0000018349us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel3Member2019-12-31

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 ~~March 31,~~June 30, 2020

Commission file number 1-10312

SYNOVUS FINANCIAL CORP.

(Exact name of registrant as specified in its charter)


Georgia						58-1134883
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1111 Bay Avenue, Suite 500

~~Suite 500,~~

Columbus,

Georgia

31901

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (706) 641-6500


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 Par Value	SNV	New York Stock Exchange
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

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). 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”, “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		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 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~May 7,~~August 4, 2020, ~~147,285,880~~147,312,937 shares of the registrant's common stock, $1.00 par value, were outstanding.

Table of Contents

Page

Part I.

Financial Information

Index of Defined Terms

Item 1.

Financial Statements (Unaudited)

Consolidated Balance Sheets as of ~~March 31,~~June 30, 2020 and December 31, 2019

Consolidated Statements of Income for the Three and Six Months Ended ~~March 31,~~June 30, 2020 and 2019

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended ~~March 31,~~June 30, 2020 and 2019

Consolidated Statements of Changes in Shareholders' Equity for the Three and Six Months Ended ~~March 31,~~June 30, 2020 and 2019

Consolidated Statements of Cash Flows for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2020 and 2019

Notes to Unaudited Interim Consolidated Financial Statements

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

4044

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

6569

Item 4.

Controls and Procedures

6569

Part II.

Other Information

Item 1.

Legal Proceedings

6670

Item 1A.

Risk Factors

6670

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

6870

Item 3.

Defaults Upon Senior Securities

6870

Item 4.

Mine Safety Disclosures

6870

Item 5.

Other Information

6870

Item 6.

Exhibits

6971

Signatures

7072

SYNOVUS FINANCIAL CORP.

INDEX OF DEFINED TERMS

Throughout this discussion, references to "Synovus", "we", "our", "us", "the Company" and similar terms refer to the consolidated entity consisting of Synovus Financial Corp. and its subsidiaries unless the context indicates that we refer only to the Parent Company, Synovus Financial Corp. When we refer to the "Bank" or "Synovus Bank" we mean our only bank subsidiary, Synovus Bank.

ACL – Allowance for credit losses ~~(applies to debt securities, loans, and~~(ALL, reserve on unfunded loan ~~commitments)~~

~~AICPA~~ ~~– American Institute of Certified Public Accountants~~commitments, and reserve, if required, on debt securities)

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.

ARRC – Alternative Reference Rates Committee

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

bp(s) – Basis point(s)

C&I – Commercial and industrial

CARES Act – The Coronavirus Aid, Relief, and Economic Security ~~(CARES)~~ Act ~~as enacted on March 27, 2020.~~

CECL – Current expected credit losses

CET1 – Common Equity Tier 1 Capital defined by Basel III capital rules

CMO – Collateralized ~~Mortgage Obligation~~mortgage obligation

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

COVID-19 – Coronavirus disease 2019

CRA – Community Reinvestment Act

CRE – Commercial real estate

DCF – Discounted cash flow

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

FCA – Financial Conduct Authority

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

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

FMS – Financial Management Services, a division of Synovus Bank

FTE – Fully taxable-equivalent

FTP – Funds transfer pricing

GA DBF – Georgia Department of Banking and Finance

GAAP – Generally Accepted Accounting Principles in the United States of America

GDP – Gross domestic product

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 acquired entity as "Global One"

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

LGD – Loss given default

LIBOR – London Interbank Offered Rate

LIHTC – Low Income Housing Tax Credit

LTV – Loan-to-collateral value ratio

MBS – Mortgage-backed security

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 January 1, 2019 merger of Azalea Merger Sub with and into FCB and immediately thereafter, the merger of FCB with and into Synovus, with Synovus continuing as the surviving entity pursuant to the terms and conditions of the Merger Agreement

MLO – Mortgage loan originator

MPS – Merchant processing servicer(s)

MRSU – Market Restricted Share Unit

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

~~OTTI~~PAA – ~~Other-than-temporary impairment~~Purchase accounting adjustments

Parent Company – Synovus Financial Corp.

PCD – Purchased Credit Deteriorated

PCI – Purchased Credit Impaired

PD – Probability of Default

PPP – Paycheck Protection Program established as part of the CARES Act and launched on April 3, 2020 by the ~~Small Business Administration~~SBA and Treasury

PSU – Performance Share Unit

RSU – Restricted Share Unit

~~ROU~~ ~~– Right-of-use~~

SBA – Small Business Administration

SBIC – Small Business Investment Company

SEC – U.S. Securities and Exchange Commission

Securities Act – Securities Act of 1933, as amended

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

SOFR – Secured Overnight Financing Rate

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' 2019 Form 10-K – Synovus' Annual Report on Form 10-K for the year ended December 31, 2019

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~~

TJCA – U.S. Tax Cuts and Jobs Act of 2017

TSR – Total shareholder return

UPB – Unpaid principal balance

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-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

iii

PART I. FINANCIAL INFORMATION

ITEM 1. - FINANCIAL STATEMENTS

SYNOVUS FINANCIAL CORP.

CONSOLIDATED BALANCE SHEETS

(unaudited)


(in thousands, except share and per share data)	(in thousands, except share and per share data)	March 31, 2020		December 31, 2019		(in thousands, except share and per share data)	June 30, 2020		December 31, 2019
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	652,451	$	535,846	Cash and due from banks	$	572,169	$	535,846
Interest-bearing funds with Federal Reserve Bank	Interest-bearing funds with Federal Reserve Bank	1,020,775		553,390		Interest-bearing funds with Federal Reserve Bank	860,289		553,390
Interest earning deposits with banks	Interest earning deposits with banks	20,717		20,635		Interest earning deposits with banks	20,719		20,635
Federal funds sold and securities purchased under resale agreements	Federal funds sold and securities purchased under resale agreements	129,891		77,047		Federal funds sold and securities purchased under resale agreements	118,048		77,047
Total cash, cash equivalents, restricted cash, and restricted cash equivalents	Total cash, cash equivalents, restricted cash, and restricted cash equivalents	1,823,834		1,186,918		Total cash, cash equivalents, restricted cash, and restricted cash equivalents	1,571,225		1,186,918
Investment securities available for sale, at fair value	Investment securities available for sale, at fair value	6,937,240		6,778,670		Investment securities available for sale, at fair value	7,197,493		6,778,670
Mortgage loans held for sale, at fair value		119,841		115,173
Loans held for sale (includes $266,306 and $115,173 measured at fair value, respectively)						Loans held for sale (includes $266,306 and $115,173 measured at fair value, respectively)	900,936		115,173
Loans, net of deferred fees and costs	Loans, net of deferred fees and costs	38,258,024		37,162,450		Loans, net of deferred fees and costs	39,914,297		37,162,450
Allowance for loan losses	Allowance for loan losses	(493,452)		(281,402)		Allowance for loan losses	(588,648)		(281,402)
Loans, net	Loans, net	37,764,572		36,881,048		Loans, net	39,325,649		36,881,048
Cash surrender value of bank-owned life insurance	Cash surrender value of bank-owned life insurance	1,031,544		775,665		Cash surrender value of bank-owned life insurance	1,038,049		775,665
Premises and equipment		482,462		493,940
Premises and equipment, net						Premises and equipment, net	481,716		493,940
Goodwill	Goodwill	497,267		497,267		Goodwill	497,267		497,267
Other intangible assets		53,032		55,671
Other intangible assets, net						Other intangible assets, net	50,392		55,671
Receivable on unsettled securities sales						Receivable on unsettled securities sales	1,289,116		—
Other assets	Other assets	1,909,793		1,418,930		Other assets	1,770,146		1,418,930
Total assets	Total assets	$	50,619,585	$	48,203,282	Total assets	$	54,121,989	$	48,203,282
LIABILITIES AND SHAREHOLDERS' EQUITY	LIABILITIES AND SHAREHOLDERS' EQUITY					LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities	Liabilities					Liabilities
Deposits:	Deposits:					Deposits:
Non-interest-bearing deposits	Non-interest-bearing deposits	$	9,659,451	$	9,439,485	Non-interest-bearing deposits	$	12,555,714	$	9,439,485
Interest-bearing deposits	Interest-bearing deposits	30,167,134		28,966,019		Interest-bearing deposits	31,638,866		28,966,019
Total deposits	Total deposits	39,826,585		38,405,504		Total deposits	44,194,580		38,405,504
Federal funds purchased and securities sold under repurchase agreements	Federal funds purchased and securities sold under repurchase agreements	312,776		165,690		Federal funds purchased and securities sold under repurchase agreements	225,576		165,690
Other short-term borrowings	Other short-term borrowings	1,175,000		1,753,560		Other short-term borrowings	300,000		1,753,560
Long-term debt	Long-term debt	3,152,339		2,153,897		Long-term debt	2,327,921		2,153,897
Due on unsettled securities purchases						Due on unsettled securities purchases	922,952		—
Other liabilities	Other liabilities	1,087,680		782,941		Other liabilities	1,097,992		782,941
Total liabilities	Total liabilities	45,554,380		43,261,592		Total liabilities	49,069,021		43,261,592
Shareholders' Equity	Shareholders' Equity					Shareholders' Equity
Preferred stock - no par value; authorized 100,000,000 shares; issued 22,000,000	Preferred stock - no par value; authorized 100,000,000 shares; issued 22,000,000	537,145		537,145		Preferred stock - no par value; authorized 100,000,000 shares; issued 22,000,000	537,145		537,145
Common stock - $1.00 par value; authorized 342,857,143 shares; issued 167,359,689 and 166,800,623; outstanding 147,266,662 and 147,157,596		167,360		166,801
Common stock - $1.00 par value; authorized 342,857,143 shares; issued 167,405,730 and 166,800,623; outstanding 147,312,703 and 147,157,596						Common stock - $1.00 par value; authorized 342,857,143 shares; issued 167,405,730 and 166,800,623; outstanding 147,312,703 and 147,157,596	167,406		166,801
Additional paid-in capital	Additional paid-in capital	3,821,357		3,819,336		Additional paid-in capital	3,826,726		3,819,336
Treasury stock, at cost; 20,093,027 and 19,643,027 shares	Treasury stock, at cost; 20,093,027 and 19,643,027 shares	(731,806)		(715,560)		Treasury stock, at cost; 20,093,027 and 19,643,027 shares	(731,806)		(715,560)
Accumulated other comprehensive income, net	Accumulated other comprehensive income, net	256,911		65,641		Accumulated other comprehensive income, net	202,970		65,641
Retained earnings	Retained earnings	1,014,238		1,068,327		Retained earnings	1,050,527		1,068,327
Total shareholders’ equity	Total shareholders’ equity	5,065,205		4,941,690		Total shareholders’ equity	5,052,968		4,941,690
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	50,619,585	$	48,203,282	Total liabilities and shareholders' equity	$	54,121,989	$	48,203,282

See accompanying notes to unaudited interim consolidated financial statements.

SYNOVUS FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)


		Three Months Ended March 31,							Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share data)	(in thousands, except per share data)	2020		2019		(in thousands, except per share data)	2020		2019		2020		2019
Interest income:	Interest income:					Interest income:
Loans, including fees	Loans, including fees	$	427,337	$	447,769	Loans, including fees	$	401,997	$	457,564	$	829,334	$	905,333
Investment securities available for sale	Investment securities available for sale	51,653		49,938		Investment securities available for sale	44,935		52,794		96,588		102,732
Mortgage loans held for sale		792		391
Loans held for sale						Loans held for sale	1,914		752		2,706		1,165
Federal Reserve Bank balances	Federal Reserve Bank balances	1,508		3,671		Federal Reserve Bank balances	394		2,701		1,902		6,371
Other earning assets	Other earning assets	2,607		3,070		Other earning assets	2,329		2,320		4,936		5,369
Total interest income	Total interest income	483,897		504,839		Total interest income	451,569		516,131		935,466		1,020,970
Interest expense:	Interest expense:					Interest expense:
Deposits	Deposits	86,002		87,684		Deposits	56,474		92,700		142,476		180,383
Federal funds purchased, securities sold under repurchase agreements, and other short-term borrowings	Federal funds purchased, securities sold under repurchase agreements, and other short-term borrowings	5,932		3,463		Federal funds purchased, securities sold under repurchase agreements, and other short-term borrowings	1,778		7,294		7,710		10,757
Long-term debt	Long-term debt	18,703		16,517		Long-term debt	16,751		18,875		35,454		35,392
Total interest expense	Total interest expense	110,637		107,664		Total interest expense	75,003		118,869		185,640		226,532
Net interest income	Net interest income	373,260		397,175		Net interest income	376,566		397,262		749,826		794,438
Provision for credit losses⁽¹⁾	Provision for credit losses⁽¹⁾	158,722		23,569		Provision for credit losses⁽¹⁾	141,851		12,119		300,573		35,688
Net interest income after provision for credit losses	Net interest income after provision for credit losses	214,538		373,606		Net interest income after provision for credit losses	234,715		385,143		449,253		758,750
Non-interest revenue:	Non-interest revenue:					Non-interest revenue:
Service charges on deposit accounts	Service charges on deposit accounts	20,689		20,859		Service charges on deposit accounts	15,567		21,994		36,255		42,853
Fiduciary and asset management fees	Fiduciary and asset management fees	15,174		13,578		Fiduciary and asset management fees	14,950		14,478		30,124		28,057
Card fees	Card fees	10,950		10,877		Card fees	9,186		11,161		20,136		22,037
Brokerage revenue	Brokerage revenue	12,398		9,379		Brokerage revenue	9,984		10,052		22,383		19,431
Mortgage banking income	Mortgage banking income	12,227		5,054		Mortgage banking income	23,530		7,907		35,757		12,962
Capital markets income	Capital markets income	11,243		5,245		Capital markets income	6,050		8,916		17,294		14,161
Income from bank-owned life insurance	Income from bank-owned life insurance	6,038		5,290		Income from bank-owned life insurance	7,756		5,176		13,794		10,466
Investment securities gains, net		8,734		75
Investment securities gains (losses), net						Investment securities gains (losses), net	69,409		(1,845)		78,144		(1,771)
Other non-interest revenue	Other non-interest revenue	6,404		9,021		Other non-interest revenue	17,052		11,968		23,454		20,989
Total non-interest revenue	Total non-interest revenue	103,857		79,378		Total non-interest revenue	173,484		89,807		277,341		169,185
Non-interest expense:	Non-interest expense:					Non-interest expense:
Salaries and other personnel expense	Salaries and other personnel expense	149,678		139,427		Salaries and other personnel expense	159,597		143,009		309,274		282,436
Net occupancy and equipment expense		42,194		38,394
Net occupancy, equipment, and software expense						Net occupancy, equipment, and software expense	41,727		39,851		83,921		78,245
Third-party processing and other services	Third-party processing and other services	21,480		17,758		Third-party processing and other services	21,366		19,118		42,846		36,875
Professional fees	Professional fees	10,675		6,348		Professional fees	15,305		9,312		25,980		15,660
FDIC insurance and other regulatory fees	FDIC insurance and other regulatory fees	5,278		6,761		FDIC insurance and other regulatory fees	6,851		7,867		12,129		14,629
Advertising expense		4,752		5,123
Merger-related expense	Merger-related expense	—		49,738		Merger-related expense	—		7,401		—		57,140
Other operating expenses	Other operating expenses	42,222		28,861		Other operating expenses	39,295		37,568		86,271		71,552
Total non-interest expense	Total non-interest expense	276,279		292,410		Total non-interest expense	284,141		264,126		560,421		556,537
Income before income taxes	Income before income taxes	42,116		160,574		Income before income taxes	124,058		210,824		166,173		371,398
Income tax expense	Income tax expense	3,595		40,388		Income tax expense	30,866		54,640		34,461		95,028
Net income	Net income	38,521		120,186		Net income	93,192		156,184		131,712		276,370
Less: Preferred stock dividends	Less: Preferred stock dividends	8,291		3,150		Less: Preferred stock dividends	8,291		3,150		16,581		6,300
Net income available to common shareholders	Net income available to common shareholders	$	30,230	$	117,036	Net income available to common shareholders	$	84,901	$	153,034	$	115,131	$	270,070
Net income per common share, basic	Net income per common share, basic	$	0.21	$	0.73	Net income per common share, basic	$	0.58	$	0.97	$	0.78	$	1.70
Net income per common share, diluted	Net income per common share, diluted	0.20		0.72		Net income per common share, diluted	0.57		0.96		0.78		1.68
Weighted average common shares outstanding, basic	Weighted average common shares outstanding, basic	147,311		160,927		Weighted average common shares outstanding, basic	147,288		157,389		147,300		159,148
Weighted average common shares outstanding, diluted	Weighted average common shares outstanding, diluted	148,401		162,760		Weighted average common shares outstanding, diluted	147,733		159,077		148,067		160,908

⁽¹⁾Beginning January 1, 2020, provision calculation is based on current expected credit loss methodology. Prior to January 1, 2020, calculation was based on incurred loss methodology.

See accompanying notes to unaudited interim consolidated financial statements.

SYNOVUS FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


		Three Months Ended March 31,																							Three Months Ended June 30,
		2020										2019											2020				2019
(in thousands)	(in thousands)	Before-tax Amount		Income Tax		Net of Tax Amount		Before-tax Amount		Income Tax		Net of Tax Amount		(in thousands)	Before-tax Amount		Income Tax		Net of Tax Amount		Before-tax Amount		Income Tax		Net of Tax Amount
Net income	Net income	$	42,116	$	(3,595)	$	38,521	$	160,574	$	(40,388)	$	120,186	Net income	$	124,058	$	(30,866)	$	93,192	$	210,824	$	(54,640)	$	156,184
Unrealized gains (losses) on investment securities available for sale:	Unrealized gains (losses) on investment securities available for sale:													Unrealized gains (losses) on investment securities available for sale:
Net unrealized gains (losses) arising during the period	Net unrealized gains (losses) arising during the period	158,341		(41,011)		117,330		102,785		(26,621)		76,164		Net unrealized gains (losses) arising during the period	(11,939)		3,092		(8,847)		89,459		(23,169)		66,290
Reclassification adjustment for realized (gains) losses included in net income	Reclassification adjustment for realized (gains) losses included in net income	(8,734)		2,262		(6,472)		(75)		19		(56)		Reclassification adjustment for realized (gains) losses included in net income	(69,409)		17,977		(51,432)		1,845		(478)		1,367
Net change	Net change	149,607		(38,749)		110,858		102,710		(26,602)		76,108		Net change	(81,348)		21,069		(60,279)		91,304		(23,647)		67,657
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:	Unrealized gains (losses) on derivative instruments designated as cash flow hedges:													Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Net unrealized gains (losses) arising during the period	Net unrealized gains (losses) arising during the period	108,639		(28,138)		80,501		—		—		—		Net unrealized gains (losses) arising during the period	8,823		(2,285)		6,538		—		—		—
Reclassification adjustment for realized (gains) losses included in net income	Reclassification adjustment for realized (gains) losses included in net income	(120)		31		(89)		—		—		—		Reclassification adjustment for realized (gains) losses included in net income	(270)		70		(200)		—		—		—
Net change	Net change	108,519		(28,107)		80,412		—		—		—		Net change	8,553		(2,215)		6,338		—		—		—
Post-retirement unfunded health benefit:	Post-retirement unfunded health benefit:													Post-retirement unfunded health benefit:
Reclassification adjustment for realized (gains) losses included in net income	Reclassification adjustment for realized (gains) losses included in net income	—		—		—		(35)		5		(30)		Reclassification adjustment for realized (gains) losses included in net income	—		—		—		(35)		9		(26)
Total other comprehensive income (loss)	Total other comprehensive income (loss)	$	258,126	$	(66,856)	$	191,270	$	102,675	$	(26,597)	$	76,078	Total other comprehensive income (loss)	$	(72,795)	$	18,854	$	(53,941)	$	91,269	$	(23,638)	$	67,631
Comprehensive income	Comprehensive income					$	229,791					$	196,264	Comprehensive income					$	39,251					$	223,815

															Six Months Ended June 30,
															2020										2019
(in thousands)														(in thousands)	Before-tax Amount		Tax Effect		Net of Tax Amount		Before-tax Amount		Tax Effect		Net of Tax Amount
Net income														Net income	$	166,173	$	(34,461)	$	131,712	$	371,398	$	(95,028)	$	276,370
Unrealized gains (losses) on investment securities available for sale:														Unrealized gains (losses) on investment securities available for sale:
Net unrealized gains (losses) arising during the period														Net unrealized gains (losses) arising during the period	146,403		(37,919)		108,484		192,241		(49,788)		142,453
Reclassification adjustment for realized (gains) losses included in net income														Reclassification adjustment for realized (gains) losses included in net income	(78,144)		20,239		(57,905)		1,771		(459)		1,312
Net change														Net change	68,259		(17,680)		50,579		194,012		(50,247)		143,765
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:														Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Net unrealized gains (losses) arising during the period														Net unrealized gains (losses) arising during the period	117,462		(30,423)		87,039		—		—		—
Reclassification adjustment for realized (gains) losses included in net income														Reclassification adjustment for realized (gains) losses included in net income	(390)		101		(289)		—		—		—
Net change														Net change	117,072		(30,322)		86,750		—		—		—
Post-retirement unfunded health benefit:														Post-retirement unfunded health benefit:
Reclassification adjustment for net gains realized in net income														Reclassification adjustment for net gains realized in net income	—		—		—		(70)		14		(56)
Other comprehensive income (loss)														Other comprehensive income (loss)	$	185,331	$	(48,002)	$	137,329	$	193,942	$	(50,233)	$	143,709
Comprehensive income														Comprehensive income					$	269,041					$	420,079

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)	(in thousands, except per share data)	Preferred Stock		Common Stock		Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total		(in thousands, except per share data)	Preferred Stock		Common Stock		Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total
Balance, December 31, 2019		$	537,145	$	166,801	$	3,819,336	$	(715,560)	$	65,641	$	1,068,327	$	4,941,690
Cumulative-effect of change in accounting principle for financial instruments - credit losses (ASU 2016-13), net of tax⁽¹⁾		—		—		—		—		—		(35,721)		(35,721)
Balance, April 1, 2020																Balance, April 1, 2020	$	537,145	$	167,360	$	3,821,357	$	(731,806)	$	256,911	$	1,014,238	$	5,065,205
Net income	Net income	—		—		—		—		—		38,521		38,521		Net income	—		—		—		—		—		93,192		93,192
Other comprehensive income, net of income taxes		—		—		—		—		191,270		—		191,270
Other comprehensive loss, net of income taxes																Other comprehensive loss, net of income taxes	—		—		—		—		(53,941)		—		(53,941)
Cash dividends declared on common stock - $0.33 per share	Cash dividends declared on common stock - $0.33 per share	—		—		—		—		—		(48,598)		(48,598)		Cash dividends declared on common stock - $0.33 per share	—		—		—		—		—		(48,612)		(48,612)
Cash dividends declared on preferred stock⁽²⁾	Cash dividends declared on preferred stock⁽²⁾	—		—		—		—		—		(8,291)		(8,291)		Cash dividends declared on preferred stock⁽²⁾	—		—		—		—		—		(8,291)		(8,291)
Repurchases of common stock including costs to repurchase		—		—		—		(16,246)		—		—		(16,246)
Restricted share unit vesting and taxes paid related to net share settlement	Restricted share unit vesting and taxes paid related to net share settlement	—		345		(7,602)		—		—		—		(7,257)		Restricted share unit vesting and taxes paid related to net share settlement	—		34		(181)		—		—		—		(147)
Stock options exercised	Stock options exercised	—		214		6,053		—		—		—		6,267		Stock options exercised	—		12		200		—		—		—		212
Share-based compensation expense	Share-based compensation expense	—		—		3,570		—		—		—		3,570		Share-based compensation expense	—		—		5,350		—		—		—		5,350
Balance at March 31, 2020		$	537,145	$	167,360	$	3,821,357	$	(731,806)	$	256,911	$	1,014,238	$	5,065,205
Balance at June 30, 2020																Balance at June 30, 2020	$	537,145	$	167,406	$	3,826,726	$	(731,806)	$	202,970	$	1,050,527	$	5,052,968

Balance, December 31, 2018		$	195,140	$	143,300	$	3,060,561	$	(1,014,746)	$	(94,420)	$	843,767	$	3,133,602
Cumulative-effect of change in accounting principle for leases (ASU 2016-02), net of tax		—		—		—		—		—		4,270		4,270
Balance, April 1, 2019																Balance, April 1, 2019	$	195,140	$	165,929	$	3,794,262	$	(319,898)	$	(18,342)	$	780,662	$	4,597,753
Net income	Net income	—		—		—		—		—		120,186		120,186		Net income	—		—		—		—		—		156,184		156,184
Other comprehensive income, net of income taxes	Other comprehensive income, net of income taxes	—		—		—		—		76,078		—		76,078		Other comprehensive income, net of income taxes	—		—		—		—		67,631		—		67,631
FCB Acquisition:
Issuance of common stock, net of issuance costs		—		22,043		682,713		—		—		—		704,756
Common stock reissued		—		—		—		1,014,746		—		(137,176)		877,570
Fair value of exchanged equity awards and warrants attributed to purchase price		—		—		43,362		—		—		—		43,362
Cash dividends declared on common stock - $0.30 per share	Cash dividends declared on common stock - $0.30 per share	—		—		—		—		—		(47,235)		(47,235)		Cash dividends declared on common stock - $0.30 per share	—		—		—		—		—		(47,236)		(47,236)
Cash dividends declared on preferred stock⁽²⁾	Cash dividends declared on preferred stock⁽²⁾	—		—		—		—		—		(3,150)		(3,150)		Cash dividends declared on preferred stock⁽²⁾	—		—		—		—		—		(3,150)		(3,150)
Repurchases of common stock including costs to repurchase	Repurchases of common stock including costs to repurchase	—		—		—		(320,167)		—		—		(320,167)		Repurchases of common stock including costs to repurchase	—		—		—		(25,003)		—		—		(25,003)
Restricted share unit vesting and taxes paid related to net share settlement	Restricted share unit vesting and taxes paid related to net share settlement	—		235		(8,647)		—		—		—		(8,412)		Restricted share unit vesting and taxes paid related to net share settlement	—		50		(281)		—		—		—		(231)
Stock options exercised	Stock options exercised	—		351		6,029		269		—		—		6,649		Stock options exercised	—		101		1,786		—		—		—		1,887
Share-based compensation expense	Share-based compensation expense	—		—		10,244		—		—		—		10,244		Share-based compensation expense	—		—		5,981		—		—		—		5,981
Balance at March 31, 2019		$	195,140	$	165,929	$	3,794,262	$	(319,898)	$	(18,342)	$	780,662	$	4,597,753
Balance at June 30, 2019																Balance at June 30, 2019	$	195,140	$	166,080	$	3,801,748	$	(344,901)	$	49,289	$	886,460	$	4,753,816


(in thousands, except per share data)	Preferred Stock		Common Stock		Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total
Balance, December 31, 2019	$	537,145	$	166,801	$	3,819,336	$	(715,560)	$	65,641	$	1,068,327	$	4,941,690
Cumulative-effect of change in accounting principle for financial instruments - credit losses (ASU 2016-13), net of tax⁽¹⁾	—		—		—		—		—		(35,721)		(35,721)
Net income	—		—		—		—		—		131,712		131,712
Other comprehensive income, net of income taxes	—		—		—		—		137,329		—		137,329
Cash dividends declared on common stock - $0.66 per share	—		—		—		—		—		(97,210)		(97,210)
Cash dividends declared on preferred stock⁽³⁾	—		—		—		—		—		(16,581)		(16,581)
Repurchases of common stock including costs to repurchase	—		—		—		(16,246)		—		—		(16,246)
Restricted share unit vesting and taxes paid related to net share settlement	—		379		(7,783)		—		—		—		(7,404)
Stock options exercised	—		226		6,253		—		—		—		6,479
Share-based compensation expense	—		—		8,920		—		—		—		8,920
Balance at June 30, 2020	$	537,145	$	167,406	$	3,826,726	$	(731,806)	$	202,970	$	1,050,527	$	5,052,968

Balance, December 31, 2018	$	195,140	$	143,300	$	3,060,561	$	(1,014,746)	$	(94,420)	$	843,767	$	3,133,602
Cumulative-effect of change in accounting principle for leases (ASU 2016-02), net of tax	—		—		—		—		—		4,270		4,270
Net income	—		—		—		—		—		276,370		276,370
Other comprehensive income, 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 declared on preferred stock⁽³⁾	—		—		—		—		—		(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 at June 30, 2019	$	195,140	$	166,080	$	3,801,748	$	(344,901)	$	49,289	$	886,460	$	4,753,816

⁽¹⁾For additional information, see "Part I - Item 1. Financial Statements and Supplementary Data - Note 1 - Basis of Presentation" in this Report.

⁽²⁾For the three months ended ~~March 31,~~June 30, 2020, dividends per share were $0.39 and $0.37 for Series D and Series E Preferred Stock, respectively. For the three months ended ~~March 31,~~June 30, 2019, dividends per share were $0.39 for Series D Preferred Stock.

~~See accompanying notes to unaudited interim consolidated financial statements.~~

⁽³⁾
For the six months ended June 30, 2020, dividends per share were $0.78 and $0.74 for Series D and Series E Preferred Stock, respectively. For the six months ended June 30, 2019, dividends per share were $0.78 for Series D Preferred Stock.

