 |
| | (14.4 | ) | | 4,839 |
| | 5,784 |
| | (16.3 | ) | 7,907 |
| | 4,839 |
| | 63.4 |
| | 12,962 |
| | 9,887 |
| | 31.1 |
|
Income from bank-owned life insurance | 7,949 |
| | 6,328 |
| | 25.6 |
| | 3,733 |
| | 3,272 |
| | 14.1 |
| 5,176 |
| | 3,733 |
| | 38.7 |
| | 10,466 |
| | 7,949 |
| | 31.7 |
|
Investment securities (losses) gains, net | (1,296 | ) | | 7,667 |
| | nm |
| | (1,296 | ) | | (1 | ) | | nm |
| |
Decrease in fair value of private equity investments, net | (3,093 | ) | | (3,166 | ) | | nm |
| | (37 | ) | | (1,352 | ) | | nm |
| |
Other fee income | 9,877 |
| | 11,033 |
| | (10.5 | ) | | 5,259 |
| | 6,164 |
| | (14.7 | ) | |
Investment securities losses, net | | (1,845 | ) | | (1,296 | ) | | nm |
| | (1,771 | ) | | (1,296 | ) | | nm |
|
Increase (decrease) in fair value of private equity investments, net | | 1,455 |
| | (37 | ) | | nm |
| | 2,313 |
| | (3,093 | ) | | nm |
|
Other non-interest income | 11,124 |
| | 7,762 |
| | 43.3 |
| | 7,174 |
| | 4,807 |
| | 49.2 |
| 11,044 |
| | 11,506 |
| | (4.0 | ) | | 19,546 |
| | 19,426 |
| | 0.6 |
|
Total non-interest income | $ | 140,433 |
| | $ | 140,539 |
| | (0.1 | )% | | $ | 73,387 |
| | $ | 68,701 |
| | 6.8 | % | $ | 89,807 |
| | $ | 73,387 |
| | 22.4 | % | | $ | 169,185 |
| | $ | 140,433 |
| | 20.5 | % |
| | | | | | | | | | | | | | | | | | | | | | |
Principal Components of Non-interest IncomeThree and Six Months Ended June 30, 2019 compared to June 30, 2018
Service charges on deposit accounts for the sixthree and threesix months ended June 30, 20182019 were down $432 thousand,up $2.0 million, or 1.1%10.0%, and down $253 thousand,$2.9 million, or 1.2%7.3%, respectively, compared toincluding the six and three months ended June 30, 2017.impact of FCB. Service charges on deposit accounts consist of NSF fees, account analysis fees, and all other service charges. NSF fees were up $940 thousand, or 10.8%, and $659 thousand, or 3.7%, for the sixthree and threesix months ended June 30, 20182019, respectively, primarily due to the FCB acquisition. Account analysis fees were down $267up $823 thousand, or 1.5%12.7%, and $241 thousand,$1.8 million, or 2.7%14.5%, respectively, compared tofor the sixthree and threesix months ended June 30, 2017. Account analysis fees for the six and three months ended June 30, 2018 were up $171 thousand, or 1.4%, and $284 thousand, or 4.6%, respectively, compared to the six and three months ended June 30, 2017.2019, respectively. All other service charges on deposit accounts, which consist primarily of monthly fees on retail demand depositdeposits, saving accounts, and savingsmall business accounts, for the sixthree and threesix months ended June 30, 20182019, were down $336up $233 thousand or 3.3%, and $297$441 thousand, or 5.8%, compared to the same periods in 2017.respectively.
Fiduciary and asset management fees are derived from providing estate administration, personal trust, corporate trust, corporate bond, investment management, and financial planning services. Fiduciary and asset management fees increased $2.7 million,$495 thousand, or 11.1%3.5%, and $1.5 million,$638 thousand, or 11.6%2.3%, for the sixthree and threesix months ended June 30, 2018, respectively, compared2019, respectively. The increases were driven by growth in total assets under management which increased by 10.0% year-over-year to $15.82 billion (including growth in brokerage assets under management).
Card fees for the sixthree and threesix months ended June 30, 2017. The increase was driven by2019, increased $328 thousand, or 3.0%, and $1.0 million, or 4.8%, respectively, including growth in assets under management. Total assets under management (including brokerage assets under management) increased by 16% year-over-year to approximately $14.4 billion, due to overall market conditions, increased productivity as well astransaction volume and the additionimpact of new talent.
Card fees totaled $21.0 million and $10.8 million for the six and three months ended June 30, 2018, respectively, compared to $19.9 million and $10.0 million for the same periods in 2017.FCB. Card fees consist primarily of credit card interchange fees, debit card interchange fees, and merchant discounts. Card fees are reported net of certain associated expense items including customer loyalty program expenses and network expenses.
Brokerage revenue was $17.6$10.1 million and $8.9$19.4 million for the sixthree and threesix months ended June 30, 2018,2019, respectively, up $3.2$1.3 million, or 21.9%15.4%, and up $1.7$2.3 million, or 23.4%13.7%, compared to the sixthree and threesix months ended June 30, 2017, respectively. The increase in 2018 from 2017 was largely driven by growth in brokerage assets under management due primarily to new talent additions.2018. Brokerage revenue consists primarily of brokerage commissions. Additionally, brokerage revenue includescommissions as well as advisory fees earned from the management of customer assets. Brokerage assets under management were $3.29 billion at June 30, 2019, an increase of 19.3% from $2.76 billion at June 30, 2018.
Capital markets income primarily includes fee income from customer derivative and investment banking transactions. Capital markets income increased $7.3 million and $11.2 million for the three and six months ended June 30, 2019, respectively, driven by contributions from newly acquired Florida markets.
Mortgage banking income decreased $1.7increased $3.1 million or 14.4%,for both the three and $945 thousand, or 16.3%, compared to the six and three months ended June 30, 2017, respectively, reflecting softer2019. Mortgage banking income was driven by higher overall production volumedue to an increase in a rising interest rate environment.mortgage loan originators and the addition of FCB.
Income from bank-owned life insurance, increased $1.6 million, or 25.6%, and $461 thousand, or 14.1%, compared to the six and three months ended June 30, 2017, respectively, due to additional investments in bank-owned life insurance policies during the first quarter of 2017,which includes increases in the cash surrender value of these policies and death benefits.proceeds from insurance benefits, increased $1.4 million, or 38.7%, and $2.5 million, or 31.7%, for the three and six months ended June 30, 2019, primarily driven by the impact of acquired FCB policies. The first six months of 2019 included income on proceeds from insurance benefits of $233 thousand compared to $561 thousand in 2018.
Investment securities losses, net, of $1.8 million for both the three and six months ended June 30, 2019 included net losses due to repositioning of the portfolio to better align with long-term liquidity objectives. Investment securities losses of $1.3 million, for both the sixthree and threesix months ended June 30, 2018, included a loss of $1.3 million from a strategic sale to improve portfolio performance. Investment securities gains, net
Increase/(decrease) in the fair value of $7.7private equity investments was up $1.5 million and $5.4 million, respectively, for the three and six months ended June 30, 2017 included a $3.42019 due to favorable fair value adjustments to private equity investments of $1.5 million gain on the sale of an equity position and a $4.3$2.3 million gain from the repositioning of the investment securities portfolio during the first quarterthree and six months ended June 30, 2019, respectively, compared to unfavorable fair value adjustments of 2017.
Private equity investments consist of an equity method investment in a venture capital fund. The net loss of$37 thousand and $3.1 million for the first halfsame period a year ago.
The main components of 2018 consisted mostly of net unrealized losses on certain investments within the fund. The net loss of $3.2 million during the first half of 2017 consisted mostly of realized losses on sales of investments within the fund.
Other feeother non-interest income includesare fees for letters of credit and unused lines of credit, safe deposit box fees, access fees for automated teller machineATM use, customer swap dealer fees, and other service charges. Other fee income was lower by $1.2 million, or 10.5%, and $905 thousand, or 14.7%, compared to the six and three months ended June 30, 2017, respectively, due primarily to higher customer swap dealer fees and syndication arranger fees in 2017.
The main components of other non-interest income arecharges, income from insurance commissions, gains from sales of GGL/SBA loans, and other miscellaneous items. Other non-interest income was up $3.4Gains from sales of GGL/SBA loans were down $1.5 million or 43.3%, and $2.4$2.1 million, or 49.2%, compared torespectively, for the sixthree and threesix months ended June 30, 2017, respectively, due primarily to higher insurance commissions, higher2019, offset by valuation gains on salesmutual funds held in rabbi trusts of GGL/SBA loans,$1.8 million and miscellaneous items.$1.7 million, respectively, for the three and six months ended June 30, 2019.
Non-interest Expense
Non-interest expense for the first six months of 2018 increased $10.1 million, or 2.6%, compared to the first six months of 2017 and non-interest expense for the second quarter of 2018 increased $12.32019 was $264.1 million, up $60.1 million, or 6.4%29.4%, compared to the second quarter of 2017. The second quarter of 2018 included2018. On a $2.3year-to-date basis, non-interest expense was up $157.3 million, expense foror 39.4%, versus the same period a valuation adjustmentyear ago. Comparisons to prior year are impacted by the Visa derivative offset in part by a $1.4 million benefit from a recovery of litigation settlementFCB acquisition and merger-related expense. The first quarter of 2018 included a $2.6 million reduction in litigation contingency accruals and the first quarter of 2017 included $6.5 million in restructuring charges. Adjusted non-interest expense, which excludes valuation adjustment to Visa derivative, restructuring charges, net, amortizationmerger-related expense and certain other items, for the second quarter of intangibles, and litigation settlement/contingency2019 was up $53.7 million, or 26.4%, versus the same period a year ago. On a year-to-date basis, adjusted non-interest expense increased $18.5$98.2 million, or 4.8%,24.5%. The efficiency ratio-FTE for the first halfsix months of 20182019 was 57.67%, compared to the first half of 2017. Strong operating leverage57.07% for the first halfsix months of 2018 resulted in an efficiency ratio of 56.97%, improved from 62.31% for the first half of 2017.2018. The adjusted tangible efficiency ratio for the first six months of 20182019 was 56.90%51.17%, down 397573 basis points fromcompared to the same period a year ago. See "Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Financial Measures" of this Report for applicable reconciliation to GAAP measures.
The following table summarizes the components of non-interest expense.
| | Non-interest Expense
| | | | | | | | | | | | |
Table 6 - Non-interest Expense | | | | | | | | | | | | |
| Six Months Ended June 30, | | Three Months Ended June 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
(in thousands) | 2018 | | 2017 | | % Change | | 2018 | | 2017 | | % Change | |
(dollars in thousands) | | 2019 | | 2018 | | % Change | | 2019 | | 2018 | | % Change |
Salaries and other personnel expense | $ | 225,583 |
| | $ | 212,404 |
| | 6.2 | % | | $ | 111,863 |
| | $ | 105,213 |
| | 6.3 | % | $ | 143,009 |
| | $ | 111,863 |
| | 27.8 | % | | $ | 282,436 |
| | $ | 225,583 |
| | 25.2 | % |
Net occupancy and equipment expense | 64,134 |
| | 59,264 |
| | 8.2 |
| | 32,654 |
| | 29,933 |
| | 9.1 |
| 39,851 |
| | 32,654 |
| | 22.0 |
| | 78,245 |
| | 64,134 |
| | 22.0 |
|
Third-party processing expense | 29,012 |
| | 26,223 |
| | 10.6 |
| | 15,067 |
| | 13,620 |
| | 10.6 |
| 19,118 |
| | 15,067 |
| | 26.9 |
| | 36,875 |
| | 29,012 |
| | 27.1 |
|
Professional fees | | 9,312 |
| | 6,284 |
| | 48.2 |
| | 15,660 |
| | 11,789 |
| | 32.8 |
|
FDIC insurance and other regulatory fees | 13,335 |
| | 13,645 |
| | (2.3 | ) | | 6,543 |
| | 6,875 |
| | (4.8 | ) | 7,867 |
| | 6,543 |
| | 20.2 |
| | 14,629 |
| | 13,335 |
| | 9.7 |
|
Professional fees | 11,789 |
| | 12,907 |
| | (8.7 | ) | | 6,284 |
| | 7,551 |
| | (16.8 | ) | |
Advertising expense | 10,312 |
| | 11,258 |
| | (8.4 | ) | | 5,220 |
| | 5,346 |
| | (2.4 | ) | 5,923 |
| | 5,220 |
| | 13.5 |
| | 11,045 |
| | 10,312 |
| | 7.1 |
|
Valuation adjustment to Visa derivative | 2,328 |
| | — |
| | nm |
| | 2,328 |
| | — |
| | nm |
| |
Foreclosed real estate expense, net | 749 |
| | 3,582 |
| | (79.1 | ) | | (107 | ) | | 1,448 |
| | (107.4 | ) | |
Earnout liability adjustment | — |
| | 1,707 |
| | nm |
| | — |
| | 1,707 |
| | nm |
| |
Restructuring charges, net | (212 | ) | | 6,524 |
| | nm |
| | 103 |
| | 13 |
| | nm |
| |
Amortization of intangibles | | 2,410 |
| | 292 |
| | nm |
| | 5,802 |
| | 583 |
| | nm |
|
Merger-related expense | | 7,401 |
| | — |
| | nm |
| | 57,140 |
| | — |
| | nm |
|
Other operating expenses | 42,204 |
| | 41,619 |
| | 1.4 |
| | 24,102 |
| | 20,041 |
| | 20.3 |
| 29,235 |
| | 26,134 |
| | 11.9 |
| | 54,705 |
| | 44,486 |
| | 23.0 |
|
Total non-interest expense | $ | 399,234 |
| | $ | 389,133 |
| | 2.6 | % | | $ | 204,057 |
| | $ | 191,747 |
| | 6.4 | % | $ | 264,126 |
| | $ | 204,057 |
| | 29.4 | % | | $ | 556,537 |
| | $ | 399,234 |
| | 39.4 | % |
| | | | | | | | | | | | | | | | | | | | | | |
Three and Six Months Ended June 30, 2019 compared to June 30, 2018
Salaries and other personnel expensesexpense increased $13.2$31.1 million, or 6.2%27.8%, and $6.7$56.9 million, or 6.3%25.2%, for the sixthree and threesix months ended June 30, 2018,2019, respectively, compared toincluding the same periods in 2017, primarily due toimpact of FCB, talent additions, higher production-based commission and incentive compensation expense, annual merit increases, and higher incentive compensation expense.employee insurance.
Net occupancy and equipment expense increased $4.9$7.2 million, or 8.2%22.0%, and $2.7$14.1 million, or 9.1%22.0%, during the sixthree and threesix months ended June 30, 2018,2019, respectively, comparedprimarily due to additional branches from the same periods in 2017 driven primarily by costs associated with growth in technology investments.acquisition of FCB.
Third-party processing expense includes all third-party core operating system and processing charges as well as third-party servicing charges. Third-party processing expense increased $2.8$4.1 million, or 10.6%26.9%, and $1.4$7.9 million, or 10.6%27.1%, duringfor the sixthree and threesix months ended June 30, 2018, respectively, compared to the same periods in 2017.2019, respectively. The increase is primarily due to an increase of $2.5 million and $1.1 million for the six and three months ended June 30, 2018, respectively, compared to the same periods in 2017, from servicing fees associated with loan growth from Synovus' two consumer-based lending partnerships.partnerships and the acquisition of FCB.
DuringProfessional fees increased $3.0 million, or 48.2%, and $3.9 million, or 32.8%, for the three months ended June 30, 2018, Synovus recorded a $2.3 million valuation adjustment to the Visa derivative following Visa's announcement on June 26, 2018 that it would deposit $600 million into its litigation escrow account.
For theand six months ended June 30, 2018, Synovus recorded net lease termination accrual reversals of $377 thousand related2019, respectively, primarily from increases in consulting fees due to branches closed in prior years offset somewhat byplanned strategic and technology initiatives.
FDIC insurance and other property related charges of $165 thousand. Duringregulatory fees were up $1.3 million for both the three and six months ended June 30, 2017, Synovus recorded severance charges2019 primarily due to the acquisition of $6.5FCB, somewhat offset by the FDIC's elimination of the assessment surcharge for all large banks in the fourth quarter of 2018.
Amortization of intangibles was up $2.1 million including $6.2and $5.2 million for termination benefitsthe three and six months ended June 30, 2019, respectively, due to amortization of the core deposit intangible asset created from the FCB acquisition, which will be amortized using an accelerated method over an estimated life of 10 years.
In connection with the FCB acquisition, Synovus incurred merger-related expense totaling $7.4 million and $57.1 million for the three and six months ended June 30, 2019, primarily related to employment compensation agreements, severance, and professional services. See "Note 2 - Acquisitions" in conjunction with a voluntary early retirement program offered to Synovus employees duringthis Report for more information on the first quarteracquisition of 2017.FCB.
Other operating expenses were up $3.1 million and $10.2 million, respectively, for the three and six months ended June 30, 2019 including the impact of FCB. Other operating expenses for the sixthree and threesix months ended June 30, 2018 included a benefit of $4.0$1.4 million and $1.4$4.0 million, respectively, from recoveries and reductions in litigation contingency accruals. Other operating expenses foraccruals and a $2.3 million valuation adjustment expense related to the six and three months ended June 30, 2017 included a $2.4 million gain from the settlement of a contingent receivable.Visa Derivative.