~~SYNOVUS FINANCIAL CORP.~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(unaudited)~~

Three Months Ended March 31,
(in thousands) 2020 2019
Operating Activities
Net income $ 38,521 $ 120,186
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses 158,722 23,569
Depreciation, amortization, and accretion, net 23,649 7,000
Deferred income tax (benefit) expense (10,978) 6,915
Originations of mortgage loans held for sale (254,395) (120,207)
Proceeds from sales of mortgage loans held for sale 259,224 104,552
Gain on sales of mortgage loans held for sale, net (9,497) (3,534)
(Increase) decrease in other assets (442,711) 21,634
Increase (decrease) in other liabilities 260,486 (27,776)
Investment securities gains, net (8,734) (75)
Loss on early extinguishment of debt 1,904 —
Share-based compensation expense 3,570 10,244
Net cash provided by operating activities 19,761 142,508
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 341,431 197,726
Proceeds from sales of investment securities available for sale 413,180 1,642,239
Purchases of investment securities available for sale (755,558) (2,254,346)
Proceeds from sales of loans 11,808 13,654
Proceeds from sales of other real estate and other assets 8,547 6,273
Net increase in loans (1,065,125) (423,514)
Net (purchases) redemptions of Federal Home Loan Bank stock (978) 1,285
Net (purchases) redemptions of Federal Reserve Bank stock (454) (24,239)
Net (purchases) proceeds from settlement of bank-owned life insurance policies (249,942) 656
Net increase in premises and equipment (6,941) (9,209)
Net cash used in investing activities (1,304,032) (648,375)
Financing Activities
Net increase in deposits 1,420,659 434,677
Net increase in federal funds purchased and securities sold under repurchase agreements 147,086 47,552
Net change in other short-term borrowings (578,560) 203,000
Repayments and redemption of long-term debt (251,904) —
Proceeds from issuance of long-term debt, net 1,248,441 297,045
Dividends paid to common shareholders (44,149) (28,966)
Dividends paid to preferred shareholders (3,150) (3,150)
Stock options and warrants exercised 6,267 6,649
Repurchase of common stock (16,246) (320,167)
Taxes paid related to net share settlement of equity awards (7,257) (8,412)
Net cash provided by financing activities 1,921,187 628,228
Increase in cash and cash equivalents including restricted cash 636,916 122,361
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period 1,186,918 1,143,564
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period $ 1,823,834 $ 1,265,925
Supplemental Disclosures:
Income taxes paid $ 920 $ 1,050
Interest paid 109,340 95,630
Non-cash Activities
Common stock issued, treasury stock reissued, equity awards/warrants exchanged to acquire FCB — 1,625,688
Securities sold during the period but settled after period-end 169,748 —
Securities purchased during the period but settled after period-end 113,818 —
Premises and equipment transferred to other assets held for sale 4,681 785
Loans foreclosed and transferred to other real estate 1,951 1,419
Loans transferred to other loans held for sale at fair value 11,893 12,237
Dividends declared on common stock during the period but paid after period-end 48,598 47,235
Dividends declared on preferred stock during the period but paid after period-end 5,141 —

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)	2020		2019
Operating Activities
Net income	$	131,712	$	276,370
Adjustments to reconcile net income to net cash (used) provided by operating activities:
Provision for credit losses	300,573		35,688
Depreciation, amortization, and accretion, net	49,921		11,446
Deferred income tax (benefit) expense	(54,741)		27,539
Originations of loans held for sale	(1,806,895)		(325,109)
Proceeds from sales of loans held for sale	1,045,342		287,648
Gain on sales of loans held for sale, net	(25,785)		(8,286)
Increase in other assets⁽¹⁾	(1,631,678)		(22,191)
Increase (decrease) in other liabilities⁽¹⁾	1,175,881		(45,265)
Investment securities (gains) losses, net	(78,144)		1,771
Loss on early extinguishment of debt	1,904		—
Share-based compensation expense	8,920		16,225
Net cash (used in) provided by operating activities	(882,990)		255,836
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	930,004		444,865
Proceeds from sales of investment securities available for sale	2,682,861		1,746,673
Purchases of investment securities available for sale	(3,890,074)		(2,717,383)
Proceeds from sales of equity securities	23,141		—
Proceeds from sales of loans	17,969		44,229
Proceeds from sales of other real estate and other assets	10,373		8,255
Net increase in loans	(2,748,040)		(970,160)
Net redemptions (purchases) of Federal Home Loan Bank stock	71,272		(43,775)
Net purchases of Federal Reserve Bank stock	(454)		(24,239)
Net (purchases) proceeds from settlement of bank-owned life insurance policies	(249,273)		656
Net increase in premises and equipment	(20,186)		(31,767)
Net cash used in investing activities	(3,172,407)		(1,341,546)
Financing Activities
Net increase in deposits	5,788,189		337,552
Net increase in federal funds purchased and securities sold under repurchase agreements	59,886		6,650
Net change in other short-term borrowings	(1,453,560)		680,000
Repayments and redemption of long-term debt	(1,076,759)		—
Proceeds from issuance of long-term debt, net	1,248,441		497,045
Dividends paid to common shareholders	(92,741)		(76,203)
Dividends paid to preferred shareholders	(16,581)		(6,300)
Stock options and warrants exercised	6,479		8,536
Repurchase of common stock	(16,246)		(345,170)
Taxes paid related to net share settlement of equity awards	(7,404)		(8,643)
Net cash provided by financing activities	4,439,704		1,093,467
Increase in cash and cash equivalents including restricted cash	384,307		7,757
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period	1,186,918		1,143,564
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period	$	1,571,225	$	1,151,321

Supplemental Disclosures:
Income taxes paid	$	257	$	62,913
Interest paid	194,687		221,475
Non-cash Activities
Common stock issued, treasury stock reissued, equity awards/warrants exchanged to acquire FCB	—		1,625,688
Loans foreclosed and transferred to other real estate	2,013		7,586
Loans transferred to loans held for sale at fair value	933,353		47,927
Dividends declared on common stock during the period but paid after period-end	48,612		47,236
Dividends declared on preferred stock during the period but paid after period-end	5,141		—

⁽¹⁾Increase in other assets includes $1.29 billion for receivable on unsettled securities sales, and increase in other liabilities includes $923.0 million for amount due on unsettled securities purchases.

See accompanying notes to unaudited interim consolidated financial statements.

Notes to Unaudited Interim Consolidated Financial Statements

Note 1 - Basis of Presentation and Accounting Policies

General

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, asset-based lending, structured lending, and international banking. Synovus Bank is positioned in markets in the Southeast, with ~~299~~293 branches and ~~386~~389 ATMs in Alabama, Florida, Georgia, South Carolina, and Tennessee.

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' 2019 Form 10-K.

Reclassifications

Prior periods' consolidated financial statements are reclassified whenever necessary to conform to the current periods' presentation.

Use of Estimates in the Preparation of Financial Statements

In preparing the consolidated financial statements in accordance with 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 change relate to the determination of the ACL; estimates of fair value, including goodwill impairment assessment; income taxes; and contingent ~~liabilities including legal matters, among others.~~liabilities.

Non-TDR Modifications due to COVID-19

Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

The U.S. has been operating under a presidentially declared state of emergency since March 13, 2020 ("National Emergency"). On March 27, 2020, the CARES Act was signed into law. Among other emergency measures aimed to lessen the impact of COVID-19, the CARES Act creates a forbearance program for federally backed mortgage loans, protects borrowers from negative credit reporting due to loan accommodations related to the National Emergency, and provides financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time to account for the effects of COVID-19.

Regulatory agencies ~~as set forth in~~have encouraged financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of COVID-19. In the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (initially issued on March 22, 2020 and revised on April 7, 2020), ~~have encouraged financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19. In this statement,~~for example, the regulatory agencies expressed their view of loan modification programs as positive actions that may mitigate adverse effects on borrowers due to COVID-19 and ~~that the agencies will not~~their unwillingness to criticize institutions for working with borrowers in a safe and sound manner. Moreover, the ~~revised statement provides~~Interagency Statement provided that eligible loan modifications related to COVID-19 may be accounted for under section 4013 of the CARES Act or in accordance with ASC 310-40. Section 4013 of ~~The~~the CARES Act allows banks to elect to not consider loan modifications related to COVID-19 that are made between March 1, 2020 and the earlier of December 31, 2020, or 60 days after the ~~COVID-19 national emergency~~National Emergency ends to borrowers that are current (i.e., less than 30 days past due as of December 31, 2019) as TDRs. The regulatory agencies further stated that performing loans granted payment deferrals due to COVID-19 are not considered past due or non-accrual. FASB confirmed the foregoing regulatory agencies' view, that such short-term modifications (e.g., six months) made on a good-faith basis in response to COVID-19 for borrowers who are current are not TDRs. As such, ~~beginning~~beginning in late March 2020, Synovus provided relief programs consisting primarily of 90-day payment deferral relief of principal and interest to borrowers negatively impacted by ~~COVID-19.~~COVID-19 and has accounted for these loan modifications in accordance with ASC 310-40. See "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" to the consolidated financial statements of Synovus' 2019 Form 10-K for information on Synovus' TDR policy. The deferred payments along with interest accrued during the deferral period are generally due and payable on the maturity date of the existing loan. Based on the terms of the deferral relief program which did not provide for forgiveness of interest, Synovus has recognized interest income on loans during the deferral period.

U.S. Small Business Administration Paycheck Protection Program (PPP)

Synovus is participating in the Paycheck Protection Program (PPP), which is a loan program that originated from the CARES Act and was subsequently expanded by the Paycheck Protection Program and Health Care Enhancement Act ("PPPHCEA Act"). The PPP is designed to provide U.S. small businesses with cash-flow assistance through loans guaranteed by the SBA. If the borrower meets certain criteria and uses the proceeds toward certain eligible expenses in accordance with the requirements of the PPP, the borrower's obligation to repay the loan can be forgiven up to the full principal amount of the loan and any accrued interest. Upon borrower forgiveness, the SBA pays the Company for the principal and accrued interest owed on the loan. If the full principal of the loan is not forgiven, the loan will operate according to the original loan terms with the SBA guaranty remaining. As of June 30, 2020, Synovus had

provided nearly $2.9 billion in funding to close to 19,000 customers through the PPP. The average PPP loan was approximately $150 thousand, and the customers that received those loans employ over 335 thousand individuals. As compensation for originating the loans, the Company receives lender processing fees from the SBA ranging from 1% to 5%, based on the size of the loan, which are deferred and will be amortized over the loans' contractual lives and recognized as interest income. Upon forgiveness of a loan by the SBA, any unrecognized net deferred fees related to the loan will be recognized as interest income in that period.

Recently Adopted Accounting Standards

ASU 2016-13, Financial Instruments-Credit Losses (ASC 326). On January 1, 2020, Synovus adopted ASU 2016-13 (and all subsequent ASUs on this topic), which replaces the existing incurred loss impairment guidance with an expected credit loss methodology (referred to as CECL). CECL requires management’s estimate of credit losses over the full remaining expected life of loans and other financial instruments and for Synovus, applies to loans, unfunded loan commitments, and available for sale debt securities. Upon adoption, Synovus applied the modified retrospective approach and recorded an after-tax cumulative-effect adjustment to beginning retained earnings for non-PCD assets (formerly non-PCI assets) and unfunded commitments of $35.7 million. Additionally, an initial estimate of expected credit losses on PCD assets (formerly PCI or ASC 310-30) was recognized with an offset to the cost basis of the related loans of $62.2 million. As permitted by transition guidance, Synovus did not reassess whether PCI assets met the criteria of PCD assets as of the adoption date. The remaining non-credit discount (based on the adjusted amortized cost basis) will be accreted into interest income. Results for reporting periods after adoption are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP.

The following table illustrates the impact of ASC 326 adoption:


	As of January 1, 2020
in thousands	Pre-ASC 326 Adoption		Impact of ASC 326 Adoption		As Reported under ASC 326
Assets
Allowance for loan losses:
Commercial and industrial	$	145,782	$	(2,310)	$	143,472
Commercial real estate	67,430		(651)		66,779
Consumer	68,190		85,955		154,145
Total allowance for loan losses	$	281,402	$	82,994	$	364,396
Liabilities
Reserve for unfunded commitments	$	1,375	$	27,440	$	28,815
Allowance for credit losses	$	282,777	$	110,434	$	393,211

The following table illustrates the distribution of the ASC 326 adoption impact to loans and equity:


	As of January 1, 2020
in thousands	Pre-ASC 326 Adoption		Impact of ASC 326 Adoption		As Reported under ASC 326
Loans, net	$	36,881,048	$	(20,767)	$	36,860,281
Retained earnings	1,068,327		(35,721)		1,032,606

In conjunction with the adoption of ASC 326, the following are additional disclosures about our significant accounting policies related to CECL.

Investment Securities Available for Sale

Investment securities available for sale are carried at fair value with unrealized gains and losses, net of the related tax effect, excluded from earnings and reported as a separate component of shareholders' equity within accumulated other comprehensive income (loss) until realized.

For investment securities available for sale in an unrealized loss position, if Synovus has an intention to sell the security, or it is more likely than not that the security will be required to be sold prior to recovery, the security is written down to its fair value. The write down is charged against the ACL with any additional impairment recorded in earnings. If the aforementioned criteria is not met, Synovus performs a quarterly assessment of its available for sale debt securities to determine if the decline in fair value of a security below its amortized cost is related to credit losses or other factors. Management considers the extent to which fair value is less than amortized cost, the issuer of the security, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. In assessing whether credit related

impairment exists, the present value of cash flows expected to be collected from the security is compared to the security's amortized cost. If the present value of cash flows expected to be collected is less than the security's amortized cost basis, the difference is attributable to credit losses. For such differences, Synovus records an ~~allowance for credit losses ("ACL")~~ACL with an offset to provision for credit losses expense. Synovus limits the ACL recorded to the amount the security's fair value is less than the amortized cost basis. Impairment losses related to other factors are recognized in other comprehensive income (loss).

Accrued interest on available for sale debt securities is excluded from the ACL determination and is recognized within other assets on the consolidated balance sheets. Available-for-sale debt securities are placed on non-accrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due. Accrued interest receivable is reversed against interest income when a security is placed on non-accrual status. Accordingly, we do not recognize an allowance for credit loss against accrued interest receivable.

Loans Held for Investment and Interest Income

Loans the Company has the intent and ability to hold for the foreseeable future are reported at principal amounts outstanding less amounts charged off, net of deferred fees and costs, and purchase premiums/discounts. Interest income, net deferred fees, and purchase premium/discount amortization/accretion on loans, are recognized on a level yield basis.

Allowance for Credit Losses for Loans Held for Investment (ALL)

The allowance for credit losses on loans held for investment are included in the ALL and represent management's estimate of credit losses expected over the life of the loans included in Synovus' existing loans held for investment portfolio. Changes to the allowance are recorded through a provision for credit losses and reduced by loans charged-off, net of recoveries. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain.

Accrued but uncollected interest is recorded in other assets on the consolidated balance sheets. ~~The~~In general, the Company ~~elected~~does not ~~to measure~~record an ACL for accrued interest receivables as allowable per ASC 326-20-30-5A as Synovus' non-accrual policies result in the timely write-off of accrued but uncollected interest.

Credit loss measurement

Synovus' loan loss estimation process includes procedures to appropriately consider the unique characteristics of its loan portfolio segments ~~(commercial and industrial ("C&I"), commercial real estate ("CRE")~~(C&I, CRE and consumer). These segments are further disaggregated into loan classes, the level at which credit quality is assessed and monitored (as described in the subsequent sections).

The ALL is measured on a collective (pool) basis when similar risk characteristics exist. Loans are grouped based upon the nature of the loan type and are further segregated based upon the individual loan risk ratings. Credit loss assumptions are primarily estimated using a ~~discounted cash flow ("DCF")~~DCF model applied to the aforementioned loan groupings. This model calculates an expected life-of-loan loss percentage for each loan category by considering the forecasted PD, which is the probability that a borrower will default, adjusted for relevant forecasted macroeconomic factors, and LGD, which is the estimate of the amount of net loss in the event of default.

Expected credit losses are estimated over the contractual term of the loan, adjusted for expected prepayments and curtailments when appropriate. Management's determination of the contract term excludes expected extensions, renewals, and modifications unless either of the following applies: there is a reasonable expectation at the reporting date that a TDR will be executed with an individual borrower, or ~~the~~an extension or renewal option is included in the contract at the reporting date ~~and~~that is not unconditionally cancellable by Synovus.

To the extent the lives of the loans in the portfolio extend beyond the period for which a reasonable and supportable forecast can be made (which is 1one year for Synovus), the Company reverts, on a straight-line basis back to the historical ~~rates.~~rates over a one year period.

Life-of-loan loss percentages may also be adjusted, as necessary, for certain quantitative and qualitative factors that in management's judgment are necessary to reflect losses expected in the portfolio. These adjustments address inherent limitations in the quantitative model including uncertainty and limitations, among others.

The above reflects the ALL estimation process for most commercial and ~~consumer~~consumer sub-pools. In some cases, Synovus may apply other acceptable loss rate models ~~(as permitted by policy)~~ to smaller subpools.

Loans that do not share risk characteristics are individually evaluated on a loan by loan basis with specific reserves, if any, recorded as appropriate. Specific reserves are determined based on two methods: discounted cash flow based upon the loan's contractual effective interest rate or at the fair value of the collateral, less costs to sell if the loan is collateral-dependent.

~~Under~~For individually evaluated loans, under the ~~discounted cash flow~~DCF method, resulting expected credit losses are recorded as a specific reserve with a charge-off for any portion of the expected credit loss that is determined not to be recoverable. The reserve is reassessed each quarter and adjusted as appropriate based on changes in estimated cash flows. Additionally, where guarantors are determined to be a source

of repayment, an assessment of the guarantee is required. This guarantee assessment would include, but not be limited to, factors such as type and feature of the guarantee, consideration for the guarantor's financial strength and capacity to service the loan in combination with the guarantor's other financial obligations as well as the guarantor's willingness to assist in servicing the loan.

IfFor individually evaluated loans, if the loan is collateral-dependent, then the fair value of the loan's collateral, less estimated selling costs, is compared to the loan's carrying amount to determine impairment. Fair value is estimated using appraisals performed by a certified or licensed appraiser. Management also considers other factors or recent developments, such as changes in absorption rates or market conditions at the time of valuation, selling costs and anticipated sales values, taking into account management's plans for disposition, which could result in adjustments to the fair value estimates indicated in the appraisals. The assumptions used in determining the amount of the impairment are subject to significant judgment. Use of

different assumptions, for example, changes in the fair value of the collateral or management's plans for disposition could have a significant impact on the amount of impairment.

Troubled debt restructurings

The ALL on a TDR is measured using the same method as all other loans held for investment, except that the original interest rate, and not the rate specified with the restructuring, is used to discount the expected cash flows.

Purchased Loans with Credit Deterioration

Purchased loans are evaluated upon acquisition in order to determine if the loan, or pool of loans, has experienced more-than-insignificant deterioration in credit quality since origination or issuance. In the performance of this evaluation, Synovus considers migration of the credit quality of the loans at origination in comparison to the credit quality at acquisition.

Purchased loans classified as PCD are recognized in accordance with ASC 326-20-30, whereby the amortized cost basis of the PCD asset is ‘grossed-up’ by the initial estimate of credit losses with an offset to the ALL. This acquisition date allowance has no income statement effect. Post-acquisition, any changes in estimates of expected credit losses are recorded through the provision for credit losses. Non-credit discounts or premiums are accreted or amortized, respectively into interest income using the interest method.

Loans formerly accounted for as purchased credit-impaired in accordance with ASC 310-30 were automatically transitioned to PCD classification. The Company did not maintain ASC 310-30 pools. PCD loans were integrated into existing pool structures based upon the nature of the loan type and are further segregated based upon the individual loan risk ratings as noted above.

The accounting treatment for purchased loans classified as non-PCD is the same as loans held for investment as detailed in the above section.

Allowance for Credit Losses on Off-balance-sheet Credit Exposures

Synovus maintains a separate ACL for off-balance-sheet credit exposures, including unfunded loan commitments, unless the associated obligation is unconditionally cancellable by the Company. This allowance is included in other liabilities on the consolidated balance sheets with offsetting expense recognized as a component of the provision for credit losses on the consolidated statements of income. The reserve for off-balance-sheet credit exposures considers the likelihood that funding will occur and estimates the expected credit losses on resulting commitments expected to be funded over its estimated ~~life.~~life using the estimated loss rates on loans held for investment.

Recently Issued Accounting Standards Not Yet Adopted

ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASC 848). Facilitation of the Effects of Reference Rate Reform on Financial Reporting, provides temporary, optional guidance to ease the potential burden in accounting for, or recognizing the effects of, the transition away from the LIBOR or other interbank offered rate on financial reporting. To help with the transition to new reference rates, the ASU provides optional expedients and exceptions for applying GAAP to affected contract modifications and hedge accounting relationships. The main provisions include:

•A change in a contract’s reference interest rate would be accounted for as a continuation of that contract rather than as the creation of a new one for contracts, including loans, debt, leases, and other arrangements, that meet specific criteria.

•When updating its hedging strategies in response to reference rate reform, an entity would be allowed to preserve its hedge accounting.

The guidance is applicable only to contracts or hedge accounting relationships that reference LIBOR or another reference rate expected to be discontinued. Because the guidance is meant to help entities through the transition period, it will be in effect for a limited time and will not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, for which an entity has elected certain optional expedients that are retained through the end of the hedging relationship. The amendments in this ASU are effective

March 12, 2020 through December 31, 2022. We are evaluating the impact of adopting the new guidance on the consolidated financial statements on an ongoing basis with no material expected impact at this time.

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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. The acquisition of FCB expanded Synovus' presence in Florida and the Southeast adding $9.29 billion in loans and $10.93 billion in deposits, on the Acquisition Date. 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, with the valuation finalized as of December 31, 2019. The results of FCB's operations are included in Synovus' consolidated financial statements since the Acquisition Date.

InDuring 2019, in connection with the FCB acquisition, Synovus incurred merger-related expense ~~presented in the table below~~ totaling ~~$49.7~~$7.4 million and $57.1 million for the three and six months ended ~~March 31,~~June 30, 2019, primarily related to employment compensation agreements, severance, professional services, and contract termination ~~charges:~~


~~(in thousands)~~	~~Three Months Ended March 31, 2019~~
~~Employment compensation agreements, severance, and other employee benefit costs~~	$	~~32,988~~
~~Professional fees~~	~~15,200~~
~~All other expense~~⁽¹⁾	~~1,550~~
~~Total merger-related expense~~	$	~~49,738~~

⁽¹⁾~~Primarily relates to fees associated with lease exit accruals, asset impairments related to the integration, and contract termination~~ charges.

See "Part II - Item 8. Financial Statements and Supplementary Data - Note 2 - Acquisitions" to the consolidated financial statements of Synovus' 2019 Form 10-K for additional information on Synovus' acquisition of FCB.

Acquisition of Global One

On October 1, 2016, Synovus completed its acquisition of all of the outstanding stock of Global One. Under the terms of the merger agreement, the purchase price included additional annual payments ("Earnout Payments") to Global One's former shareholders over a ~~three~~period not to ~~five-year period,~~extend beyond June 30, 2021, 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. During the three months ended June 30, 2020, Synovus recorded a $4.9 million increase to the earnout liability driven by increased earnings and earnings projections of Global One. The total fair value of the earnout liability at ~~March 31,~~June 30, 2020 was ~~$11.0~~$15.9 million.

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Note 3 - Investment Securities Available for Sale

The amortized cost, gross unrealized gains and losses, and estimated fair values of investment securities available for sale at ~~March 31,~~June 30, 2020 and December 31, 2019 are summarized below.


		March 31, 2020															June 30, 2020
(in thousands)	(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury securities	U.S. Treasury securities	$	19,918	$	—	$	—	$	19,918	U.S. Treasury securities	$	19,921	$	—	$	—	$	19,921
U.S. Government agency securities	U.S. Government agency securities	72,424		2,469		(37)		74,856		U.S. Government agency securities	168,918		2,504		(56)		171,366
Mortgage-backed securities issued by U.S. Government agencies	Mortgage-backed securities issued by U.S. Government agencies	53,557		1,866		(1)		55,422		Mortgage-backed securities issued by U.S. Government agencies	860,773		3,721		(66)		864,428
Mortgage-backed securities issued by U.S. Government sponsored enterprises	Mortgage-backed securities issued by U.S. Government sponsored enterprises	5,312,698		237,127		—		5,549,825		Mortgage-backed securities issued by U.S. Government sponsored enterprises	4,293,563		150,689		—		4,444,252
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	601,585		27,297		(2)		628,880		Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	1,191,630		21,597		(146)		1,213,081
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	311,235		24,502		—		335,737		Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	342,974		22,335		(56)		365,253
State and municipal securities	State and municipal securities	1,007		2		(4)		1,005		State and municipal securities	1,003		4		—		1,007
Asset-backed securities		154,954		150		(9,129)		145,975
Corporate debt securities and other debt securities	Corporate debt securities and other debt securities	129,376		921		(4,675)		125,622		Corporate debt securities and other debt securities	119,573		40		(1,428)		118,185
Total investment securities available for sale	Total investment securities available for sale	$	6,656,754	$	294,334	$	(13,848)	$	6,937,240	Total investment securities available for sale	$	6,998,355	$	200,890	$	(1,752)	$	7,197,493

		December 31, 2019															December 31, 2019
(in thousands)	(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury securities	U.S. Treasury securities	$	19,855	$	—	$	—	$	19,855	U.S. Treasury securities	$	19,855	$	—	$	—	$	19,855
U.S. Government agency securities	U.S. Government agency securities	35,499		1,042		—		36,541		U.S. Government agency securities	35,499		1,042		—		36,541
Mortgage-backed securities issued by U.S. Government agencies	Mortgage-backed securities issued by U.S. Government agencies	56,328		560		(72)		56,816		Mortgage-backed securities issued by U.S. Government agencies	56,328		560		(72)		56,816
Mortgage-backed securities issued by U.S. Government sponsored enterprises	Mortgage-backed securities issued by U.S. Government sponsored enterprises	5,079,396		103,495		(2,076)		5,180,815		Mortgage-backed securities issued by U.S. Government sponsored enterprises	5,079,396		103,495		(2,076)		5,180,815
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	629,706		7,349		(204)		636,851		Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	629,706		7,349		(204)		636,851
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	357,291		14,301		—		371,592		Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	357,291		14,301		—		371,592
State and municipal securities	State and municipal securities	2,069		6		—		2,075		State and municipal securities	2,069		6		—		2,075
Asset-backed securities	Asset-backed securities	323,237		4,315		(152)		327,400		Asset-backed securities	323,237		4,315		(152)		327,400
Corporate debt securities and other debt securities	Corporate debt securities and other debt securities	144,410		2,317		(2)		146,725		Corporate debt securities and other debt securities	144,410		2,317		(2)		146,725
Total investment securities available for sale	Total investment securities available for sale	$	6,647,791	$	133,385	$	(2,506)	$	6,778,670	Total investment securities available for sale	$	6,647,791	$	133,385	$	(2,506)	$	6,778,670

At ~~March 31,~~June 30, 2020 and December 31, 2019, investment securities with a carrying value of ~~$2.16~~$2.49 billion and $1.71 billion, respectively, were pledged to secure certain deposits and other liabilities, as required by law or contractual agreements.

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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 ~~March 31,~~June 30, 2020 and December 31, 2019 are presented below.


		March 31, 2020																							June 30, 2020
		Less than 12 Months						12 Months of Longer								Total					Less than 12 Months						12 Months of Longer	Total
(in thousands)	(in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		(in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. Government agency securities	U.S. Government agency securities	$	38,502	$	(37)	$	—	$	—	$	38,502	$	(37)	U.S. Government agency securities	$	47,091	$	(56)	$	—	$	—	$	47,091	$	(56)
Mortgage-backed securities issued by U.S. Government agencies	Mortgage-backed securities issued by U.S. Government agencies	6		(1)		—		—		6		(1)		Mortgage-backed securities issued by U.S. Government agencies	25,126		(66)		—		—		25,126		(66)
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	320		(1)		32		(1)		352		(2)		Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	142,634		(146)		—		—		142,634		(146)
State and municipal securities		503		(4)		—		—		503		(4)
Asset-backed securities		140,993		(9,129)		—		—		140,993		(9,129)
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises														Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	33,285		(56)		—		—		33,285		(56)
Corporate debt securities and other debt securities	Corporate debt securities and other debt securities	105,446		(4,675)		—		—		105,446		(4,675)		Corporate debt securities and other debt securities	42,782		(1,428)		—		—		42,782		(1,428)
Total	Total	$	285,770	$	(13,847)	$	32	$	(1)	$	285,802	$	(13,848)	Total	$	290,918	$	(1,752)	$	—	$	—	$	290,918	$	(1,752)

		December 31, 2019																							December 31, 2019
		Less than 12 Months						12 Months of Longer								Total					Less than 12 Months						12 Months of Longer	Total
(in thousands)	(in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		(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	Mortgage-backed securities issued by U.S. Government agencies	$	19,543	$	(70)	$	355	$	(2)	$	19,898	$	(72)	Mortgage-backed securities issued by U.S. Government agencies	$	19,543	$	(70)	$	355	$	(2)	19,898		$	(72)
Mortgage-backed securities issued by U.S. Government sponsored enterprises	Mortgage-backed securities issued by U.S. Government sponsored enterprises	768,040		(2,076)		—		—		768,040		(2,076)		Mortgage-backed securities issued by U.S. Government sponsored enterprises	768,040		(2,076)		—		—		768,040		(2,076)
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	57,670		(204)		—		—		57,670		(204)		Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	57,670		(204)		—		—		57,670		(204)
Asset-backed securities	Asset-backed securities	37,156		(116)		4,954		(36)		42,110		(152)		Asset-backed securities	37,156		(116)		4,954		(36)		42,110		(152)
Corporate debt securities and other debt securities	Corporate debt securities and other debt securities	9,505		(2)		—		—		9,505		(2)		Corporate debt securities and other debt securities	9,505		(2)		—		—		9,505		(2)
Total	Total	$	891,914	$	(2,468)	$	5,309	$	(38)	$	897,223	$	(2,506)	Total	$	891,914	$	(2,468)	$	5,309	$	(38)	$	897,223	$	(2,506)

As of ~~March 31,~~June 30, 2020, Synovus had 1712 investment securities in a loss position for less than twelve months and 30 investment securities in a loss position for twelve months or longer. At December 31, 2019, Synovus had 26 investment securities in a loss position for less than twelve months and 5 investment securities in a loss position for twelve months or longer. 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. As such, no write-downs to the amortized cost basis of the portfolio were recorded in the current period. During the latter part of the second quarter of 2020, as part of an overall strategic repositioning of the investment securities portfolio, Synovus realized net gains of $69.4 million from sales of investment securities, including losses of $5.7 millionrelated to the sale of Synovus' remaining portfolio of asset-backed securities.