Income Tax Expense
Income tax expense was $61.1$54.6 million and $30.9$95.0 million for the three and six months ended June 30, 2019, respectively, representing an effective tax rate of 25.9% and 25.6% for the respective periods. Income tax expense was $30.9 million and $61.1 million for the three and six months ended June 30, 2018, respectively, representing an effective tax rate of 22.2%21.8% and 21.8% for the respective periods. Income tax expense was $75.6 million and $41.8 million for the six and three months ended June 30, 2017, respectively, representing an effective tax rate of 33.8% and 35.5%22.2% for the respective periods. The increase in the effective tax rate is lower for the three and six months ended June 30, 2019, as compared to the three and threesix months ended June 30, 2018, was largely due to Federal Tax Reform that reducednon-deductible merger-related expenses, an increase in state tax expense resulting from a shift of earnings into higher tax jurisdictions, and a decrease in the federal statutory rate from 35% to 21% for tax years beginning after December 31, 2017.benefit recognized as a result of employee share-based award vesting.
The effective tax rate is affected by many factors including, but not limited to, the level of pre-tax income, bank-owned life insurance, tax-exempt interest, and nondeductible expenses. In addition, the effective tax rate is affected by items that may occur in any given period but are not consistent from period-to-period, such as tax benefits related to share-based compensation, jurisdiction statutory tax rate changes, valuation allowance changes, income tax credits earned, and changes to unrecognized tax benefits. Accordingly, the comparability of the effective tax rate between periods may be impacted.
The effective income tax rate for the six months ended June 30, 2018 included a net discrete income tax benefit of $2.8 million predominantly resulting from tax benefits associated with the exercise and vesting of employee equity awards.
CREDIT QUALITY, CAPITAL RESOURCES AND LIQUIDITY
Credit Quality
Synovus continuously monitors the quality of its loan portfolio by industry, property type, geography, as well as credit quality metrics and maintains an allowance for loan losses that management believes is sufficient to absorb probable losses inherent in its loan portfolio. Credit quality metrics have remained favorableSynovus continued to benefit from a relatively stable credit environment during the first six months of 2018.2019.
The table below includes selected credit quality metrics.
| | Credit Quality Metrics | | |
Table 7 - Credit Quality Metrics | | |
(dollars in thousands) | June 30, 2018 | | December 31, 2017 | | June 30, 2017 | June 30, 2019 | | December 31, 2018 | | June 30, 2018 |
Non-performing loans (1) | $ | 117,328 |
| | $ | 115,561 |
| | $ | 159,317 |
| $ | 124,083 |
| | $ | 106,733 |
| | $ | 117,328 |
|
Impaired loans held for sale(1)(2) | 2,733 |
| | 11,278 |
| | 127 |
| 631 |
| | 1,506 |
| | 2,733 |
|
Other real estate | 6,288 |
| | 3,758 |
| | 19,476 |
| 14,848 |
| | 6,220 |
| | 6,288 |
|
Non-performing assets (1) | $ | 126,349 |
| | $ | 130,597 |
| | $ | 178,920 |
| $ | 139,562 |
| | $ | 114,459 |
| | $ | 126,349 |
|
Total loans | | $ | 36,138,561 |
| | $ | 25,946,573 |
| | $ | 25,134,056 |
|
Non-performing loans as a % of total loans | 0.47 | % | | 0.47 |
| | 0.65 |
| 0.34 | % | | 0.41 | % | | 0.47 | % |
Non-performing assets as a % of total loans, other loans held for sale, and ORE | 0.50 |
| | 0.53 |
| | 0.73 |
| 0.39 |
| | 0.44 |
| | 0.50 |
|
Loans 90 days past due and still accruing | $ | 3,222 |
| | 4,414 |
| | 4,550 |
| $ | 5,851 |
| | $ | 3,798 |
| | $ | 3,222 |
|
As a % of total loans | 0.01 | % | | 0.02 |
| | 0.02 |
| 0.02 | % | | 0.01 | % | | 0.01 | % |
Total past due loans and still accruing | $ | 55,614 |
| | 52,031 |
| | 66,788 |
| |
Total past due loans and still accruing(3) | | $ | 80,792 |
| | $ | 56,927 |
| | $ | 55,614 |
|
As a % of total loans | 0.22 | % | | 0.21 |
| | 0.27 |
| 0.22 | % | | 0.22 | % | | 0.22 | % |
Net charge-offs, quarter | $ | 17,829 |
| | 8,979 |
| | 15,679 |
| $ | 11,779 |
| | $ | 13,044 |
| | $ | 17,829 |
|
Net charge-offs/average loans, quarter | 0.29 | % | | 0.15 |
| | 0.26 |
| 0.13 | % | | 0.20 | % | | 0.29 | % |
Net charge-offs, year-to-date | $ | 22,109 |
| | 69,675 |
| | 22,597 |
| $ | 28,867 |
| | $ | 50,410 |
| | $ | 22,109 |
|
Net charge-offs/average loans, year-to-date | 0.18 | % | | 0.29 |
| | 0.19 |
| 0.16 | % | | 0.20 | % | | 0.18 | % |
Provision for loan losses, quarter | $ | 11,790 |
| | 8,564 |
| | 10,260 |
| $ | 12,119 |
| | $ | 12,148 |
| | $ | 11,790 |
|
Provision for loan losses, year-to-date | 24,566 |
| | 67,185 |
| | 18,934 |
| 35,688 |
| | 51,697 |
| | 24,566 |
|
Allowance for loan losses | 251,725 |
| | 249,268 |
| | 248,095 |
| 257,376 |
| | 250,555 |
| | 251,725 |
|
Allowance for loan losses as a % of total loans | 1.00 | % | | 1.01 |
| | 1.02 |
| 0.71 | % | | 0.97 | % | | 1.00 | % |
| | | | | | | | | | |
(1) For purposes of this table, June 30, 2019 non-performing loans exclude acquired loans accounted for under ASC 310-30 that are currently accruing income.
(2) Represent only impaired loans that have been specifically identified to be sold. Impaired loans held for sale are carried at the lower of cost or fair value, less costs to sell, based primarily on estimated sales proceeds net of selling costs.
(3) For purposes of this table, June 30, 2019 total past due loans and still accruing include acquired loans accounted for under ASC 310-30 that are contractually 30-89 days past due.
Non-performing Assets
Total NPAs were $126.3 million at June 30, 2018, a $4.2 million, or 3.3%, decrease from $130.6 million at December 31, 2017 and a $52.6 million, or 29.4%, decrease from $178.9 million at June 30, 2017. The year-over-year decline in non-performing assets was driven by the continued resolution of problem assets, including accelerated dispositions in conjunction with the balance sheet restructuring actions in the third quarter of 2017. Total non-performing assets as a percentage of total loans, otherimpaired loans held for sale, and other real estate wereORE improved 5 basis points and 11 basis points, respectively, to 0.39% at June 30, 2019 compared to 0.44% at December 31, 2018 and 0.50% at June 30, 2018 compared to 0.53%2018. Total NPAs were $139.6 million at June 30, 2019, a $25.1 million, or 21.9%, increase from $114.5 million at December 31, 20172018 and 0.73%a $13.2 million, or 10.5%, increase from $126.3 million at June 30, 2017.2018, primarily due to NPAs from the FCB acquisition. NPAs declined $15.7 million, or 10.1%, from the March 31, 2019 balance of $155.3 million, primarily due to the sale of FCB acquired NPLs during the second quarter of 2019 at a price that exceeded the preliminary fair value recorded at the Acquisition Date.
Net Charge-offs
Net charge-offs for the six months ended June 30, 2019 were $28.9 million, or 0.16%, as a percentage of average loans annualized, compared to $22.1 million, or 0.18%, as a percentage of average loans annualized, for the six months ended June 30, 2018. The increase in net charge-offs from 2018 is primarily attributable to a higher level of recoveries in the previous year. Year-to-date net charge-offs of 16 basis points is well within Synovus' guidance of 15-20 basis points. Net charge-offs for the second quarter of 2019 were 13 basis points annualized, down from 29 basis points in the second quarter of 2018, primarily due to lower gross charge-offs in the current quarter.
Provision for Loan Losses and Allowance for Loan Losses
For the six months ended June 30, 2019, the provision for loan losses was $35.7 million, an increase of $11.1 million, or 45.3%, compared to the six months ended June 30, 2018. The year-to-date increase in provision expense was driven by organic loan growth as well as an increased level of net charge-offs due to lower recoveries. The provision for loan losses covered 124% of net charge-offs for the six months ended June 30, 2019 compared to 111% for the six months ended June 30, 2018. For the second quarter of 2019, provision expense was $12.1 million, a decline of $11.5 million, or 48.6%, compared to the first quarter of 2019, primarily due to lower charge-offs and reduction of impaired reserves.
The ALL at June 30, 2019 was $257.4 million, or 0.71% of total loans, compared to $250.6 million, or 0.97% of total loans, at December 31, 2018 and $251.7 million, or 1.00% of total loans, at June 30, 2018, reflecting a lower ratio at June 30, 2019 due to the impact of acquisition date accounting for acquired loans. The allowance to non-performing loans at June 30, 2019 remained strong at 207%, compared to 235% at December 31, 2018 and 215% at June 30, 2018.
|
| | | | | | | | | | | | | | | | | | | | |
Table 8 - Accruing TDRs by Risk Grade | | | | | | | | | | | |
| June 30, 2019 | | December 31, 2018 | | June 30, 2018 |
(dollars in thousands) | Amount | | % | | Amount | | % | | Amount | | % |
Pass | $ | 60,586 |
| | 47.9 | % | | $ | 50,668 |
| | 43.9 | % | | $ | 57,013 |
| | 45.5 | % |
Special Mention | 12,841 |
| | 10.2 |
| | 14,480 |
| | 12.5 |
| | 19,799 |
| | 15.8 |
|
Substandard accruing | 52,942 |
| | 41.9 |
| | 50,440 |
| | 43.6 |
| | 48,498 |
| | 38.7 |
|
Total accruing TDRs | $ | 126,369 |
| | 100.0 | % | | $ | 115,588 |
| | 100.0 | % | | $ | 125,310 |
| | 100.0 | % |
| | | | | | | | | | | |
Troubled Debt Restructurings
Accruing TDRs were $126.4 million at June 30, 2019, compared to $115.6 million at December 31, 2018 and $125.3 million at June 30, 2018. Accruing TDRs increased $10.8 million from December 31, 2018 and$1.1 million fromJune 30, 2018. Non-accruing TDRs were $12.8 million at June 30, 2019, compared to $151.3$26.2 million at December 31, 20172018 and $167.4$30.4 million at June 30, 2017. Accruing2018, a decrease of $13.4 million and $17.6 million, respectively. The primary driver of the increase in accruing TDRs declined $26.0 million, or 17.2%, fromand decline in non-accruing TDRs compared to December 31, 20172018 and $42.1 million, or 25.1%, from a year ago primarily due to continued decline in TDR inflows, fewer loans qualifying for removal of TDR designation upon subsequent renewal, refinance, or modification, and pay-offs.
At June 30, 2018 is a result of a large TDR relationship being upgraded from non-accruing to accruing status based on the allowance for loan losses allocated to these accruing TDRs was $6.5 million compared to $8.7 millionat December 31, 2017extent of its payment performance and $8.5 million at June 30, 2017. the expectation of the collectability of all contractual amounts.
Accruing TDRs are considered performing because they are performing in accordance with the restructured terms.At June 30, 2019, December 31, 2018, and December 31, 2017, June 30, 2018, approximately97%, 98%, and 99%97%, respectively, of accruing TDRs were current. In addition, subsequent defaults on accruing TDRs (defaults defined as the earlier of the TDR being placed on non-accrual status or reaching 90 days past due with respect to principal and/or interest payments within twelve months of the TDR designation) have remained at low levels. There were eight defaults for the six months ended June 30, 2018 and three defaults for the six months ended June 30, 2017.
|
| | | | | | | | | | | | | | | | | | | | |
Accruing TDRs by Risk Grade | June 30, 2018 | | December 31, 2017 | | June 30, 2017 |
(dollars in thousands) | Amount | | % | | Amount | | % | | Amount | | % |
Pass | $ | 57,013 |
| | 45.5 | % | | $ | 57,136 |
| | 37.8 | % | | $ | 69,943 |
| | 41.8 | % |
Special Mention | 19,799 |
| | 15.8 |
| | 15,879 |
| | 10.5 |
| | 20,550 |
| | 12.3 |
|
Substandard accruing | 48,498 |
| | 38.7 |
| | 78,256 |
| | 51.7 |
| | 76,902 |
| | 45.9 |
|
Total accruing TDRs | $ | 125,310 |
| | 100.0 | % | | $ | 151,271 |
| | 100.0 | % | | $ | 167,395 |
| | 100.0 | % |
| | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | |
Accruing TDRs Aging by Portfolio Class |
| June 30, 2018 |
(in thousands) | Current | | 30-89 Days Past Due | | 90+ Days Past Due | | Total | |
Commercial, financial and agricultural | $ | 11,302 |
| | $ | 817 |
| | $ | — |
| | $ | 12,119 |
| |
Owner-occupied | 36,388 |
| | 62 |
| | — |
| | 36,450 |
| |
Total commercial and industrial | 47,690 |
| | 879 |
| | — |
| | 48,569 |
| |
Investment properties | 24,218 |
| | — |
| | — |
| | 24,218 |
| |
1-4 family properties | 10,347 |
| | 111 |
| | — |
| | 10,458 |
| |
Land and development | 15,281 |
| | 589 |
| | — |
| | 15,870 |
| |
Total commercial real estate | 49,846 |
| | 700 |
| | — |
| | 50,546 |
| |
Home equity lines | 1,312 |
| | 1,108 |
| | 333 |
| | 2,753 |
| |
Consumer mortgages | 18,572 |
| | 195 |
| | — |
| | 18,767 |
| |
Credit cards | — |
| | — |
| | — |
| | — |
| |
Other consumer loans | 4,630 |
| | 45 |
| | — |
| | 4,675 |
| |
Total consumer | 24,514 |
| | 1,348 |
| | 333 |
| | 26,195 |
| |
Total accruing TDRs | $ | 122,050 |
|
| $ | 2,927 |
| | $ | 333 |
|
| $ | 125,310 |
| |
| | | | | | | | |
| December 31, 2017 |
(in thousands) | Current | | 30-89 Days Past Due | | 90+ Days Past Due | | Total | |
Commercial, financial and agricultural | $ | 33,789 |
| | $ | 1,161 |
| | $ | 44 |
| | $ | 34,994 |
| |
Owner-occupied | 35,554 |
| | — |
| | — |
| | 35,554 |
| |
Total commercial and industrial | 69,343 |
| | 1,161 |
| | 44 |
| | 70,548 |
| |
Investment properties | 21,398 |
| | — |
| | — |
| | 21,398 |
| |
1-4 family properties | 14,865 |
| | 191 |
| | — |
| | 15,056 |
| |
Land and development | 14,835 |
| | 381 |
| | — |
| | 15,216 |
| |
Total commercial real estate | 51,098 |
| | 572 |
| | — |
| | 51,670 |
| |
Home equity lines | 5,096 |
| | — |
| | — |
| | 5,096 |
| |
Consumer mortgages | 18,588 |
| | 80 |
| | — |
| | 18,668 |
| |
Credit cards | — |
| | — |
| | — |
| | — |
| |
Other consumer loans | 5,097 |
| | 192 |
| | — |
| | 5,289 |
| |
Total consumer | 28,781 |
| | 272 |
| | — |
| | 29,053 |
| |
Total accruing TDRs | $ | 149,222 |
| | $ | 2,005 |
| | $ | 44 |
| | $ | 151,271 |
| |
| | | | | | | | |
Non-accruing TDRs were $30.4 million at June 30, 2018 compared to $11.7 million at December 31, 2017. Non-accruing TDRs generally may be returned to accrual status if there has been a period of performance, consisting usually of at least a six month sustained period of repayment performance in accordance with the terms of the agreement.
Potential Problem Loans
Potential problem loans are defined by management as being certain performing loans with a well-defined weakness where there is known information about possible credit problems of borrowers which causes management to have concerns about the ability of such borrowers to comply with the present repayment terms of such loans. Potential problem commercial loans consist of commercial Substandard accruing loans but exclude loans 90 days past due and still accruing interest and accruing TDRs
classified as Substandard since these loans are disclosed separately. Potential problem commercial loans were $153.5 million at June 30, 2018 compared to $103.3 million and $149.2 million at December 31, 2017 and June 30, 2017, respectively. Synovus cannot predict whether these potential problem loans ultimately will become non-performing loans or result in losses.
Net Charge-offs
Net charge-offs for the six months ended June 30, 2018 were $22.1 million, or 0.18% as a percentage of average loans annualized, compared to $22.6 million, or 0.19%, as a percentage of average loans annualized for the six months ended June 30, 2017.