Synovus has evaluated investment securities that are in an unrealized loss position as of ~~March 31,~~June 30, 2020 and determined the ~~following by investment category:~~

~~Asset-backed securities~~following: - Synovus considers the amount of credit support available to absorb losses for these holdings. For securities in which adequate credit support is not available, Synovus compares the present value of expected cash flows to the amortized cost of the individual securities. Assumptions used in cash flow determination include expected future default rates, severity of loss, and prepayments. The analysis performed at March 31, 2020 indicated the decline in fair value of asset-backed

securities was unrelated to credit losses and was instead attributable to wider market spreads. As such, no ACL was recorded during the period and unrealized losses were recognized in other comprehensive income, net of tax.

Corporate debt securities - Synovus considers the credit quality of each issuer and whether payments of principal and interest are current. None of the investment securities described above are past due as of ~~March 31,~~June 30, 2020. At ~~March 31,~~June 30, 2020, these

securities are rated investment grade and the decline in fair value was largely driven by liquidity and wider market spreads. As such, no ACL was recorded during the period and unrealized losses were recognized in other comprehensive income, net of tax.

The amortized cost and fair value by contractual maturity of investment securities available for sale at ~~March 31,~~June 30, 2020 are shown below. The expected life of ~~mortgage-backed securities~~MBSs 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~~MBSs 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 March 31, 2020																			Distribution of Maturities at June 30, 2020
(in thousands)	(in thousands)	Within One Year		1 to 5 Years		5 to 10 Years		More Than 10 Years		Total		(in thousands)	Within One Year		1 to 5 Years		5 to 10 Years		More Than 10 Years		Total
Amortized Cost	Amortized Cost											Amortized Cost
U.S. Treasury securities	U.S. Treasury securities	$	19,918	$	—	$	—	$	—	$	19,918	U.S. Treasury securities	$	19,921	$	—	$	—	$	—	$	19,921
U.S. Government agency securities	U.S. Government agency securities	568		3,367		43,501		24,988		72,424		U.S. Government agency securities	568		27,714		140,636		—		168,918
Mortgage-backed securities issued by U.S. Government agencies	Mortgage-backed securities issued by U.S. Government agencies	—		1,542		803		51,212		53,557		Mortgage-backed securities issued by U.S. Government agencies	—		1,398		715		858,660		860,773
Mortgage-backed securities issued by U.S. Government sponsored enterprises	Mortgage-backed securities issued by U.S. Government sponsored enterprises	—		517		86,523		5,225,658		5,312,698		Mortgage-backed securities issued by U.S. Government sponsored enterprises	—		410		83,168		4,209,985		4,293,563
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	—		—		296		601,289		601,585		Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	—		—		273		1,191,357		1,191,630
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	—		109,774		116,210		85,251		311,235		Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	—		109,753		116,092		117,129		342,974
State and municipal securities	State and municipal securities	—		—		—		1,007		1,007		State and municipal securities	—		—		500		503		1,003
Asset-backed securities		—		—		154,954		—		154,954
Corporate debt securities and other debt securities	Corporate debt securities and other debt securities	24,127		94,619		8,630		2,000		129,376		Corporate debt securities and other debt securities	24,049		84,869		8,655		2,000		119,573
Total amortized cost	Total amortized cost	$	44,613	$	209,819	$	410,917	$	5,991,405	$	6,656,754	Total amortized cost	$	44,538	$	224,144	$	350,039	$	6,379,634	$	6,998,355

Fair Value	Fair Value											Fair Value
U.S. Treasury securities	U.S. Treasury securities	$	19,918	$	—	$	—	$	—	$	19,918	U.S. Treasury securities	$	19,921	$	—	$	—	$	—	$	19,921
U.S. Government agency securities	U.S. Government agency securities	578		3,426		45,897		24,955		74,856		U.S. Government agency securities	571		27,770		143,025		—		171,366
Mortgage-backed securities issued by U.S. Government agencies	Mortgage-backed securities issued by U.S. Government agencies	—		1,588		831		53,003		55,422		Mortgage-backed securities issued by U.S. Government agencies	—		1,442		743		862,243		864,428
Mortgage-backed securities issued by U.S. Government sponsored enterprises	Mortgage-backed securities issued by U.S. Government sponsored enterprises	—		536		92,059		5,457,230		5,549,825		Mortgage-backed securities issued by U.S. Government sponsored enterprises	—		423		89,415		4,354,414		4,444,252
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	—		—		309		628,571		628,880		Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	—		—		285		1,212,796		1,213,081
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	—		116,257		129,175		90,305		335,737		Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	—		116,639		125,274		123,340		365,253
State and municipal securities	State and municipal securities	—		—		—		1,005		1,005		State and municipal securities	—		—		501		506		1,007
Asset-backed securities		—		—		145,975		—		145,975
Corporate debt securities and other debt securities	Corporate debt securities and other debt securities	24,068		92,574		7,418		1,562		125,622		Corporate debt securities and other debt securities	23,967		83,922		8,634		1,662		118,185
Total fair value	Total fair value	$	44,564	$	214,381	$	421,664	$	6,256,631	$	6,937,240	Total fair value	$	44,459	$	230,196	$	367,877	$	6,554,961	$	7,197,493

1415

Proceeds from sales, gross gains, and gross losses on sales of securities available for sale for the three and six months ended ~~March 31,~~June 30, 2020 and 2019 are presented below. The specific identification method is used to reclassify gains and losses out of other comprehensive income at the time of sale.


		Three Months Ended March 31,							Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	(in thousands)	2020		2019		(in thousands)	2020		2019		2020		2019
Proceeds from sales of investment securities available for sale	Proceeds from sales of investment securities available for sale	$	413,180	$	1,642,239	Proceeds from sales of investment securities available for sale	$	2,269,682	$	104,434	$	2,682,861	$	1,746,673
Gross realized gains on sales	Gross realized gains on sales	8,734		9,130		Gross realized gains on sales	75,105		—		83,839		9,129
Gross realized losses on sales(1)	Gross realized losses on sales(1)	—		(9,055)		Gross realized losses on sales(1)	(5,696)		(1,845)		(5,695)		(10,900)
Investment securities gains, net	Investment securities gains, net	$	8,734	$	75	Investment securities gains, net	$	69,409	$	(1,845)	$	78,144	$	(1,771)

⁽¹⁾
Losses recognized during 2020 related to the sale of Synovus' remaining portfolio of asset-backed securities during the second quarter of 2020.

1516

Note 4 - Loans and Allowance for Loan Losses

The following tables provide a summary of current, accruing past due, and non-accrual loans by portfolio class as of ~~March 31,~~June 30, 2020 and December 31, 2019.


Current, Accruing Past Due, and Non-accrual Loans	Current, Accruing Past Due, and Non-accrual Loans																														Current, Accruing Past Due, and Non-accrual Loans
		March 31, 2020																												June 30, 2020
(in thousands)	(in thousands)	Current		Accruing 30-89 Days Past Due⁽¹⁾		Accruing 90 Days or Greater Past Due ⁽¹⁾		Total Accruing Past Due ⁽¹⁾		Non-accrual with an ALL ⁽¹⁾		Non-accrual without an ALL ⁽¹⁾		Total			(in thousands)	Current		Accruing 30-89 Days Past Due⁽¹⁾		Accruing 90 Days or Greater Past Due ⁽¹⁾		Total Accruing Past Due ⁽¹⁾		Non-accrual with an ALL ⁽¹⁾		Non-accrual without an ALL ⁽¹⁾		Total
Commercial, financial and agricultural	Commercial, financial and agricultural	$	10,896,890	$	21,149	$	829	$	21,978	$	78,263	$	21,024	$	11,018,155		Commercial, financial and agricultural	$	13,041,583	$	9,515	$	2,598	$	12,113	$	67,535	$	15,465	$	13,136,696
Owner-occupied	Owner-occupied	6,614,799		10,279		852		11,131		7,718		9,639		6,643,287			Owner-occupied	6,779,043		1,894		1,038		2,932		9,206		10,399		6,801,580
Total commercial and industrial	Total commercial and industrial	17,511,689		31,428		1,681		33,109		85,981		30,663		17,661,442			Total commercial and industrial	19,820,626		11,409		3,636		15,045		76,741		25,864		19,938,276
Investment properties	Investment properties	9,252,438		3,056		85		3,141		2,212		—		9,257,791			Investment properties	9,444,615		829		118		947		1,638		—		9,447,200
1-4 family properties	1-4 family properties	744,451		4,636		56		4,692		2,325		—		751,468			1-4 family properties	689,660		1,507		1,204		2,711		4,437		—		696,808
Land and development	Land and development	658,624		976		142		1,118		1,935		265		661,942			Land and development	680,445		469		46		515		2,302		265		683,527
Total commercial real estate	Total commercial real estate	10,655,513		8,668		283		8,951		6,472		265		10,671,201			Total commercial real estate	10,814,720		2,805		1,368		4,173		8,377		265		10,827,535
Consumer mortgages	Consumer mortgages	5,583,714		10,836		—		10,836		13,017		554		5,608,121			Consumer mortgages	5,786,762		7,176		—		7,176		17,086		352		5,811,376
Home equity lines	Home equity lines	1,759,571		5,873		943		6,816		12,475		—		1,778,862			Home equity lines	1,692,542		3,495		27		3,522		14,200		—		1,710,264
Credit cards	Credit cards	256,445		2,465		2,671		5,136		—		—		261,581			Credit cards	243,333		4,395		2,720		7,115		—		—		250,448
Other consumer loans	Other consumer loans	2,277,102		17,567		820		18,387		6,860		—		2,302,349			Other consumer loans	1,460,672		8,719		640		9,359		4,552		—		1,474,583
Total consumer	Total consumer	9,876,832		36,741		4,434		41,175		32,352		554		9,950,913			Total consumer	9,183,309		23,785		3,387		27,172		35,838		352		9,246,671
Total loans	Total loans	$	38,044,034	$	76,837	$	6,398	$	83,235	$	124,805	$	31,482	$	38,283,556	(2)	Total loans	$	39,818,655	$	37,999	$	8,391	$	46,390	$	120,956	$	26,481	$	40,012,482	(2)


		December 31, 2019																												December 31, 2019
(in thousands)	(in thousands)	Current		Accruing 30-89 Days Past Due		Accruing 90 Days or Greater Past Due		Total Accruing Past Due		Non-accrual		ASC 310-30 Loans⁽³⁾		Total			(in thousands)	Current		Accruing 30-89 Days Past Due		Accruing 90 Days or Greater Past Due		Total Accruing Past Due		Non-accrual		ASC 310-30 Loans⁽³⁾		Total
Commercial, financial and agricultural	Commercial, financial and agricultural	$	9,137,585	$	38,916	$	1,206	$	40,122	$	56,017	$	1,019,135	$	10,252,859		Commercial, financial and agricultural	$	9,124,285	$	38,916	$	1,206	$	40,122	$	56,017	$	1,019,135	$	10,239,559
Owner-occupied	Owner-occupied	5,691,095		5,164		576		5,740		9,780		823,196		6,529,811			Owner-occupied	5,691,095		5,164		576		5,740		9,780		823,196		6,529,811
Total commercial and industrial	Total commercial and industrial	14,828,680		44,080		1,782		45,862		65,797		1,842,331		16,782,670			Total commercial and industrial	14,815,380		44,080		1,782		45,862		65,797		1,842,331		16,769,370
Investment properties	Investment properties	7,303,146		1,344		—		1,344		1,581		1,736,608		9,042,679			Investment properties	7,264,794		1,344		—		1,344		1,581		1,736,608		9,004,327
1-4 family properties	1-4 family properties	733,984		2,073		304		2,377		2,253		41,401		780,015			1-4 family properties	733,984		2,073		304		2,377		2,253		41,401		780,015
Land and development	Land and development	577,711		808		—		808		1,110		78,161		657,790			Land and development	629,363		808		—		808		1,110		78,161		709,442
Total commercial real estate	Total commercial real estate	8,614,841		4,225		304		4,529		4,944		1,856,170		10,480,484			Total commercial real estate	8,628,141		4,225		304		4,529		4,944		1,856,170		10,493,784
Consumer mortgages	Consumer mortgages	3,681,553		4,223		730		4,953		11,369		1,848,493		5,546,368			Consumer mortgages	3,681,553		4,223		730		4,953		11,369		1,848,493		5,546,368
Home equity lines	Home equity lines	1,691,759		7,038		171		7,209		12,034		2,155		1,713,157			Home equity lines	1,691,759		7,038		171		7,209		12,034		2,155		1,713,157
Credit cards	Credit cards	263,065		3,076		2,700		5,776		—		—		268,841			Credit cards	263,065		3,076		2,700		5,776		—		—		268,841
Other consumer loans	Other consumer loans	2,363,101		18,688		616		19,304		5,704		8,185		2,396,294			Other consumer loans	2,363,101		18,688		616		19,304		5,704		8,185		2,396,294
Total consumer	Total consumer	7,999,478		33,025		4,217		37,242		29,107		1,858,833		9,924,660			Total consumer	7,999,478		33,025		4,217		37,242		29,107		1,858,833		9,924,660
Total loans	Total loans	$	31,442,999	$	81,330	$	6,303	$	87,633	$	99,848	$	5,557,334	$	37,187,814	(4)	Total loans	$	31,442,999	$	81,330	$	6,303	$	87,633	$	99,848	$	5,557,334	$	37,187,814	(4)

⁽¹⁾For purposes of this table, non-performing and past due loans exclude COVID-19 loan modifications.

⁽²⁾Total before net deferred fees and costs of ~~$25.5~~$98.2 million.

⁽³⁾Represents loans (at fair value) acquired from FCB accounted for under ASC 310-30, net of discount of $90.3 million and payments since Acquisition Date and also include $1.8 million in non-accrual loans, $9.6 million in accruing 90 days or greater past due loans, and $26.5 million in 30-89 days past due loans.

⁽⁴⁾Total before net deferred fees and costs of $25.4 million.

Interest income on non-accrual loans outstanding ~~at March 31, 2020 and 2019~~ that would have been recorded if the loans had been current and performing in accordance with their original terms was ~~$2.1~~$2.8 million and $3.4 million for ~~each of~~ the three months ended

~~March 31,~~ June 30, 2020 and ~~2019. O~~f2019, respectively, and $4.9 million and $5.5 million for the six months ended June 30, 2020 and 2019, respectively. Of the interest income recognized during the three months ended ~~March 31,~~June 30, 2020 and 2019, cash-basis interest income was ~~$961~~

$484 thousand and ~~$648~~$996 thousand, respectively. Cash-basis interest income was $1.4 million and $1.6 million for the six months ended June 30, 2020 and 2019, respectively.

Loans with carrying values of ~~$15.24~~$15.42 billion and $12.11 billion, respectively, were pledged as collateral for borrowings and capacity at ~~March 31,~~June 30, 2020 and December 31, 2019, 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 Retail Credit Classification Policy. Additionally, in accordance with Interagency Supervisory Guidance, the risk grade classifications of consumer loans (consumer mortgages and HELOCs) 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.

The risk characteristics and collateral information of each portfolio segment are as follows:

Commercial and Industrial Loans

The C&I loan portfolio is comprised of general middle market and commercial banking clients across a diverse set of industries. 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. These loans are secured by collateral such as business equipment, inventory, and real estate. Whether for real estate or non-real estate purpose, credit decisions on loans in the C&I portfolio are based on cash flow from the operations of the business as the primary source of repayment of the debt, with underlying real estate or other collateral being the secondary source of repayment.PPP loans, which are categorized as C&I loans, were $2.71 billion net of unearned fees at June 30, 2020 and are guaranteed by the SBA.

Commercial Real Estate Loans

CRE loans primarily consist of income-producing investment properties loans. Additionally, CRE loans include 1-4 family properties loans as well as land and development loans. Investment properties loans consist of construction and mortgage loans for income-producing properties and are primarily made to finance multi-family properties, hotels, office buildings, shopping centers, warehouses and other commercial development properties. 1-4 family properties loans include construction loans to homebuilders and commercial mortgage loans related to 1-4 family rental properties 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. 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. Properties securing these loans are substantially within markets served by Synovus, 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).

Consumer Loans

The consumer loan portfolio consists of a wide variety of loan products offered through Synovus' banking network including first and second residential mortgages, HELOCs, and credit card loans, as well as home improvement loans, student, and ~~student~~personal loans from third-party lending partnerships. The majority of Synovus' consumer loans are consumer mortgages ~~and~~

1718

and HELOCs secured by first and second liens on residential real estate primarily located in the markets served by Synovus. The primary source of repayment for all consumer loans is generally the personal income of the borrower(s)~~, which can be impacted by economic conditions in their market areas.~~.

1819

The following table summarizes each loan portfolio class by risk grade and origination as of ~~March 31,~~June 30, 2020.


Loan Portfolio by Risk Grade and Origination	Loan Portfolio by Risk Grade and Origination																																					Loan Portfolio by Risk Grade and Origination
		March 31, 2020																																			June 30, 2020
		Term Loans Amortized Cost Basis by Origination Year																								Revolving Loans							Term Loans Amortized Cost Basis by Origination Year						Revolving Loans
(in thousands)	(in thousands)	2020		2019		2018		2017		2016		Prior		Amortized Cost Basis		Converted to Term Loans		Total		(in thousands)	2020		2019		2018		2017		2016		Prior		Amortized Cost Basis		Converted to Term Loans		Total
Commercial, financial and agricultural	Commercial, financial and agricultural																			Commercial, financial and agricultural
Pass	Pass	$	550,653	$	1,657,933	$	1,115,403	$	769,493	$	642,584	$	954,718	$	4,922,661	$	78,912	$	10,692,357	Pass	$	3,740,787	$	1,597,917	$	1,036,299	$	708,156	$	612,390	$	892,294	$	4,122,798	$	77,917	$	12,788,558
Special Mention	Special Mention	1,884		6,304		18,293		30,775		2,090		13,352		57,251		2,223		132,172		Special Mention	7,352		7,740		19,208		31,223		3,910		14,110		61,580		2,820		147,943
Substandard⁽¹⁾	Substandard⁽¹⁾	2,935		13,677		46,404		6,442		10,500		40,659		63,437		721		184,775		Substandard⁽¹⁾	4,674		11,579		15,952		20,561		11,095		37,335		65,753		1,016		167,965
Doubtful⁽²⁾	Doubtful⁽²⁾	—		—		—		198		915		91		6,919		728		8,851		Doubtful⁽²⁾	—		3,721		19,778		186		915		91		6,810		729		32,230
Total commercial, financial and agricultural	Total commercial, financial and agricultural	555,472		1,677,914		1,180,100		806,908		656,089		1,008,820		5,050,268		82,584		11,018,155		Total commercial, financial and agricultural	3,752,813		1,620,957		1,091,237		760,126		628,310		943,830		4,256,941		82,482		13,136,696
Owner-occupied	Owner-occupied																			Owner-occupied
Pass	Pass	386,363		1,213,917		1,271,307		1,116,905		714,764		1,503,199		284,048		—		6,490,503		Pass	688,033		1,216,238		1,250,906		1,082,002		669,572		1,419,946		308,851		—		6,635,548
Special Mention	Special Mention	—		5,742		5,000		12,431		5,058		15,252		—		—		43,483		Special Mention	2,700		6,233		13,990		6,776		3,219		7,362		—		—		40,280
Substandard⁽¹⁾	Substandard⁽¹⁾	338		7,352		38,459		29,820		3,912		29,397		23		—		109,301		Substandard⁽¹⁾	1,101		11,466		35,225		30,457		6,749		31,093		23		—		116,114
Doubtful⁽²⁾																				Doubtful⁽²⁾	—		—		9,638		—		—		—		—		—		9,638
Total owner-occupied	Total owner-occupied	386,701		1,227,011		1,314,766		1,159,156		723,734		1,547,848		284,071		—		6,643,287		Total owner-occupied	691,834		1,233,937		1,309,759		1,119,235		679,540		1,458,401		308,874		—		6,801,580
Total commercial and industrial	Total commercial and industrial	942,173		2,904,925		2,494,866		1,966,064		1,379,823		2,556,668		5,334,339		82,584		17,661,442		Total commercial and industrial	4,444,647		2,854,894		2,400,996		1,879,361		1,307,850		2,402,231		4,565,815		82,482		19,938,276
Investment properties	Investment properties																			Investment properties
Pass	Pass	387,787		1,961,810		2,339,056		1,690,528		855,438		1,765,377		184,095		—		9,184,091		Pass	584,995		2,148,882		2,367,168		1,568,115		794,784		1,645,276		225,887		—		9,335,107
Special Mention	Special Mention	836		92		2,117		4,754		5		10,146		—		—		17,950		Special Mention	828		717		—		22,446		21,406		4,499		—		—		49,896
Substandard⁽¹⁾	Substandard⁽¹⁾	160		1,668		1,718		2,124		1,278		48,802		—		—		55,750		Substandard⁽¹⁾	154		1,982		4,691		2,328		976		52,026		40		—		62,197
Total investment properties	Total investment properties	388,783		1,963,570		2,342,891		1,697,406		856,721		1,824,325		184,095		—		9,257,791		Total investment properties	585,977		2,151,581		2,371,859		1,592,889		817,166		1,701,801		225,927		—		9,447,200
1-4 family properties	1-4 family properties																			1-4 family properties
Pass	Pass	47,219		203,421		103,044		118,126		54,752		138,793		70,505		—		735,860		Pass	94,373		150,134		90,084		102,285		51,637		124,109		67,053		—		679,675
Special Mention	Special Mention	5		2,006		—		—		815		410		2,273		—		5,509		Special Mention	430		1,996		160		—		807		410		—		—		3,803
Substandard⁽¹⁾	Substandard⁽¹⁾	69		2,920		3,726		988		387		1,923		86		—		10,099		Substandard⁽¹⁾	1,518		922		4,399		1,092		382		2,640		2,377		—		13,330
Total 1-4 family properties	Total 1-4 family properties	47,293		208,347		106,770		119,114		55,954		141,126		72,864		—		751,468		Total 1-4 family properties	96,321		153,052		94,643		103,377		52,826		127,159		69,430		—		696,808
Land and development	Land and development																			Land and development
Pass	Pass	21,204		205,099		104,987		87,990		26,427		96,809		90,201		—		632,717		Pass	41,600		222,580		103,868		115,763		21,025		103,966		48,039		—		656,841
Special Mention	Special Mention	—		1,544		2,394		639		—		8,608		5,738		—		18,923		Special Mention	—		1,533		2,390		636		—		7,186		5,642		—		17,387
Substandard⁽¹⁾	Substandard⁽¹⁾	115		1,327		2,905		635		964		4,356		—		—		10,302		Substandard⁽¹⁾	1,101		1,274		2,864		630		1,190		2,240		—		—		9,299
Total land and development	Total land and development	21,319		207,970		110,286		89,264		27,391		109,773		95,939		—		661,942		Total land and development	42,701		225,387		109,122		117,029		22,215		113,392		53,681		—		683,527
Total commercial real estate	Total commercial real estate	457,395		2,379,887		2,559,947		1,905,784		940,066		2,075,224		352,898		—		10,671,201		Total commercial real estate	724,999		2,530,020		2,575,624		1,813,295		892,207		1,942,352		349,038		—		10,827,535

1920


Loan Portfolio by Risk Grade and Origination (continued)	Loan Portfolio by Risk Grade and Origination (continued)																																					Loan Portfolio by Risk Grade and Origination (continued)
		March 31, 2020																																			June 30, 2020
		Term Loans Amortized Cost Basis by Origination Year																								Revolving Loans							Term Loans Amortized Cost Basis by Origination Year						Revolving Loans
(in thousands)	(in thousands)	2020		2019		2018		2017		2016		Prior		Amortized Cost Basis		Converted to Term Loans		Total		(in thousands)	2020		2019		2018		2017		2016		Prior		Amortized Cost Basis		Converted to Term Loans		Total
Consumer mortgages	Consumer mortgages																			Consumer mortgages
Pass	Pass	$	279,510	$	1,149,232	$	701,190	$	942,965	$	898,374	$	1,622,114	$	880	$	—	$	5,594,265	Pass	$	1,087,169	$	1,042,318	$	560,207	$	841,101	$	826,726	$	1,433,288	$	991	$	—	$	5,791,800
Substandard⁽¹⁾	Substandard⁽¹⁾	—		784		281		1,488		1,811		9,418		—		—		13,782		Substandard⁽¹⁾	29		1,116		895		4,741		2,500		10,221		—		—		19,502
Loss⁽³⁾	Loss⁽³⁾	—		—		—		—		—		74		—		—		74		Loss⁽³⁾	—		—		—		—		—		74		—		—		74
Total consumer mortgages	Total consumer mortgages	279,510		1,150,016		701,471		944,453		900,185		1,631,606		880		—		5,608,121		Total consumer mortgages	1,087,198		1,043,434		561,102		845,842		829,226		1,443,583		991		—		5,811,376
Home equity lines	Home equity lines																			Home equity lines
Pass	Pass	—		—		—		—		—		—		1,666,627		93,499		1,760,126		Pass	—		—		—		—		—		—		1,600,837		89,969		1,690,806
Substandard⁽¹⁾	Substandard⁽¹⁾	—		—		—		—		—		—		11,824		5,949		17,773		Substandard⁽¹⁾	—		—		—		—		—		—		11,234		6,047		17,281
Doubtful⁽²⁾	Doubtful⁽²⁾	—		—		—		—		—		—		17		20		37		Doubtful⁽²⁾	—		—		—		—		—		—		17		20		37
Loss⁽³⁾	Loss⁽³⁾	—		—		—		—		—		—		736		190		926		Loss⁽³⁾	—		—		—		—		—		—		1,898		242		2,140
Total home equity lines	Total home equity lines	—		—		—		—		—		—		1,679,204		99,658		1,778,862		Total home equity lines	—		—		—		—		—		—		1,613,986		96,278		1,710,264
Credit cards	Credit cards																			Credit cards
Pass	Pass	—		—		—		—		—		—		258,904		—		258,904		Pass	—		—		—		—		—		—		247,884		—		247,884
Substandard⁽¹⁾	Substandard⁽¹⁾	—		—		—		—		—		—		736		—		736		Substandard⁽¹⁾	—		—		—		—		—		—		898		—		898
Loss⁽⁴⁾	Loss⁽⁴⁾	—		—		—		—		—		—		1,941		—		1,941		Loss⁽⁴⁾	—		—		—		—		—		—		1,666		—		1,666
Total credit cards	Total credit cards	—		—		—		—		—		—		261,581		—		261,581		Total credit cards	—		—		—		—		—		—		250,448		—		250,448
Other consumer loans	Other consumer loans																			Other consumer loans
Pass	Pass	121,380		788,397		438,760		413,899		185,671		100,619		245,304		—		2,294,030		Pass	259,282		326,999		221,013		196,955		126,927		88,033		249,397		—		1,468,606
Substandard⁽¹⁾	Substandard⁽¹⁾	—		1,117		588		3,849		1,439		1,111		215		—		8,319		Substandard⁽¹⁾	—		1,246		536		2,517		715		677		286		—		5,977
Total other consumer loans	Total other consumer loans	121,380		789,514		439,348		417,748		187,110		101,730		245,519		—		2,302,349		Total other consumer loans	259,282		328,245		221,549		199,472		127,642		88,710		249,683		—		1,474,583
Total consumer	Total consumer	400,890		1,939,530		1,140,819		1,362,201		1,087,295		1,733,336		2,187,184		99,658		9,950,913		Total consumer	1,346,480		1,371,679		782,651		1,045,314		956,868		1,532,293		2,115,108		96,278		9,246,671
Total loans⁽⁵⁾	Total loans⁽⁵⁾	$	1,800,458	$	7,224,342	$	6,195,632	$	5,234,049	$	3,407,184	$	6,365,228	$	7,874,421	$	182,242	$	38,283,556	Total loans⁽⁵⁾	$	6,516,126	$	6,756,593	$	5,759,271	$	4,737,970	$	3,156,925	$	5,876,876	$	7,029,961	$	178,760	$	40,012,482

⁽¹⁾ ~~Includes $266.4 million~~The majority of loans within Substandard risk grade are accruing loans at ~~March 31,~~June 30, 2020.

⁽²⁾ ~~The loans~~Loans within ~~this~~Doubtful risk grade are on non-accrual status and generally have an ALL equal to 50% of the loan amount.

⁽³⁾~~The loans~~Loans within ~~this~~Loss risk grade are on non-accrual status and have an ALL 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 ALL 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 ~~$25.5~~$98.2 million.

2021


Loan Portfolio by Risk Grade	Loan Portfolio by Risk Grade																												Loan Portfolio by Risk Grade
		December 31, 2019																										December 31, 2019
(in thousands)	(in thousands)	Pass		Special Mention		Substandard⁽¹⁾		Doubtful⁽²⁾		Loss⁽³⁾				Total		(in thousands)	Pass		Special Mention		Substandard⁽¹⁾		Doubtful⁽²⁾		Loss⁽³⁾			Total
Commercial, financial and agricultural	Commercial, financial and agricultural	$	9,940,359	$	128,506	$	182,831	$	1,163	$	—			$	10,252,859	Commercial, financial and agricultural	$	9,927,059	$	128,506	$	182,831	$	1,163	$	—		$	10,239,559
Owner-occupied	Owner-occupied	6,386,055		58,330		85,426		—		—				6,529,811		Owner-occupied	6,386,055		58,330		85,426		—		—			6,529,811
Total commercial and industrial	Total commercial and industrial	16,326,414		186,836		268,257		1,163		—				16,782,670		Total commercial and industrial	16,313,114		186,836		268,257		1,163		—			16,769,370
Investment properties	Investment properties	8,968,712		16,490		57,477		—		—				9,042,679		Investment properties	8,930,360		16,490		57,477		—		—			9,004,327
1-4 family properties	1-4 family properties	766,529		3,249		10,237		—		—				780,015		1-4 family properties	766,529		3,249		10,237		—		—			780,015
Land and development	Land and development	629,351		18,643		9,796		—		—				657,790		Land and development	681,003		18,643		9,796		—		—			709,442
Total commercial real estate	Total commercial real estate	10,364,592		38,382		77,510		—		—				10,480,484		Total commercial real estate	10,377,892		38,382		77,510		—		—			10,493,784
Consumer mortgages	Consumer mortgages	5,527,746		—		18,376		97		149		��		5,546,368		Consumer mortgages	5,527,746		—		18,376		97		149			5,546,368
Home equity lines	Home equity lines	1,697,086		—		14,806		21		1,244				1,713,157		Home equity lines	1,697,086		—		14,806		21		1,244			1,713,157
Credit cards	Credit cards	266,146		—		818		—		1,877			⁽⁴⁾	268,841		Credit cards	266,146		—		818		—		1,877		⁽⁴⁾	268,841
Other consumer loans	Other consumer loans	2,390,199		—		6,095		—		—				2,396,294		Other consumer loans	2,390,199		—		6,095		—		—			2,396,294
Total consumer	Total consumer	9,881,177		—		40,095		118		3,270				9,924,660		Total consumer	9,881,177		—		40,095		118		3,270			9,924,660
Total loans⁽⁵⁾	Total loans⁽⁵⁾	$	36,572,183	$	225,218	$	385,862	$	1,281	$	3,270			$	37,187,814	Total loans⁽⁵⁾	$	36,572,183	$	225,218	$	385,862	$	1,281	$	3,270		$	37,187,814

⁽¹⁾ ~~Includes $288.8 million~~The majority of ~~substandard~~loans within Substandard risk grade are accruing loans at December 31, 2019.

⁽²⁾ ~~The loans~~Loans within ~~this~~Doubtful risk grade are on non-accrual status and generally have an ALL equal to 50% of the loan amount.

⁽³⁾~~The loans~~Loans within ~~this~~Loss risk grade are on non-accrual status and have an ALL equal to the full loan amount.

⁽⁵⁾Total before net deferred fees and costs of $25.4 million.

Collateral-Dependent Loans

We classify a loan as collateral-dependent when our borrower is experiencing financial difficulty, and we expect repayment to be provided substantially through the operation or sale of collateral. Our commercial loans have collateral that is comprised of real estate and business assets. Our consumer loans have collateral that is substantially comprised of residential real estate.

There were no significant changes in the extent to which collateral secures our collateral-dependent loans during the three and six months ended ~~March 31,~~June 30, 2020.

2122

The following tables detail the changes in the ALL by loan segment for the three and six months ended ~~March 31,~~June 30, 2020 and 2019.

Allowance for Loan Losses Roll Forward
As Of and For the Three Months Ended March 31, 2020
(in thousands) Commercial & Industrial Commercial Real Estate Consumer Total
Allowance for loan losses:
Beginning balance, prior to adoption of ASU 2016-13 $ 145,782 $ 67,430 $ 68,190 $ 281,402
Impact from adoption of ASU 2016-13 (2,310) (651) 85,955 82,994
Charge-offs (14,885) (1,017) (7,972) (23,874)
Recoveries 1,741 399 1,673 3,813
Provision for loan losses 86,622 40,956 21,539 149,117
Ending balance $ 216,950 $ 107,117 $ 169,385 $ 493,452
As Of and For the Three Months Ended March 31, 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 (13,039) (1,233) (6,427) (20,699)
Recoveries 1,990 344 1,277 3,611
Provision for loan losses 13,565 1,102 8,902 23,569
Ending balance $ 135,639 $ 69,009 $ 52,388 $ 257,036

~~Provision~~ Additionally, during the three months ended June 30, 2020, Synovus reversed $13.3 million in previously established reserves for credit losses ~~and allowance~~associated with the transfer of $801.0 million in certain third-party lending partnership consumer loans to held for ~~the quarter, which includes both the~~sale loans.


Allowance for Loan Losses Roll Forward
	As Of and For the Three Months Ended June 30, 2020
(in thousands)	Commercial & Industrial		Commercial Real Estate		Consumer		Total
Allowance for loan losses:
Beginning balance	$	216,950	$	107,117	$	169,385	$	493,452
Charge-offs	(23,245)		(689)		(6,844)		(30,778)
Recoveries	3,261		536		2,935		6,732
Provision for loan losses	32,949		64,562		21,731		119,242
Ending balance	$	229,915	$	171,526	$	187,207	$	588,648

	As Of and For the Three Months Ended June 30, 2019
(in thousands)	Commercial & Industrial		Commercial Real Estate		Consumer		Total
Allowance for loan losses:
Beginning balance	$	135,639	$	69,009	$	52,388	$	257,036
Charge-offs	(11,095)		(861)		(4,909)		(16,865)
Recoveries	1,821		1,954		1,311		5,086
Provision for (reversal of) loan losses	11,639		(6,639)		7,119		12,119
Ending balance	$	138,004	$	63,463	$	55,909	$	257,376

	As Of and For the Six Months Ended June 30, 2020
(in thousands)	Commercial & Industrial		Commercial Real Estate		Consumer		Total
Allowance for loan losses:
Beginning balance, prior to adoption of ASU 2016-13	$	145,782	$	67,430	$	68,190	$	281,402
Impact from adoption of ASU 2016-13	(2,310)		(651)		85,955		82,994
Charge-offs	(38,130)		(1,706)		(14,816)		(54,652)
Recoveries	5,002		935		4,608		10,545
Provision for loan losses	119,571		105,518		43,270		268,359
Ending balance	$	229,915	$	171,526	$	187,207	$	588,648

	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	$	138,004	$	63,463	$	55,909	$	257,376

The ALL of $588.6 million and the reserve for unfunded commitments ~~were impacted~~of $61.0 million, which is recorded in other liabilities, comprise the total ACL of $649.7 million at June 30, 2020. The ACL increased during the second quarter of 2020 by $117.8 million to $649.7 million as of June 30, 2020.Since the adoption of CECL on January 1, ~~2020.~~ 2020, the ACL has increased $256.5 million.The ~~impact on provision~~increase for the three and six months ended June 30, 2020 continues to be primarily driven by the deteriorated economic environment caused by the COVID-19 pandemic.Provision for credit losses (which includes the provision for loan losses and unfunded commitments) of $141.9 million and $300.6 million for the three and six months ~~ending March 31,~~ended

June 30, 2020, ~~and~~respectively, resulted in the ~~allowance at March 31, 2020, compared~~building of the ACL required under CECL primarily as a result of deterioration in the economic environment due to ~~prior year, was amplified by~~ the ~~heightened economic distress resulting from the COVID-19 pandemic.~~impact of COVID-19.

Our 2019 disclosures included in "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" of Synovus' 2019 Form 10-K referenced a two-year reasonable and supportable forecast period used in CECL estimates, but it was deemed more appropriate to reduce that to a one-year horizon during this period of heightened economic uncertainty. A one-year reversion to historical losses follows the reasonable and supportable forecast period.

Our modeling process incorporates quantitative and qualitative considerations that are used to inform CECL estimates. The internally developed economic forecast used to determine the ~~allowance for credit losses~~ACL as of ~~March 31,~~June 30, 2020 was approved late in the ~~first~~second quarter of 2020 pursuant to Synovus' economic forecasting governance processes. ~~Between that approval date~~The economic assumptions for the second quarter of 2020 included the estimated impact of currently enacted government stimulus plans and ~~March 31,~~an unemployment rate ending the 2020 ~~further deterioration~~year around 10%. Our model forecast includes moderate economic expansion following significant declines in real GDP in the ~~economic outlook occurred which resulted in the need for a qualitative overlay to our allowance for credit losses. The qualitative overlay~~second quarter of ~~$37.3 million adds 10 bps to the allowance for credit losses and better aligns the total allowance with the economic indicators and forecasts at March 31,~~ 2020.

~~The~~ This represented further deterioration of the economic environment since ~~January 1,~~March 31, 2020 ~~due to the effects of COVID-19~~and resulted in an increase of the ACL to loans coverage ratio during the quarter of ~~1.39%~~24 bps to 1.63% at ~~March 31, 2020.~~June 30, 2020, or 1.74% excluding PPP loans.

~~Economic projections are an important consideration in CECL estimates.~~ Significant economic uncertainty remains as a result of the continuing ~~healthcare~~COVID-19 crisis, and the ~~ultimate~~trajectory of the economic recovery including any additional government stimulus plans will impact ~~of government stimulation efforts. If our economic outlook on June 30, 2020 evidences further deterioration, then we would expect to see a further increase in the allowance for credit losses.~~subsequent period CECL reserves.

Information about Synovus' TDRs is presented in the following tables. Synovus began entering into loan modifications with borrowers in response to the COVID-19 pandemic, which have not been classified as TDRs, and therefore are not included in the discussion below. See "Part I-Item 1. Financial Statements and Supplementary Data - Note 1 - Basis of Presentation" in this Report for more information on Synovus' loan modifications due to COVID-19. The following tables represent, by concession type, the post-modification balance for loans modified or renewed during the three and six months ended ~~March 31,~~June 30, 2020 and 2019 that were reported as accruing or non-accruing TDRs.


TDRs by Concession Type	TDRs by Concession Type															TDRs by Concession Type
		Three Months Ended March 31, 2020															Three Months Ended June 30, 2020
(in thousands, except contract data)	(in thousands, except contract data)	Number of Contracts	Below Market Interest Rate		Other Concessions⁽¹⁾		Total			(in thousands, except contract data)	Number of Contracts	Below Market Interest Rate		Other Concessions⁽¹⁾			Total
Commercial, financial and agricultural	Commercial, financial and agricultural	36	$	3,724	$	2,011	$	5,735		Commercial, financial and agricultural	40	$	1,503	$	2,000		$	3,503
Owner-occupied	Owner-occupied	5	1,367		96		1,463			Owner-occupied	7	453		1,434			1,887
Total commercial and industrial	Total commercial and industrial	41	5,091		2,107		7,198			Total commercial and industrial	47	1,956		3,434			5,390
Investment properties	Investment properties	2	23,070		—		23,070			Investment properties	2	5,599		—			5,599
1-4 family properties	1-4 family properties	6	724		442		1,166			1-4 family properties	4	69		549			618
Land and development	Land and development	1	449		—		449			Land and development	1	91		—			91
Total commercial real estate	Total commercial real estate	9	24,243		442		24,685			Total commercial real estate	7	5,759		549			6,308
Consumer mortgages	Consumer mortgages	6	515		1,083		1,598			Consumer mortgages	10	556		1,482			2,038
Home equity lines	Home equity lines	19	275		964		1,239			Home equity lines	14	181		918			1,099
Other consumer loans	Other consumer loans	29	78		1,897		1,975			Other consumer loans	18	19		798			817
Total consumer	Total consumer	54	868		3,944		4,812			Total consumer	42	756		3,198			3,954
Total TDRs	Total TDRs	104	$	30,202	$	6,493	$	36,695	⁽²⁾	Total TDRs	96	$	8,471	$	7,181		$	15,652	⁽²⁾

		Three Months Ended March 31, 2019															Three Months Ended June 30, 2019
(in thousands, except contract data)	(in thousands, except contract data)	Number of Contracts	Below Market Interest Rate		Other Concessions(1)		Total			(in thousands, except contract data)	Number of Contracts	Below Market Interest Rate		Other Concessions⁽¹⁾			Total
Commercial, financial and agricultural	Commercial, financial and agricultural	13	$	1,783	$	899	$	2,682		Commercial, financial and agricultural	21	$	1,343	$	1,589		$	2,932
Owner-occupied	Owner-occupied	2	949		—		949			Owner-occupied	4	1,082		—			1,082
Total commercial and industrial	Total commercial and industrial	15	2,732		899		3,631			Total commercial and industrial	25	2,425		1,589			4,014
Investment properties	Investment properties	1	482		—		482			Investment properties	1	180		—			180
1-4 family properties	1-4 family properties	6	793		—		793			1-4 family properties	4	514		—			514
Land and development										Land and development	2	169		—			169
Total commercial real estate	Total commercial real estate	7	1,275		—		1,275			Total commercial real estate	7	863		—			863
Consumer mortgages	Consumer mortgages	4	128		1,214		1,342			Consumer mortgages	1	109		—			109
Home equity lines	Home equity lines	1	—		105		105			Home equity lines	24	2,321		—			2,321
Other consumer loans	Other consumer loans	18	108		1,046		1,154			Other consumer loans	34	586		1,332			1,918
Total consumer	Total consumer	23	236		2,365		2,601			Total consumer	59	3,016		1,332			4,348
Total TDRs	Total TDRs	45	$	4,243	$	3,264	$	7,507	⁽³⁾	Total TDRs	91	$	6,304	$	2,921		$	9,225	⁽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 the three months ending ~~March 31,~~June 30, 2020 and 2019.

⁽²⁾NaN net charge-offs were recorded during the three months ended ~~March 31, 2020.~~June 30, 2020.

⁽³⁾NaN net charge-offs were recorded during the three months ended ~~March 31,~~June 30, 2019.


	Six Months Ended June 30, 2020
(in thousands, except contract data)	Number of Contracts	Below Market Interest Rate		Other Concessions⁽¹⁾		Total
Commercial, financial and agricultural	76	$	5,226	$	4,011	$	9,237
Owner-occupied	12	1,821		1,530		3,351
Total commercial and industrial	88	7,047		5,541		12,588
Investment properties	4	28,669		—		28,669
1-4 family properties	10	793		991		1,784
Land and development	2	541		—		541
Total commercial real estate	16	30,003		991		30,994
Consumer mortgages	16	1,072		2,566		3,638
Home equity lines	33	455		1,882		2,337
Other consumer loans	47	97		2,694		2,791
Total consumer	96	1,624		7,142		8,766
Total TDRs	200	$	38,674	$	13,674	$	52,348	⁽²⁾

	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	⁽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 the six months ending June 30, 2020 and 2019.

⁽²⁾NaN net charge-offs were recorded during the six months ended June 30, 2020.

⁽³⁾NaN net charge-offs were recorded during the six months ended June 30, 2019.

For the three and six months ended ~~March 31,~~June 30, 2020 there ~~were 3~~was 1 default with a recorded investment of $27 thousand and 4 defaults with a recorded investment of ~~$618~~$645 thousand, respectively, 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 ~~0 defaults~~1 default with a recorded investment of $5 thousand for both the three and six months ended ~~March 31,~~June 30, 2019. As of ~~March 31,~~June 30, 2020 and December 31, 2019, there were 0 commitments to lend a material amount of additional funds to any customer whose loan was classified as a TDR.

Note 5 - Goodwill and Other Intangible Assets

Goodwill allocated to each reporting unit at ~~March 31,~~June 30, 2020 and December 31, 2019 is presented as follows (the FMS reportable segment includes 2 reporting units of Consumer Mortgages and Wealth Management):

(in thousands) Community Banking Reporting Unit Wholesale Banking Reporting Unit Consumer Mortgages Reporting Unit Wealth Management Reporting Unit Total
Balance as of December 31, 2019 $ 256,323 $ 171,636 $ 44,877 $ 24,431 $ 497,267
Goodwill acquired and adjustments during the year — — — — —
Balance as of March 31, 2020 $ 256,323 $ 171,636 $ 44,877 $ 24,431 $ 497,267


(in thousands)	Community Banking Reporting Unit		Wholesale Banking Reporting Unit		Consumer Mortgages Reporting Unit		Wealth Management Reporting Unit		Total
Balance as of December 31, 2019	$	256,323	$	171,636	$	44,877	$	24,431	$	497,267
Goodwill acquired and adjustments during the year	—		—		—		—		—
Balance as of June 30, 2020	$	256,323	$	171,636	$	44,877	$	24,431	$	497,267

Goodwill is evaluated for impairment on an annual basis or whenever an event occurs or circumstances change to indicate that it is more likely than not that an impairment loss has been incurred (i.e., a triggering event). Synovus conducted a goodwill impairment assessment as of December 31, 2019, following Synovus' reorganization, applying ASC 350-20-35-3A Goodwill Subsequent Measurement - Qualitative Assessment Approach and concluded that goodwill was not impaired. See "Part II - Item 8. Financial Statements and Supplementary Data - Note 19 -Segment Reporting" to the consolidated financial statements of Synovus' 2019 Form 10-K for information on Synovus' reorganization during 2019.

During the ~~first~~ second quarter of 2020, Synovus assessed the indicators of goodwill impairment for each reporting unit and noted certain events related to COVID-19 that indicated it was more likely than not that goodwill was impaired, necessitatingan interim test. Triggering events included Synovus' stock price trading below book value for ~~several weeks prior to quarter-end,~~the entire quarter, a ~~series of emergency~~n extremely low interest rate ~~cuts by the Federal Reserve in March,~~environment, as well as general economic uncertainty surrounding the ~~pandemic.~~pandemic, which has led to an economic recession. As such, Synovus performed a quantitative assessment of goodwill impairment as of ~~March 31,~~June 30, 2020, which included determining the estimated fair value of each reporting unit, utilizing a combination of discounted cash flow and market-based approaches, and comparing that fair value to ~~the~~each reporting unit's carrying amount. The ~~results~~discounted cash flow method included updated internal forecasts, long-term profitability targets, growth rates and discount rates.The market approach was based on a comparison of ~~this test indicated that~~certain financial metrics of Synovus' reporting units to guideline public company peers. The income-based discounted cash flow approach was more heavily weighted (60%) than the ~~estimated~~market-based approach (40%) due to significant volatility in the market since the pandemic was declared a National Emergency.

Based on assessments performed at June 30, 2020 and March 31, 2020, the fair value of each of our reporting ~~unit~~units exceeded its carrying amount ~~as of~~at June 30, 2020 and March 31, 2020; therefore, goodwill is ~~not impaired as~~0t impaired. However, the excess of fair value over the ~~testing date. A~~carrying amount for the Community Banking and Wholesale Banking reporting units was significantly less than the excess at December 31, 2019.

Due to the high degree of subjectivity involved in estimating the fair value of Synovus' reporting units, a significant decline in ~~Synovus’~~Synovus' expected future cash flows or estimated growth rates due to further deterioration in the economic environment, or a prolonged decline in the price of ~~Synovus’~~Synovus' common stock, ~~due to further deterioration in the economic environment,~~ may necessitate additional future interim ~~tests and/or the recording of an~~assessments that could result in a goodwill impairment charge ~~on goodwill during 2020.~~that is material to Synovus' results from operations, but would not materially impact our financial condition.

The following table shows the gross carrying amount and accumulated amortization of other intangible assets as of ~~March 31,~~June 30, 2020 and December 31, 2019, which primarily consist of core deposit intangible assets acquired in the FCB acquisition. The CDI is being amortized over its estimated useful life of approximately ten years utilizing an accelerated method. Aggregate other intangible assets amortization expense for the three and six months ended ~~March 31,~~June 30, 2020 ~~and 2019~~ was $2.6 million and ~~$3.4~~$5.3 million, respectively. Aggregate other intangible assets amortization for the three and six months ended June 30, 2019 was $2.4 million and $5.8 million, respectively.


(in thousands)	(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value		(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
March 31, 2020
June 30, 2020								June 30, 2020
CDI	CDI	$	57,400	$	(12,784)	$	44,616	CDI	$	57,400	$	(15,132)	$	42,268
Other	Other	12,500		(4,084)		8,416		Other	12,500		(4,376)		8,124
Total other intangible assets	Total other intangible assets	$	69,900	$	(16,868)	$	53,032	Total other intangible assets	$	69,900	$	(19,508)	$	50,392
December 31, 2019	December 31, 2019							December 31, 2019
CDI	CDI	$	57,400	$	(10,436)	$	46,964	CDI	$	57,400	$	(10,436)	$	46,964
Other	Other	12,500		(3,793)		8,707		Other	12,500		(3,793)		8,707
Total other intangible assets	Total other intangible assets	$	69,900	$	(14,229)	$	55,671	Total other intangible assets	$	69,900	$	(14,229)	$	55,671

Note 6 - Shareholders' Equity and Other Comprehensive Income (Loss)

Repurchases of Common Stock

During the three months ended ~~March 31,~~June 30, 2020, Synovus did not repurchase any shares of its common stock. During the six months ended June 30, 2020, Synovus repurchased $16.2 million, or 450 thousand shares of its common stock, at an average price of $36.08 per share, under the share repurchase program announced on January 24, 2020.

Dividends

The following table presents dividends declared related to common stock. For information related to preferred stock dividends, see "Part II - Item 8. Financial Statements and Supplementary Data - Note 10 - Shareholders' Equity and Other Comprehensive Income" to the consolidated financial statements of Synovus' 2019 Form 10-K.

Three Months Ended March 31,
2020 2019
Cash dividends declared per share $ 0.33 $ 0.30


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Cash dividends declared per share	$	0.33	$	0.30	$	0.66	$	0.60

Equity-Based Compensation Plans

The following tables summarize the status of Synovus' stock options, restricted share units, market restricted share units, and performance share units as of ~~March 31,~~June 30, 2020 and activity for the ~~three~~six months ended ~~March 31,~~June 30, 2020.


		Stock Options					Stock Options
(in thousands, except per share amounts)	(in thousands, except per share amounts)	Quantity	Weighted-Average Exercise Price Per Share		(in thousands, except per share amounts)	Quantity	Weighted-Average Exercise Price Per Share
Outstanding at January 1, 2020	Outstanding at January 1, 2020	3,037	$	22.74	Outstanding at January 1, 2020	3,037	$	22.74
Exercised	Exercised	(220)	29.05		Exercised	(232)	28.59
Expired/canceled	Expired/canceled	(6)	20.99		Expired/canceled	(16)	25.00
Outstanding at March 31, 2020		2,811	$	22.25
Outstanding at June 30, 2020					Outstanding at June 30, 2020	2,789	$	22.24


		RSUs, MRSUs, and PSUs					RSUs, MRSUs, and PSUs
(in thousands, except per share amounts)	(in thousands, except per share amounts)	Quantity	Weighted-Average Grant Date Fair Value Per Share		(in thousands, except per share amounts)	Quantity	Weighted-Average Grant Date Fair Value Per Share
Non-vested at January 1, 2020	Non-vested at January 1, 2020	1,312	$	39.28	Non-vested at January 1, 2020	1,312	$	39.28
Granted	Granted	689	36.63		Granted	743	35.11
Quantity change based on TSR and performance factors	Quantity change based on TSR and performance factors	23	36.63		Quantity change based on TSR and performance factors	44	35.11
Dividend equivalents granted	Dividend equivalents granted	12	36.63		Dividend equivalents granted	41	35.11
Vested	Vested	(556)	39.25		Vested	(582)	38.40
Forfeited	Forfeited	(5)	36.63		Forfeited	(48)	36.22
Non-vested at March 31, 2020		1,475	$	38.01
Non-vested at June 30, 2020					Non-vested at June 30, 2020	1,510	$	37.43

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 three and six months ended ~~March 31,~~June 30, 2020 and 2019.

Changes in Accumulated Other Comprehensive Income (Loss) by Component (Net of Income Taxes)
(in thousands)
Net unrealized gains (losses) on investment securities available for sale⁽¹⁾
Net unrealized gains (losses) on cash flow hedges⁽¹⁾
Post-retirement unfunded health benefit Total
Balance, December 31, 2019 $ 83,666 $ (18,487) $ 462 $ 65,641
Other comprehensive income (loss) before reclassifications 117,330 80,501 — 197,831
Amounts reclassified from AOCI (6,472) (89) — (6,561)
Net current period other comprehensive income (loss) 110,858 80,412 — 191,270
Balance at March 31, 2020 $ 194,524 $ 61,925 $ 462 $ 256,911
Balance, December 31, 2018 $ (83,179) $ (12,137) $ 896 $ (94,420)
Other comprehensive income (loss) before reclassifications 76,164 — — 76,164
Amounts reclassified from AOCI (56) — (30) (86)
Net current period other comprehensive income (loss) 76,108 — (30) 76,078
Balance at March 31, 2019 $ (7,071) $ (12,137) $ 866 $ (18,342)


Changes in Accumulated Other Comprehensive Income (Loss) by Component (Net of Income Taxes)
(in thousands)	Net unrealized gains (losses) on investment securities available for sale⁽¹⁾		Net unrealized gains (losses) on cash flow hedges⁽¹⁾		Post-retirement unfunded health benefit		Total
Balance, April 1, 2020	$	194,524	$	61,925	$	462	$	256,911
Other comprehensive income (loss) before reclassifications	(8,847)		6,538		—		(2,309)
Amounts reclassified from AOCI	(51,432)		(200)		—		(51,632)
Net current period other comprehensive income (loss)	(60,279)		6,338		—		(53,941)
Balance at June 30, 2020	$	134,245	$	68,263	$	462	$	202,970

Balance, April 1, 2019	$	(7,071)	$	(12,137)	$	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 at June 30, 2019	$	60,586	$	(12,137)	$	840	$	49,289

Balance, December 31, 2019	$	83,666	$	(18,487)	$	462	$	65,641
Other comprehensive income (loss) before reclassifications	108,484		87,039		—		195,523
Amounts reclassified from AOCI	(57,905)		(289)		—		(58,194)
Net current period other comprehensive income (loss)	50,579		86,750		—		137,329
Balance at June 30, 2020	$	134,245	$	68,263	$	462	$	202,970

Balance, December 31, 2018	$	(83,179)	$	(12,137)	$	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 at June 30, 2019	$	60,586	$	(12,137)	$	840	$	49,289

⁽¹⁾For all periods presented, the ending balance in net unrealized gains (losses) on cash flow hedges and investment securities available for sale includes unrealized losses of $12.1 million and $13.3 million, respectively, related to residual tax effects remaining in OCI due to previously established deferred tax asset valuation allowances in 2010 and 2011. In accordance with ASC 740-20-45-11(b), under the portfolio approach, these unrealized losses are realized at the time the entire portfolio is sold or disposed.

2528

Note 7 - Fair Value Accounting

Fair value accounting guidance defines fair value as the exchange price that would be received to sell an asset or paid to transfer a liability (an "exit price") in the principal or most advantageous market available to the entity in an orderly transaction between market participants, on the measurement date. See "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" of Synovus' 2019 Form 10-K for a description of how fair value measurements are determined.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present all financial instruments measured at fair value on a recurring basis as of ~~March 31,~~June 30, 2020 and December 31, 2019.