Provision for Loan Losses and Allowance for Loan Losses
For the six months ended June 30, 2018, the provision for loan losses was $24.6 million, an increase of $5.6 million, or 29.7%, compared to the six months ended June 30, 2017. The increase in provision expense for the six months ended June 30, 2018 compared to the six months ended June 30, 2017 is primarily due to loan growth as well as a slightly increased level of charge-offs above reserves.
The allowance for loan losses at June 30, 2018 was $251.7 million, or 1.00% of total loans, compared to $249.3 million, or 1.01% of total loans, at December 31, 2017 and $248.1 million, or 1.02% of total loans, at June 30, 2017.
Capital Resources
Synovus and Synovus Bank are required to comply with capital adequacy standards established by their primary federal regulator, the Federal Reserve. Synovus and Synovus Bank measure capital adequacy using the standardized approach to the Basel III Final Rule. Synovus has always placed great emphasis on maintaining a solid capital base and continues to satisfy applicable regulatory capital requirements.
At June 30, 2018,2019, Synovus and Synovus Bank's capital levels remained strong and each exceeded well-capitalized requirements currently in effect. The following table presents certain ratios used to measure Synovus and Synovus Bank's capitalization.
| | Capital Ratios | | | | |
Table 9 - Capital Ratios | | | | |
(dollars in thousands) | June 30, 2018 | | December 31, 2017 | June 30, 2019 | | December 31, 2018 |
Common equity Tier 1 capital (transitional) | | | | |
CET1 capital (transitional) | | | | |
Synovus Financial Corp. | $ | 2,838,616 |
| | $ | 2,763,168 |
| $ | 3,899,532 |
| | $ | 2,897,997 |
|
Synovus Bank | 3,285,713 |
| | 3,155,163 |
| 4,513,247 |
| | 3,382,497 |
|
Tier 1 capital | | | | |
Tier 1 risk-based capital | | | | |
Synovus Financial Corp. | 3,156,805 |
| | 2,872,001 |
| 4,094,672 |
| | 3,090,416 |
|
Synovus Bank | 3,285,713 |
| | 3,155,163 |
| 4,513,247 |
| | 3,382,497 |
|
Total risk-based capital | | | | | | |
Synovus Financial Corp. | 3,668,904 |
| | 3,383,081 |
| 4,913,043 |
| | 3,601,376 |
|
Synovus Bank | 3,537,812 |
| | 3,406,243 |
| 4,771,618 |
| | 3,633,457 |
|
Common equity Tier 1 capital ratio (transitional) | | | | |
CET1 capital ratio (transitional) | | | | |
Synovus Financial Corp. | 10.12 | % | | 9.99 | % | 9.61 | % | | 9.95 | % |
Synovus Bank | 11.72 |
| | 11.43 |
| 11.13 |
| | 11.62 |
|
Tier 1 capital ratio | | | | |
Tier 1 risk-based capital ratio | | | | |
Synovus Financial Corp. | 11.25 |
| | 10.38 |
| 10.09 |
| | 10.61 |
|
Synovus Bank | 11.72 |
| | 11.43 |
| 11.13 |
| | 11.62 |
|
Total risk-based capital to risk-weighted assets ratio | | | | | | |
Synovus Financial Corp. | 13.08 |
| | 12.23 |
| 12.11 |
| | 12.37 |
|
Synovus Bank | 12.61 |
| | 12.33 |
| 11.77 |
| | 12.49 |
|
Leverage ratio | | | | | | |
Synovus Financial Corp. | 10.03 |
| | 9.19 |
| 8.89 |
| | 9.60 |
|
Synovus Bank | 10.45 |
| | 10.12 |
| 9.80 |
| | 10.51 |
|
Tangible common equity to tangible assets ratio (1) | | | | |
Tangible common equity ratio(1) | | | | |
Synovus Financial Corp. | 8.77 |
| | 8.79 |
| 8.56 |
| | 8.34 |
|
| | | | | | |
(1) See " Non-GAAP Financial Measures" in this Report for the applicable reconciliation to the most comparable GAAP measure.
The Basel III capital rules became effective January 1, 2015 for Synovus and Synovus Bank, subject to a transition period for several aspects, including the capital conservation buffer and certain regulatory capital adjustments and deductions, as described below. Under the Basel III capital rules, the minimum capital requirements for Synovus and Synovus Bank include a common equity Tier 1 (CET1) ratio of 4.5%; Tier 1 capital ratio of 6%; total capital ratio of 8%; and leverage ratio of 4%. When fully phased-in on January 1, 2019, the Basel III capital rules include a capital conservation buffer of 2.5% that is added on top of each of the minimum risk-based capital ratios. The implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and will be phased-in over a three-year period (increasing by that amount on each subsequent January 1 until it reaches 2.5% on January 1, 2019). As a financial holding company, Synovus and its subsidiary bank, Synovus Bank, are required to maintain capital levels required for a well-capitalized institution as defined by federal banking regulations. Under the Basel III capital rules, Synovus and Synovus Bank are well-capitalized if each has a CET1 ratio of 6.5% or greater, a Tier 1 risk-based capital ratio of 8% or greater, a total risk-based capital ratio of 10% or greater, a leverage ratio of 5% or greater, and are not subject to any written agreement, order, capital directive, or prompt corrective action directive from a federal and/or state banking regulatory agency to meet and maintain a specific capital level for any capital measure.
On June 21, 2018, Synovus completed a public offering of $200 million of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D. The offering generated net proceeds of $195 million, which were largely used to fund the redemption of all of the outstanding shares of Series C Preferred Stock on August 1, 2018 for an aggregate redemption price of $130 million.
On January 23, 2018, Synovus announced a share repurchase program of up to $150 million to be completed during 2018. As of June 30, 2018, Synovus had repurchased under this program a total of $76.8 million, or 1.5 million shares of its common stock, at an average price of $52.72 per share. As of June 30, 2018 and August 6, 2018, the remaining authorization under this program was $73.2 million and $44.6 million, respectively.
As of June 30, 2018, total disallowed deferred tax assets were $63.6 million or 0.23% of risk-weighted assets, compared to $70.4 million, or 0.25% of risk-weighted assets, at December 31, 2017. Disallowed deferred tax assets for CET1 were $50.9 million at June 30, 2018 compared to $56.3 million at December 31, 2017. See "Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Income Taxes" in Synovus' 2017 Form 10-K for more information on Synovus' net deferred tax asset.
At June 30, 2018,2019, Synovus' CET1 ratio was 10.12%9.61% under the Basel III transitional provisions, and the estimated fully phased-in CET1 ratio was 10.06%9.60% (See "Non-GAAP Financial Measures" in this Report), both of which are well in excess of regulatory requirements including the capital conservation buffer. On November 21, 2017, federal banking regulators adopted a final rulebuffer which has now reached the fully-phased in amount of 2.5% effective January 1, 2019. See "Part II - Item 8. Financial Statements and Supplementary Data - Note 11 - Regulatory Capital" to extend the consolidated financial statements of Synovus' 2018 Form 10-K for additional information on regulatory capital transition for certain items applicable during 2017 to future periods for banking organizations (such as Synovus) that are not subject to the advanced approaches capital rule. This reduced the capital impact to Synovus in 2018 from the fully phased-in implementation of Basel III that was originally required. See "Non-GAAP Financial Measures" in this Report for the applicable reconciliation to the most comparable GAAP measure.requirements. Management currently believes, based on internal capital analyses and earnings projections, that Synovus' capital position is adequate to meet current and future regulatory minimum capital requirements.requirements inclusive of the capital conservation buffer.
Effective January 1, 2019, Synovus completed its acquisition of all of the outstanding stock of FCB for total consideration of $1.63 billion. See "Part I - Item 1. Financial Statements and Supplementary Data - Note 2 - Acquisitions" in this Report for more information on the FCB acquisition.
On June 17, 2019, the Company announced that the Board of Directors increased its prior $400 million share repurchase authorization to $725 million for the year 2019. As of June 30, 2019, Synovus had repurchased under this program a total of $345.0 million, or 9.2 million shares of its common stock, at an average price of $37.43 per share. As of July 31, 2019, the remaining authorization under this program was $286.8 million. The timing and amount of future repurchases under the share repurchase program will depend upon a variety of factors, including market conditions, regulatory requirements, availability of funds, and other relevant considerations, as determined by us and applicable law and regulations.
Additionally, Synovus increased the quarterly common stock dividend by 20% to $0.30 per share effective with the first quarter 2019 dividend paid in April 2019.
On February 7, 2019, Synovus completed a public offering of $300.0 million aggregate principal amount of 5.900% Fixed-to-Fixed Rate Subordinated Notes due in 2029.
On July 1, 2019, Synovus completed a $350 million public offering of Series E Preferred Stock. The offering generated net proceeds of $341.5 million.
In December 2018, the federal banking regulators adopted as final the transitional arrangements to permit banking organizations to phase-in the day-one impact of the adoption of ASU 2016-13, referred to as the current expected credit loss model, on regulatory capital over a period of three years. For additional information on ASU 2016-13, see "Note 1 - Basis of Presentation" in this Report.
Dividends
Synovus has historically paid a quarterly cash dividend to the holders of its common stock. Management and the Board of Directors closely monitor current and projected capital levels, liquidity (including dividends from subsidiaries), financial markets and other economic trends, as well as regulatory requirements regarding the payment of dividends. During the first quarter of 2018, Synovus increased the quarterly common stock dividend by 67%20% to $0.25$0.30 per share effective with the quarterly dividend declared during the first quarter of 2018.2019 dividend paid in April 2019.
Synovus' ability to pay dividends on its capital stock, consisting of the common stock and the preferred stock is primarily dependent upon dividends and distributions that it receives from its bank and non-banking subsidiaries, which are restricted by various regulations administered by federal and state bank regulatory authorities, as further discussed below. During the six months ended June 30, 2018, Synovus Bank paid upstream cash dividends to Synovus totaling $110.0 million. For the year ended December 31, 2017, Synovus Bank and non-bank subsidiaries made upstream cash distributions to the Parent Company totaling $451.0 million including cash dividends of $283.2 million.authorities.
Synovus declared dividends of $0.50$0.60 and $0.30$0.50 per common share for the six months ended June 30, 20182019 and six months ended June 30, 2017,2018, respectively. In addition to dividends paid on its common stock, Synovus paid dividends of $6.3 million on its Series D Preferred Stock during the six months ended June 30, 2019 and paid dividends of $5.1 million on its Series C Preferred Stock during both the six months ended June 30, 2018 and 2017.
On June 21, 2018, Synovus completed a public offering of $200 million of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D. The offering generated net proceeds of $195 million, which were largely used to fund the redemption of all of the outstanding shares of Series C Preferred Stock on August 1, 2018 for an aggregate redemption price of $130 million.2018.
Liquidity
Liquidity represents the extent to which Synovus has readily available sources of funding needed to meet the needs of depositors, borrowers and creditors, to support asset growth, and to otherwise sustain operations of Synovus and its subsidiaries, at a reasonable cost, on a timely basis, and without adverse consequences. ALCO monitors Synovus' economic, competitive, and regulatory environment and is responsible for measuring, monitoring, and reporting on liquidity and funding risk, interest rate risk, and market risk and has the authority to establish policies relative to these risks. ALCO, operating under liquidity and funding policies approved by the Board of Directors, actively analyzes contractual and anticipated cash flows in order to properly manage Synovus’ liquidity position.
Contractual and anticipated cash flows are analyzed under normal and stressed conditions to determine forward lookingforward-looking liquidity needs and sources. Synovus analyzes liquidity needs under various scenarios of market conditions and operating performance. This analysis includes stress testing and measures expected sources and uses of funds under each scenario. Emphasis is placed on maintaining numerous sources of current and potential liquidity to allow Synovus to meet its obligations to depositors, borrowers, and creditors on a timely basis.
Liquidity is generated primarily through maturities and repayments of loans by customers, maturities and sales of investment securities, core deposit growth, and access to sources of funds other than deposits. Management continuously monitors and maintains appropriate levels of liquidity so as to provide adequate funding sources to manage customer deposit withdrawals, loan requests, and funding maturities. Liquidity is also enhanced by the acquisition of new deposits. Each of the local markets monitors deposit flows and evaluates local market conditions in an effort to retain and grow deposits.
Synovus Bank also generates liquidity through the national deposit markets through the issuance of brokered certificates of deposit and money market accounts. Synovus Bank accesses these funds from a broad geographic base to diversify its sources of funding and liquidity. On September 25, 2017, Synovus Bank completed the Cabela's Transaction and thereby retained WFB's $1.10 billion brokered time deposit portfolio with a weighted average remaining maturity of approximately 2.53 years and a weighted average rate of 1.83 percent.percent (the balance of these deposits at June 30, 2019 was $530.2 million). In addition, Synovus Bank has the capacity to access funding through its membership in the FHLB system. At June 30, 2018,2019, based on currently pledged collateral, Synovus Bank had access to incremental funding of $1.26$2.06 billion, subject to FHLB credit policies, through utilization of FHLB advances.
In addition to bank level liquidity management, Synovus must manage liquidity at the parent company level for various operating needs including the servicing of debt, the payment of dividends on our common stock and preferred stock, share repurchases, payment of general corporate expenses and potential capital infusions into subsidiaries. The primary source of liquidity for Synovus consists of dividends from Synovus Bank, which is governed by certain rules and regulations of the GA DBF and the Federal Reserve Bank. During the six months ended June 30, 2018, Synovus Bank paid upstream cash dividends to Synovus totaling $110.0 million. For the year ended December 31, 2017, Synovus Bank and non-bank subsidiaries made upstream cash distributions to the Parent Company totaling $451.0 million including cash dividends of $283.2 million. Synovus' ability to receive dividends from Synovus Bank in future periods will depend on a number of
factors, including, without limitation, Synovus Bank's future profits, asset quality, liquidity, and overall condition. In addition, GA DBF rules and related statutes contain limitations on payments of dividends by Synovus without the approval of the GA DBF.
On June 21, 2018,February 7, 2019, Synovus completed a public offering of $200$300.0 million aggregate principal amount of Fixed-to-Floating5.900% Fixed-to-Fixed Rate Non-Cumulative PerpetualSubordinated Notes due in 2029. Subject to any redemption prior to February 7, 2029, the notes will bear interest at the rate of 5.900% per annum for the first five years and, thereafter, at a fixed rate which will be 3.379% above the 5-Year Mid-Swap Rate as of the reset date. Interest on the notes will be payable semi-annually in arrears. The notes will mature on February 7, 2029. Proceeds from these notes were primarily used to repurchase common stock under the current authorization.
On July 1, 2019, Synovus completed a $350 million public offering of Series E Preferred Stock, Series D.Stock. The offering generated net proceeds of $195 million, which were largely used$341.5 million. Dividends on the shares are non-cumulative and, if declared, will accrue and be payable, in arrears, quarterly at a rate per annum equal to fund5.875% for each dividend period from the redemption of all oforiginal issue date to, but excluding, July 1, 2024. From and including July 1, 2024, the outstanding shares ofdividend rate will change and reset every five years on July 1 at a rate equal to the five-year U.S. Treasury Rate plus 4.127% per annum. The Series CE Preferred Stock is redeemable at Synovus' option in whole or in part, from time to time, on AugustJuly 1, 2018 for an aggregate2024 or any subsequent reset date, or in whole but not in part, at any time within 90 days following a regulatory capital treatment event, in each case, at a redemption price equal to $25.00 per share, plus any declared and unpaid dividends, without accumulation of $130 million.any undeclared dividends. The Series E Preferred Stock has no preemptive or conversion rights. Except in limited circumstances, the Series E Preferred Stock does not have any voting rights. Proceeds from the preferred stock offering will be used for general corporate purposes, including share repurchases under the new authorization.
On November 1, 2017, Synovus issued $300.0 million aggregate principal amount of 3.125% senior notes maturing in 2022 in a public offering with aggregate proceeds of $296.9 million, net of discount and debt issuance costs. On November 9, 2017, Synovus redeemed all of the $300.0 million aggregate principal amount of its 7.875% senior notes due 2019 at a "make whole" premium. 2017 results included a loss of $23.2 million related to early extinguishment of these notes. Additionally, during 2017, Synovus paid off the remaining balance of $278.6 million of its subordinated notes at their maturity date of June 15, 2017.
Synovus presently believes that the sources of liquidity discussed above, including existing liquid funds on hand, are sufficient to meet its anticipated funding needs. However, if economic conditions were to significantly deteriorate, regulatory capital requirements for Synovus or Synovus Bank were to increase as the result of regulatory directives or otherwise, or Synovus believes it is prudent to enhance current liquidity levels, then Synovus may seek additional liquidity from external sources. See "Part I – Item 1A. Risk Factors - Changes in the cost and availability of funding due to changes in the deposit market and credit market may adversely affect our capital resources, liquidity and financial results." ofSynovus' 20172018 Form 10-K. Furthermore, Synovus may, from time to time, take advantage of attractive market opportunities to refinance its existing debt, redeem its preferred stock, which is redeemable beginning on August 1, 2018, or strengthen its liquidity or capital position.