		March 31, 2020															June 30, 2020
(in thousands)	(in thousands)	Level 1		Level 2		Level 3		Total Assets and Liabilities at Fair Value		(in thousands)	Level 1		Level 2		Level 3		Total Assets and Liabilities at Fair Value
Assets	Assets									Assets
Trading securities:	Trading securities:									Trading securities:
Mortgage-backed securities issued by U.S. Government agencies										Mortgage-backed securities issued by U.S. Government agencies	$	—	$	18	$	—	$	18
Commercial mortgage-backed securities issued by U.S. Government sponsored enterprises	Commercial mortgage-backed securities issued by U.S. Government sponsored enterprises	$	—	$	637	$	—	$	637	Commercial mortgage-backed securities issued by U.S. Government sponsored enterprises	—		288		—		288
Other mortgage-backed securities	Other mortgage-backed securities	—		1,582		—		1,582		Other mortgage-backed securities	—		1,620		—		1,620
State and municipal securities	State and municipal securities	—		680		—		680		State and municipal securities	—		165		—		165
Asset-backed securities	Asset-backed securities	—		1,913		—		1,913		Asset-backed securities	—		2,535		—		2,535
Other investments		—		45		—		45
Total trading securities	Total trading securities	$	—	$	4,857	$	—	$	4,857	Total trading securities	$	—	$	4,626	$	—	$	4,626
Investment securities available for sale:	Investment securities available for sale:									Investment securities available for sale:
U.S. Treasury securities	U.S. Treasury securities	$	19,918	$	—	$	—	$	19,918	U.S. Treasury securities	$	19,921	$	—	$	—	$	19,921
U.S. Government agency securities	U.S. Government agency securities	—		74,856		—		74,856		U.S. Government agency securities	—		171,366		—		171,366
Mortgage-backed securities issued by U.S. Government agencies	Mortgage-backed securities issued by U.S. Government agencies	—		55,422		—		55,422		Mortgage-backed securities issued by U.S. Government agencies	—		864,428		—		864,428
Mortgage-backed securities issued by U.S. Government sponsored enterprises	Mortgage-backed securities issued by U.S. Government sponsored enterprises	—		5,549,825		—		5,549,825		Mortgage-backed securities issued by U.S. Government sponsored enterprises	—		4,444,252		—		4,444,252
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	—		628,880		—		628,880		Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	—		1,213,081		—		1,213,081
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	—		335,737		—		335,737		Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	—		365,253		—		365,253
State and municipal securities	State and municipal securities	—		1,005		—		1,005		State and municipal securities	—		1,007		—		1,007
Asset-backed securities		—		145,975		—		145,975
Corporate debt securities and other debt securities	Corporate debt securities and other debt securities	—		124,060		1,562		125,622		Corporate debt securities and other debt securities	—		116,523		1,662		118,185
Total investment securities available for sale	Total investment securities available for sale	$	19,918	$	6,915,760	$	1,562	$	6,937,240	Total investment securities available for sale	$	19,921	$	7,175,910	$	1,662	$	7,197,493
Mortgage loans held for sale	Mortgage loans held for sale	—		119,841		—		119,841		Mortgage loans held for sale	—		266,306		—		266,306
Private equity investments	Private equity investments	11,877		—		3,255		15,132		Private equity investments	—		—		698		698
Mutual funds and mutual funds held in rabbi trusts	Mutual funds and mutual funds held in rabbi trusts	31,241		—		—		31,241		Mutual funds and mutual funds held in rabbi trusts	34,219		—		—		34,219
GGL/SBA loans servicing asset	GGL/SBA loans servicing asset	—		—		3,149		3,149		GGL/SBA loans servicing asset	—		—		3,019		3,019
Derivative assets	Derivative assets	—		466,401		—		466,401		Derivative assets	—		496,978		—		496,978
Liabilities	Liabilities									Liabilities
Earnout liability	Earnout liability	$	—	$	—	$	11,016	$	11,016	Earnout liability	$	—	$	—	$	15,924	$	15,924
Derivative liabilities	Derivative liabilities	—		184,021		2,050		186,071		Derivative liabilities	—		194,376		1,755		196,131

2629



	December 31, 2019
(in thousands)	Level 1		Level 2		Level 3		Total Assets and Liabilities at Fair Value
Assets
Trading securities:
Commercial mortgage-backed securities issued by U.S. Government sponsored enterprises	$	—	$	2,486	$	—	$	2,486
Other mortgage-backed securities	—		1,284		—		1,284
State and municipal securities	—		65		—		65
Asset-backed securities	—		3,227		—		3,227
Other investments	—		150		—		150
Total trading securities	$	—	$	7,212	$	—	$	7,212
Investment securities available for sale:
U.S. Treasury securities	$	19,855	$	—	$	—	$	19,855
U.S. Government agency securities	—		36,541		—		36,541
Mortgage-backed securities issued by U.S. Government agencies	—		56,816		—		56,816
Mortgage-backed securities issued by U.S. Government sponsored enterprises	—		5,180,815		—		5,180,815
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	—		636,851		—		636,851
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	—		371,592		—		371,592
State and municipal securities	—		2,075		—		2,075
Asset-backed securities	—		327,400		—		327,400
Corporate debt securities and other debt securities	—		144,620		2,105		146,725
Total investment securities available for sale	$	19,855	$	6,756,710	$	2,105	$	6,778,670
Mortgage loans held for sale	—		115,173		—		115,173
Private equity investments	15,502		—		3,887		19,389
Mutual funds and mutual funds held in rabbi trusts	32,348		—		—		32,348
GGL/SBA loans servicing asset	—		—		3,040		3,040
Derivative assets	—		140,016		—		140,016
Liabilities
Trading liability for short positions	$	1,560	$	—	$	—	$	1,560
Earnout liability	—		—		11,016		11,016
Derivative liabilities	—		34,732		2,339		37,071

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 UPB of mortgage loans held for sale and the changes in fair value of these loans. An immaterial portion of these changes in fair value was attributable to changes in instrument-specific credit risk.


Mortgage Loans Held for Sale	Mortgage Loans Held for Sale								Mortgage Loans Held for Sale
(in thousands)	(in thousands)	As of March 31, 2020		As of December 31, 2019		(in thousands)	As of June 30, 2020			As of December 31, 2019
Fair value	Fair value	$	119,841	$	115,173	Fair value	$	266,306		$	115,173
Unpaid principal balance	Unpaid principal balance	116,268		112,218		Unpaid principal balance	257,365			112,218
Fair value less aggregate unpaid principal balance	Fair value less aggregate unpaid principal balance	$	3,573	$	2,955	Fair value less aggregate unpaid principal balance	$	8,941		$	2,955

2730


Changes in Fair Value Included in Net Income	Changes in Fair Value Included in Net Income					Changes in Fair Value Included in Net Income
		Three Months Ended March 31,							Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	(in thousands)	2020		2019		(in thousands)	2020		2019		2020		2019
Mortgage loans held for sale	Mortgage loans held for sale	$	619	$	356	Mortgage loans held for sale	$	5,365	$	345	$	5,984	$	701

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

During the three and six months ended ~~March 31,~~June 30, 2020, Synovus did not have any transfers in or out of Level 3 in the fair value hierarchy. During the ~~three~~six months ended ~~March 31,~~June 30, 2019, Synovus had transfers out of Level 3 into Level 1 in the fair value hierarchy as certain funds within private equity investments became public with traded securities.


		Three Months Ended March 31, 2020																			Three Months Ended June 30, 2020
(in thousands)	(in thousands)	Investment Securities Available for Sale		Private Equity Investments		GGL / SBA Loans Servicing Asset		Earnout Liability		Visa Derivative		(in thousands)	Investment Securities Available for Sale		Private Equity Investments		GGL / SBA Loans Servicing Asset		Earnout Liability		Visa Derivative
Beginning balance, December 31, 2019		$	2,105	$	3,887	$	3,040	$	(11,016)	$	(2,339)
Beginning balance, April 1, 2020												Beginning balance, April 1, 2020	$	1,562	$	3,255	$	3,149	$	(11,016)	$	(2,050)
Total gains (losses) realized/unrealized:	Total gains (losses) realized/unrealized:											Total gains (losses) realized/unrealized:
Included in earnings	Included in earnings	—		(632)		(264)		—		—		Included in earnings	—		(2,557)		(291)		(4,908)		—
Unrealized gains (losses) included in OCI	Unrealized gains (losses) included in OCI	(543)		—		—		—		—		Unrealized gains (losses) included in OCI	100		—		—		—		—
Additions	Additions	—		—		373		—		—		Additions	—		—		161		—		—
Settlements	Settlements	—		—		—		—		289		Settlements	—		—		—		—		295
Ending balance, March 31, 2020		$	1,562	$	3,255	$	3,149	$	(11,016)	$	(2,050)
Total net gains (losses) for the period included in earnings attributable to the change in unrealized gains/(losses) relating to assets/liabilities still held at March 31, 2020		$	—	$	(632)	$	—	$	—	$	—
Ending balance, June 30, 2020												Ending balance, June 30, 2020	$	1,662	$	698	$	3,019	$	(15,924)	$	(1,755)
Total net gains (losses) for the period included in earnings attributable to the change in unrealized gains/(losses) relating to assets/liabilities still held at June 30, 2020												Total net gains (losses) for the period included in earnings attributable to the change in unrealized gains/(losses) relating to assets/liabilities still held at June 30, 2020	$	—	$	(2,557)	$	—	$	(4,908)	$	—

		Three Months Ended March 31, 2019																			Three Months Ended June 30, 2019
(in thousands)	(in thousands)	Investment Securities Available for Sale		Private Equity Investments		GGL / SBA Loans Servicing Asset		Earnout Liability		Visa Derivative		(in thousands)	Investment Securities Available for Sale		Private Equity Investments		GGL / SBA Loans Servicing Asset		Earnout Liability		Visa Derivative
Beginning balance, December 31, 2018		$	1,785	$	11,028	$	3,729	$	(14,353)	$	(1,673)
Beginning balance, April 1, 2019												Beginning balance, April 1, 2019	$	1,981	$	9,481	$	3,447	$	(14,353)	$	(1,366)
Total gains (losses) realized/unrealized:	Total gains (losses) realized/unrealized:											Total gains (losses) realized/unrealized:
Included in earnings	Included in earnings	—		28		(488)		—		—		Included in earnings	—		82		(305)		—		—
Unrealized gains (losses) included in OCI	Unrealized gains (losses) included in OCI	196		—		—		—		—		Unrealized gains (losses) included in OCI	36		—		—		—		—
Additions	Additions	—		—		206		—		—		Additions	—		—		184		—		—
Settlements	Settlements	—		—		—		—		307		Settlements	—		—		—		—		317
Transfers out of Level 3		—		(1,575)		—		—		—
Ending balance, March 31, 2019		$	1,981	$	9,481	$	3,447	$	(14,353)	$	(1,366)
Total net gains (losses) for the period included in earnings attributable to the change in unrealized gains/(losses) relating to assets/liabilities still held at March 31, 2019		$	—	$	28	$	—	$	—	$	—
Ending balance, June 30, 2019												Ending balance, June 30, 2019	$	2,017	$	9,563	$	3,326	$	(14,353)	$	(1,049)
Total net gains (losses) for the period included in earnings attributable to the change in unrealized gains/(losses) relating to assets/liabilities still held at June 30, 2019												Total net gains (losses) for the period included in earnings attributable to the change in unrealized gains/(losses) relating to assets/liabilities still held at June 30, 2019	$	—	$	82	$	—	$	—	$	—



	Six Months Ended June 30, 2020
(in thousands)	Investment Securities Available for Sale		Private Equity Investments		GGL / SBA Loans Servicing Asset		Earnout Liability		Visa Derivative
Beginning balance, December 31, 2019	$	2,105	$	3,887	$	3,040	$	(11,016)	$	(2,339)
Total gains (losses) realized/unrealized:
Included in earnings	—		(3,189)		(555)		(4,908)		—
Unrealized gains (losses) included in OCI	(443)		—		—		—		—
Additions	—		—		534		—		—
Settlements	—		—		—		—		584
Ending balance, June 30, 2020	$	1,662	$	698	$	3,019	$	(15,924)	$	(1,755)
Total net gains (losses) for the period included in earnings attributable to the change in unrealized gains/(losses) relating to assets/liabilities still held at June 30, 2020	$	—	$	(3,189)	$	—	$	(4,908)	$	—

	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, December 31, 2018	$	1,785	$	11,028	$	3,729	$	(14,353)	$	(1,673)
Total (losses) gains realized/unrealized:
Included in earnings	—		110		(793)		—		—
Unrealized gains (losses) included in OCI	232		—		—		—		—
Additions	—		—		390		—		—
Settlements	—		—		—		—		624
Transfers out of Level 3	—		(1,575)		—		—		—
Ending balance, June 30, 2019	$	2,017	$	9,563	$	3,326	$	(14,353)	$	(1,049)
Total net gains (losses) for the period included in earnings attributable to the change in unrealized losses relating to assets/liabilities still held at June 30, 2019	$	—	$	110	$	—	$	—	$	—

2832

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. 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.

~~March 31,~~June 30, 2020

(dollars in thousands)

Valuation Technique

Significant Unobservable Input

Level 3 Fair Value

Rate/Range ~~/ Weighted Average~~

Assets measured at fair value on a recurring basis

Investment Securities Available for Sale -
Corporate debt and other debt securities - trust preferred security

Discounted cash flow analysis

Discount rate
Forecasted average Prime reset rate

$~~1,562~~1,662

~~7.01% 3.56%~~6.51% 3.68%

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

$~~3,255~~698

N/A

GGL/SBA loans servicing asset

Discounted cash flow analysis

Discount rate
Prepayment speeds

$~~3,149~~3,019

12.16% 16.10%

Earnout liability

Option pricing methods and Monte Carlo simulation

Financial projections of Global One

$~~11,016~~15,924

N/A

Visa derivative liability

Discounted cash flow analysis

Estimated timing of resolution of ~~covered litigation~~Covered Litigation and future cumulative deposits to the litigation escrow for settlement of the Covered Litigation

$~~2,050~~1,755

~~0-2~~0-1.5 years

(4Q 2021)

Assets Measured at Fair Value on a Non-recurring Basis

Certain assets are required to be measured at fair value on a nonrecurring basis ~~in periods~~ subsequent to their initial recognition. These assets and liabilities are not measured at fair value on an ongoing basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. 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 period.~~

March 31, 2020 December 31, 2019
(in thousands) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Other real estate $ — $ — $ 460 $ 460 $ — $ — $ 8,023 $ 8,023
MPS receivable — — 18,490 18,490 — — 21,437 21,437
Other assets held for sale — — 1,206 1,206 — — 1,238 1,238
adjustment.

2933


	June 30, 2020														December 31, 2019
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Loans⁽¹⁾	$	—	$	—	$	21,138	$	21,138	$	—	$	—	$	1,461	$	1,461
Other real estate	—		—		5,902		5,902		—		—		8,023		8,023
MPS receivable	—		—		18,202		18,202		—		—		21,437		21,437
Other assets held for sale	—		—		1,634		1,634		—		—		1,238		1,238

ORE properties are included in other assets on the consolidated balance sheets. The carrying value of ORE at ~~March 31,~~June 30, 2020 and December 31, 2019 was ~~$15.2~~$12.0 million and $14.4 million, respectively.

The following table presents fair value adjustments recognized in earnings for the three and six months ended ~~March 31,~~June 30, 2020 and 2019 for assets measured at fair value on a non-recurring basis still held at period-end.


		Three Months Ended March 31,							Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	(in thousands)	2020		2019		(in thousands)	2020		2019		2020		2019
Loans⁽¹⁾						Loans⁽¹⁾	$	14,950	$	—	$	14,950	$	2,625
Other real estate	Other real estate	$	5	$	18	Other real estate	1,228		612		1,228		624
MPS receivable	MPS receivable	2,663		—		MPS receivable	—		—		2,663		—
Other assets held for sale	Other assets held for sale	1,391		96		Other assets held for sale	729		—		2,120		91

⁽¹⁾ Collateral-dependent loans that were written down to fair value of collateral.

~~March 31,~~June 30, 2020

Valuation Technique

Significant Unobservable Input

Range

(Weighted Average)⁽¹⁾

Assets measured at fair value on a non-recurring basis

Loans

Third-party appraised value of collateral less estimated selling costs

Discount to appraised value
Estimated selling costs

0%-43% (24%) 0%-10% (7%)

Other real estate

Third-party appraised value of real estate less estimated selling costs

Discount to appraised value
Estimated selling costs

0%~~-1% (1%~~-33% (23%) 0%-10% (7%)

MPS receivable⁽²⁾

Third-party appraised value of business less estimated selling costs

Discount to appraised value
Estimated selling costs

N/A

Other assets held for sale

Third-party appraised value less estimated selling costs or BOV

Discount to appraised value
Estimated selling costs

0%~~-76% (58%~~-66% (63%) 0%-10% (7%)

⁽¹⁾The weighted average is the measure of central tendencies; it is not the value that management is using for the asset or liability.

⁽²⁾See "Part I - Item 1. Notes to Unaudited Interim Financial Statements - Note 10 - Commitments and Contingencies" of this Report for more information on this receivable which was classified as a NPA at ~~March 31,~~June 30, 2020 and December 31, 2019.

Fair Value of Financial Instruments

The following tables present the carrying and estimated fair values of financial instruments at ~~March 31,~~June 30, 2020 and December 31, 2019. The fair values represent management’s best estimates based on a range of methodologies and assumptions. See "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" to the consolidated financial statements of Synovus' 2019 Form 10-K for a description of how fair value measurements are determined.

3034


		March 31, 2020																			June 30, 2020
(in thousands)	(in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3		(in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial assets	Financial assets											Financial assets
Total cash, cash equivalents, restricted cash, and restricted cash equivalents	Total cash, cash equivalents, restricted cash, and restricted cash equivalents	$	1,823,834	$	1,823,834	$	1,823,834	$	—	$	—	Total cash, cash equivalents, restricted cash, and restricted cash equivalents	$	1,571,225	$	1,571,225	$	1,571,225	$	—	$	—
Trading securities	Trading securities	4,857		4,857		—		4,857		—		Trading securities	4,626		4,626		—		4,626		—
Investment securities available for sale	Investment securities available for sale	6,937,240		6,937,240		19,918		6,915,760		1,562		Investment securities available for sale	7,197,493		7,197,493		19,921		7,175,910		1,662
Mortgage loans held for sale		119,841		119,841		—		119,841		—
Loans held for sale												Loans held for sale	900,936		900,936		—		266,306		634,630
Private equity investments	Private equity investments	15,132		15,132		11,877		—		3,255		Private equity investments	698		698		—		—		698
Mutual funds and mutual funds held in rabbi trusts	Mutual funds and mutual funds held in rabbi trusts	31,241		31,241		31,241		—		—		Mutual funds and mutual funds held in rabbi trusts	34,219		34,219		34,219		—		—
Loans, net	Loans, net	37,764,572		38,168,063		—		—		38,168,063		Loans, net	39,325,649		39,386,584		—		—		39,386,584
GGL/SBA loans servicing asset	GGL/SBA loans servicing asset	3,149		3,149		—		—		3,149		GGL/SBA loans servicing asset	3,019		3,019		—		—		3,019
Derivative assets	Derivative assets	466,401		466,401		—		466,401		—		Derivative assets	496,978		496,978		—		496,978		—

Financial liabilities	Financial liabilities											Financial liabilities
Non-interest-bearing deposits	Non-interest-bearing deposits	$	9,659,451	$	9,659,451	$	—	$	9,659,451	$	—	Non-interest-bearing deposits	$	12,555,714	$	12,555,714	$	—	$	12,555,714	$	—
Non-time interest-bearing deposits	Non-time interest-bearing deposits	21,305,350		21,305,350		—		21,305,350		—		Non-time interest-bearing deposits	23,236,436		23,236,436		—		23,236,436		—
Time deposits	Time deposits	8,861,784		8,934,652		—		8,934,652		—		Time deposits	8,402,430		8,458,264		—		8,458,264		—
Total deposits	Total deposits	$	39,826,585	$	39,899,453	$	—	$	39,899,453	$	—	Total deposits	$	44,194,580	$	44,250,414	$	—	$	44,250,414	$	—
Federal funds purchased and securities sold under repurchase agreements	Federal funds purchased and securities sold under repurchase agreements	312,776		312,776		312,776		—		—		Federal funds purchased and securities sold under repurchase agreements	225,576		225,576		225,576		—		—
Other short-term borrowings	Other short-term borrowings	1,175,000		1,175,000		—		1,175,000		—		Other short-term borrowings	300,000		300,000		—		300,000		—
Long-term debt	Long-term debt	3,152,339		3,122,480		—		3,122,480		—		Long-term debt	2,327,921		2,351,494		—		2,351,494		—
Earnout liability	Earnout liability	11,016		11,016		—		—		11,016		Earnout liability	15,924		15,924		—		—		15,924
Derivative liabilities	Derivative liabilities	186,071		186,071		—		184,021		2,050		Derivative liabilities	196,131		196,131		—		194,376		1,755

3135


	December 31, 2019
(in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial assets
Total cash, cash equivalents, restricted cash, and restricted cash equivalents	$	1,186,918	$	1,186,918	$	1,186,918	$	—	$	—
Trading securities	7,212		7,212		—		7,212		—
Investment securities available for sale	6,778,670		6,778,670		19,855		6,756,710		2,105
Mortgage loans held for sale	115,173		115,173		—		115,173		—
Private equity investments	19,389		19,389		15,502		—		3,887
Mutual funds and mutual funds held in rabbi trusts	32,348		32,348		32,348		—		—
Loans, net	36,881,048		36,931,256		—		—		36,931,256
GGL/SBA loans servicing asset	3,040		3,040		—		—		3,040
Derivative assets	140,016		140,016		—		140,016		—

Financial liabilities
Non-interest-bearing deposits	$	9,439,485	$	9,439,485	$	—	$	9,439,485	$	—
Non-time interest-bearing deposits	19,891,711		19,891,711		—		19,891,711		—
Time deposits	9,074,308		9,112,459		—		9,112,459		—
Total deposits	$	38,405,504	$	38,443,655	$	—	$	38,443,655	$	—
Federal funds purchased and securities sold under repurchase agreements	165,690		165,690		165,690		—		—
Trading liability for short positions	1,560		1,560		1,560		—		—
Other short-term borrowings	1,752,000		1,752,000		—		1,752,000		—
Long-term debt	2,153,897		2,185,717		—		2,185,717		—
Earnout liability	11,016		11,016		—		—		11,016
Derivative liabilities	37,071		37,071		—		34,732		2,339

Note 8 - Derivative Instruments and Hedging Activities

Synovus utilizes derivative instruments to manage its exposure to various types of interest rate risk, exposures related to liquidity and credit risk, and to facilitate customer transactions. The primary types of derivative instruments utilized by Synovus consist of interest rate swaps, interest rate lock commitments made to prospective mortgage loan customers, commitments to sell fixed-rate mortgage loans, and foreign currency exchange forwards. Interest rate lock commitments represent derivative instruments since it is intended that such loans will be sold. 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. See "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" to the consolidated financial statements of Synovus' 2019 Form 10-K for additional information regarding accounting policies for derivatives.

Hedging Derivatives

Cash flow hedge relationships mitigate exposure to the variability of future cash flows or other forecasted transactions. Synovus has entered into interest rate swap contracts to manage overall cash flow changes related to interest rate risk exposure on index-based variable rate commercial loans. The contracts effectively modify Synovus' exposure to interest rate risk by utilizing receive fixed/pay index-based variable rate interest rate swaps.

For cash flow hedges, the effective portion of the gain or loss related to the derivative instrument is initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings or when the hedge is terminated and included in the same income statement line item as the earnings effect of the hedged item.

Synovus recorded an unrealized gain of $9.8 million, or $7.3 million, after-tax, in OCI, during the ~~three months ended March 31,~~first quarter of 2020, related to terminated cash flow hedges, which ~~will be amortized~~is being recognized into earnings in conjunction with the effective terms of the original swaps through the third quarter of 2025. Synovus recognized pre-tax income of ~~$120~~$270 thousand and $390 thousand, respectively, during the three and six months ended ~~March 31,~~June 30, 2020 related to ~~the~~the amortization ofof terminated cash flow hedges.

3236

As of ~~March 31,~~June 30, 2020, Synovus expects to reclassify approximately ~~$32~~$39 million of pre-tax gains from AOCI into interest income on cash flow hedges over the next twelve months. Included in this amount is approximately $3$5 million in pre-tax gains related to the ~~amortization of~~ terminated cash flow hedges.As of ~~March 31,~~June 30, 2020, the maximum length of time over which Synovus is hedging its exposure to the variability in future cash flows is through the first quarter of 2024.

For derivative instruments that are not designated as hedging instruments, changes in the fair value of the derivatives are recognized in earnings immediately.

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 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~~risk 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.

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 ~~March 31,~~June 30, 2020 and December 31, 2019, collateral totaling ~~$157.8~~$159.3 million and $84.6 million, respectively, was pledged to the derivative counterparties to comply with collateral requirements. For derivatives cleared through central clearing houses, the variation margin payments made are legally characterized as settlements of the derivatives. As a result, these variation margin payments are netted against the fair value of the respective derivative contracts in the consolidated balance sheets and related disclosures. At ~~March 31,~~June 30, 2020 and December 31, 2019, Synovus had a variation margin of ~~$193.4~~$198.5 million and $113.7 million respectively, each reducing the derivative liability.

3337

The following table reflects the notional amount and fair value of derivative instruments included on the consolidated balance sheets.


		March 31, 2020										December 31, 2019											June 30, 2020					December 31, 2019
				Fair Value								Fair Value									Fair Value						Fair Value
(in thousands)	(in thousands)	Notional Amount		Derivative Assets ⁽¹⁾		Derivative Liabilities ⁽²⁾		Notional Amount		Derivative Assets ⁽¹⁾		Derivative Liabilities ⁽²⁾		(in thousands)	Notional Amount		Derivative Assets ⁽¹⁾		Derivative Liabilities ⁽²⁾		Notional Amount		Derivative Assets ⁽¹⁾		Derivative Liabilities ⁽²⁾
Derivatives in cash flow hedging relationships:	Derivatives in cash flow hedging relationships:													Derivatives in cash flow hedging relationships:
Interest rate contracts	Interest rate contracts	$	2,750,000	$	90,246	$	—	$	2,000,000	$	54	$	8,624	Interest rate contracts	$	2,750,000	$	99,070	$	—	$	2,000,000	$	54	$	8,624
Total derivatives designated as hedging instruments	Total derivatives designated as hedging instruments			$	90,246	$	—			$	54	$	8,624	Total derivatives designated as hedging instruments			$	99,070	$	—			$	54	$	8,624

Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:													Derivatives not designated as hedging instruments:
Interest rate contracts⁽³⁾	Interest rate contracts⁽³⁾	$	8,260,884	$	367,841	$	178,496	$	7,258,159	$	138,672	$	25,849	Interest rate contracts⁽³⁾	$	8,647,036	$	390,228	$	192,556	$	7,258,159	$	138,672	$	25,849
Mortgage derivatives - interest rate lock commitments	Mortgage derivatives - interest rate lock commitments	412,218		8,314		—		70,481		1,290		—		Mortgage derivatives - interest rate lock commitments	348,408		7,680		—		70,481		1,290		—
Mortgage derivatives - forward commitments to sell fixed-rate mortgage loans	Mortgage derivatives - forward commitments to sell fixed-rate mortgage loans	330,000		—		5,097		107,000		—		168		Mortgage derivatives - forward commitments to sell fixed-rate mortgage loans	325,000		—		1,396		107,000		—		168
Other contracts⁽⁴⁾	Other contracts⁽⁴⁾	159,412		—		428		145,764		—		91		Other contracts⁽⁴⁾	164,430		—		424		145,764		—		91
Visa derivative	Visa derivative	—		—		2,050		—		—		2,339		Visa derivative	—		—		1,755		—		—		2,339
Total derivatives not designated as hedging instruments	Total derivatives not designated as hedging instruments			$	376,155	$	186,071			$	139,962	$	28,447	Total derivatives not designated as hedging instruments			$	397,908	$	196,131			$	139,962	$	28,447

⁽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.

⁽⁴⁾Includes risk participation agreements sold. Additionally, the notional amount of risk participation agreements purchased was ~~$2.9~~$2.8 million and $3.0 million at ~~March 31,~~June 30, 2020 and December 31, 2019, respectively.

Synovus also provides foreign currency exchange services, primarily forward contracts, with counterparties to allow commercial customers to mitigate exchange rate risk. Synovus covers its risk by entering into an offsetting foreign currency exchange forward contract. The notional amount of foreign currency exchange forwards was ~~$47.2~~$35.1 million and $32.9 million at ~~March 31,~~June 30, 2020 and December 31, 2019, respectively. The fair value of foreign currency exchange forwards was negligible at ~~March 31,~~June 30, 2020 and December 31, 2019 due to the very short duration of these contracts.

The following table presents the effect of hedging derivative instruments on the consolidated statements of income and the total amounts for the respective line item affected for the three and six months ended ~~March 31,~~June 30, 2020 and ~~2019.~~2019.


		Three Months Ended March 31,							Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	(in thousands)	2020		2019		(in thousands)	2020		2019		2020		2019
Total amounts presented in the consolidated statements of income in interest income on loans	Total amounts presented in the consolidated statements of income in interest income on loans	$	3,637	$	—	Total amounts presented in the consolidated statements of income in interest income on loans	$	5,261	$	—	$	5,086	$	—

Gain/loss on cash flow hedging relationships:⁽¹⁾	Gain/loss on cash flow hedging relationships:⁽¹⁾					Gain/loss on cash flow hedging relationships:⁽¹⁾
Interest rate swaps:	Interest rate swaps:					Interest rate swaps:
Realized gains (losses) reclassified from AOCI, pre-tax, to interest income on loans	Realized gains (losses) reclassified from AOCI, pre-tax, to interest income on loans	120		—		Realized gains (losses) reclassified from AOCI, pre-tax, to interest income on loans	270		—		390		—
Pre-tax income recognized on cash flow hedges	Pre-tax income recognized on cash flow hedges	$	120	$	—	Pre-tax income recognized on cash flow hedges	$	270	$	—	$	390	$	—

⁽¹⁾See "Part I - Item 1. Financial Statements and Supplementary Data - Note 6 - Shareholders' Equity and Other Comprehensive Income (Loss) in this Report for additional information.

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The pre-tax effect of changes in fair value from derivative instruments not designated as hedging instruments on the consolidated statements of income for the three and six months ended ~~March 31,~~June 30, 2020 and 2019 is presented below.


			Gain (Loss) Recognized in Consolidated Statements of Income								Gain (Loss) Recognized in Consolidated Statements of Income
			Three Months Ended March 31,								Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	(in thousands)	Location in Consolidated Statements of Income	2020		2019		(in thousands)	Location in Consolidated Statements of Income	2020		2019		2020		2019
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:						Derivatives not designated as hedging instruments:
Interest rate contracts⁽¹⁾	Interest rate contracts⁽¹⁾	Capital markets income	$	(604)	$	(130)	Interest rate contracts⁽¹⁾	Capital markets income	$	653	$	221	$	49	$	91
Other contracts⁽²⁾	Other contracts⁽²⁾	Capital markets income	(337)		—		Other contracts⁽²⁾	Capital markets income	4		—		(333)		—
Mortgage derivatives - interest rate lock commitments	Mortgage derivatives - interest rate lock commitments	Mortgage banking income	7,024		693		Mortgage derivatives - interest rate lock commitments	Mortgage banking income	(634)		255		6,390		948
Mortgage derivatives - forward commitments to sell fixed-rate mortgage loans	Mortgage derivatives - forward commitments to sell fixed-rate mortgage loans	Mortgage banking income	(4,929)		13		Mortgage derivatives - forward commitments to sell fixed-rate mortgage loans	Mortgage banking income	3,701		(243)		(1,228)		(229)

Total derivatives not designated as hedging instruments	Total derivatives not designated as hedging instruments		$	1,154	$	576	Total derivatives not designated as hedging instruments		$	3,724	$	233	$	4,878	$	810

⁽¹⁾Additionally, losses related to termination of customer swaps of $2.5 million were recorded in other non-interest expense ~~for~~during the ~~three months ended March 31,~~first quarter of 2020.

⁽²⁾Includes risk participation agreements sold.

Note 9 - 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 three and six months ended ~~March 31,~~June 30, 2020 and 2019.


		Three Months Ended March 31,							Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share data)	(in thousands, except per share data)	2020		2019		(in thousands, except per share data)	2020		2019		2020		2019
Basic Net Income Per Common Share:	Basic Net Income Per Common Share:					Basic Net Income Per Common Share:
Net income available to common shareholders	Net income available to common shareholders	$	30,230	$	117,036	Net income available to common shareholders	$	84,901	$	153,034	$	115,131	$	270,070
Weighted average common shares outstanding	Weighted average common shares outstanding	147,311		160,927		Weighted average common shares outstanding	147,288		157,389		147,300		159,148
Net income per common share, basic	Net income per common share, basic	$	0.21	$	0.73	Net income per common share, basic	$	0.58	$	0.97	$	0.78	$	1.70
Diluted Net Income Per Common Share:	Diluted Net Income Per Common Share:					Diluted Net Income Per Common Share:
Net income available to common shareholders	Net income available to common shareholders	$	30,230	$	117,036	Net income available to common shareholders	$	84,901	$	153,034	$	115,131	$	270,070
Weighted average common shares outstanding	Weighted average common shares outstanding	147,311		160,927		Weighted average common shares outstanding	147,288		157,389		147,300		159,148
Effect of dilutive outstanding equity-based awards, warrants, and earnout payments	Effect of dilutive outstanding equity-based awards, warrants, and earnout payments	1,090		1,833		Effect of dilutive outstanding equity-based awards, warrants, and earnout payments	445		1,688		767		1,760
Weighted average diluted common shares	Weighted average diluted common shares	148,401		162,760		Weighted average diluted common shares	147,733		159,077		148,067		160,908
Net income per common share, diluted	Net income per common share, diluted	$	0.20	$	0.72	Net income per common share, diluted	$	0.57	$	0.96	$	0.78	$	1.68

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, 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 ~~March 31,~~June 30, 2020 and 2019, there were ~~557 thousand~~1.3 million and 40 thousand, respectively, potentially dilutive shares related to stock options to purchase shares of common stock that were outstanding during these quarters. Potentially dilutive shares are not included in the computation of diluted net income per common share because the effect would be anti-dilutive.

Note 10 - 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, solar energy, and CRA investments.

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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) can generally be canceled by providing notice to the borrower.

The ACL associated with unfunded commitments and letters of credit is recorded within other liabilities on the consolidated balance sheets. Upon adoption of CECL on January 1, 2020, Synovus recorded $27.4 million in unfunded commitment reserves due to the consideration under CECL of expected utilization over the life of such commitments. At ~~March 31,~~June 30, 2020, the ACL for unfunded commitments was ~~$38.4~~$61.0 million, including the impact of CECL and COVID-19, compared to a reserve of $1.4 million at December 31, 2019. Additionally, an immaterial amount of unearned fees relating to letters of credit are recorded within other liabilities on the consolidated balance sheets. See "Part I-Item 1. Financial Statements and Supplementary Data - Note 1 - Basis of Presentation" in this Report for more information on Synovus' adoption of CECL.

Synovus invests in certain LIHTC partnerships which are engaged in the development and operation of affordable multi-family housing pursuant to Section 42 of the Code. Additionally, Synovus invests in certain solar energy tax credit partnerships pursuant to Section 48 of the Code. Synovus typically acts as a limited partner in these investments and does not exert control over the operating or financial policies of the partnerships and as such, is not considered the primary beneficiary of the partnership. For certain of its LIHTC investments, Synovus provides financing during the construction and development of the properties and is at risk for the funded 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 is not exposed to losses beyond Synovus’ investment. Synovus receives tax credits related to these investments which are subject to recapture by taxing authorities based on compliance provisions required to be met at the project level.

Synovus also invests in certain other CRA partnerships including SBIC programs. The SBIC is a program initiated by the SBA in 1958 to assist in the funding of small business loans.


(in thousands)	(in thousands)	March 31, 2020		December 31, 2019		(in thousands)	June 30, 2020		December 31, 2019
Letters of credit*	Letters of credit*	$	182,629	$	202,614	Letters of credit*	$	175,465	$	202,614
Commitments to fund commercial and industrial loans	Commitments to fund commercial and industrial loans	6,994,969		7,018,152		Commitments to fund commercial and industrial loans	7,887,720		7,018,152
Commitments to fund commercial real estate, construction, and land development loans	Commitments to fund commercial real estate, construction, and land development loans	2,925,791		3,032,252		Commitments to fund commercial real estate, construction, and land development loans	2,823,515		3,032,252
Commitments under home equity lines of credit	Commitments under home equity lines of credit	1,508,176		1,501,452		Commitments under home equity lines of credit	1,584,619		1,501,452
Unused credit card lines	Unused credit card lines	940,016		877,929		Unused credit card lines	971,419		877,929
Other loan commitments	Other loan commitments	469,958		485,371		Other loan commitments	435,907		485,371
Total letters of credit and unfunded lending commitments	Total letters of credit and unfunded lending commitments	$	13,021,539	$	13,117,770	Total letters of credit and unfunded lending commitments	$	13,878,645	$	13,117,770

Investments in low income housing, solar energy tax credit, and other CRA partnerships:
Carrying amount included in other assets $ 166,460 $ 146,612
Amount of future funding commitments included in carrying amount 93,749 78,266
Short-term construction loans and letter of credit commitments 792 2,124
Funded portion of short-term loans and letters of credit 4,516 3,196


Investments in low income housing, solar energy tax credit and other CRA partnerships:
Carrying amount included in other assets	$	168,058	$	146,612
Amount of future funding commitments included in carrying amount	92,025		78,266
Permanent and short-term construction loans and letter of credit commitments	12,488		2,124
Funded portion of permanent and short-term loans and letters of credit	5,146		3,196

* Represent the contractual amount net of risk participations purchased of approximately ~~$32~~$31 million and $33 million at ~~March 31,~~June 30, 2020 and December 31, 2019, respectively.

Merchant Services

In accordance with credit and debit card association rules, Synovus provides merchant processing services for customers. Prior to the second quarter of 2020, these services were provided through a referral relationship which was replaced during the quarter with a new contractual arrangement under which certain sales and processing support are provided through an outside merchant services provider with Synovus owning the merchant contract relationship. In addition, Synovus sponsors various third-party MPS businesses that process credit and debit card transactions on behalf of 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 obligations, the cardholder, through its issuing bank, generally has until six months after the date of the transaction to present a chargeback to the MPS, which is primarily liable for any losses on covered transactions. However, if ~~the~~a sponsored MPS fails to meet its obligations, then Synovus, as the sponsor, could be held liable for the disputed amount. Synovus seeks to mitigate this risk through its contractual arrangements with the MPS and the merchants by withholding future settlements, retaining cash reserve accounts and/or obtaining other security. For the three and six months ended ~~March 31,~~June 30, 2020, Synovus and the sponsored entities processed and settled $16.40 billion and $34.75 billion of

transactions, respectively. For the three and six months ended June 30, 2019, the sponsored entities processed and settled ~~$18.37~~$18.88 billion and ~~$17.71~~$36.59 billion of transactions, respectively.

Synovus covered chargebacks related to a particular sponsored MPS during 2019 and 2018 where the MPS’s cash reserve account was unavailable to support the chargebacks. As of ~~March 31,~~June 30, 2020, the remaining amount due to Synovus from the MPS is ~~$21.2~~$20.9 million, compared to $21.4 million at December 31, 2019. During the ~~three months ended March 31,~~first quarter of 2020, Synovus recorded a $2.7 million reserve in other operating expenses associated with the chargebacks, reflecting the amount that Synovus does not expect to collect. The net balance of ~~$18.5~~$18.2 million at ~~March 31,~~June 30, 2020 is included in other assets and classified in NPAs. While Synovus has contractual protections to mitigate against loss, repayment of the amounts owed to Synovus will depend in large part 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, claims and disputes 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, 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, allegations of violations of state and federal laws and regulations relating to banking practices, and allegations related to Synovus' participation in government stimulus programs, 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.

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 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 ~~March 31,~~June 30, 2020 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 0 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 or financial condition 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 11 - Segment Reporting

Synovus' business segments are based on the products and services provided or the customers served, and as of the fourth quarter of 2019, reflect the manner in which financial information is evaluated by the chief operating decision ~~maker.~~makers. Prior to the fourth quarter of 2019, Synovus identified its overall banking operations as its only reportable segment. Synovus has 3 major reportable business segments: Community Banking, Wholesale Banking, and Financial Management Services (FMS), with functional activities such as treasury, technology, operations, marketing, finance, enterprise risk, legal, human resources, corporate communications, executive management, among others, included in Treasury and Corporate Other.

Business segment results are determined based upon Synovus' management reporting system, which assigns balance sheet and income statement items to each of the business segments. Certain assets, liabilities, revenues, and expenses not allocated or

attributable to a particular business segment are included in Treasury and Corporate Other.Synovus's third-party lending partnership consumer loans as well as PPP C&I loans are included in Treasury and Corporate Other. The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, ~~unlike~~unlike financial accounting, are not based on authoritative guidance similar to GAAP. As a result, reported segment results are not necessarily comparable with similar information reported by other financial institutions.

The Community Banking business segment serves customers using a relationship-based approach through its branch, ATM, commercial, and private wealth network in addition to mobile, Internet, and telephone banking. This segment primarily provides individual, small business, and corporate customers with an array of comprehensive banking products and services including commercial, home equity, and other consumer loans, credit and debit cards, and deposit accounts.

The Wholesale Banking business segment serves primarily larger corporate customers by providing commercial lending and deposit services through specialty teams including middle market, CRE, senior housing, national accounts, premium finance, structured lending, healthcare, and asset-based lending.

The ~~Financial Management Services (FMS)~~FMS business segment serves its customers by providing mortgage and trust services and also specializing in professional portfolio management for fixed-income securities, investment banking, the execution of securities transactions as a broker/dealer, asset management, and financial planning services, as well as the provision of individual investment advice on equity and other securities.

Synovus uses a centralized FTP methodology to attribute appropriate net interest income to the business segments. The intent of the FTP methodology is to transfer interest rate risk from the business segments by providing matched duration funding of assets and liabilities. The result is to centralize the financial impact, management, and reporting of interest rate risk in the Treasury and Corporate Other function where it can be centrally monitored and managed. Treasury and Corporate Other charges (credits) an internal cost of funds for assets held in (or pays for funding provided by) each business segment. The FTP rate is based on prevailing market interest rates for comparable duration assets (or liabilities).

The following ~~table presents~~tables present certain financial information for each reportable business segment for the ~~first quarter of~~three and six months ended June 30, 2020. To provide comparable information, Synovus has included proforma business segment financial information for the ~~first quarter of~~three and six months ended June 30, 2019 utilizing various allocation methodologies based on balance sheet and income statement items assigned to each business segment. The application and development of management reporting methodologies is a dynamic process and is subject to periodic enhancements. As these enhancements are made, financial results presented by each reportable business segment may be periodically revised.


													Three Months Ended June 30, 2020
(in thousands)	(in thousands)	Community Banking		Wholesale Banking		Financial Management Services		Treasury and Corporate Other		Synovus Consolidated		(in thousands)	Community Banking		Wholesale Banking		Financial Management Services		Treasury and Corporate Other		Synovus Consolidated
First Quarter 2020
Net interest income	Net interest income	$	197,246	$	123,170	$	16,782	$	36,062	$	373,260	Net interest income	$	220,638	$	145,016	$	18,832	$	(7,920)	$	376,566
Non-interest revenue	Non-interest revenue	33,449		9,256		47,275		13,877		103,857		Non-interest revenue	25,982		5,654		52,972		88,876		173,484
Non-interest expense	Non-interest expense	75,304		18,202		43,289		139,484		276,279		Non-interest expense	75,984		22,934		48,281		136,942		284,141
Pre-provision net revenue	Pre-provision net revenue	$	155,391	$	114,224	$	20,768	$	(89,545)	$	200,838	Pre-provision net revenue	$	170,636	$	127,736	$	23,523	$	(55,986)	$	265,909


													Three Months Ended June 30, 2019 Proforma
(in thousands)	(in thousands)	Community Banking		Wholesale Banking		Financial Management Services		Treasury and Corporate Other		Synovus Consolidated		(in thousands)	Community Banking		Wholesale Banking		Financial Management Services		Treasury and Corporate Other		Synovus Consolidated
First Quarter 2019 Proforma
Net interest income	Net interest income	$	214,759	$	125,611	$	28,865	$	27,940	$	397,175	Net interest income	$	207,493	$	128,857	$	30,978	$	29,934	$	397,262
Non-interest revenue	Non-interest revenue	32,776		6,758		32,279		7,565		79,378		Non-interest revenue	34,050		7,937		38,628		9,192		89,807
Non-interest expense	Non-interest expense	74,816		15,019		33,218		169,357		292,410		Non-interest expense	73,910		14,709		37,508		137,999		264,126
Pre-provision net revenue	Pre-provision net revenue	$	172,719	$	117,350	$	27,926	$	(133,852)	$	184,143	Pre-provision net revenue	$	167,633	$	122,085	$	32,098	$	(98,873)	$	222,943

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March 31, 2020
(dollars in thousands) Community Banking Wholesale Banking Financial Management Services Treasury and Corporate Other Synovus Consolidated
Total loans net of deferred fees and costs $ 12,224,112 $ 18,691,302 $ 5,344,276 $ 1,998,334 $ 38,258,024
Total deposits 25,364,034 9,111,207 266,839 5,084,505 39,826,585
Total full-time equivalent employees 2,291 237 838 1,936 5,302
December 31, 2019
(dollars in thousands) Community Banking Wholesale Banking Financial Management Services Treasury and Corporate Other Synovus Consolidated
Total loans net of deferred fees and costs $ 12,170,914 $ 17,643,509 $ 5,285,455 $ 2,062,572 $ 37,162,450
Total deposits 25,610,777 8,314,184 284,716 4,195,827 38,405,504
Total full-time equivalent employees 2,301 213 839 1,911 5,264


	Six Months Ended June 30, 2020
(in thousands)	Community Banking		Wholesale Banking		Financial Management Services		Treasury and Corporate Other		Synovus Consolidated
Net interest income	$	417,885	$	268,185	$	35,614	$	28,142	$	749,826
Non-interest revenue	59,431		14,910		100,247		102,753		277,341
Non-interest expense	151,288		41,136		91,570		276,427		560,421
Pre-provision net revenue	$	326,028	$	241,959	$	44,291	$	(145,532)	$	466,746


	Six Months Ended June 30, 2019 Proforma
(in thousands)	Community Banking		Wholesale Banking		Financial Management Services		Treasury and Corporate Other		Synovus Consolidated
Net interest income	$	422,253	$	254,468	$	59,843	$	57,874	$	794,438
Non-interest revenue	66,826		14,695		70,907		16,757		169,185
Non-interest expense	148,727		29,728		70,726		307,356		556,537
Pre-provision net revenue	$	340,352	$	239,435	$	60,024	$	(232,725)	$	407,086


	June 30, 2020
(dollars in thousands)	Community Banking		Wholesale Banking		Financial Management Services		Treasury and Corporate Other		Synovus Consolidated



Total loans net of deferred fees and costs	$	11,837,955	$	18,718,503	$	5,544,768	$	3,813,071	$	39,914,297


Total deposits	$	28,777,901	$	9,737,901	$	313,296	$	5,365,482	$	44,194,580
Total full-time equivalent employees	2,273		269		831		1,935		5,308

	December 31, 2019
(dollars in thousands)	Community Banking		Wholesale Banking		Financial Management Services		Treasury and Corporate Other		Synovus Consolidated
Total loans net of deferred fees and costs	$	12,170,914	$	17,643,509	$	5,285,455	$	2,062,572	$	37,162,450
Total deposits	$	25,610,777	$	8,314,184	$	284,716	$	4,195,827	$	38,405,504
Total full-time equivalent employees	2,301		213		839		1,911		5,264

3943

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 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 financial 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 financial 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:


(1)									the risks and uncertainties related to the impact of the COVID-19 pandemic on our assets, business, capital and liquidity, financial condition, prospects and results of operations;


(2)							the risk that the current and any further economic downturn and contraction could have a material adverse effect on our capital, liquidity, financial condition, credit quality, results of operations and future growth, including the risk that the current economic contraction could last much longer and be much more severe if efforts to contain the pandemic are unsuccessful and restrictions on movement last longer than currently anticipated;


(3)									the risk that ~~competition~~our asset quality may deteriorate, our allowance for credit losses may prove to be inadequate or may be negatively affected by credit risk exposures, and the risk that we may be unable to obtain full payment in ~~the financial services industry may adversely affect our future earnings and growth;~~respect of any loan or other receivables;


(4)									the risk that we may not realize the expected benefits from our efficiency and growth initiatives or that we may not be able to realize those cost savings or revenue initiatives in the time period expected, which could negatively impact our future profitability;


~~(5)~~						changes in the cost and availability of funding due to changes in the deposit market and credit market;


(5)						the risks that if economic conditions worsen further or regulatory capital rules are modified, we may be required to undertake initiatives to improve our capital position;


(6)						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;


(7)						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;


~~(7)~~(8)									changes in the ~~risks that if economic conditions worsen~~interest rate environment, including changes to the federal funds rate to include a possible negative interest rate environment, and competition in our primary market area may result in increased funding costs or reduced earning assets yields, thus further ~~or regulatory capital rules are modified, we may be required to undertake initiatives to improve our capital position;~~reducing margins and net interest income;


~~(8)~~(9)						the risk that competition in the financial services industry may adversely affect our future earnings and growth;


(10)						the risk that we may not realize the expected benefits from our efficiency and growth initiatives or that we may not be able to realize those cost savings or revenue initiatives in the time period expected, which could negatively impact our future profitability;


(11)						our ability to identify and address cyber-security risks such as data security breaches, malware, "denial of service" attacks, "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;


~~(9)~~							changes in the interest rate environment, including changes to the federal funds rate to include a possible negative interest rate environment, and competition in our primary market area may result in increased funding costs or reduced earning assets yields, thus further reducing margins and net interest income;


~~(10)~~						the risk that our asset quality may deteriorate, our allowance for credit losses may prove to be inadequate or may be negatively affected by credit risk exposures, and the risk that we may be unable to obtain full payment in respect of any loan or other receivables;


~~(11)~~		(12)				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;


~~(12)~~(13)						our ability to attract and retain employees that are key to our strategic and growth initiatives;


(14)						the risk related to our implementation of new lines of business, new products and services or new technologies;


(15)						the impact of recent and proposed changes in governmental policy, laws and regulations, including recently enacted laws, regulations and guidance related to government stimulus programs related to the COVID-19 pandemic, 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;


(16)						our ability to receive dividends from our subsidiaries could affect our liquidity, including our ability to pay dividends or take other capital actions;


(17)						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;


~~(13)~~							~~our ability to attract and retain employees that are key to our strategic and growth initiatives;~~


~~(14)~~						~~our ability to receive dividends from our subsidiaries could affect our liquidity, including our ability to pay dividends or take other capital actions;~~


~~(15)~~						~~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;~~


~~(16)~~		(18)				risks related to our business relationships with, and reliance upon, third parties that 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 with a third-party vendor or business relationship;


~~(17)~~(19)									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 business partners, as well as our relationship with third-party vendors and other service providers;


~~(18)~~							~~the risk related to our implementation of new lines of business, new products and services or new technologies;~~


~~(19)~~						the impact of recent and proposed changes in governmental policy, laws and regulations, including recently enacted laws, regulations and guidance related to government stimulus programs related to the COVID-19 pandemic, 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;


(20)						~~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;~~


~~(21)~~						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-party vendor, obligor, or business partner fails to pay amounts due to us under that relationship or under any arrangement that we enter into with them;


~~(22)~~(21)						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;


(22)						risks related to the fluctuation in our stock price and general volatility in the stock market;


(23)							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;


(24)							risks related to regulatory approval to take certain actions, including any dividends on our common stock or preferred stock, any repurchases of common stock or any issuance or redemption of any other regulatory capital instruments;


(25)									risks related to the continued use, availability and reliability of LIBOR and other "benchmark" rates;


(26)							the costs and effects of litigation, investigations, inquiries or similar matters, or adverse facts and developments related thereto, including the costs and effects of litigation related to our participation in government stimulus programs associated with the COVID-19 pandemic;


(27)									~~the risk that we may fail to realize all of the anticipated benefits of the Merger or those benefits may take longer to realize than expected;~~


~~(28)~~						the risk that we may not be able to identify suitable bank and non-bank acquisition opportunities as part of our growth strategy and even if we are able to identify attractive acquisition opportunities, we may not be able to complete such transactions on favorable terms or realize anticipated benefits from such transactions;


~~(29)~~						the effects of any damages to our reputation resulting from developments related to any of the items identified above; and


~~(30)~~			(28)				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 II - 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' 2019 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 oral or 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 Company provides commercial and retail banking in addition to a full suite of specialized products and services including private banking, treasury management, wealth management, mortgage services, premium finance and international banking. Synovus also provides financial planning, and investment advisory services through its wholly-owned subsidiaries, 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 ~~299~~293 branches in Alabama, Florida, Georgia, South Carolina, 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 three and six months ended ~~March 31,~~June 30, 2020 and financial condition as of ~~March 31,~~June 30, 2020 and December 31, 2019. 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’ 2019 Form 10-K.

Management's Discussion and Analysis of Financial Condition and Results of Operations consists of:

•Discussion 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.

•Credit 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.

•Additional 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.

4246

DISCUSSION OF RESULTS OF OPERATIONS


Table 1 - Consolidated Financial Highlights	Table 1 - Consolidated Financial Highlights									Table 1 - Consolidated Financial Highlights
		Three Months Ended March 31,															Three Months Ended June 30,										Six Months Ended June 30,
(dollars in thousands, except per share data)	(dollars in thousands, except per share data)	2020			2019			Change		(dollars in thousands, except per share data)	2020			2019			Change		2020			2019			Change
Net interest income	Net interest income	$	373,260		$	397,175		(6.0)	%	Net interest income	$	376,566		$	397,262		(5.2)	%	$	749,826		$	794,438		(5.6)	%
Provision for credit losses⁽¹⁾	Provision for credit losses⁽¹⁾	158,722			23,569			573.4		Provision for credit losses⁽¹⁾	141,851			12,119			nm		300,573			35,688			742.2
Non-interest revenue	Non-interest revenue	103,857			79,378			30.8		Non-interest revenue	173,484			89,807			93.2		277,341			169,185			63.9
Adjusted non-interest revenue⁽²⁾	Adjusted non-interest revenue⁽²⁾	99,378			78,445			26.7		Adjusted non-interest revenue⁽²⁾	95,368			90,197			5.7		194,745			168,643			15.5
Total FTE revenues	Total FTE revenues	477,903			477,183			0.2		Total FTE revenues	550,911			487,880			12.9		1,028,814			965,064			6.6
Adjusted total revenues⁽²⁾	Adjusted total revenues⁽²⁾	473,424			476,250			(0.6)		Adjusted total revenues⁽²⁾	472,795			488,270			(3.2)		946,218			964,522			(1.9)
Non-interest expense	Non-interest expense	276,279			292,410			(5.5)		Non-interest expense	284,141			264,126			7.6		560,421			556,537			0.7
Adjusted non-interest expense⁽²⁾	Adjusted non-interest expense⁽²⁾	271,155			242,653			11.7		Adjusted non-interest expense⁽²⁾	276,411			256,707			7.7		547,567			499,360			9.7
Income before income taxes	Income before income taxes	42,116			160,574			(73.8)		Income before income taxes	124,058			210,824			(41.2)		166,173			371,398			(55.3)
Net income	Net income	38,521			120,186			(67.9)		Net income	93,192			156,184			(40.3)		131,712			276,370			(52.3)
Net income available to common shareholders	Net income available to common shareholders	30,230			117,036			(74.2)		Net income available to common shareholders	84,901			153,034			(44.5)		115,131			270,070			(57.4)
Net income per common share, basic	Net income per common share, basic	0.21			0.73			(71.8)		Net income per common share, basic	0.58			0.97			(40.7)		0.78			1.70			(53.9)
Net income per common share, diluted	Net income per common share, diluted	0.20			0.72			(71.7)		Net income per common share, diluted	0.57			0.96			(40.3)		0.78			1.68			(53.7)
Adjusted net income per common share, diluted⁽²⁾	Adjusted net income per common share, diluted⁽²⁾	0.21			0.98			(79.0)		Adjusted net income per common share, diluted⁽²⁾	0.23			1.00			(76.9)		0.44			1.98			(78.0)
Net interest margin⁽³⁾	Net interest margin⁽³⁾	3.37		%	3.78		%	(41)	bps	Net interest margin⁽³⁾	3.13		%	3.69		%	(56)	bps	3.25		%	3.74		%	(49)	bps
Net charge-off ratio⁽³⁾	Net charge-off ratio⁽³⁾	0.21			0.19			2		Net charge-off ratio⁽³⁾	0.24			0.13			11		0.23			0.16			7
Return on average assets⁽³⁾	Return on average assets⁽³⁾	0.32			1.06			(74)		Return on average assets⁽³⁾	0.71			1.34			(63)		0.52			1.21			(69)
Adjusted return on average assets⁽²⁾⁽³⁾	Adjusted return on average assets⁽²⁾⁽³⁾	0.32			1.45			(113)		Adjusted return on average assets⁽²⁾⁽³⁾	0.32			1.39			(107)		0.32			1.42			(110)
Efficiency ratio-FTE	Efficiency ratio-FTE	57.81			61.28			(347)		Efficiency ratio-FTE	51.58			54.14			(256)		54.47			57.67			(320)
Adjusted tangible efficiency ratio⁽²⁾	Adjusted tangible efficiency ratio⁽²⁾	56.72			50.24			648		Adjusted tangible efficiency ratio⁽²⁾	57.91			52.08			583		57.31			51.17			614

⁽¹⁾Beginning January 1, 2020, provision calculation is based on current expected credit loss methodology. Prior to January 1, 2020, calculation was based on incurred loss methodology.

⁽²⁾See "Table 14 - Reconciliation of Non-GAAP Financial Measures” in this Report for the applicable reconciliation to the most comparable GAAP measure.