Earning Assets and Sources of Funds
Average total assets for the six months ended June 30, 20182019 increased $838.0 million$14.86 billion, or 2.7%47.4%, to $31.37$46.24 billion as compared to $30.54$31.37 billion for the first six months of 2017.2018. Average earning assets increased $968.6 million,$13.32 billion, or 3.4%45.0%, in the first six months of 20182019 compared to the same period in 20172018 and represented 94.3%92.8% of average total assets at June 30, 2018,2019, as compared to 93.7%94.3% at June 30, 2017.2018. The increase in average earning assets resulted from a $708.9 million$10.64 billion increase in average loans, net, and a $242.8 million$2.66 billion increase in average taxable investment securities. securities primarily attributable to the FCB acquisition.
Average interest bearinginterest-bearing liabilities increased $632.9 million,$11.05 billion, or 3.1%53.2%, to $20.76$31.81 billion for the first six months of 20182019 compared to the same period in 2017.2018. The increase in average interest bearinginterest-bearing liabilities was driven byprimarily related to the $10.93 billion in deposits acquired from FCB, of which $9.42 billion were interest-bearing. The year-over-year increase in average interest-bearing liabilities included a $672.8 million$5.72 billion increase in average time deposits, and a $206.0$2.97 billion increase in average money market deposit accounts, a $1.35 billion increase in average interest-bearing demand deposits, a $608.1 million increase in average interest bearing demand deposits. These increases were partially offset byother short-term borrowings, and a $238.2$256.4 million decreaseincrease in average long-term debt.debt, primarily due to the $300.0 million aggregate principal amount of fixed-to-fixed rate subordinated notes issued in February 2019. Average non-interest bearingnon-interest-bearing demand deposits increased $229.1 million,$1.71 billion, or 3.2%23.0%, to $7.47$9.18 billion for the first six months of 20182019 compared to the same period in 2017.2018, due primarily to the FCB acquisition.
Net interest income for the six months ended June 30, 20182019 was $558.9$794.4 million, an increase of $67.8$235.6 million, or 13.8%42.2%, compared to $491.0$558.9 million for the six months ended June 30, 2017.
The net2018, driven primarily by the FCB acquisition. Net interest margin was 3.82% for the six months ended June 30, 2018, an increase of 36down 8 basis points from 3.46% forover the six months ended June 30, 2017.comparable six-month periods to 3.74% , and was impacted by the FCB acquisition, the continued deposit shift to time deposits, and the issuance of subordinated debt. The yield on earning assets was 4.39%4.80%, up 46an increase of 41 basis points compared to the six months ended June 30, 2017 and2018, while the effectivetotal cost of funds increased 1051 basis points to 0.57%1.11%. The yield on loans was 4.79%, an increase of 48increased 38 basis points fromto 5.17%, and the yield on investment securities increased 71 basis points to 3.05% over the six months ended June 30, 2017 and the yield on investment securities was 2.34%, an increase of 25 basis points from the six months ended June 30, 2017.2018.
On a sequential quarter basis, net interest income increased by $10.3 million and the net interest margin increased by 8 basis points to 3.86%.was essentially flat. The increase in net interest income was driven by an $81.3 million increase in average loans, net. The increase in net interest income for the quarter was also driven by margin expansion. Additionally, the rate increases in March and June favorably impacted net interest income and the net interest margin for the three months ended June 30, 2018 compared to the previous quarter. The yield on earning assetsquarter was 4.47%3.69%, up 16down 9 basis points from the first quarter of 2018. This increase was driven by2019, and included a 1 basis point decrease in earning asset yields and an 188 basis point increase in loan yields. The effectivethe total cost of funds was 0.61%funds. Net interest income and margin for the second quarter of 2018, up 82019 were favorably impacted by $21.0 million, or 21 basis points, fromof purchase accounting adjustments primarily comprised of $9.8 million of loan accretion and $11.0 million of deposit premium amortization compared to a favorable impact of $18.8 million, or 19 basis points, including $7.4 million of loan accretion and $11.0 million of deposit premium amortization, in the first quarter of 2018.2019. The sequential quarter decrease in the net interest margin was driven by the full quarter effect of sub-debt issuance and continued upward repricing of
time deposits. The net interest margin, excluding the impact of purchase accounting adjustments was 3.48% for the second quarter of 2019, down 11 basis points sequentially.
Quarterly yields earned on average interest-earning assets and rates paid on average interest-bearing liabilities for the five most recent quarters are presented below.
| | Average Balances, Interest, and Yields | 2018 | | 2017 | |
Table 10 - Average Balances and Yields/Rates | | 2019 | | 2018 |
(dollars in thousands) (yields and rates annualized) | Second Quarter | | First Quarter | | Fourth Quarter | | Third Quarter | | Second Quarter | Second Quarter | | First Quarter | | Fourth Quarter | | Third Quarter | | Second Quarter |
Interest Earning Assets: | | | | | | | | | | | | | | | | | | |
Taxable investment securities (1) | $ | 4,077,564 |
| | 4,097,162 |
| | 3,937,278 |
| | 3,786,436 |
| | 3,844,688 |
| |
Investment securities(1)(2) | | $ | 6,955,386 |
| | 6,536,199 |
| | 4,073,685 |
| | 4,061,328 |
| | 4,077,679 |
|
Yield | 2.34 | % | | 2.34 |
| | 2.29 |
| | 2.11 |
| | 2.11 |
| 3.03 | % | | 3.06 |
| | 2.45 |
| | 2.39 |
| | 2.36 |
|
Tax-exempt investment securities(1)(3) | $ | 115 |
| | 140 |
| | 180 |
| | 259 |
| | 340 |
| |
Yield (taxable equivalent) (3) | 6.87 | % | | 6.57 |
| | 7.97 |
| | 7.86 |
| | 6.87 |
| |
Trading account assets(4) | $ | 23,772 |
| | 8,167 |
| | 7,360 |
| | 7,823 |
| | 3,667 |
| |
Trading account assets(3) | | $ | 4,853 |
| | 2,049 |
| | 7,493 |
| | 16,646 |
| | 23,772 |
|
Yield | 2.79 | % | | 2.66 |
| | 2.78 |
| | 2.09 |
| | 2.28 |
| 1.83 | % | | 1.30 |
| | 1.90 |
| | 2.52 |
| | 2.79 |
|
Commercial loans(2)(3) | $ | 18,857,271 |
| | 18,963,515 |
| | 18,935,774 |
| | 19,059,936 |
| | 19,137,733 |
| |
Commercial loans(2)(4) | | $ | 26,353,973 |
| | 26,140,672 |
| | 19,150,252 |
| | 19,025,830 |
| | 18,857,271 |
|
Yield | 4.85 | % | | 4.64 |
| | 4.49 |
| | 4.41 |
| | 4.27 |
| 5.13 | % | | 5.16 |
| | 5.13 |
| | 4.98 |
| | 4.85 |
|
Consumer loans(2) | $ | 6,092,899 |
| | 5,899,015 |
| | 5,704,629 |
| | 5,440,765 |
| | 5,215,258 |
| |
Consumer loans(4) | | $ | 9,423,427 |
| | 9,180,679 |
| | 6,476,026 |
| | 6,298,643 |
| | 6,092,899 |
|
Yield | 4.76 | % | | 4.71 |
| | 4.54 |
| | 4.55 |
| | 4.49 |
| 5.17 | % | | 5.10 |
| | 4.85 |
| | 4.80 |
| | 4.76 |
|
Allowance for loan losses | $ | (257,966 | ) | | (251,635 | ) | | (252,319 | ) | | (249,248 | ) | | (251,219 | ) | $ | (259,284 | ) | | (252,815 | ) | | (251,098 | ) | | (251,684 | ) | | (257,966 | ) |
Loans, net (2) | $ | 24,692,204 |
| | 24,610,895 |
| | 24,388,084 |
| | 24,251,453 |
| | 24,101,772 |
| |
Loans, net(4) | | $ | 35,518,116 |
| | 35,068,536 |
| | 25,375,180 |
| | 25,072,789 |
| | 24,692,204 |
|
Yield | 4.88 | % | | 4.70 |
| | 4.55 |
| | 4.49 |
| | 4.36 |
| 5.17 | % | | 5.17 |
| | 5.11 |
| | 4.99 |
| | 4.88 |
|
Mortgage loans held for sale | $ | 50,366 |
| | 38,360 |
| | 45,353 |
| | 52,177 |
| | 52,224 |
| $ | 70,497 |
| | 34,913 |
| | 36,477 |
| | 49,030 |
| | 50,366 |
|
Yield | 4.42 | % | | 3.95 |
| | 3.96 |
| | 3.88 |
| | 3.87 |
| 4.27 | % | | 4.48 |
| | 4.79 |
| | 4.71 |
| | 4.42 |
|
Other earning assets (5) | $ | 724,537 |
| | 516,575 |
| | 922,296 |
| | 543,556 |
| | 561,503 |
| $ | 511,488 |
| | 679,477 |
| | 641,832 |
| | 544,704 |
| | 724,537 |
|
Yield | 1.77 | % | | 1.48 |
| | 1.31 |
| | 1.23 |
| | 1.00 |
| 2.37 | % | | 2.45 |
| | 2.20 |
| | 1.90 |
| | 1.77 |
|
Federal Home Loan Bank and Federal Reserve Bank Stock(4) | $ | 165,845 |
| | 177,381 |
| | 159,455 |
| | 175,263 |
| | 177,323 |
| |
Federal Home Loan Bank and Federal Reserve Bank Stock(3) | | $ | 234,949 |
| | 211,408 |
| | 162,369 |
| | 163,568 |
| | 165,845 |
|
Yield | 4.63 | % | | 3.39 |
| | 4.03 |
| | 3.50 |
| | 2.99 |
| 3.29 | % | | 4.82 |
| | 4.31 |
| | 4.41 |
| | 4.63 |
|
Total interest earning assets | $ | 29,734,403 |
| | 29,448,680 |
| | 29,460,006 |
| | 28,816,967 |
| | 28,741,517 |
| $ | 43,295,289 |
|
| 42,532,582 |
|
| 30,297,036 |
|
| 29,908,065 |
|
| 29,734,403 |
|
Yield | 4.47 | % | | 4.31 |
| | 4.15 |
| | 4.11 |
| | 3.99 |
| 4.79 | % | | 4.80 |
| | 4.69 |
| | 4.58 |
| | 4.47 |
|
Interest Bearing Liabilities: | | | | | | | | | | |
Interest bearing demand deposits | $ | 5,001,826 |
| | 5,032,000 |
| | 4,976,239 |
| | 4,868,372 |
| | 4,837,053 |
| |
Interest-Bearing Liabilities: | | | | | | | | | | |
Interest-bearing demand deposits | | $ | 6,335,953 |
| | 6,393,304 |
| | 4,692,804 |
| | 4,701,204 |
| | 5,001,826 |
|
Rate | 0.35 | % | | 0.31 |
| | 0.28 |
| | 0.27 |
| | 0.23 |
| 0.71 | % | | 0.68 |
| | 0.41 |
| | 0.38 |
| | 0.35 |
|
Money Market accounts, excluding brokered deposits | $ | 7,791,107 |
| | 7,561,554 |
| | 7,514,992 |
| | 7,528,036 |
| | 7,427,562 |
| |
Money market accounts, excluding brokered deposits | | $ | 10,024,836 |
| | 10,244,556 |
| | 8,050,732 |
| | 7,936,621 |
| | 7,791,107 |
|
Rate | 0.55 | % | | 0.43 |
| | 0.36 |
| | 0.34 |
| | 0.32 |
| 1.23 | % | | 1.18 |
| | 0.89 |
| | 0.72 |
| | 0.55 |
|
Savings deposits | $ | 829,800 |
| | 811,587 |
| | 804,853 |
| | 803,184 |
| | 805,019 |
| $ | 904,183 |
| | 901,059 |
| | 815,588 |
| | 824,935 |
| | 829,800 |
|
Rate | 0.03 | % | | 0.03 |
| | 0.03 |
| | 0.03 |
| | 0.04 |
| 0.05 | % | | 0.06 |
| | 0.04 |
| | 0.03 |
| | 0.03 |
|
Time deposits under $100,000 | $ | 1,161,890 |
| | 1,143,780 |
| | 1,166,413 |
| | 1,183,582 |
| | 1,202,746 |
| $ | 2,245,878 |
| | 2,238,568 |
| | 1,242,811 |
| | 1,205,987 |
| | 1,161,890 |
|
Rate | 0.82 | % | | 0.71 |
| | 0.70 |
| | 0.68 |
| | 0.67 |
| 1.39 | % | | 1.24 |
| | 1.16 |
| | 0.99 |
| | 0.82 |
|
Time deposits over $100,000 | $ | 2,021,084 |
| | 1,895,545 |
| | 2,004,031 |
| | 2,067,347 |
| | 2,040,924 |
| $ | 6,331,665 |
| | 6,211,067 |
| | 2,478,649 |
| | 2,273,582 |
| | 2,021,084 |
|
Rate | 1.22 | % | | 1.02 |
| | 0.99 |
| | 0.97 |
| | 0.94 |
| 1.70 | % | | 1.60 |
| | 1.67 |
| | 1.46 |
| | 1.22 |
|
Non-maturing brokered deposits | $ | 262,976 |
| | 424,118 |
| | 546,413 |
| | 547,466 |
| | 564,043 |
| $ | 766,718 |
| | 937,629 |
| | 349,480 |
| | 358,277 |
| | 262,976 |
|
Rate | 1.94 | % | | 1.14 |
| | 0.81 |
| | 0.73 |
| | 0.54 |
| 2.46 | % | | 2.60 |
| | 2.46 |
| | 2.10 |
| | 1.94 |
|
Brokered time deposits | $ | 1,659,941 |
| | 1,527,793 |
| | 1,651,920 |
| | 983,423 |
| | 815,515 |
| $ | 1,985,589 |
| | 1,845,819 |
| | 1,275,276 |
| | 1,414,700 |
| | 1,659,941 |
|
Rate | 1.85 | % | | 1.75 |
| | 1.63 |
| | 1.16 |
| | 0.94 |
| 2.28 | % | | 2.13 |
| | 2.03 |
| | 1.94 |
| | 1.85 |
|
Total interest bearing deposits | $ | 18,728,624 |
| | 18,396,377 |
| | 18,664,861 |
| | 17,981,410 |
| | 17,692,862 |
| |
Total interest-bearing deposits | | $ | 28,594,822 |
| | 28,772,002 |
| | 18,905,340 |
| | 18,715,306 |
| | 18,728,624 |
|
Rate | 0.70 | % | | 0.58 |
| | 0.54 |
| | 0.46 |
| | 0.41 |
| 1.30 | % | | 1.24 |
| | 0.96 |
| | 0.83 |
| | 0.70 |
|
Federal funds purchased and securities sold under repurchase agreements | $ | 210,679 |
| | 202,226 |
| | 184,369 |
| | 191,585 |
| | 183,400 |
| $ | 300,168 |
| | 233,076 |
| | 194,370 |
| | 230,504 |
| | 207,655 |
|
Rate | 0.38 | % | | 0.21 |
| | 0.15 |
| | 0.08 |
| | 0.10 |
| 0.20 | % | | 0.22 |
| | 0.18 |
| | 0.25 |
| | 0.35 |
|
Other short-term borrowings | | $ | 1,090,581 |
| | 517,456 |
| | 112,228 |
| | 146,794 |
| | 3,024 |
|
Rate | | 2.59 | % | | 2.58 |
| | 2.51 |
| | 2.12 |
| | 2.84 |
|
Long-term debt | $ | 1,852,094 |
| | 2,127,994 |
| | 1,713,982 |
| | 1,985,175 |
| | 2,270,452 |
| $ | 2,114,819 |
| | 1,983,910 |
| | 1,657,022 |
| | 1,656,743 |
| | 1,852,094 |
|
Rate | 2.66 | % | | 2.32 |
| | 2.67 |
| | 2.81 |
| | 2.83 |
| 3.53 | % | | 3.33 |
| | 3.06 |
| | 2.87 |
| | 2.66 |
|
Total interest bearing liabilities | $ | 20,791,397 |
| | 20,726,597 |
| | 20,563,212 |
| | 20,158,170 |
| | 20,146,714 |
| |
Total interest-bearing liabilities | | $ | 32,100,390 |
| | 31,506,444 |
|
| 20,868,960 |
|
| 20,749,347 |
|
| 20,791,397 |
|
Rate | 0.87 | % | | 0.76 |
| | 0.72 |
| | 0.69 |
| | 0.68 |
| 1.48 | % | | 1.38 |
| | 1.12 |
| | 0.99 |
| | 0.87 |
|
Non-interest bearing demand deposits | $ | 7,539,451 |
| | 7,391,695 |
| | 7,621,147 |
| | 7,305,508 |
| | 7,298,845 |
| |
Effective cost of funds | 0.61 | % | | 0.53 |
| | 0.50 |
| | 0.48 |
| | 0.48 |
| |
Non-interest-bearing demand deposits | | $ | 9,304,839 |
| | 9,054,949 |
| | 8,014,761 |
| | 7,672,006 |
| | 7,539,451 |
|
Cost of funds | | 1.15 | % | | 1.07 |
| | 0.81 |
| | 0.73 |
| | 0.64 |
|
Effective cost of funds(6) | | 1.10 | % | | 1.02 |
| | 0.77 |
| | 0.69 |
| | 0.61 |
|
Net interest margin | 3.86 | % | | 3.78 |
| | 3.65 |
| | 3.63 |
| | 3.51 |
| 3.69 | % | | 3.78 |
| | 3.92 |
| | 3.89 |
| | 3.86 |
|
Taxable equivalent adjustment (3) | $ | 120 |
| | 116 |
| | 234 |
| | 283 |
| | 298 |
| |
Taxable equivalent adjustment(2) | | $ | 811 |
| | 630 |
| | 181 |
| | 136 |
| | 120 |
|
| | | | | | | | | | | | | | | | | | |
| |
(1) | Excludes net unrealized gains (losses). |
| |
(2) | Reflects taxable-equivalent adjustments, using the statutory federal income tax rate of 21%, in adjusting interest on tax-exempt loans and investment securities to a taxable-equivalent basis. |
| |
(3) | Included as a component of other assets on the consolidated balance sheets. |
(1)(4) Excludes net unrealized gains (losses).
(2) Average loans are shown net of deferred fees and costs. Non-performing loans are included.
| |
(5) | Includes interest-bearing funds with Federal Reserve Bank, interest earning deposits with banks, and federal funds sold and securities purchased under resale agreements. |
(6) Includes the impact of non-interest-bearing capital funding sources.
(3) Reflects taxable-equivalent adjustments, using the statutory federal income tax rate of 21% beginning in 2018, and 35% for prior years, in adjusting interest on tax-exempt loans and investment securities to a taxable-equivalent basis.(4) Included as a component of Other Assets on the balance sheet.
(5) Includes interest bearing funds with Federal Reserve Bank, interest earning deposits with banks, and federal funds sold and securities purchased under resale agreements.
Net Interest Income and Rate/Volume Analysis
The following tables settable sets forth the major components of net interest income and the related annualized yields and rates for the six months ended June 30, 20182019 and 2017,2018, as well as the variances between the periods caused by changes in interest rates versus changes in volume.
| | Net Interest Income and Rate/Volume Analysis | |
Table 11 - Net Interest Income and Rate/Volume Analysis | | Table 11 - Net Interest Income and Rate/Volume Analysis |
| Six Months Ended June 30, | | 2018 Compared to 2017 | Six Months Ended June 30, | | 2019 Compared to 2018 |
| Average Balances | | Interest | | Annualized Yield/Rate | | Change due to | | Increase (Decrease) | Average Balances | | Interest | | Annualized Yield/Rate | | Change due to | | Increase (Decrease) |
(dollars in thousands) | 2018 | | 2017 | | 2018 | | 2017 | | 2018 | | 2017 | | Volume | | Rate | | 2019 | | 2018 | | 2019 | | 2018 | | 2019 | | 2018 | | Volume | | Rate | |
Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest earning assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Taxable investment securities | $ | 4,087,309 |
| | $ | 3,843,131 |
| | $ | 47,812 |
| | $ | 40,069 |
| | 2.34 | % | | 2.09 | % | | $ | 2,531 |
| | $ | 5,212 |
| | $ | 7,743 |
| |
Tax-exempt investment securities(2) | 128 |
| | 1,528 |
| | 4 |
| | 45 |
| | 6.71 |
| | 5.95 |
| | (41 | ) | | — |
| | (41 | ) | |
Total investment securities | 4,087,437 |
| | 3,844,659 |
| | 47,816 |
| | 40,114 |
| | 2.34 |
| | 2.09 |
| | 2,490 |
| | 5,212 |
| | 7,702 |
| |
Investment securities | | $ | 6,746,950 |
| | $ | 4,087,437 |
| | $ | 102,789 |
| | $ | 47,816 |
| | 3.05 | % | | 2.34 | % | | $ | 31,103 |
| | $ | 23,870 |
| | $ | 54,973 |
|
Trading account assets | 16,012 |
| | 5,047 |
| | 220 |
| | 49 |
| | 2.75 |
| | 1.93 |
| | 105 |
| | 66 |
| | 171 |
| 3,459 |
| | 16,012 |
| | 29 |
| | 220 |
| | 1.67 |
| | 2.75 |
| | (171 | ) | | (20 | ) | | (191 | ) |
Taxable loans, net(1) | 24,854,408 |
| | 24,122,851 |
| | 584,543 |
| | 510,222 |
| | 4.74 |
| | 4.27 |
| | 15,490 |
| | 58,831 |
| | 74,321 |
| 35,207,787 |
| | 24,854,408 |
| | 900,151 |
| | 584,543 |
| | 5.16 |
| | 4.74 |
| | 243,358 |
| | 72,250 |
| | 315,608 |
|
Tax-exempt loans, net(1)(2) | 52,184 |
| | 72,553 |
| | 1,120 |
| | 1,688 |
| | 4.33 |
| | 4.69 |
| | (474 | ) | | (94 | ) | | (568 | ) | 342,848 |
| | 52,184 |
| | 6,587 |
| | 1,120 |
| | 3.87 |
| | 4.33 |
| | 6,241 |
| | (774 | ) | | 5,467 |
|
Allowance for loan losses | (254,818 | ) | | (252,565 | ) | | | | | | | | | | | | | | | (256,067 | ) | | (254,818 | ) | | | | | | | | | | | | | | |
Loans, net | 24,651,774 |
| | 23,942,839 |
| | 585,663 |
| | 511,910 |
| | 4.79 |
| | 4.31 |
| | 15,016 |
| | 58,737 |
| | 73,753 |
| 35,294,568 |
| | 24,651,774 |
| | 906,738 |
| | 585,663 |
| | 5.17 |
| | 4.79 |
| | 249,599 |
|
| 71,476 |
| | 321,075 |
|
Mortgage loans held for sale | 44,396 |
| | 49,405 |
| | 936 |
| | 972 |
| | 4.22 |
| | 3.93 |
| | (98 | ) | | 62 |
| | (36 | ) | 52,803 |
| | 44,396 |
| | 1,143 |
| | 936 |
| | 4.33 |
| | 4.22 |
| | 176 |
| | 31 |
| | 207 |
|
Other earning assets(3) | 621,131 |
| | 607,656 |
| | 5,147 |
| | 2,684 |
| | 1.65 |
| | 0.88 |
| | 59 |
| | 2,404 |
| | 2,463 |
| 595,018 |
| | 621,131 |
| | 7,233 |
| | 5,147 |
| | 2.42 |
| | 1.65 |
| | (212 | ) | | 2,298 |
| | 2,086 |
|
Federal Home Loan Bank and Federal Reserve Bank stock | 171,581 |
| | 174,101 |
| | 3,422 |
| | 2,788 |
| | 3.99 |
| | 3.20 |
| | (40 | ) | | 674 |
| | 634 |
| 223,244 |
| | 171,581 |
| | 4,479 |
| | 3,422 |
| | 4.01 |
| | 3.99 |
| | 1,022 |
| | 35 |
| | 1,057 |
|
Total interest earning assets | 29,592,331 |
| | 28,623,707 |
| | 643,204 |
| | 558,517 |
| | 4.39 |
| | 3.93 |
| | 17,532 |
| | 67,155 |
| | 84,687 |
| 42,916,042 |
|
| 29,592,331 |
| | 1,022,411 |
|
| 643,204 |
| | 4.80 |
| | 4.39 |
| | 281,517 |
|
| 97,690 |
|
| 379,207 |
|
Cash and due from banks | 387,472 |
| | 396,305 |
| | | | | | | | | | | | | | | 517,958 |
| | 387,472 |
| | | | | | | | | | | | | | |
Premises and equipment, net | 427,291 |
| | 414,810 |
| | | | | | | | | | | | | | | 483,420 |
| | 427,291 |
| | | | | | | | | | | | | | |
Other real estate | 3,709 |
| | 21,723 |
| | | | | | | | | | | | | | | 14,056 |
| | 3,709 |
| | | | | | | | | | | | | | |
Cash surrender value of bank-owned life insurance | | 763,741 |
| | 543,233 |
| | | | | | | | | | | | | | |
Other assets(4) | 964,141 |
| | 1,080,397 |
| | | | | | | | | | | | | | | 1,544,423 |
| | 420,908 |
| | | | | | | | | | | | | | |
Total assets | $ | 31,374,944 |
| | $ | 30,536,942 |
| | | | | | | | | | | | | | | $ | 46,239,640 |
|
| $ | 31,374,944 |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Liabilities and Shareholders' Equity | Liabilities and Shareholders' Equity | | | | | | | | | | | | | | | | | Liabilities and Shareholders' Equity | | | | | | | | | | | | | | | | |
Interest-bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest-bearing demand deposits | $ | 5,016,830 |
| | $ | 4,810,836 |
| | $ | 8,151 |
| | $ | 5,001 |
| | 0.33 | % | | 0.21 | % | | $ | 215 |
| | $ | 2,935 |
| | $ | 3,150 |
| $ | 6,364,470 |
| | $ | 5,016,830 |
| | $ | 21,974 |
| | $ | 8,151 |
| | 0.70 | % | | 0.33 | % | | $ | 2,205 |
| | $ | 11,618 |
| | $ | 13,823 |
|
Money market accounts | 8,020,066 |
| | 8,017,785 |
| | 21,192 |
| | 12,857 |
| | 0.53 |
| | 0.32 |
| | 3 |
| | 8,332 |
| | 8,335 |
| 10,985,791 |
| | 8,020,066 |
| | 71,264 |
| | 21,192 |
| | 1.31 |
| | 0.53 |
| | 7,794 |
| | 42,278 |
| | 50,072 |
|
Savings deposits | 820,744 |
| | 857,050 |
| | 118 |
| | 329 |
| | 0.03 |
| | 0.08 |
| | (14 | ) | | (197 | ) | | (211 | ) | 902,630 |
| | 820,744 |
| | 258 |
| | 118 |
| | 0.06 |
| | 0.03 |
| | 12 |
| | 128 |
| | 140 |
|
Time deposits | 4,705,778 |
| | 4,032,971 |
| | 29,514 |
| | 16,887 |
| | 1.26 |
| | 0.84 |
| | 2,803 |
| | 9,824 |
| | 12,627 |
| 10,430,033 |
| | 4,705,778 |
| | 86,887 |
| | 29,514 |
| | 1.68 |
| | 1.26 |
| | 35,767 |
| | 21,606 |
| | 57,373 |
|
Federal funds purchased and securities sold under repurchase agreements | 206,476 |
| | 180,145 |
| | 310 |
| | 84 |
| | 0.30 |
| | 0.09 |
| | 12 |
| | 214 |
| | 226 |
| 266,807 |
| | 204,956 |
| | 281 |
| | 288 |
| | 0.21 |
| | 0.28 |
| | 86 |
| | (93 | ) | | (7 | ) |
Other short-term borrowings | | 805,602 |
| | 197,460 |
| | 10,476 |
| | 1,516 |
| | 2.59 |
| | 1.53 |
| | 4,614 |
| | 4,346 |
| | 8,960 |
|
Long-term debt | 1,989,282 |
| | 2,227,501 |
| | 24,822 |
| | 31,728 |
| | 2.48 |
| | 2.83 |
| | (3,343 | ) | | (3,563 | ) | | (6,906 | ) | 2,049,726 |
| | 1,793,342 |
| | 35,392 |
| | 23,328 |
| | 3.43 |
| | 2.60 |
| | 3,306 |
| | 8,758 |
| | 12,064 |
|
Total interest-bearing liabilities | 20,759,176 |
| | 20,126,288 |
| | 84,107 |
| | 66,886 |
| | 0.81 |
| | 0.67 |
| | (324 | ) | | 17,545 |
| | 17,221 |
| 31,805,059 |
|
| 20,759,176 |
| | 226,532 |
| | 84,107 |
| | 1.43 |
| | 0.81 |
| | 53,784 |
|
| 88,641 |
|
| 142,425 |
|
Non-interest bearing deposits | 7,465,982 |
| | 7,236,840 |
| | | | | | | | | | | | | | | |
Non-interest-bearing deposits | | 9,180,584 |
| | 7,465,982 |
| | | | | | | | | | | | | | |
Other liabilities | 201,790 |
| | 214,381 |
| | | | | | | | | | | | | | | 689,462 |
| | 201,790 |
| | | | | | | | | | | | | | |
Shareholders' equity | 2,947,996 |
| | 2,959,433 |
| | | | | | | | | | | | | | | 4,564,535 |
| | 2,947,996 |
| | | | | | | | | | | | | | |
Total liabilities and equity | $ | 31,374,944 |
| | $ | 30,536,942 |
| | | | | | | | | | | | | | | $ | 46,239,640 |
|
| $ | 31,374,944 |
| | | | | | | | | | | | | | |
Interest rate spread: | | | | | | | | | 3.58 | % | | 3.26 | % | | | | | | | | | | | | | | | 3.37 | % | | 3.58 | % | | | | | | |
Net interest income - FTE/margin(5) | | | | | $ | 559,097 |
| | $ | 491,631 |
| | 3.82 | % | | 3.46 | % | | $ | 17,856 |
| | $ | 49,610 |
| | $ | 67,466 |
| | | | | $ | 795,879 |
| | $ | 559,097 |
| | 3.74 | % | | 3.82 | % | | $ | 227,733 |
|
| $ | 9,049 |
|
| $ | 236,782 |
|
Taxable equivalent adjustment | | | | | 236 |
| | 607 |
| | | | | | | | | | | | | | | 1,441 |
| | 236 |
| | | | | | | | | | |
Net interest income, actual | | | | | $ | 558,861 |
| | $ | 491,024 |
| | | | | | | | | | | | | | | $ | 794,438 |
| | $ | 558,861 |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) Average loans are shown net of unearned income. Non-performing loans are included. Interest income includes fees as follows: 2019 - $17.1 million, 2018 - $15.5 million, 2017 - $15.7 million.(2) Reflects taxable-equivalent adjustments, using the statutory federal income tax rate (21% in 2018 and 35% in 2017)of 21%, in adjusting interest on tax-exempt loans and investment securities
to a taxable-equivalent basis.
(3) Includes interest bearinginterest-bearing funds with Federal Reserve Bank, interest earning deposits with banks, and federal funds sold and securities purchased under resale agreements.
(4) Includes average net unrealized gains (losses) on investment securities available for sale of $(115.1)$(36.5) million and $(41.2)$(115.1) million for the six months ended June 30, 2019 and 2018, andrespectively.
2017, respectively.
(5) The net interest margin is calculated by dividing annualized net interest income - FTE by average total interest earnings assets.
Market Risk Analysis
Interest rate risk is the primary market risk to which Synovus is potentially exposed. Synovus measures its sensitivity to changes in market interest rates through the use of a simulation model. Synovus uses this simulation model to determine a baseline net interest income forecast and the sensitivity of this forecast to changes in interest rates. These simulations include all of Synovus’ earning assets and liabilities. Forecasted balance sheet changes, primarily reflecting loan and deposit growth forecasts, are included in the periods modeled. Anticipated deposit mix changes in each interest rate scenario are also included in the periods modeled. Assumptions utilized in the model are updated on an ongoing basis and are reviewed and approved by ALCO and the Risk Committee of the Board of Directors.