⁽³⁾Annualized


		March 31, 2020			December 31, 2019			Sequential Quarter Change			March 31, 2019			Year-Over-Year Change							June 30, 2020				March 31, 2020				Sequential Quarter Change				June 30, 2019			Year-Over-Year Change
(dollars in thousands)	(dollars in thousands)																																				March 31, 2020	Sequential Quarter Change	June 30, 2019	Year-Over-Year Change
Loans, net of deferred fees and costs	Loans, net of deferred fees and costs	$	38,258,024		$	37,162,450		$	1,095,574		$	35,634,501		$	2,623,523		Loans, net of deferred fees and costs	$	39,914,297			$	38,258,024			$	1,656,273			$	36,138,561			$	3,775,736
Total average loans	Total average loans	37,593,045			36,508,035			1,085,010			35,320,014			2,273,031			Total average loans	40,136,090				37,593,045				2,543,045				35,777,127				4,358,963
Total deposits	Total deposits	39,826,585			38,405,504			1,421,081			38,075,190			1,751,395			Total deposits	44,194,580				39,826,585				4,367,995				37,966,722				6,227,858
Core deposits		35,838,637			34,975,511			863,126			35,366,186			472,451
Core transaction deposits		24,790,621			24,167,582			623,039			23,168,085			1,622,536
Core deposits (excludes brokered deposits)																	Core deposits (excludes brokered deposits)	39,904,278				35,838,637				4,065,641				34,963,178				4,941,100
Core transaction deposits (excludes brokered and public fund deposits)																	Core transaction deposits (excludes brokered and public fund deposits)	29,425,251				24,790,621				4,634,630				23,268,923				6,156,328
Total average deposits	Total average deposits	38,687,207			37,878,818			808,389			37,826,952			860,255			Total average deposits	43,096,475				38,687,207				4,409,268				37,899,662				5,196,813
Non-performing assets ratio	Non-performing assets ratio	0.50		%	0.37		%	13		bps	0.44		%	6		bps	Non-performing assets ratio	0.44		%		0.50		%		(6)		bps		0.39		%		5		bps
Non-performing loans ratio	Non-performing loans ratio	0.41			0.27			14			0.40			1			Non-performing loans ratio	0.37				0.41				(4)				0.34				3
Past due loans over 90 days	Past due loans over 90 days	0.02			0.04			(2)			0.01			1			Past due loans over 90 days	0.02				0.02				—				0.02				—
CET1 capital	CET1 capital	$	3,744,415		$	3,743,459		$	956		$	3,790,393		$	(45,978)		CET1 capital	$	3,827,229			$	3,744,415			$	82,814			$	3,899,532			$	(72,303)
Tier 1 capital	Tier 1 capital	4,281,560			4,280,604			956			3,985,533			296,027			Tier 1 capital	4,364,374				4,281,560				82,814				4,094,672				269,702
Total risk-based capital	Total risk-based capital	5,289,039			5,123,381			165,658			4,803,639			485,400			Total risk-based capital	5,459,568				5,289,039				170,529				4,913,043				546,525
CET1 capital ratio	CET1 capital ratio	8.70		%	8.95		%	(25)		bps	9.52		%	(82)		bps	CET1 capital ratio	8.90		%		8.70		%		20		bps		9.61		%		(71)		bps
Tier 1 capital ratio	Tier 1 capital ratio	9.95			10.23			(28)			10.01			(6)			Tier 1 capital ratio	10.15				9.95				20				10.09				6
Total risk-based capital ratio	Total risk-based capital ratio	12.29			12.25			4			12.06			23			Total risk-based capital ratio	12.70				12.29				41				12.11				59
Total shareholders’ equity to total assets ratio	Total shareholders’ equity to total assets ratio	10.01			10.25			(24)			9.86			15			Total shareholders’ equity to total assets ratio	9.34				10.01				(67)				10.05				(71)
Tangible common equity ratio⁽¹⁾	Tangible common equity ratio⁽¹⁾	7.94			8.08			(14)			8.34			(40)			Tangible common equity ratio⁽¹⁾	7.41				7.94				(53)				8.56				(115)
Return on average common equity⁽²⁾	Return on average common equity⁽²⁾	2.75			13.08			(1,033)			10.98			(823)			Return on average common equity⁽²⁾	7.48				2.75				473				13.90				(642)
Adjusted return on average common equity⁽¹⁾⁽²⁾	Adjusted return on average common equity⁽¹⁾⁽²⁾	2.79			12.78			(999)			15.03			nm			Adjusted return on average common equity⁽¹⁾⁽²⁾	3.00				2.79				21				14.43				nm
Adjusted return on average tangible common equity⁽¹⁾⁽²⁾	Adjusted return on average tangible common equity⁽¹⁾⁽²⁾	3.39			14.84			(1,145)			17.52			nm			Adjusted return on average tangible common equity⁽¹⁾⁽²⁾	3.60				3.39				21				16.70				nm

⁽¹⁾See "Table 14 - Reconciliation of Non-GAAP Financial Measures” in this Report for the applicable reconciliation to the most comparable GAAP measure.

⁽²⁾Quarter annualized

4347

COVID-19 Healthcare Crisis and Economic Environment

The ongoing COVID-19 ~~outbreak~~healthcare crisis and public health response to contain it have ~~resulted in~~ triggered recessionary economic and financial market conditions ~~as of the end~~during a large portion of the first ~~quarter.~~half of 2020. During March 2020 in ~~response,~~an effort to lessen the impact of COVID-19 on consumers and businesses, the Federal Reserve reduced the federal funds rate 1.5 percentage points to 0.00 to 0.25 percent and the U.S. government enacted the CARES Act, the largest economic stimulus package in the nation’s history ~~in an effort to lessen the impact of COVID-19 on consumers and businesses.~~ .

Synovus' response to the COVID-19 pandemic ~~has~~ included measures to improve the ~~following actions:~~

•~~Over 95%~~health and safety of ~~branches were converted to drive-thru and appointment-only, and Synovus implemented aggressive cleaning, sanitizing and hygiene protocols at all company facilities;~~

•~~More than 80 percent of Synovus' 5,400~~our team members, ~~were repositioned to~~customers, and communities including remote work ~~remotely;~~

•~~Offered~~capabilities and branch service enhancements; bonus payments to hourly team members required to work ~~on-site~~on-site;payment deferments on approximately $6 billionof our loan portfolio and ~~provided additional paid time off to team members who are sick, quarantining, or dealing with childcare or other COVID-related family hardships;~~

•~~To help customers through the period~~forgiveness of ~~financial distress, Synovus is offering to waive~~ NSF and monthly service charges for customers ~~impacted by COVID-19, and offering payment deferment and other loan relief as appropriate;~~

•impacted. Additionally, Synovus participated in delivering PPP loans to close to 19,000 customers beginning on April 3, ~~2020.~~2020 and funded nearly $2.9 billion in PPP loans during the second quarter. The average PPP loan was approximately $150 thousand, and the customers that received those loans employ over 335 thousand individuals.

~~Additionally, in~~In light of current economic uncertainty, Synovus has suspended its share repurchase activity beyond the $16.2 million completed during the first quarter and withdrawn 2020 guidance and long-term goals announced at the beginning of the year. Significant economic uncertainty remains, including the trajectory of the economic recovery which will be impacted by any additional government stimulus plans.

Executive Summary

Net income available to common shareholders for the ~~first~~second quarter of 2020 was ~~$30.2~~$84.9 million, or ~~$0.20~~$0.57 per diluted common share, a ~~decrease~~decline of ~~74.2%~~44.5% and ~~71.7%~~40.3%, respectively, compared to the ~~first~~second quarter of ~~2019. Adjusted~~2019 and adjusted net income per common share, diluted⁽¹⁾ was ~~$0.21~~$0.23, down 76.9% compared to $1.00 for the second quarter of 2019. Net income available to common shareholders for the first ~~quarter~~six months of 2020 ~~down 79.0%~~was $115.1 million, or $0.78 per diluted common share, a decline of 57.4% and 53.7%, respectively, compared to ~~$0.98~~the first six months of 2019 and adjusted net income per common share, diluted⁽¹⁾ was $0.44, down 78.0% compared to $1.98 for the first ~~quarter~~six months of 2019. The year-over-year decline for all periods was driven by a significant increase in provision for credit losses following the adoption of CECL on January 1, 2020, as well as the impact of COVID-19, a 225 bps reduction in the federal funds rate, and PAA including loan discount accretion and deposit premium amortization that positively impacted ~~2019,.~~2019.

Net interest income ~~was $373.3 million~~ for the ~~three~~six months ended ~~March 31,~~June 30, 2020 was $749.8 million, down ~~6.0% from~~$44.6 million, or 5.6%, compared to the same period in 2019. The decrease in year-over-year net interest income was due to declines of $36.2 million in PAA associated with the FCB acquisition and declines in market interest rates, which were somewhat offset by higher average earning assets. Net interest margin was down 49 bps over the comparable ~~period in 2019 and down 6.5% from the fourth quarter of 2019,~~six-month periods to 3.25%, due primarily to the decline in market interest rates ~~and decline~~ in ~~PAA associated with the FCB acquisition. The~~addition to declines in PAA. On a sequential quarter basis, net interest income was up $3.3 million, or 0.9%, and net interest margin ~~was 3.37%~~ for ~~the first quarter of 2020, down 41 bps and 28 bps from the first and fourth quarter of 2019, respectively. Synovus expects net interest income in~~ the second quarter to be relatively flat compared to first quarter levels as a result of significant loan growth associated with the PPP. However, with this growth, along with a depressed rate environment and an elevated cash position, we expect continued downward pressure on our net interest margin in the second quarter.

~~Non-interest revenue for the first quarter of 2020~~ was ~~$103.9 million, up $24.5 million, or 30.8%~~3.13%, which was down 24 bps compared to the first quarter of 2020. The sequential quarter decline in net interest margin was primarily driven by the full quarter impact of the March 2020 emergency rate cuts by the Federal Reserve, as well as excess liquidity. While the second half of the year is expected to be favorably impacted by additional PPP fee accretion as PPP loans are forgiven, net interest income and net interest margin are expected to experiencedownward pressure due to certain strategic balance sheet management activities which were completed late in the second quarter.

Non-interest revenue for the second quarter of 2020 was $173.5 million, up $83.7 million, or 93.2%, and year-to-date was $277.3 million, up $108.2 million, or 63.9%, compared to the same periods in 2019 and ~~adjusted~~included gains on sales of investment securities available for sale of $69.4 million and $78.1 million, respectively. Adjusted non-interest revenue⁽¹⁾for the second quarter of ~~$99.4~~2020 was $95.4 million, ~~was~~ up ~~$20.9~~$5.2 million, or ~~26.7%~~5.7%, and on a year-to-date basis was $194.7 million compared to $168.6 million for the first six months of 2019, up $26.1 million, or 15.5%. The increase in adjusted non-interest revenue was due primarily to strong growth in mortgage banking income ~~capital markets income, and~~with record production driven by the current rate environment. As mortgage activity normalizes, Synovus believes a reduction of adjusted non-interest revenue in the third quarter is likely before we see a return to consistent growth in ~~fiduciary businesses. The disruption from COVID-19 will likely result in non-interest~~fee revenue ~~declining 15-25% in the second quarter from our recent run rate of approximately $90 million. We expect non-interest revenues to normalize, assuming~~as the economy ~~stabilizes.~~recovers.

Non-interest expense for the ~~first~~second quarter of 2020 was ~~$276.3~~$284.1 million, ~~down $16.1~~up $20.0 million, or ~~5.5%~~7.6%, ~~compared to the first quarter of 2019~~ and adjusted non-interest expense⁽¹⁾of ~~$271.2~~$276.4 million was up ~~$28.5~~$19.7 million, or 7.7%, compared to the second quarter of 2019. On a year-to-date basis, non-interest expense was up $3.9 million, or ~~11.7%.~~0.7%, and adjusted non-interest expense⁽¹⁾ was up $48.2 million, or 9.7%, compared to the same period in 2019. The increase in adjusted expense ~~over the first quarter of 2019~~during 2020 was largely driven by mortgage production commissions, expense associated with Synovus' internal revenue growth and efficiency initiative, "Synovus Forward", COVID-19 related expenses, and investments in talent and ~~technology and growth in production related commissions and fees.~~technology. The efficiency ratio-FTE for the first ~~three~~six months of 2020 was ~~57.81%~~54.47%, compared to ~~61.28%~~57.67% for the first ~~three~~six months of 2019. The adjusted tangible efficiency ratio⁽¹⁾ for the first ~~three~~six months of 2020 was ~~56.72%~~57.31%, up ~~648~~614 bps compared to the same period a year ago. ~~With the increased levels of COVID-19 related expenses, which we currently estimate at $5-6 million in the second quarter, we~~ Synovus expect ~~adjusted~~s expenses to ~~remain relatively stable quarter-on quarter, before declining~~decline in the second half of the year ~~if the economy stabilizes.~~

The decrease in the effective tax rate for the three months ended March 31, 2020 to 8.5%, from 25.2% for the three months ended March 31, 2019, reflects a one-time benefit of $2.7 million for carrying back net operating loss deductions to pre-TJCA tax periods, as ~~allowed by the CARES Act,~~mortgage production commissions decline with normalized mortgage activity, COVID-19 related expenses decline, and ~~other discrete benefit items, while the effective tax rate in the first quarter of 2019 was higher largely due to non-deductible merger-related expenses associated with the FCB acquisition.~~

~~Loans grew $1.10 billion, or~~Synovus Forward initiatives are implemented.11.9% annualized, sequentially, with total loans of $38.26 billion at March 31, 2020: C&I loan growth was $878.8 million, CRE loan growth was $190.7 million, and consumer loan growth was $26.3 million.

Synovus' adoption of CECL resulted in a January 1, 2020 ACL increase of $110.4 million, or 39.1%, over December 31, 2019. Provision for credit losses of $158.7 million during the first quarter included the impact of the COVID-19 healthcare

4448

~~crisis~~At June 30, 2020, total loans of $39.91 billion increased $1.66 billion, or 4.3%, sequentially, and increased $2.75 billion, or 7.4%, from December 31, 2019. The growth in total loans at June 30, 2020 included $2.71 billion in PPP loans net of unearned fees funded during the ~~first~~second quarter, ~~under CECL.~~ offset partially by the transfer of certain third-party lending partnership consumer loans to held for sale during the second quarter totaling $801.0 million. We expect loans to be fairly flat over the second half of the year, as compared to balances at June 30, 2020, excluding the impact of PPP loan forgiveness.

The ACL at ~~March 31,~~June 30, 2020 totaled ~~$531.9~~$649.7 million ~~consisting~~, an increase of ~~an ALL~~$366.9 million from December 31, 2019, reflecting a building of ~~$493.5 million and reserve on unfunded commitments~~the ACL required under CECL primarily as a result of ~~$38.4 million resulting~~deterioration in anthe economic environment due to the impact of COVID-19. The ACL to loans coverage ratio ~~of 1.39%. While Synovus did see an increase from year-end 2019 in the March 31, 2020 NPA ratio of 0.50% and NPL ratio of 0.41%~~was 1.63%, ~~the NPL ratio is up only one bp over prior year~~or 1.74%, excluding PPP loans, at June 30, 2020. Current credit metrics remain stable with NPAs at 44 bps, NPLs at 37 bps, and total past ~~dues declined~~due loans at 12 bps. Year-to-date, net charge-offs are 23 bps compared to ~~0.22% from 0.33%, sequentially. Net charge-offs for the first quarter of 2020 were 21 bps, annualized, up from 10~~16 bps in the ~~fourth quarter of 2019. While~~ prior year. Synovus does expect ~~to experience stress~~some pressure on credit metrics over the next few quarters, which aligns with the reserve builds in the ~~portfolio as we progress through the current economic environment, the credit quality~~first half of the ~~portfolio at March 31, 2020 was generally stable. If economic forecasts continue to deteriorate, we would expect to see a further increase in~~year under the ~~ACL.~~pro-cyclical nature of CECL.

Ataccounts compared to both March 31, 2020 and December 31, 2019.

At June 30, 2020, Synovus' CET1 ratio was ~~8.70%~~8.90%, ~~well~~ in excess of regulatory requirements including the ~~capital~~capital conservation buffer of 2.5%. The ~~23 bps decline in Synovus'~~June 30, 2020 CET1 ratio ~~from~~improved 20 bps compared to March 31, 2020 and declined 5 bps compared to December 31, ~~2019 was largely due~~2019. During the latter part of the second quarter of 2020, Synovus executed certain balance sheet management activities including repositioning the investment securities portfolio and transitioning certain third-party lending partnership loans to held for sale. These actions settled subsequent to quarter-end, at the ~~increase~~margin, and are expected to provide further support to capital ratios in ~~risk-weighted assets from loan growth~~the third quarter of ~~$1.10 billion.~~2020.

More detail on Synovus' financial results for the three and six months ended ~~March 31,~~June 30, 2020 ~~and current and expected effects from COVID-19~~ may be found in subsequent sections of "Item 2. – Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Report. See also "Item 1A. - Risk Factors" of this Report.

⁽¹⁾ See "Table 14 - Reconciliation of Non-GAAP Financial Measures” in this Report for applicable reconciliation to the most comparable GAAP measure.

Changes in Financial Condition

During the ~~three~~six months ended ~~March 31,~~June 30, 2020, total assets increased ~~$2.42~~$5.92 billion from $48.20 billion at December 31, 2019 to ~~$50.62~~$54.12 billion. Loans increased ~~$1.10~~$2.75 billion, including $2.71 billion in PPP loans net of unearned fees, and loans held for sale increased $785.8 million as Synovus transitioned certain third-party lending partnership consumer loans to held for sale. Investment securities available for sale increased $418.8 million and cash and cash equivalents increased ~~$636.9 million, and investment securities available for sale increased $158.6~~$384.3 million. Additional ~~investments in BOLI policies of $250.0 million during the three months ended March 31, 2020 also contributed to the increase~~increases in total ~~assets. Other~~ assets ~~increased $490.9 million including increases in the fair value of derivative assets of $326.4 million and~~at June 30, 2020, compared to December 31, 2019, included a ~~$169.7 million~~$1.29 billion receivable for securities available for sale sold during the quarter that will settle after ~~quarter-end. The growth~~quarter-end and additional investments in BOLI policies of $262.4 million. Other assets ~~was funded primarily by increases of $1.42 billion in deposits~~increased $351.2 million and ~~the issuance of $400.0 million in long-term debt on February 12, 2020. Other liabilities increased $304.7 million including~~included an increase in the fair value of derivative assets of $357.0 million.

The growth in assets was primarily funded by increases of $5.79 billion in deposits. Other short-term borrowings declined $1.45 billion and long-term debt increased $174.0 million. Additionally, total liabilities ~~of $149.0 million and~~at June 30, 2020 included an accrued liability of ~~$113.8~~$923.0 million for purchases of securities available for sale that will settle after quarter-end. Other liabilities increased $315.1 million and included an increase in the fair value of derivative liabilities of $159.1 million, an increase in income taxes payable of $67.5 million, and an increase in reserves on unfunded commitments of $59.7 million. Total shareholders' equity increased $111.3 million during the six months ended June 30, 2020, primarily due to net income of $131.7 million, increases in unrealized gains of $50.6 million in investment securities available for sale and $86.8 million in cash flow hedges, offset partially by dividends declared on common stock of $97.2 million.

Synovus adopted CECL on January 1, 2020 with an increase to the ALL of $83.0 million and an increase to the reserve on unfunded commitments of $27.4 million with offsetting increases in loans of $62.2 million related to acquired PCI loans and net deferred tax assets of $12.5 million and a reduction to retained earnings of $35.7 million. The ACL at June 30, 2020 was $649.7 million, an increase of $366.9 million from December 31, 2019, reflecting significant economic stress due to the COVID-19 healthcare crisis.

The loan to deposit ratio was ~~96.1%~~90.3% at ~~March 31,~~June 30, 2020, compared to 96.8% at December 31, 2019, and ~~93.6%~~95.2% at ~~March 31,~~June 30, 2019.

4549

Loans

The following table compares the composition of the loan portfolio at ~~March 31,~~June 30, 2020, December 31, 2019, and ~~March 31,~~June 30, 2019.

Table 2 - Loans by Portfolio Class
March 31, 2020 vs. December 31, 2019 % Change⁽¹⁾
March 31, 2020 vs. March 31, 2019 % Change
(dollars in thousands) March 31, 2020 December 31, 2019 March 31, 2019
Commercial, financial and agricultural $ 11,018,155 $ 10,252.859 30.0 % $ 9,566,403 15.2 %
Owner-occupied 6,643,287 6,529.811 7.0 6,542,506 1.5
Total commercial and industrial 17,661,442 16,782,670 21.1 16,108,909 9.6
Investment properties 9,257,791 9,042,679 9.6 8,853,494 4.6
1-4 family properties 751,468 780,015 (14.7) 838,727 (10.4)
Land and development 661,942 657,790 2.5 594,925 11.3
Total commercial real estate 10,671,201 10,480,484 7.3 10,287,146 3.7
Consumer mortgages 5,608,121 5,546,368 4.5 5,365,635 4.5
Home equity lines 1,778,862 1,713,157 15.4 1,606,227 10.7
Credit cards 261,581 268,841 (10.9) 252,762 3.5
Other consumer loans 2,302,349 2,396,294 (15.8) 2,037,477 13.0
Total consumer 9,950,913 9,924,660 1.1 9,262,101 7.4
Total loans 38,283,556 37,187,814 11.9 35,658,156 7.4
Deferred fees and costs, net (25,532) (25,364) 2.7 (23,655) 7.9
Total loans, net of deferred fees and costs $ 38,258,024 $ 37,162,450 11.9 % $ 35,634,501 7.4 %

⁽¹⁾ ~~Percentage changes are annualized.~~


Table 2 - Loans by Portfolio Class
									June 30, 2020 vs. December 31, 2019 Change																				June 30, 2020 vs. June 30, 2019 % Change
(dollars in thousands)	June 30, 2020						December 31, 2019																										June 30, 2019
Commercial, financial and agricultural	$	13,136,696	32.9	%	$	10,239,559	27.6	%			$	2,897,137			28.3	%			$	9,716,939			26.9	%			$	3,419,757			35.2	%
Owner-occupied	6,801,580		17.0		6,529,811		17.6		271,769				4.2				6,511,805				18.0				289,775				4.4
Total commercial and industrial	19,938,276		49.9		16,769,370		45.2		3,168,906				18.9				16,228,744				44.9				3,709,532				22.9
Investment properties	9,447,200		23.7		9,004,327		24.2		442,873				4.9				8,914,992				24.7				532,208				6.0
1-4 family properties	696,808		1.7		780,015		2.1		(83,207)				(10.7)				804,426				2.2				(107,618)				(13.4)
Land and development	683,527		1.7		709,442		1.9		(25,915)				(3.7)				647,828				1.8				35,699				5.5
Total commercial real estate	10,827,535		27.1		10,493,784		28.2		333,751				3.2				10,367,246				28.7				460,289				4.4
Consumer mortgages	5,811,376		14.6		5,546,368		14.9		265,008				4.8				5,407,762				15.0				403,614				7.5
Home equity lines	1,710,264		4.3		1,713,157		4.6		(2,893)				(0.2)				1,650,745				4.6				59,519				3.6
Credit cards	250,448		0.6		268,841		0.7		(18,393)				(6.8)				258,283				0.7				(7,835)				(3.0)
Other consumer loans	1,474,583		3.7		2,396,294		6.5		(921,711)				(38.5)				2,249,337				6.2				(774,754)				(34.4)
Total consumer	9,246,671		23.2		9,924,660		26.7		(677,989)				(6.8)				9,566,127				26.5				(319,456)				(3.3)
Total loans	40,012,482		100.2		37,187,814		100.1		2,824,668				7.6				36,162,117				100.1				3,850,365				10.6
Deferred fees and costs, net	(98,185)		(0.2)		(25,364)		(0.1)		(72,821)				287.1				(23,556)				(0.1)				(74,629)				316.8
Total loans, net of deferred fees and costs	$	39,914,297	100.0	%	$	37,162,450	100.0	%	$	2,751,847			7.4	%			$	36,138,561			100.0	%			$	3,775,736			10.4	%

At ~~March 31,~~June 30, 2020, total loans, net of deferred fees and costs of ~~$38.26~~$39.91 billion, increased ~~$1.10~~$2.75 billion, or ~~11.9% annualized,~~7.4%, from December 31, 2019 led by C&I growth of $3.17 billion, including $2.71 billion in PPP loans net of unearned fees, and ~~$2.62 billion, or 7.4%,~~CRE growth of $333.8 million, partially offset by a $678.0 million decline in consumer loans. We expect loans to be fairly flat over the second half of the year, as compared to ~~March 31, 2019.~~balances at June 30, 2020, excluding the impact of PPP loan forgiveness. C&I loans remain the largest component of our ~~balance sheet~~loan portfolio, representing ~~46.1%~~49.9% of total loans, while CRE and consumer loans represent ~~27.9%,~~27.1% and ~~26.0%~~23.2%, respectively. Our portfolio composition is established through a comprehensive concentration management policy which sets limits for C&I, CRE, and ~~Consumer~~consumer loan levels as well as for sub-categories therein.

U.S. Small Business Administration Paycheck Protection Program (PPP)

Synovus is participating in the Paycheck Protection Program (“PPP”), which is a loan program that originated from the CARES Act and was subsequently expanded by the Paycheck Protection Program and Health Care Enhancement Act (“PPPHCEA Act”) which was passed by Congress on April 23, 2020 and signed into law on April 24, 2020. PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. These loans carry a fixed rate of 1.00% and a term of two years, if not forgiven, in whole or in part. The loans are guaranteed by the SBA. The SBA pays the originating bank a processing fee ranging from 1% to 5%, based on the size of the loan. Synovus began accepting applications from qualified customers on April 3, 2020 and has provided nearly $2.9 billion in funding to close to 19,000 customers through the PPP as of June 30, 2020. The average PPP loan was approximately $150 thousand, and the customers that received those loans employ over 335 thousand individuals.

Commercial Loans

Total commercial loans (which are comprised of C&I and CRE loans) at ~~March 31,~~June 30, 2020 were ~~$28.33~~$30.77 billion, or ~~74.0%~~77.0% of the total loan portfolio, compared to $27.26 billion, or 73.4%, at December 31, 2019 and ~~$26.40~~$26.60 billion, or ~~74.0%~~73.6%, at ~~March 31,~~June 30, 2019.

At ~~March 31,~~June 30, 2020, Synovus had 65 commercial loan relationships with total commitments of $100 million or more (including amounts funded), with no single relationship exceeding $150 million in commitments.

Commercial and Industrial Loans

The C&I loan portfolio represents the largest category of Synovus' loan portfolio and is primarily comprised of general middle market and commercial banking clients across a diverse set of industries. The following table shows the composition of the C&I loan portfolio aggregated by NAICS code. 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~~.relationship. As of ~~March 31,~~June 30, 2020, ~~92.3%~~80.1% (93.0% excluding PPP loans) of Synovus' C&I loans are secured by real

estate, business equipment, inventory, and other types of ~~collateral.~~collateral compared to 92.6% as of December 31, 2019. C&I loans ~~of $17.66~~grew $3.17 billion, or ~~46.1% of the loan portfolio, grew $878.8 million, or 21.1% annualized,~~18.9%, from December 31, 2019, driven primarily by ~~strong productivity from our Wholesale Banking segment across many specialty divisions as well as an increase~~$2.71 billion in ~~line utilization due to the economic and financial market conditions as~~PPP loans net of ~~the end of the first quarter of~~unearned fees at June 30, 2020.


Table 3 - Commercial and Industrial Loans by Industry	Table 3 - Commercial and Industrial Loans by Industry																	Table 3 - Commercial and Industrial Loans by Industry
		March 31, 2020						December 31, 2019							June 30, 2020					December 31, 2019
(dollars in thousands)	(dollars in thousands)	Amount		%⁽¹⁾		Amount		%⁽¹⁾		(dollars in thousands)	Amount		%⁽¹⁾		Amount		%⁽¹⁾
Health care and social assistance	Health care and social assistance	$	3,176,354	18.0	%	$	3,083,355	18.4	%	Health care and social assistance	$	3,567,225	17.9	%	$	3,083,355	18.4		%
Finance and insurance	Finance and insurance	1,506,106		8.5		1,263,521		7.5		Finance and insurance	1,487,083		7.5		1,263,521		7.5
Manufacturing	Manufacturing	1,282,100		7.3		1,208,688		7.2		Manufacturing	1,387,812		7.0		1,208,688		7.2
Retail trade	Retail trade	1,214,539		6.9		1,202,958		7.2		Retail trade	1,376,393		6.9		1,202,958		7.2
Wholesale trade		1,163,175		6.6		1,138,145		6.8
Real estate and rental and leasing		1,147,800		6.5		1,126,828		6.7
Accommodation and food services	Accommodation and food services	1,002,118		5.7		921,515		5.5		Accommodation and food services	1,315,174		6.6		921,515		5.5
Professional, scientific, and technical services	Professional, scientific, and technical services	1,000,676		5.7		883,433		5.3		Professional, scientific, and technical services	1,269,710		6.4		883,433		5.3
Wholesale trade										Wholesale trade	1,197,540		6.0		1,138,145		6.8
Other services	Other services	986,081		5.6		1,005,420		6.0		Other services	1,168,152		5.9		1,005,420		6.0
Real estate and rental and leasing										Real estate and rental and leasing	1,164,789		5.8		1,126,828		6.7
Construction										Construction	1,089,184		5.5		702,892		4.2
Transportation and warehousing	Transportation and warehousing	863,306		4.9		854,954		5.1		Transportation and warehousing	957,299		4.8		854,954		5.1
Construction		825,388		4.7		716,192		4.3
Arts, entertainment and recreation	Arts, entertainment and recreation	789,778		4.5		771,846		4.6		Arts, entertainment and recreation	825,993		4.1		771,846		4.6
Real estate other	Real estate other	625,449		3.5		615,441		3.7		Real estate other	669,717		3.4		615,441		3.7
Educational services	Educational services	483,554		2.7		409,639		2.4		Educational services	580,615		2.9		409,639		2.4
Agriculture, forestry, fishing, and hunting		363,669		2.1		369,185		2.2
Public Administration	Public Administration	345,702		2.0		342,329		2.0		Public Administration	421,781		2.1		342,329		2.0
Administration, support, waste management, and remediation	Administration, support, waste management, and remediation	318,624		1.8		302,711		1.8		Administration, support, waste management, and remediation	406,743		2.0		302,711		1.8
Agriculture, forestry, fishing, and hunting										Agriculture, forestry, fishing, and hunting	402,946		2.0		369,185		2.2
Information	Information	307,495		1.7		314,740		1.9		Information	372,992		1.9		314,740		1.9
Other Industries	Other Industries	259,528		1.3		251,770		1.4		Other Industries	277,128		1.3		251,770		1.5
Total commercial and industrial loans	Total commercial and industrial loans	$	17,661,442	100.0	%	$	16,782,670	100.0	%	Total commercial and industrial loans	$	19,938,276	100.0	%	$	16,769,370	100.0		%

⁽¹⁾Loan balance in each category expressed as a percentage of total C&I loans.