Synovus has modeled its baseline net interest income forecast assuming a flat interest rate environment with the federal funds rate at the Federal Reserve’s current targeted range of 1.75%2.25% to 2.00%2.50% and the current prime rate of 5.00%5.50%. Synovus has modeled the impact of a gradual increase in short-term ratesthe targeted federal funds range and the prime rate of 100 and 200 basis points and a gradual decline of 100 and 200 basis points to determine the sensitivity of net interest income for the next twelve months. Synovus continues to maintain aSynovus' current rate risk position is considered modestly asset sensitive position whichasset-sensitive and would be expected to benefit net interest income in a rising interest rate environment and reduce net interest income in a declining interest rate environment. The following table represents the estimated sensitivity of net interest income to these changes in short-term interest rates at June 30, 2018,2019, with comparable information for December 31, 2017.2018.
|
| | | | | |
| Table 12 - Twelve Month Net Interest Income Sensitivity(1) |
| | | Estimated % Change in Net Interest Income as Compared to Unchanged Rates (for the next twelve months) |
|
| Change in Short-term Interest Rates (in basis points) | | June 30, 2019 | | December 31, 2018 |
| +200 | | 4.7% | | 3.4% |
| +100 | | 3.0% | | 2.0% |
| Flat | | —% | | —% |
| -100 | | (1.5)% | | (2.0)% |
| -200 | | (4.8)% | | N/A |
| | | | | |
|
| | | | | |
| | | Estimated % Change in Net Interest Income as Compared to Unchanged Rates (for the next twelve months) |
|
| Change in Short-term Interest Rates (in basis points) | | June 30, 2018 | | December 31, 2017 |
| +200 | | 3.0% | | 3.6% |
| +100 | | 1.4% | | 1.9% |
| Flat | | —% | | —% |
| -100 | | -3.7% | | -4.7% |
| | | | | |
Several factors could serve to diminish or eliminate this asset sensitivity in a rising rate environment. These factors(1) December 31, 2018 does not include a higher than projected levelassets and liabilities of deposit customer migration to higher cost deposits, such as certificates of deposit,FCB which would increase total interest expense and serve to reduce the realized level of asset sensitivity. Another factor which could impact the realized interest rate sensitivity is the repricing behavior of interest bearing non-maturity deposits. Assumptions for repricing are expressed as a beta relative to the change in the prime rate. For instance, a 50% beta would correspond to a deposit rate that would increase 0.5% for every 1% increase in the prime rate. Projected betas for interest bearing non-maturity deposit repricing are a key component of determining the Company's interest rate risk positioning. Projected betas are basedwere acquired on historical analysis, current product features, and deposit mix. These projected betas reflect an assumption that realized betas will increase as short-term rates increase. Should realized betas be higher than projections, the expected benefit from higher interest rates would be diminished. The following table presents an example of the potential impact of an increase in repricing betas on Synovus' realized interest rate sensitivity position.
|
| | | | |
| | As of June 30, 2018 |
Change in Short-term Interest Rates (in basis points) | | Base Scenario | | 15% Increase in Average Repricing Beta |
+200 | | 3.0% | | 1.4% |
+100 | | 1.4% | | 0.7% |
| | | | |
January 1, 2019.The net interest income simulation model is the primary tool utilized to evaluate potential interest rate risks over a shorter termshorter-term time horizon. Synovus also evaluates potential longer termlonger-term interest rate risk through modeling and evaluation of EVE. Simulation modeling is utilized to measure the economic value of equity and its sensitivity to immediate changes in interest rates. This EVE modeling allows Synovus to capture longer-term repricing risk and options risk embedded in the balance sheet. These simulations value only the current balance sheet and do not incorporate growth assumptions used in the net interest income simulation. The economic value of equity is the net fair value of assets, liabilities, and off-balance sheet financial instruments derived from the present value of future cash flows discounted at current market interest rates. From this baseline valuation, Synovus evaluates changes in the value of each of these items in various interest rate scenarios to determine the net impact on the economic value of equity. Key assumptions utilized in the model, namely loan prepayments, investment security prepayments, deposit repricing betas, and non-maturity deposit duration have a significant impact on the results of the EVE simulations. As illustrated in the table below, the EVE model indicates that, compared with a valuation assuming stable rates, EVE is projected to increasedecrease by 1.6%0.5% and by 1.5%4.3%, assuming an immediate and sustained increase in interest rates of 100 and 200 basis points, respectively. Assuming an immediate 100 basis point and 200 basis point decline in rates, EVE is projected to decrease by 14.7%.7.0% and 19.2%, respectively. These metrics reflect a relatively stable long termchanges in long-term interest rate risk position as comparedsensitivity are primarily due to the impact of the acquisition of FCB.
|
| | | | |
Table 13 - Economic Value of Sensitivity(1) | | | | |
| | Estimated Change in EVE |
Immediate Change in Interest Rates (in basis points) | | June 30, 2019 | | December 31, 2018 |
+200 | | (4.3)% | | 0.7% |
+100 | | (0.5)% | | 1.3% |
-100 | | (7.0)% | | (13.9)% |
-200 | | (19.2)% | | N/A |
| | | | |
(1) December 31, 2017.
|
| | | | |
| | Estimated Change in EVE |
Immediate Change in Interest Rates (in basis points) | | June 30, 2018 | | December 31, 2017 |
+200 | | 1.5% | | -0.2% |
+100 | | 1.6% | | 1.6% |
-100 | | -14.7% | | -16.9% |
| | | | |
ADDITIONAL DISCLOSURES
Recently Issued Accounting Standards
Several accounting standards will be effective in fiscal year 2019 or later. Synovus is currently evaluating the requirements2018 does not include assets and liabilities of these new ASUs to determine the impact on the consolidated financial statements:
ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities
ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs: Premium Amortization on Purchased Callable Debt Securities
ASU 2017-04, Intangibles-Goodwill and Other, Simplifying the Test for Goodwill Impairment
ASU 2016-13, Financial Instruments-Credit Losses (CECL)
The ASUs with the most significant impact on Synovus are ASU 2016-13, Financial Instruments-Credit Losses (CECL), effective in 2020 and ASU 2016-02, Leases, effective in 2019.
ASU 2016-13, Financial Instruments--Credit Losses (CECL).In June 2016, the FASB issued the new guidance related to credit losses. The new guidance replaces the existing incurred loss impairment guidance with an expected credit loss methodology. The new guidance will require management’s estimate of credit losses over the full remaining expected life of loans and other financial instruments. For Synovus, the standard will apply to loans, unfunded loan commitments, and debt securities available for sale. The standard is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permittedFCB which were acquired on January 1, 2019. Upon adoption, Synovus will record a cumulative effect adjustment to retained earnings as of the beginning of the reporting period of adoption.
Synovus has begun its implementation efforts which are led by a cross-functional steering committee. Management expects that the allowance for loan losses will be higher under the new standard; however, management is still in the process of determining the magnitude of the impact on its financial statements and regulatory capital ratios. Additionally, the extent of the expected increase on the allowance for loan losses will depend upon the composition of the loan portfolio upon adoption of the standard, as well as economic conditions and forecasts at that time.
ASU 2016-02, Leases.In February 2016, the FASB issued ASU 2016-02, its new standard on lease accounting. ASU 2016-02 introduces a lessee model that brings most leases on the balance sheet. Under the new standard, all lessees will recognize a right-of-use asset and a lease liability, including operating leases, with a lease term greater than 12 months. From a lessor perspective, the accounting model is largely unchanged, though the new standard does include certain targeted improvements to align, where necessary, lessor accounting with the lessee accounting model and the revenue recognition guidance in ASC Topic 606 (those related to evaluating when profit can be recognized). For Synovus, the impact of this ASU will primarily relate to its accounting and reporting of leases as a lessee. The new ASU will be effective for Synovus beginning January 1, 2019. Synovus will adopt this ASU retrospectively, at the beginning of the period of adoption, through a cumulative-effect adjustment to retained earnings. The standard also requires additional disclosures regarding leasing arrangements.
Synovus is currently evaluating the potential financial statement impact from the implementation of this standard by reviewing its existing lease contracts and other contracts that may include embedded leases. Synovus currently expects to recognize lease liabilities and corresponding right-of-use assets (at their present value) related to substantially all of the $230 million of future minimum lease commitments as disclosed in Note 7 of Synovus' 2017 Form 10-K. However, the population of contracts requiring balance sheet recognition and their initial measurement continues to be under evaluation.
See "Note 1 - Significant Accounting Policies" in this Report for a discussion of recently adopted accounting standards updates.
Critical Accounting Policies
The accounting and financial reporting policies of Synovus are in accordance with GAAP and conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. Synovus has identified certain of its accounting policies as “critical accounting policies,” consisting of those related to the allowance for loan losses, and determination of the fair value of financial instruments.measurements and income taxes. In determining which accounting policies are critical in nature, Synovus has identified the policies that require significant judgment or involve complex estimates. It is management's practice to discuss critical accounting policies with the Board of Directors' Audit Committee, including the development, selection, implementation and disclosure of the critical accounting policies. The application of these policies has a significant impact on Synovus’ unaudited interim consolidated financial statements. Synovus’ financial results could differ significantly if different judgments or estimates are used in the application of these policies. All accounting policies described in "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" in Synovus' 20172018 Form 10-K should be reviewed for a greater understanding of how we record and report our financial performance. In connection with the adoption of ASU 2016-18, Statement of Cash Flows-Restricted Cash, Synovus changed its presentation of cash and cash equivalents, effective January 1, 2018, to include cash and due from banks as well as interest bearing funds with the Federal Reserve Bank, interest earning deposits with banks, and federal funds sold and securities purchased under resale agreements, which are inclusive of any restricted cash and restricted cash equivalents. Prior to 2018, cash and cash equivalents only included cash and due from banks. Prior periods have been revised to maintain comparability. Excluding the aforementioned presentation change,recently adopted accounting standards and purchased loans accounting policy disclosed in "Note 1 - Basis of Presentation" in this Report, there have been no significant changes to the accounting policies, estimates and assumptions, or the judgments affecting the application of these estimates and assumptions from those disclosed in Synovus' 20172018 Form 10-K.
Non-GAAP Financial Measures
The measures entitled adjusted non-interest income; adjusted non-interest expense; adjusted total revenues; adjusted tangible efficiency ratio; adjusted net income per common share, diluted; adjusted return on average assets; adjusted return on average common equity; adjusted return on average tangible common equity; average core deposits; core transaction deposits; tangible common equity ratio; and common equity Tier 1 (CET1)CET1 ratio (fully phased-in) are not measures recognized under GAAP and therefore are considered non-GAAP financial measures. The most comparable GAAP measures to these measures are total non-interest income; total non-interest expense; total revenues; efficiency ratio;ratio-FTE; net income per common share, diluted; return on average assets; return on average common equity; total average deposits; the ratio of total shareholders' equity to total assets; and the CET1 ratio, respectively.
Management believes that these non-GAAP financial measures provide meaningful additional information about Synovus to assist management and investors in evaluating Synovus’ operating results, financial strength, the performance of its business, and the strength of its capital position. However, these non-GAAP financial measures have inherent limitations as analytical tools and should not be considered in isolation or as a substitute for analyses of operating results or capital position as reported under GAAP. The non-GAAP financial measures should be considered as additional views of the way our financial measures are affected by significant items and other factors, and since they are not required to be uniformly applied, they may not be comparable to other similarly titled measures at other companies. Adjusted total revenues and adjusted non-interest income is a measureare measures used by management to evaluate non-interest income exclusive of net investment securities gains/lossesgains (losses) and changes in fair value of private equity investments, net. Adjusted non-interest expense and the adjusted tangible efficiency ratio are measures utilized by management to measure the success of expense management initiatives focused on reducing recurring controllable operating costs. Adjusted net income per common share, diluted, adjusted return on average assets, and adjusted return on average common equity are measurements used by management to evaluate operating results exclusive of items that management believes are not indicative of ongoing operations and impact period-to-period comparisons. The adjusted return on average tangible common equity is a measure used by management to compare Synovus' performance with other financial institutions because it calculates the return available to common shareholders without the impact of intangible assets and their related amortization, thereby allowing management to evaluate the performance of the business consistently. AverageCore deposits and core transaction deposits is a measureare measures used by management to evaluate organic growth of deposits and the quality of deposits as a funding source. The tangible common equity ratio and common equity Tier 1 (CET1)CET1 ratio (fully phased-in) are used by management and bank regulators to assess the strength of our capital position. The computations of these measures are set forth in the tables below.
|
| | | | | | | | | | | | | | | |
Reconciliation of Non-GAAP Financial Measures
| Six Months Ended | | Three Months Ended |
(in thousands, except per share data) | June 30, 2018 | | June 30, 2017 | | June 30, 2018 | | June 30, 2017 |
Adjusted non-interest income | | | | | | | |
Total non-interest income | $ | 140,433 |
| | $ | 140,539 |
| | $ | 73,387 |
| | $ | 68,701 |
|
Add/subtract: Investment securities losses (gains), net | 1,296 |
| | (7,667 | ) | | 1,296 |
| | 1 |
|
Add: Decrease in fair value of private equity investments, net | 3,093 |
| | 3,166 |
| | 37 |
| | 1,352 |
|
Adjusted non-interest income | $ | 144,822 |
| | $ | 136,038 |
| | $ | 74,720 |
| | $ | 70,054 |
|
| | | | | | | |
Adjusted non-interest expense | | | | | | | |
Total non-interest expense | $ | 399,234 |
| | $ | 389,133 |
| | $ | 204,057 |
| | $ | 191,747 |
|
Subtract: Merger-related expense | — |
| | (86 | ) | | — |
| | — |
|
Add: Litigation settlement/contingency expense | 4,026 |
| | — |
| | 1,400 |
| | — |
|
Add/subtract: Restructuring charges, net | 212 |
| | (6,524 | ) | | (103 | ) | | (13 | ) |
Subtract: Amortization of intangibles | (583 | ) | | (475 | ) | | (292 | ) | | (292 | ) |
Subtract: Valuation adjustment to Visa derivative | (2,328 | ) | | — |
| | (2,328 | ) | | — |
|
Adjusted non-interest expense | $ | 400,561 |
| | $ | 382,048 |
| | $ | 202,734 |
| | $ | 191,442 |
|
| | | | | | | |
|
| | | | | | | | | | | | | | | |
Table 14 - Reconciliation of Non-GAAP Financial Measures | | | | | | | |
| Three Months Ended | | Six Months Ended |
(in thousands) | June 30, 2019 | | June 30, 2018 | | June 30, 2019 | | June 30, 2018 |
Adjusted non-interest income | | | | | | | |
Total non-interest income | $ | 89,807 |
| | $ | 73,387 |
| | $ | 169,185 |
| | $ | 140,433 |
|
Add: Investment securities losses, net | 1,845 |
| | 1,296 |
| | 1,771 |
| | 1,296 |
|
Subtract/add: (Increase) decrease in fair value of private equity investments, net | (1,455 | ) | | 37 |
| | (2,313 | ) | | 3,093 |
|
Adjusted non-interest income | $ | 90,197 |
| | $ | 74,720 |
| | $ | 168,643 |
| | $ | 144,822 |
|
| | | | | | | |
Adjusted non-interest expense | | | | | | | |
Total non-interest expense | $ | 264,126 |
| | $ | 204,057 |
| | $ | 556,537 |
| | $ | 399,234 |
|
Subtract: Merger-related expense | (7,401 | ) | | — |
| | (57,140 | ) | | — |
|
Add: Litigation settlement/contingency expense | — |
| | 1,400 |
| | — |
| | 4,026 |
|
Subtract/add: Restructuring charges, net | (18 | ) | | (103 | ) | | (37 | ) | | 212 |
|
Subtract: Fair value adjustment to Visa derivative | — |
| | (2,328 | ) | | — |
| | (2,328 | ) |
Adjusted non-interest expense | $ | 256,707 |
| | $ | 203,026 |
| | $ | 499,360 |
| | $ | 401,144 |
|
| | | | | | | |
|
| | | | | | | | | | | | | | | |
Reconciliation of Non-GAAP Financial Measures, continued
| Six Months Ended | | Three Months Ended |
(in thousands, except per share data) | June 30, 2018 | | June 30, 2017 | | June 30, 2018 | | June 30, 2017 |
Adjusted efficiency ratio | | | | | | | |
Adjusted non-interest expense | $ | 400,561 |
| | $ | 382,048 |
| | $ | 202,734 |
| | $ | 191,442 |
|
| | | | | | | |
Net interest income | 558,861 |
| | 491,024 |
| | 284,577 |
| | 251,097 |
|
Add: Tax equivalent adjustment | 236 |
| | 607 |
| | 120 |
| | 298 |
|
Add: Total non-interest income | 140,433 |
| | 140,539 |
| | 73,387 |
| | 68,701 |
|
Add/subtract: Investment securities losses (gains), net | 1,296 |
| | (7,667 | ) | | 1,296 |
| | 1 |
|
Total FTE revenues | $ | 700,826 |
| | $ | 624,503 |
| | $ | 359,380 |
| | $ | 320,097 |
|
Add: Decrease in fair value of private equity investments, net | 3,093 |
| | 3,166 |
| | 37 |
| | 1,352 |
|
Adjusted total revenues | $ | 703,919 |
| | $ | 627,669 |
| | $ | 359,417 |
| | $ | 321,449 |
|
Efficiency ratio | 56.97 | % | | 62.31 | % | | 56.78 | % | | 59.90 | % |
Adjusted efficiency ratio | 56.90 |
| | 60.87 |
| | 56.41 |
| | 59.56 |
|
| | | | | | | |
Adjusted net income per common share, diluted | | | | | | | |
Net income available to common shareholders | $ | 209,229 |
| | $ | 142,742 |
| | $ | 108,622 |
| | $ | 73,444 |
|
Add/subtract: Income tax expense related to effects of State Tax Reform | 717 |
| | — |
| | (608 | ) | | — |
|
Add: Merger-related expense | — |
| | 86 |
| | — |
| | — |
|
Subtract: Litigation settlement/contingency expense | (4,026 | ) | | — |
| | (1,400 | ) | | — |
|
Subtract/add: Restructuring charges, net | (212 | ) | | 6,524 |
| | 103 |
| | 13 |
|
Add: Amortization of intangibles | 583 |
| | 475 |
| | 292 |
| | 292 |
|
Add: Valuation adjustment to Visa derivative | 2,328 |
| | — |
| | 2,328 |
| | — |
|
Add/subtract: Investment securities losses (gains), net | 1,296 |
| | (7,667 | ) | | 1,296 |
| | 1 |
|
Add: Decrease in fair value of private equity investments, net | 3,093 |
| | 3,166 |
| | 37 |
| | 1,352 |
|
Subtract: Tax effect of adjustments | (719 | ) | | (963 | ) | | (624 | ) | | (613 | ) |
Adjusted net income available to common shareholders | $ | 212,289 |
| | $ | 144,363 |
| | $ | 110,046 |
| | $ | 74,489 |
|
Weighted average common shares outstanding, diluted | 119,229 |
| | 123,304 |
| | 119,139 |
| | 123,027 |
|
Adjusted net income per common share, diluted | $ | 1.78 |
| | $ | 1.17 |
| | $ | 0.92 |
| | $ | 0.61 |
|
| | | | | | | |
Adjusted return on average assets (annualized) | | | | | | | |
Net income | $ | 214,348 |
| | $ | 147,861 |
| | $ | 111,181 |
| | $ | 76,003 |
|
Add/subtract: Income tax expense related to effects of State Tax Reform | 717 |
| | — |
| | (608 | ) | | — |
|
Add: Merger-related expense | — |
| | 86 |
| | — |
| | — |
|
Add: Litigation settlement/contingency expense | (4,026 | ) | | — |
| | (1,400 | ) | | — |
|
Subtract/add: Restructuring charges, net | (212 | ) | | 6,524 |
| | 103 |
| | 13 |
|
Add: Amortization of intangibles | 583 |
| | 475 |
| | 292 |
| | 292 |
|
Add: Valuation adjustment to Visa derivative | 2,328 |
| | — |
| | 2,328 |
| | — |
|
Add/subtract: Investment securities losses (gains), net | 1,296 |
| | (7,667 | ) | | 1,296 |
| | 1 |
|
Add: Decrease in fair value of private equity investments, net | 3,093 |
| | 3,166 |
| | 37 |
| | 1,352 |
|
Subtract: Tax effect of adjustments | (719 | ) | | (963 | ) | | (624 | ) | | (613 | ) |
Adjusted net income | $ | 217,408 |
| | $ | 149,482 |
| | $ | 112,605 |
| | $ | 77,048 |
|
Net income annualized | $ | 432,249 |
| | $ | 298,173 |
| | $ | 445,946 |
| | $ | 304,847 |
|
Adjusted net income annualized | $ | 438,419 |
| | $ | 301,442 |
| | $ | 451,657 |
| | $ | 309,039 |
|
Total average assets | $ | 31,374,944 |
| | $ | 30,536,942 |
| | $ | 31,502,758 |
| | $ | 30,630,748 |
|
Return on average assets | 1.38 | % | | 0.98 | % | | 1.42 | % | | 1.00 | % |
Adjusted return on average assets (annualized) | 1.40 |
| | 0.99 |
| | 1.43 |
| | 1.01 |
|
| | | | | | | |
|
| | | | | | | | | | | | | | | |
Table 14 - Reconciliation of Non-GAAP Financial Measures, continued | | | | |
| Three Months Ended | | Six Months Ended |
(in thousands, except per share data) | June 30, 2019 | | June 30, 2018 | | June 30, 2019 | | June 30, 2018 |
Adjusted total revenues and adjusted tangible efficiency ratio | | | | | | | |
Adjusted non-interest expense | $ | 256,707 |
| | $ | 203,026 |
| | $ | 499,360 |
| | $ | 401,144 |
|
Subtract: Amortization of intangibles | (2,410 | ) | | (292 | ) | | (5,802 | ) | | (583 | ) |
Adjusted tangible non-interest expense | $ | 254,297 |
| | $ | 202,734 |
| | $ | 493,558 |
| | $ | 400,561 |
|
| | | | | | | |
Net interest income | $ | 397,262 |
| | $ | 284,577 |
| | $ | 794,438 |
| | $ | 558,861 |
|
Add: Tax equivalent adjustment | 811 |
| | 120 |
| | 1,441 |
| | 236 |
|
Add: Total non-interest income | 89,807 |
| | 73,387 |
| | 169,185 |
| | 140,433 |
|
Total FTE revenues | $ | 487,880 |
| | $ | 358,084 |
| | $ | 965,064 |
| | $ | 699,530 |
|
Add: Investment securities losses, net | 1,845 |
| | 1,296 |
| | 1,771 |
| | 1,296 |
|
Subtract/add: (Increase) decrease in fair value of private equity investments, net | (1,455 | ) | | 37 |
| | (2,313 | ) | | 3,093 |
|
Adjusted total revenues | $ | 488,270 |
| | $ | 359,417 |
| | $ | 964,522 |
| | $ | 703,919 |
|
Efficiency ratio-FTE | 54.14 | % | | 56.99 | % | | 57.67 | % | | 57.07 | % |
Adjusted tangible efficiency ratio | 52.08 |
| | 56.41 |
| | 51.17 |
| | 56.90 |
|
| | | | | | | |
Adjusted net income per common share, diluted | | | | | | | |
Net income available to common shareholders | $ | 153,034 |
| | $ | 108,622 |
| | $ | 270,070 |
| | $ | 209,229 |
|
Subtract/add: Income tax expense, net related to State Tax Reform | — |
| | (608 | ) | | — |
| | 717 |
|
Add: Merger-related expense | 7,401 |
| | — |
| | 57,140 |
| | — |
|
Subtract: Litigation settlement/contingency expense | — |
| | (1,400 | ) | | — |
| | (4,026 | ) |
Add/subtract: Restructuring charges, net | 18 |
| | 103 |
| | 37 |
| | (212 | ) |
Add: Fair value adjustment to Visa derivative | — |
| | 2,328 |
| | — |
| | 2,328 |
|
Add: Investment securities losses, net | 1,845 |
| | 1,296 |
| | 1,771 |
| | 1,296 |
|
Subtract/add: (Increase) decrease in fair value of private equity investments, net | (1,455 | ) | | 37 |
| | (2,313 | ) | | 3,093 |
|
Subtract: Tax effect of adjustments | (1,951 | ) | | (554 | ) | | (7,659 | ) | | (582 | ) |
Adjusted net income available to common shareholders | $ | 158,892 |
| | $ | 109,824 |
| | $ | 319,046 |
| | $ | 211,843 |
|
Weighted average common shares outstanding, diluted | 159,077 |
| | 119,139 |
| | 160,908 |
| | 119,229 |
|
Adjusted net income per common share, diluted | $ | 1.00 |
| | $ | 0.92 |
| | $ | 1.98 |
| | $ | 1.78 |
|
| | | | | | | |
|
| | | | | | | | | | | |
Reconciliation of Non-GAAP Financial Measures, continued | Three Months Ended |
(dollars in thousands) | June 30, 2018 | | March 31, 2018 | | June 30, 2017 |
Adjusted return on average common equity and adjusted return on average tangible common equity (annualized) | | | | | |
Net income available to common shareholders | $ | 108,622 |
| | $ | 100,607 |
| | $ | 73,444 |
|
Subtract/add: Income Tax expense related to effects of State Tax Reform | (608 | ) | | 1,325 |
| | — |
|
Subtract: Litigation settlement/contingency expense | (1,400 | ) | | (2,626 | ) | | — |
|
Add/subtract: Restructuring charges, net | 103 |
| | (315 | ) | | 13 |
|
Add: Amortization of intangibles | 292 |
| | 292 |
| | 292 |
|
Add: Valuation adjustment to Visa derivative | 2,328 |
| | — |
| | — |
|
Add: Investment securities losses, net | 1,296 |
| | — |
| | 1 |
|
Add: Decrease in fair value of private equity investments, net | 37 |
| | 3,056 |
| | 1,352 |
|
Subtract: Tax effect of adjustments | (624 | ) | | (96 | ) | | (613 | ) |
Adjusted net income available to common shareholders | $ | 110,046 |
| | $ | 102,243 |
| | $ | 74,489 |
|
Net income annualized | $ | 441,393 |
| | $ | 414,652 |
| | $ | 298,775 |
|
| | | | | |
Total average shareholders' equity less preferred stock | $ | 2,831,368 |
| | $ | 2,790,648 |
| | $ | 2,849,069 |
|
Subtract: Goodwill | (57,315 | ) | | (57,315 | ) | | (57,018 | ) |
Subtract: Other intangible assets, net | (10,555 | ) | | (10,915 | ) | | (11,966 | ) |
Total average tangible shareholders' equity less preferred stock | $ | 2,763,498 |
| | $ | 2,722,418 |
| | $ | 2,780,085 |
|
Return on average common equity (annualized) | 15.39 | % |
| 14.62 | % |
| 10.34 | % |
Adjusted return on average common equity (annualized) | 15.59 |
| | 14.86 |
| | 10.49 |
|
Adjusted return on average tangible common equity (annualized) | 15.97 |
| | 15.23 |
| | 10.75 |
|
| | | | | |
|
| | | | | | | | | | | | | | | |
Table 14 - Reconciliation of Non-GAAP Financial Measures, continued | | | | |
| Three Months Ended | | Six Months Ended |
(dollars in thousands) | June 30, 2019 | | June 30, 2018 | | June 30, 2019 | | June 30, 2018 |
Adjusted return on average assets (annualized) | | | | | | | |
Net income | $ | 156,184 |
| | $ | 111,181 |
| | $ | 276,370 |
| | $ | 214,348 |
|
Subtract/add: Income tax expense, net related to State Tax Reform | — |
| | (608 | ) | | — |
| | 717 |
|
Add: Merger-related expense | 7,401 |
| | — |
| | 57,140 |
| | — |
|
Subtract: Litigation settlement/contingency expense | — |
| | (1,400 | ) | | — |
| | (4,026 | ) |
Add/subtract: Restructuring charges, net | 18 |
| | 103 |
| | 37 |
| | (212 | ) |
Add: Fair value adjustment to Visa derivative | — |
| | 2,328 |
| | — |
| | 2,328 |
|
Add: Investment securities losses, net | 1,845 |
| | 1,296 |
| | 1,771 |
| | 1,296 |
|
Subtract/add: (Increase) decrease in fair value of private equity investments, net | (1,455 | ) | | 37 |
| | (2,313 | ) | | 3,093 |
|
Subtract: Tax effect of adjustments | (1,951 | ) | | (554 | ) | | (7,659 | ) | | (582 | ) |
Adjusted net income | $ | 162,042 |
| | $ | 112,383 |
| | $ | 325,346 |
| | $ | 216,962 |
|
Net income annualized | 626,452 |
| | 445,946 |
| | 557,321 |
| | 432,249 |
|
Adjusted net income annualized | 649,949 |
| | 450,767 |
| | 656,084 |
| | 437,520 |
|
Total average assets | 46,679,769 |
| | 31,502,758 |
| | 46,239,640 |
| | 31,374,944 |
|
Return on average assets | 1.34 | % | | 1.42 | % | | 1.21 | % | | 1.38 | % |
Adjusted return on average assets (annualized) | 1.39 |
| | 1.43 |
| | 1.42 |
| | 1.39 |
|
| | | | | | | |
|
| | | | | | | | | | | | | | | |
Reconciliation of Non-GAAP Financial Measures, continued
| | | | | | | |
(dollars in thousands) | June 30, 2018 | | March 31, 2018 | | December 31, 2018 | | June 30, 2017 |
Average core deposits | | | | | | | |
Average total deposits | $ | 26,268,074 |
| | $ | 25,788,073 |
| | $ | 26,286,009 |
| | $ | 24,991,708 |
|
Subtract: Average brokered deposits | (1,922,917 | ) | | (1,951,910 | ) | | (2,198,333 | ) | | (1,379,559 | ) |
Average core deposits | $ | 24,345,157 |
| | $ | 23,836,163 |
| | $ | 24,087,676 |
| | $ | 23,612,149 |
|
| | | | | | | |
Tangible common equity ratio | | | | | | | |
Total assets | $ | 31,740,305 |
| | $ | 31,501,028 |
| | $ | 31,221,837 |
| | $ | 30,687,966 |
|
Subtract: Goodwill | (57,315 | ) | | (57,315 | ) | | (57,315 | ) | | (57,092 | ) |
Subtract: Other intangible assets, net | (10,458 | ) | | (10,750 | ) | | (11,254 | ) | | (11,843 | ) |
Tangible assets | $ | 31,672,532 |
| | $ | 31,432,963 |
| | $ | 31,153,268 |
| | $ | 30,619,031 |
|
Total shareholders' equity | $ | 3,167,694 |
| | $ | 2,956,495 |
| | $ | 2,961,566 |
| | $ | 2,997,947 |
|
Subtract: Goodwill | (57,315 | ) | | (57,315 | ) | | (57,315 | ) | | (57,092 | ) |
Subtract: Other intangible assets, net | (10,458 | ) | | (10,750 | ) | | (11,254 | ) | | (11,843 | ) |
Subtract: Preferred Stock, no par value | (321,118 | ) | | (125,980 | ) | | (125,980 | ) | | (125,980 | ) |
Tangible common equity | $ | 2,778,803 |
| | $ | 2,762,450 |
| | $ | 2,767,017 |
| | $ | 2,803,032 |
|
Total shareholders' equity to total assets ratio | 9.98 | % | | 9.39 | % | | 9.49 | % | | 9.77 | % |
Tangible common equity ratio | 8.77 |
| | 8.79 |
| | 8.88 |
| | 9.15 |
|
| | | | | | | |
Common equity Tier 1 (CET1) ratio (fully phased-in) | | | | | | | |
Common equity Tier 1 (CET1) | $ | 2,838,616 |
| | | | | | |
Subtract: Adjustment related to capital components | (3,599 | ) | | | | | | |
CET1 (fully phased-in) | $ | 2,835,017 |
| | | | | |
|
|
Total risk-weighted assets | $ | 28,056,193 |
| | | | | | |
Total risk-weighted assets (fully phased-in) | $ | 28,182,637 |
| | | | | | |
Common equity Tier 1 (CET1) ratio | 10.12 | % | | | | | |
|
|
Common equity Tier 1 (CET1) ratio (fully phased-in) | 10.06 |
| | | | | |
|
|
| | | | | | | |
|
| | | | | | | | | | | |
Table 14 - Reconciliation of Non-GAAP Financial Measures, continued | | | | | |
| Three Months Ended |
(dollars in thousands) | June 30, 2019 | | March 31, 2019 | | June 30, 2018 |
Adjusted return on average common equity and adjusted return on average tangible common equity (annualized) | | | | | |
Net income available to common shareholders | $ | 153,034 |
| | $ | 117,036 |
| | $ | 108,622 |
|
Subtract: Income tax expense, net related to State Tax Reform | — |
| | — |
| | (608 | ) |
Add: Merger-related expense | 7,401 |
| | 49,738 |
| | — |
|
Subtract: Litigation settlement/contingency expense | — |
| | — |
| | (1,400 | ) |
Add: Restructuring charges, net | 18 |
| | 19 |
| | 103 |
|
Add: Fair value adjustment to Visa derivative | — |
| | — |
| | 2,328 |
|
Add/subtract: Investment securities losses (gains), net | 1,845 |
| | (75 | ) | | 1,296 |
|
Subtract/add: (Increase) decrease in fair value of private equity investments, net | (1,455 | ) | | (858 | ) | | 37 |
|
Subtract: Tax effect of adjustments | (1,951 | ) | | (5,705 | ) | | (554 | ) |
Net income available to common shareholders | $ | 158,892 |
| | $ | 160,155 |
| | $ | 109,824 |
|
| | | | | |
Adjusted net income available to common shareholders' annualized | $ | 637,314 |
| | $ | 649,518 |
| | $ | 440,502 |
|
Add: Amortization of intangibles | 7,250 |
| | 10,317 |
| | 896 |
|
Adjusted net income available to common shareholders excluding amortization of intangibles annualized | $ | 644,564 |
|
| $ | 659,835 |
|
| $ | 441,398 |
|
| | | | | |
Total average shareholders' equity less preferred stock | $ | 4,416,705 |
| | $ | 4,321,561 |
| | $ | 2,831,368 |
|
Subtract: Goodwill | (487,601 | ) | | (480,215 | ) | | (57,315 | ) |
Subtract: Other intangible assets, net | (69,853 | ) | | (75,191 | ) | | (10,555 | ) |
Total average tangible shareholders' equity less preferred stock | $ | 3,859,251 |
| | $ | 3,766,155 |
| | $ | 2,763,498 |
|
Return on average common equity (annualized) | 13.90 | % | | 10.98 | % | | 15.39 | % |
Adjusted return on average common equity (annualized) | 14.43 |
| | 15.03 |
| | 15.56 |
|
Adjusted return on average tangible common equity (annualized) | 16.70 |
| | 17.52 |
| | 15.97 |
|
| | | | | |
|
| | | | | | | | | | | | | | | |
Table 14 - Reconciliation of Non-GAAP Financial Measures, continued |
(in thousands) | June 30, 2019 | | March 31, 2019 | | December 31, 2018 | | June 30, 2018 |
Period-end core deposits and core transaction deposits | | | | | | | |
Total deposits | $ | 37,966,722 |
| | $ | 38,075,190 |
| | $ | 26,720,322 |
| | $ | 26,442,688 |
|
Subtract: Brokered deposits | (3,003,544 | ) | | (2,709,004 | ) | | (1,548,030 | ) | | (1,851,010 | ) |
Core deposits | 34,963,178 |
| | 35,366,186 |
| | 25,172,292 |
| | 24,591,678 |
|
Subtract: Time deposits, excluding brokered deposits | (7,342,951 | ) | | (7,568,079 | ) | | (3,685,867 | ) | | (3,275,932 | ) |
Subtract: Public funds | (4,351,304 | ) | | (4,630,022 | ) | | (2,374,892 | ) | | (2,224,631 | ) |
Core transaction deposits | $ | 23,268,923 |
| | $ | 23,168,085 |
| | $ | 19,111,533 |
| | $ | 19,091,115 |
|
| | | | | | | |
|
| | | | | | | |
| Current expectation- increase (decrease) vs. 2017 |
(dollars in thousands) | 2017 | | $ | | % |
2018 Expectation for adjusted non-interest income growth | | | | | |
Total non-interest income, as reported | $ | 345,327 |
| | $285 million-$290 million | | (16%)-(18%) |
Subtract: Cabela's Transaction Fee | (75,000 | ) | | | | |
Add: Investment securities losses, net | 289 |
| | | | |
Add: decrease in fair value of private equity investments, net | 3,093 |
| | | | |
Adjusted non-interest income | $ | 273,709 |
| | $285 million-$290 million | | 4%-6% |
| | | | | |
|
| | | | | | | | | | | |
Table 14 - Reconciliation of Non-GAAP Financial Measures, continued |
(dollars in thousands) | June 30, 2019 |
| March 31, 2019 |
| June 30, 2018 |
Tangible common equity ratio | | | | | |
Total assets | $ | 47,318,203 |
| | $ | 46,630,025 |
| | $ | 31,740,305 |
|
Subtract: Goodwill | (492,390 | ) | | (485,000 | ) | | (57,315 | ) |
Subtract: Other intangible assets, net | (61,473 | ) | | (74,683 | ) | | (10,458 | ) |
Tangible assets | $ | 46,764,340 |
| | $ | 46,070,342 |
| | $ | 31,672,532 |
|
Total shareholders' equity | $ | 4,753,816 |
| | $ | 4,597,753 |
| | $ | 3,167,694 |
|
Subtract: Goodwill | (492,390 | ) | | (485,000 | ) | | (57,315 | ) |
Subtract: Other intangible assets, net | (61,473 | ) | | (74,683 | ) | | (10,458 | ) |
Subtract: Preferred Stock, no par value | (195,140 | ) | | (195,140 | ) | | (321,118 | ) |
Tangible common equity | $ | 4,004,813 |
| | $ | 3,842,930 |
| | $ | 2,778,803 |
|
Total shareholders' equity to total assets ratio | 10.05 | % | | 9.86 | % | | 9.98 | % |
Tangible common equity ratio | 8.56 |
| | 8.34 |
| | 8.77 |
|
| | | | | |
CET1 ratio (fully phased-in) | | | | | |
CET1 | $ | 3,899,532 |
| | | | |
Total risk-weighted assets | 40,562,547 |
| | | | |
Total risk-weighted assets (fully phased-in) | 40,630,953 |
| | | | |
CET1 ratio | 9.61 | % | | | |
|
|
CET1 ratio (fully phased-in) | 9.60 |
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ITEM 3. – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information presented in the Market Risk Analysis section of the Management's Discussion and Analysis of Financial Condition and Results of Operations is incorporated herein by reference.
ITEM 4. – CONTROLS AND PROCEDURES
In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by Synovus' management, with the participation of Synovus' Chief Executive Officer and Chief Financial Officer, of the effectiveness of Synovus' disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on that evaluation, Synovus' Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2018,2019, Synovus' disclosure controls and procedures were effective.
There have been no material changes in Synovus' internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 20182019 that have materially affected, or are reasonably likely to materially affect, Synovus' internal control over financial reporting.
PART II. – OTHER INFORMATION
ITEM 1. – LEGAL PROCEEDINGS
Synovus and its subsidiaries are subject to various legal proceedings, claims and disputes that arise in the ordinary course of its business. Additionally, in the ordinary course of its business, Synovus and its subsidiaries are subject to regulatory examinations, information gathering requests, inquiries and investigations. Synovus, like many other financial institutions, has been the target of legal actions and other proceedings asserting claims for damages and related relief for losses. These actions include mortgage loan and other loan put-back claims, claims and counterclaims asserted by individual borrowers related to their loans and allegations of violations of state and federal laws and regulations relating to banking practices, including putative class action matters. In addition to actual damages, if Synovus does not prevail in such asserted legal actions, credit-related litigation could result in additional write-downs or charge-offs of assets, which could adversely affect Synovus' results of operations during the period in which the write-down or charge-off were to occur.
Based on Synovus' current knowledge and advice of counsel, management presently does not believe that the liabilities arising from these legal matters will have a material adverse effect onof Synovus' consolidated financial condition, results of operations or cash flows. However, it is possible that the ultimate resolution of these legal matters could have a material adverse effect on Synovus' results of operations and financial condition for any particular period. For additional information, see "Note 13"Note 12 - Commitments and Contingencies"Contingencies" of this Report, which Note is incorporated herein by this reference.
ITEM 1A. – RISK FACTORS
In addition to the other information set forth in this Report, you should carefully consider the factors discussed in "Part I - Item IA - Risk Factors” of Synovus’ 2017Synovus' 2018 Form 10-K which could materially affect its business, financial position, results of operations, cash flows, or future results. Please be aware that these risks may change over time and other risks may prove to be important in the future. New risks may emerge at any time, and we cannot predict such risks or estimate the extent to which they may affect our business, financial condition or results of operations, or the trading price of our securities.
As a result of Synovus entering intoThere are no material changes during the Merger Agreement with FCB, certainperiod covered by this Report to the risk factors as provided below, have been identified in addition to those previously reported in Synovus’ 2017 10-K. These risks and the other risks associated with the proposed Merger will be more fully discusseddisclosed in the joint proxy statement/prospectus that will be included in the registration statement onSynovus' 2018 Form S-4 that Synovus will file with the SEC in connection with the Merger. We urge you to read the registration statement on Form S-4 once it becomes available because it will contain important information about the Merger, including relevant risk factors.
The consummation of the Merger is contingent upon the satisfaction of a number of conditions, including shareholder and regulatory approvals, that are outside of our or FCB’s control and that we and FCB may be unable to satisfy or obtain or which may delay the consummation of the Merger or result in the imposition of conditions that could reduce the anticipated benefits from the Merger or cause the parties to abandon the Merger.
Consummation of the Merger is contingent upon the satisfaction of a number of conditions, some of which are beyond our and FCB’s control, including, among others: (i) the adoption of the Merger Agreement by the holders of FCB’s class A common stock, (ii) the approval of the issuance of shares of our common stock to be issued to the FCB stockholders in the Merger by our shareholders, (iii) the authorization for listing on the New York Stock Exchange of the shares our common stock to be issued to the FCB stockholders in the Merger, (iv) the effectiveness of the registration statement registering our common stock to be issued to FCB stockholders in the Merger, (v) the absence of any order, injunction or other legal restraint preventing the completion of the Merger or making the consummation of the Merger illegal and (vi) the receipt of required regulatory approvals, including the approval of the Board of Governors of the Federal Reserve System and the Georgia Department of Banking and Finance. Furthermore, each party’s obligation to complete the Merger is also subject to certain additional customary conditions, including (i) subject to certain exceptions, the accuracy of the representations and warranties of the other party, generally subject to a material adverse effect qualification, (ii) performance in all material respects by the other party of its obligations under the Merger Agreement and (iii) receipt by such party of an opinion from its counsel to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
These conditions to the closing of the Merger may not be fulfilled in a timely manner or at all, and, accordingly, the Merger may not be completed. In addition, the parties can mutually decide to terminate the Merger Agreement at any time, before or after receipt of the requisite approvals by our shareholders or FCB's stockholders, or we or FCB may elect to terminate the Merger Agreement in certain other circumstances.
In addition, we and FCB may be subject to lawsuits challenging the Merger, and adverse rulings in these lawsuits may delay or prevent the Merger from being completed or require us or FCB to incur significant costs to defend or settle these lawsuits. Any delay in completing the Merger could cause us not to realize, or to be delayed in realizing, some or all of the benefits that we expect it to achieve if the Merger is successfully completed within its expected time frame.
We may fail to realize all of the anticipated benefits of the Merger, or those benefits may take longer to realize than expected. We may also encounter significant difficulties in integrating FCB.
Our ability to realize the anticipated benefits of the Merger will depend, to a large extent, on our ability to successfully integrate the acquired businesses. The integration and combination of the acquired businesses is a complex, costly and time-consuming process. As a result, we will be required to devote significant management attention and resources to integrating their business practices and operations with ours. The integration process may disrupt our business and the business of FCB and, if implemented ineffectively, could limit the full realization of the anticipated benefits of the acquisition. The failure to meet the challenges involved in integrating the acquired businesses and to realize the anticipated benefits of the Merger could cause an interruption of, or a loss of momentum in, our business activities or those of FCB and could adversely impact our business, financial condition and results of operations. In addition, the overall integration of the businesses may result in material unanticipated problems, expenses, liabilities, loss of customers and diversion of our management’s and employees’ attention. The challenges of combining the operations of the companies include, among others:
difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from the acquisition;
difficulties in the integration of operations and systems;
difficulties in the assimilation of employees;
difficulties in managing the expanded operations of a larger and more complex company;
challenges in keeping existing customers and obtaining new customers;
challenges in attracting and retaining key personnel, including personnel that are considered key to the future success of FCB’s businesses; and
challenges in keeping key business relationships in place.
Many of these factors will be outside of our control and any one of them could result in increased costs and liabilities, decreases in the amount of expected income and diversion of management’s time and energy, which could have a material adverse effect on our business, financial condition and results of operations.
In addition, even if the operations of FCB are integrated successfully with our business, the full benefits of the transaction may not be realized, including the synergies, cost savings, growth opportunities or earnings accretion that are expected. These benefits may not be achieved within the anticipated time frame, or at all, and additional unanticipated costs may be incurred in the integration of the businesses. Furthermore, FCB may have unknown or contingent liabilities that we would assume in the acquisition and that were not discovered during the course of our due diligence. These liabilities could include exposure to unexpected asset quality problems, compliance and regulatory violations, key employee and client retention problems and other problems that could result in significant costs to us.
All of these factors could cause dilution to our earnings per share, decrease or delay the expected accretive effect of the transaction, negatively impact the price of our common stock, or have a material adverse effect on our business, financial condition and results of operations.
Failure to complete the Merger could negatively impact our stock price and the future business and financial results.
Completion of the Merger is not assured. If the Merger is not completed, our ongoing business and financial results may be adversely affected and we will be subject to several risks, including the following:
the price of our common stock may decline to the extent that current market prices reflect a market assumption that the Merger will be completed;
having to pay significant costs relating to the Merger without receiving the benefits of the Merger, including, in certain circumstances, a termination fee of $93.5 million;
negative reactions from customers, shareholders, market analysts, employees and future acquisition partners;
the possible loss of employees necessary to operate our business;
we will have been subject to certain restrictions on the conduct of our business, which may have prevented us from making certain acquisitions or dispositions or pursuing certain business opportunities while the Merger was pending; and
the diversion of the focus of our management to the Merger instead of on pursuing other opportunities that could have been beneficial to us and our business.
If the Merger is not completed, we cannot assure our shareholders that these risks will not materialize and will not materially adversely affect our business, financial results, and stock price. Additionally, if the Merger is not completed, we will not recognize the anticipated benefits of the Merger, yet will still incur significant expenses.
While the Merger is pending, we will be subject to business uncertainties and contractual restrictions that could adversely affect our business and operations.
Uncertainty about the effect of the Merger on employees, customers and other persons with whom we or FCB have a business relationship may have an adverse effect on our business, operations and stock price. In connection with the pendency of the acquisition, existing customers of FCB could decide to no longer do business with FCB, reducing the anticipated benefits of the Merger. Synovus is also subject to certain restrictions on the conduct of its business while the Merger is pending. As a result, certain other projects may be delayed or ceased and business decisions could be deferred. Employee retention at FCB, and also at Synovus, may be challenging during the pendency of the Merger, as certain employees may experience uncertainty about their future roles with the combined company. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with Synovus, FCB or the combined company, the benefits of the Merger could be materially diminished.
In addition, shareholders and market analysts could also have a negative perception of the Merger, which could cause a material reduction in our stock price and could also result in (i) our not achieving the requisite vote to approve the issuance of our shares in the Merger and/or (ii) FCB not achieving the requisite vote to adopt the Merger Agreement.
The Merger may not be accretive and may cause dilution of our adjusted earnings per share following the Merger, which may negatively affect the market price of our common stock.
We currently anticipate that the Merger will be accretive to shareholders of the combined company on an earnings per share basis in 2020. This expectation is based on preliminary estimates, which may materially change. We could also encounter additional transaction and integration-related costs or other factors resulting in the failure to realize all of the benefits anticipated in the Merger. All of these factors could cause dilution of our adjusted earnings per share or decrease or delay the expected accretive effect of the Merger and cause a decrease in the market value of our common stock.
We are expected to incur substantial expenses related to the Merger and our integration with FCB.
Both Synovus and FCB will incur substantial expenses in connection with the Merger and our integration with FCB. There are a large number of processes, policies, procedures, operations, technologies, and systems that must be integrated. While we have assumed that a certain level of expenses would be incurred, there are many factors beyond our control that could affect the total amount or the timing of the integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. These expenses could, particularly in the near term, exceed the savings that we expect to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings. These integration expenses likely will result in us taking significant charges against earnings following the completion of the Merger, and the amount and timing of such charges are uncertain at present.
Our future results will suffer if we do not effectively manage our expanded operations following the Merger.
Following the Merger, the size of our business will increase significantly beyond its current size. Our future success depends, in part, upon our ability to manage this expanded business, which will pose substantial challenges for our management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. There can be no assurances we will be successful or that we will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the Merger.
Current Synovus shareholders may have a reduced ownership and voting interest in the combined company after the Merger.
Synovus expects to issue or reserve for issuance approximately 52 million shares of Synovus common stock to FCB stockholders in connection with the Merger (including shares of Synovus common stock to be issued in connection with outstanding FCB equity awards). Upon completion of the Merger, each Synovus shareholder will remain a shareholder of Synovus with a percentage ownership of the combined company that may be smaller than the shareholder's percentage of Synovus prior to the transaction, depending upon such shareholder's current ownership of Synovus shares. As a result of these potentially reduced ownership
percentages, Synovus shareholders may have less voting power in the combined company than they now have with respect to Synovus.
10-K.
ITEM 2. – UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS
(a) None.
(b) None.
(c) Issuer Purchases of Equity Securities:
Synovus'On June 17, 2019, the Company announced that the Board of Directors authorized a $150increased its prior $400 million share repurchase program that will expire atauthorization to $725 million for the end of 2018. This program was announced on January 23, 2018. The table below sets forth information regarding repurchases of our common stock during the second quarter of 2018.year 2019.
| | Share Repurchases | (in thousands, except per share data) | | Total Number of Shares Repurchased | | Average Price Paid per Share(1) | | Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs | | Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | Total Number of Shares Repurchased | | Average Price Paid per Share(1) | | Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs | | Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs |
April 2018 | | 22 |
| | $ | 52.98 |
| | 22 |
| | $ | 122,112 |
| |
May 2018 | | 479 |
| | 53.63 |
| | 479 |
| | 96,408 |
| |
June 2018 | | 421 |
| | 55.14 |
| | 421 |
| | 73,220 |
| |
April 2019 | | | — |
| | $ | — |
| | — |
| | $ | 80,002 |
|
May 2019 | | | 137 |
| | 36.52 |
| | 137 |
| | 75,002 |
|
June 2019 | | | 595 |
| | 33.58 |
| | 595 |
| | 380,014 |
|
Total | | 922 |
| | $ | 54.30 |
| | 922 |
| |
| | 732 |
| | $ | 37.71 |
| | 732 |
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(1) The average price paid per share is calculated on a trade date basis for all open market transactions and excludes commissions and other transaction expenses.
The foregoing repurchases during the second quarter of 20182019 were purchased through open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act. The timing and amount of future repurchases under the share repurchase program will depend upon a variety of factors, including market conditions, regulatory requirements, availability of funds, and other relevant considerations, as determined by us and applicable law and regulations.
ITEM 3. – DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. – MINE SAFETY DISCLOSURES
None.
ITEM 5. – OTHER INFORMATION
None.
ITEM 6. – EXHIBITS
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Exhibit Number | | Description |
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2.1 |
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3.1 |
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3.2 |
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3.3 |
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3.4 |
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3.5 |
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3.6 |
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3.7 |
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12.131.1 |
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31.1 |
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31.2 |
| | |
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32 |
| | |
| | |
101 |
| | Interactive Data File |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
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| SYNOVUS FINANCIAL CORP. |
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August 8, 20182, 2019 | By: | | /s/ Kevin S. BlairAndrew J. Gregory, Jr. |
Date | | | Kevin S. BlairAndrew J. Gregory, Jr. |
| | | Executive Vice President and Chief Financial Officer |
| | | (Duly Authorized Officer and Principal Financial Officer) |