At ~~March 31,~~June 30, 2020, ~~$11.02~~$13.14 billion of C&I loans, or ~~28.8%~~32.9% of the total loan portfolio, included PPP loans of $2.71 billion net of unearned fees and 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 ~~March 31,~~June 30, 2020, ~~$6.64~~$6.80 billion of C&I loans, or ~~17.3%~~17.0% 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

CRE loans consist primarily of income-producing investment properties loans. Additionally, CRE loans include 1-4 family properties loans as well as land and development loans. Total CRE loans of ~~$10.67~~$10.83 billion ~~or 27.9% of the loan portfolio,~~ increased $~~190.7~~333.8 million, or ~~7.3% annualized,~~3.2%, from December 31, 2019, driven primarily by growth in income-producing investment properties.

Investment properties loans consist of construction and mortgage loans for ~~income-producing~~income-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 ~~March 31,~~June 30, 2020 were ~~$9.26~~$9.45 billion, or ~~86.8%~~87.3% of the CRE loan portfolio, and ~~24.2% of the loan portfolio, and~~ increased ~~$215.1~~$442.9 million, or ~~9.6% annualized,~~ 4.9%,from December 31, 2019 with most sub-categories experiencing growth other than ~~office buildings and~~ shopping centers, which were ~~flat and down 10.0% annualized, respectively.~~slightly down.

1-4 Family Properties Loans

1-4 family properties loans include construction loans to home builders and commercial mortgage loans related to 1-4 family rental properties 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. At ~~March 31,~~June 30, 2020, 1-4 family properties loans totaled

~~$751.5~~ $696.8 million, or ~~7.0%~~6.4% of the CRE loan portfolio, and ~~2.0% of the loan portfolio, and~~ decreased by ~~$28.5~~$83.2 million, or ~~14.7% annualized~~10.7%, from December 31, 2019.

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. Properties securing these loans are substantially within markets served by Synovus 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). Land and development loans of ~~$661.9~~$683.5 million at ~~March 31,~~June 30, 2020 ~~or 1.7% of the loan portfolio, increased~~decreased slightly ~~by $4.2~~from $709.4 million ~~or 2.5% annualized, from~~at December 31, 2019.

Consumer Loans

The consumer loan portfolio consists of a wide variety of loan products offered through Synovus' banking network including first and second residential mortgages, HELOCs, and credit card loans, as well as home improvement, student, and personal loans from third-party lending partnerships. The majority of Synovus' consumer loans are consumer mortgages and HELOCs secured by first and second liens on residential real estate primarily located in the markets served by Synovus.

Consumer loans at ~~March 31,~~June 30, 2020 of ~~$9.95~~$9.25 billion ~~or 26.0% of the loan portfolio, increased $26.3~~decreased $678.0 million, or ~~1.1% annualized,~~6.8%, compared to ~~$9.92 billion at~~ December 31, 2019 primarily due to the transfer of certain third-party lending partnership loans to held for sale, partially offset by growth in consumer mortgages. Consumer mortgages grew ~~$61.8~~$265.0 million, or ~~4.5% annualized,~~4.8%, from December 31, 2019 due to record production primarily ~~as a result of~~resulting from the low rate environment ~~and additional mortgage loan originators.~~in addition to continued successful recruiting of MLOs. HELOCs ~~increased $65.7~~decreased $2.9 million ~~or 15.4% annualized,~~ from December 31, ~~2019, driven primarily by an increase in line utilization due to the economic and financial market conditions as of the end of the first quarter of 2020.~~2019. Credit card loans of ~~$261.6~~$250.4 million at ~~March 31,~~June 30, 2020 included ~~$62.4~~$53.0 million of commercial credit card loans, and decreased ~~marginally~~$18.4 million from $268.8 million at December 31, 2019. Other consumer loans decreased ~~$93.9~~$921.7 million, or ~~15.8% annualized,~~38.5%, from December 31, 2019 primarily due to ~~pay-downs related to our~~the transfer of $801.0 million of Synovus' third-party lending ~~partnerships~~partnership loans to held-for-sale. As of ~~March 31,~~June 30, 2020, these partnerships had combined balances of ~~$1.89~~$1.13 billion, or ~~4.9%~~2.8% of the total loan ~~portfolio.~~portfolio, compared to $1.98 billion, or 5.3% of the total loan portfolio, at December 31, 2019.

Consumer loans 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. Consumer loans are generally assigned a risk rating on a 9-point scale based on credit bureau scores, with a loan grade of 1 assigned as the lowest level of risk and a loan grade of 6 as the highest level of risk. No loans graded higher than a 6 at origination are approved for funding. 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 ALL. Revolving lines of credit are reviewed for a 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 ~~March 31,~~June 30, 2020, weighted-average FICO scores within the residential real estate portfolio based on committed balances were ~~786~~789 for HELOCs and ~~775~~778 for Consumer Mortgages.

~~U.S. Small Business Administration Paycheck Protection Program~~

The CARES Act included an allocation of $349 billion for loans to be issued by financial institutions through the Small Business Administration (“SBA”). This program is known as the Paycheck Protection Program (“PPP”). PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. These loans carry a fixed rate of 1.00% and a term of two years, if not forgiven, in whole or in part. Payments are deferred for the first six months of the loan. The loans are 100% guaranteed by the SBA. The SBA pays the originating bank a processing fee ranging from 1% to 5%, based on the size of the loan. The Paycheck Protection Program and Health Care Enhancement Act (“PPP / HCEA Act”) was passed by Congress on April 23, 2020 and signed into law on April 24, 2020. The PPP / HCEA Act authorizes additional funding under the CARES Act of $310 billion for PPP loans to be issued by financial institutions through the SBA. Synovus began accepting applications from qualified customers on April 3, 2020 and has provided over $2.8 billion in funding to over 18,000 customers through the PPP, as of May 7, 2020.

4852

Deposits

Deposits provide the most significant funding source for interest earning assets. The following table shows the composition of period-end deposits asas of the dates indicated. See Table 10 - Average Balances and Yields/Rates in this Report for information on average deposits including average rates.


Table 4 - Composition of Period-end Deposits	Table 4 - Composition of Period-end Deposits																			Table 4 - Composition of Period-end Deposits
(dollars in thousands)	(dollars in thousands)	March 31, 2020		%⁽¹⁾		December 31, 2019		%⁽¹⁾		March 31, 2019		%⁽¹⁾		(dollars in thousands)	June 30, 2020		%⁽¹⁾		March 31, 2020		%⁽¹⁾		December 31, 2019		%⁽¹⁾		June 30, 2019		%⁽¹⁾
Non-interest-bearing demand deposits⁽²⁾	Non-interest-bearing demand deposits⁽²⁾	$	8,968,756	22.5	%	$	8,661,220	22.6	%	$	8,440,520	22.2	%	Non-interest-bearing demand deposits⁽²⁾	$	11,830,675	26.8	%	$	8,968,756	22.5	%	$	8,661,220	22.6	%	$	8,577,612	22.6	%
Interest-bearing demand deposits⁽²⁾	Interest-bearing demand deposits⁽²⁾	4,617,368		11.6		4,769,505		12.4		4,911,215		12.8		Interest-bearing demand deposits⁽²⁾	5,057,234		11.4		4,617,368		11.6		4,769,505		12.4		4,847,242		12.8
Money market accounts⁽²⁾	Money market accounts⁽²⁾	10,255,014		25.8		9,827,357		25.6		8,912,528		23.4		Money market accounts⁽²⁾	11,457,223		26.0		10,255,014		25.8		9,827,357		25.6		8,952,875		23.6
Savings deposits⁽²⁾	Savings deposits⁽²⁾	949,483		2.4		909,500		2.4		903,822		2.4		Savings deposits⁽²⁾	1,080,119		2.4		949,483		2.4		909,500		2.4		891,194		2.3
Public funds	Public funds	5,261,383		13.2		4,622,318		12.0		4,630,022		12.2		Public funds	5,347,351		12.1		5,261,383		13.2		4,622,318		12.0		4,351,304		11.5
Time deposits⁽²⁾	Time deposits⁽²⁾	5,786,633		14.5		6,185,611		16.1		7,568,079		19.9		Time deposits⁽²⁾	5,131,676		11.6		5,786,633		14.5		6,185,611		16.1		7,342,951		19.3
Brokered deposits	Brokered deposits	3,987,948		10.0		3,429,993		8.9		2,709,004		7.1		Brokered deposits	4,290,302		9.7		3,987,948		10.0		3,429,993		8.9		3,003,544		7.9
Total deposits	Total deposits	$	39,826,585	100.0	%	$	38,405,504	100.0	%	$	38,075,190	100.0	%	Total deposits	$	44,194,580	100.0	%	$	39,826,585	100.0	%	$	38,405,504	100.0	%	$	37,966,722	100.0	%
Core deposits⁽³⁾	Core deposits⁽³⁾	$	35,838,637	90.0	%	$	34,975,511	91.1	%	$	35,366,186	92.9	%	Core deposits⁽³⁾	$	39,904,278	90.3	%	$	35,838,637	90.0	%	$	34,975,511	91.1	%	$	34,963,178	92.1	%
Core transaction deposits⁽⁴⁾	Core transaction deposits⁽⁴⁾	$	24,790,621	62.2	%	$	24,167,582	62.9	%	$	23,168,085	60.8	%	Core transaction deposits⁽⁴⁾	$	29,425,251	66.6	%	$	24,790,621	62.2	%	$	24,167,582	62.9	%	$	23,268,923	61.3	%

Time deposits greater than $100,000, including brokered and public funds	Time deposits greater than $100,000, including brokered and public funds	$	7,176,468	18.0	%	$	7,262,833	18.9	%	$	8,318,082	21.8	%	Time deposits greater than $100,000, including brokered and public funds	$	6,875,462	15.6	%	$	7,176,468	18.0	%	$	7,262,833	18.9	%	$	8,290,297	21.8	%
Brokered time deposits	Brokered time deposits	$	2,229,596	5.6	%	$	2,154,095	5.6	%	$	1,902,962	5.0	%	Brokered time deposits	$	2,442,940	5.5	%	$	2,229,596	5.6	%	$	2,154,095	5.6	%	$	2,095,240	5.5	%

⁽¹⁾Deposits balance in each category expressed as percentage of total deposits.

⁽²⁾Excluding any public funds or brokered deposits.

⁽³⁾Core deposits exclude brokered deposits.

⁽⁴⁾Core transaction deposits consist of non-interest-bearing demand deposits, interest-bearing demand deposits, money market accounts, and savings deposits excluding public funds and brokered deposits.

Total period-end deposits at June 30, 2020 increased $4.37 billion, or 11.0%, compared to March 31, 2020, and increased ~~$1.42~~$5.79 billion, or ~~14.9% annualized,~~15.1%, compared to December 31, 2019,~~. Core~~ led by growth in non-interest-bearing demand deposits. The growth in non-interest-bearing demand deposits occurred in conjunction with Synovus' PPP lending effort. Synovus also experienced broad-based growth across interest-bearing core transaction ~~deposit growth was very strong, up $623.0 million, or 10.4% annualized,~~accounts compared to both March 31, 2020 and December 31, 2019. ~~Within the~~The quarterly growth in interest-bearing core transaction ~~deposit category, non-interest-bearing deposits increased $307.5 million and~~accounts included growth in money market accounts ~~increased $427.7 million. Public fund deposits increased $639.1~~of $1.20 billion, NOW accounts of $439.9 million, ~~while~~and savings balances of $130.6 million, offset somewhat by declines in higher cost time deposits ~~declined $399.0 million, compared to year-end 2019.~~of $655.0 million. Additionally, Synovus increased funding by ~~$558.0~~$302.4 million in lower priced brokered deposits, at ~~March 31,~~June 30, 2020, compared to ~~December~~March 31, ~~2019.~~2020. Interest-bearing deposit costs declined 45 bps during the second quarter of 2020, compared to the first quarter of 2020.

On an average basis, the increase in total deposits was ~~$808.4 million,~~$4.41 billion, or ~~8.6% annualized, compared to the fourth quarter of 2019.~~

~~Non-interest Revenue~~

~~Non-interest revenue for the first quarter of 2020 was $103.9 million, up $24.5 million, or 30.8%~~11.4%, compared to the first quarter of 2020.

Non-interest Revenue

Non-interest revenue for the second quarter of 2020 was $173.5 million, up $83.7 million, or 93.2%, and year-to-date was $277.3 million, up $108.2 million, or 63.9% compared to the same periods in 2019 and ~~adjusted~~included gains on sales of investment securities available for sale of $69.4 million and $78.1 million, respectively. Adjusted non-interest revenue, which excludes net investment securities gains and gain on sale/fair value increase/(decrease) of ~~$99.4~~private equity investments, for the second quarter of 2020 was $95.4 million, ~~was~~ up ~~$20.9~~$5.2 million, or ~~26.7%~~5.7%, from the second quarter of 2019, and on a year-to-date basis was $194.7 million compared to $168.6 million for the first six months of 2019, up $26.1 million, or 15.5%. The increase in adjusted non-interest revenue was due primarily to strong growth in mortgage banking income ~~capital markets income, and~~with record production driven by the current rate environment.As mortgage activity normalizes, Synovus believes a reduction of adjusted non-interest revenue in the third quarter is likely before we see a return to consistent growth in ~~fiduciary businesses including growth in brokerage revenue.~~fee revenue as the economy recovers. See "Table 14 - Reconciliation of Non-GAAP Financial Measures” in this Report for applicable reconciliation to GAAP measures.

4953

The following table shows the principal components of non-interest revenue.


Table 5 - Non-interest revenue	Table 5 - Non-interest revenue							Table 5 - Non-interest revenue
		Three Months Ended March 31,											Three Months Ended June 30,								Six Months Ended June 30,
(dollars in thousands)	(dollars in thousands)	2020		2019		% Change		(dollars in thousands)	2020		2019		% Change		2020		2019		% Change
Service charges on deposit accounts	Service charges on deposit accounts	$	20,689	$	20,859	(0.8)	%	Service charges on deposit accounts	$	15,567	$	21,994	(29.2)	%	$	36,255	$	42,853	(15.4)	%
Fiduciary and asset management fees	Fiduciary and asset management fees	15,174		13,578		11.8		Fiduciary and asset management fees	14,950		14,478		3.3		30,124		28,057		7.4
Card fees	Card fees	10,950		10,877		0.7		Card fees	9,186		11,161		(17.7)		20,136		22,037		(8.6)
Brokerage revenue	Brokerage revenue	12,398		9,379		32.2		Brokerage revenue	9,984		10,052		(0.7)		22,383		19,431		15.2
Mortgage banking income	Mortgage banking income	12,227		5,054		141.9		Mortgage banking income	23,530		7,907		197.6		35,757		12,962		175.9
Capital markets income	Capital markets income	11,243		5,245		114.4		Capital markets income	6,050		8,916		(32.1)		17,294		14,161		22.1
Income from bank-owned life insurance	Income from bank-owned life insurance	6,038		5,290		14.1		Income from bank-owned life insurance	7,756		5,176		49.8		13,794		10,466		31.8
Investment securities gains, net		8,734		75		nm
(Decrease) increase in fair value of private equity investments		(4,255)		858		nm
Investment securities gains (losses), net								Investment securities gains (losses), net	69,409		(1,845)		nm		78,144		(1,771)		nm
Gain on sale and increase/(decrease) in fair value of private equity investments								Gain on sale and increase/(decrease) in fair value of private equity investments	8,707		1,455		nm		4,452		2,313		nm
Other non-interest revenue	Other non-interest revenue	10,659		8,163		30.6		Other non-interest revenue	8,345		10,513		(20.6)		19,002		18,676		1.7
Total non-interest revenue	Total non-interest revenue	$	103,857	$	79,378	30.8	%	Total non-interest revenue	$	173,484	$	89,807	93.2	%	$	277,341	$	169,185	63.9	%

Three and Six Months Ended ~~March 31,~~June 30, 2020 compared to ~~March 31,~~June 30, 2019

Service charges on deposit accounts for the three and six months ended ~~March 31,~~June 30, 2020 were down ~~$170 thousand,~~$6.4 million, or ~~0.8%~~29.2%, and $6.6 million, or 15.4%, respectively, due primarily to the impact of COVID-19, including fewer transactions, fee waivers, and the impact of higher average balances due to stimulus funds. Service charges on deposit accounts consist of NSF fees, account analysis fees, and all other service charges. NSF fees were ~~up $215 thousand,~~down $5.1 million, or ~~2.5%~~52.8%, and $4.9 million, or 26.6%, for the three and six months ended ~~March 31, 2020.~~June 30, 2020, respectively. Account analysis fees were down ~~$19~~$432 thousand, or ~~0.3%~~5.9%, and $451 thousand, or 3.2%, for the three and six months ended ~~March 31, 2020.~~June 30, 2020, respectively. All other service charges on deposit accounts, which consist primarily of monthly fees on retail demand deposits, saving accounts, and small business accounts, for the three and six months ended ~~March 31,~~June 30, 2020, were down ~~$366~~$909 thousand, or ~~7.1%. Beginning in March, to help customers through the period of financial distress, Synovus is offering to waive NSF~~17.9%, and monthly service charges for customers impacted by COVID-19. The impact to the first quarter of 2020 from fee waivers was immaterial; however, Synovus does expect a larger impact in the second quarter of 2020.$1.3 million, or 12.5%, 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 ~~$1.6~~$472 thousand, or 3.3%, and $2.1 million, or ~~11.8%~~7.4%, for the three and six months ended ~~March 31,~~June 30, 2020, ~~due primarily to~~respectively. The increases were driven by growth in total assets under management ~~during the quarter~~ which totaled $15.25 billion at March 31, 2020, as well as talent additions in the second quarter of 2019. Since certain fiduciary and asset management fees are based on the value of assets under management, the second quarter of 2020 may be negatively impactedincreased by ~~market dynamics due~~4.7% year-over-year to ~~COVID-19.~~$16.56 billion.

Card fees for the three and six months ended ~~March 31,~~June 30, 2020 were ~~essentially flat compared~~down $2.0 million, or 17.7%, and $1.9 million, or 8.6%, respectively, due to lower transaction volume as a result of the ~~same period in 2019.~~impact of COVID-19. 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. While flat compared to the same period a year ago, card fees did decline during the last two weeks of March due to lower transaction volume as a result of the impact of COVID -19, a trend that may continue in the second quarter due to economic uncertainty.

Brokerage revenue ~~was $12.4~~of $10.0 million for the three months ended ~~March 31,~~June 30, 2020 was essentially flat, and for the six months ended June 30, 2020 was $22.4 million, up $3.0 million, or ~~32.2%, compared to~~15.2%. The year-over-year growth for the ~~three~~first six months ~~ended March 31, 2019,~~of 2020 was driven by growth in assets under management, increasing contributions from 2019 new hires, and higher transaction revenue from elevated market volatility. Brokerage revenue consists primarily of brokerage commissions as well as advisory fees earned from the management of customer assets. Brokerage assets under management were ~~$3.4~~$3.94 billion at ~~March 31,~~June 30, 2020, an increase of ~~11.5%~~19.6% from ~~$3.1~~$3.29 billion at ~~March 31,~~June 30, 2019. ~~Since certain advisory fees are based on the value of brokerage assets under management, the second quarter of 2020 may be negatively impacted by market environment due to COVID-19.~~

Mortgage banking income ~~increased $7.2~~was significantly higher in the first six months of 2020, with increases of $15.6 million and $22.8 million for the three and six months ended ~~March 31, 2020.~~June 30, 2020, respectively. Mortgage banking income was driven by higher production and sales, including an increase in refinance volume, due primarily to a decline in long-term interest ~~rates during the quarter.~~rates. Total secondary market mortgage loan production ~~was $250.8~~was $635.2 million, up $418.3 million, and $889.7 million, up $545.6 million, for the three and six months ended ~~March 31,~~June 30, 2020, ~~up $127.5 million, or 103.4%, compared to the three months ended March 31, 2019.~~respectively.

Capital markets income primarily includes fee income from customer derivative transactions. Additionally, capital markets income includes fee income from capital raising investment banking transactions and foreign exchange as well as other miscellaneous income from capital market transactions. ~~Capital~~While capital markets income ~~increased $6.0~~was $2.9 million lower for the three months ended ~~March 31,~~June 30, 2020, capital markets income for the first six months of 2020 was up $3.1 million, as commercial clients locked in lower rates on ~~borrowings.~~

borrowings late in the first quarter.

Income from BOLI, which includes increases in the cash surrender value of policies and proceeds from insurance benefits, increased ~~$748 thousand,~~$2.6 million, or ~~14.1%~~49.8%, and $3.3 million, or 31.8%, for the three and six months ended ~~March 31,~~June 30, 2020, respectively,

due primarily to additional investments in BOLI policies during the first quarter of 2020. The first ~~three~~six months of 2020 included income on proceeds from insurance benefits of ~~$118~~$706 thousand compared to $233 thousand in 2019.

Investment securities gains, net, of ~~$8.7~~$69.4 million and $78.1 million for the three and six months ended ~~March 31,~~June 30, 2020, respectively, reflected strategic repositioning of the ~~portfolio.~~portfolio primarily during the latter part of the second quarter of 2020. The transactions were primarily focused on agency mortgage-backed securities, but also included the disposition of Synovus' remaining $155.0 million in asset-backed securities.

~~(Decrease)/increase~~Gain on sale and increase/(decrease) in ~~the~~ fair value of private equity investments included ~~unrealized decreases in fair value of $4.3 million~~realized gains during the ~~three months ended March 31,~~second quarter of 2020 ~~due primarily to market volatility~~from the sale of positions in ~~certain~~two publicly traded equity investments, ~~which recently became public and contain lock-up periods.~~offset partially by write-downs on two smaller remaining investments.

The main components of other non-interest revenue are fees for letters of credit and unused lines of credit, safe deposit box fees, access fees for ATM use, other service charges, income from insurance commissions, gains from sales of GGL/SBA loans, and other miscellaneous items. The first quarter of 2020 included a sale-leaseback gain of $2.4 million associated with a bank office ~~property. While fees included in other non-interest revenue were not materially impacted by COVID-19 during the first quarter, Synovus does expect to see a decline in ATM and other services charges during~~property while the second quarter of ~~2020.~~2020 included expense of $1.6 million related to investments in solar energy tax credit partnerships.

Non-interest Expense

~~Non-interest~~Non-interest expense for the ~~first~~second quarter of 2020 was ~~$276.3~~$284.1 million, ~~down $16.1~~up $20.0 million, or ~~5.5%~~7.6%, compared to the ~~first~~second quarter of 2019 and adjusted non-interest expense ~~which excludes merger-related expense, loss on early extinguishment of debt, and restructuring charges,~~of ~~$271.2~~$276.4 million was up ~~$28.5~~$19.7 million, or ~~11.7~~%7.7%. On a year-to-date basis, non-interest expense was up $3.9 million, or 0.7%, and adjusted non-interest expense was up $48.2 million, or 9.7%. The increase in adjusted expense ~~over the first quarter of 2019~~during 2020 was largely driven by mortgage production commissions, expense associated with Synovus' internal revenue growth and efficiency initiatives, COVID-19 related expenses, and investments in talent and ~~technology and growth in production-related commissions and fees. T~~hetechnology. The efficiency ratio-FTE for the first ~~three~~six months of 2020 was ~~57.81%~~54.47%, compared to ~~61.28%~~57.67% for the first ~~three~~six months of 2019. The adjusted tangible efficiency ratio for the first ~~three~~six months of 2020 was ~~56.72%~~57.31%, up ~~648~~614 bps compared to the same period a year ago. Synovus expects expenses to decline in the second half of the year as mortgage production commissions decline with normalized mortgage activity, COVID-19 related expenses decline, and Synovus Forward initiatives are implemented. See "Table 14 - Reconciliation of Non-GAAP Financial Measures” in this Report for applicable reconciliation to GAAP measures.

The following table summarizes the components of non-interest expense.


Table 6 - Non-interest Expense	Table 6 - Non-interest Expense							Table 6 - Non-interest Expense
		Three Months Ended March 31,											Three Months Ended June 30,								Six Months Ended June 30,
(dollars in thousands)	(dollars in thousands)	2020		2019		% Change		(dollars in thousands)	2020		2019		% Change		2020		2019		% Change
Salaries and other personnel expense	Salaries and other personnel expense	$	149,678	$	139,427	7.4	%	Salaries and other personnel expense	$	159,597	$	143,009	11.6	%	$	309,274	$	282,436	9.5	%
Net occupancy and equipment expense		42,194		38,394		9.9
Net occupancy, equipment, and software expense								Net occupancy, equipment, and software expense	41,727		39,851		4.7		83,921		78,245		7.3
Third-party processing and other services	Third-party processing and other services	21,480		17,758		21.0		Third-party processing and other services	21,366		19,118		11.8		42,846		36,875		16.2
Professional fees	Professional fees	10,675		6,348		68.2		Professional fees	15,305		9,312		64.4		25,980		15,660		65.9
FDIC insurance and other regulatory fees	FDIC insurance and other regulatory fees	5,278		6,761		(21.9)		FDIC insurance and other regulatory fees	6,851		7,867		(12.9)		12,129		14,629		(17.1)
Advertising expense		4,752		5,123		(7.2)
Earnout liability adjustments								Earnout liability adjustments	4,908		—		nm		4,908		—		nm
Merger-related expense	Merger-related expense	—		49,738		nm		Merger-related expense	—		7,401		nm		—		57,140		nm
Restructuring charges	Restructuring charges	3,220		19		nm		Restructuring charges	2,822		18		nm		6,042		37		nm
Loss on early extinguishment of debt	Loss on early extinguishment of debt	1,904		—		nm		Loss on early extinguishment of debt	—		—		nm		1,904		—		nm
Other operating expenses	Other operating expenses	37,098		28,842		28.6		Other operating expenses	31,565		37,550		(15.9)		73,417		71,515		2.7
Total non-interest expense	Total non-interest expense	$	276,279	$	292,410	(5.5)	%	Total non-interest expense	$	284,141	$	264,126	7.6	%	$	560,421	$	556,537	0.7	%

Three and Six Months Ended ~~March 31,~~June 30, 2020 compared to ~~March 31,~~June 30, 2019

Salaries and other personnel expense increased ~~$10.3~~$16.6 million, or ~~7.4%~~11.6%, and $26.8 million, or 9.5%, for the three and six months ended ~~March 31,~~June 30, 2020, ~~including talent additions and~~respectively, due primarily to higher mortgage production-based ~~commission and incentive compensation expense including $1.0 million in~~commissions, COVID-19 related bonus payments to certain front-line employee~~s. Synovus will continue to assess the need for bonus pay to front-line team members during the healthcare crisis.~~s, and investments in talent.

Net occupancy, equipment, and ~~equipment~~software expense increased ~~$3.8~~$1.9 million, or ~~9.9%~~4.7%, and $5.7 million, or 7.3%, during the three and six months ended ~~March 31,~~June 30, 2020, respectively, primarily due to investments in ~~technology.~~ technology as well as increases in net rent expense. Synovus expects ~~minimal technology~~net rent expense ~~due~~ to ~~COVID-19.~~decline during the second half of 2020, as compared to expense during the six months ended June 30, 2020, as Synovus optimizes its physical space with branch and corporate real estate closures.

Third-party processing and other services includes all third-party core operating system and processing ~~charg~~escharges as well as third-party loan servicing charges. Third-party processing expense increased ~~$3.7~~$2.2 million, or ~~21.0%~~11.8%, and $6.0 million, or 16.2%, for the three and six months ended ~~March 31, 2020.~~June 30, 2020, respectively. The increase is primarily associated with loan growth from Synovus' consumer-based lending partnerships.

During the second quarter of 2020, Synovus restructured certain of its third-party consumer-based lending partnership arrangements with a shift of new originations to held for sale. Thus, Synovus expects third-party loan servicing expense to decline in the second half of 2020, as compared to expense during the six months ended June 30, 2020.

Professional fees increased ~~$4.3~~$6.0 million, or ~~68.2%~~64.4%, and $10.3 million, or 65.9%, for the three and six months ended ~~March 31,~~June 30, 2020, respectively, ~~mostly~~ from increases in consulting fees ~~with $2.0 million~~ related to Synovus' internal revenue growth and efficiency initiative, "Synovus Forward".

FDIC insurance and other regulatory fees were down ~~$1.5~~$1.0 million and $2.5 million for the three and six months ended ~~March 31,~~June 30, 2020, respectively, due primarily to ~~reversal~~strategic balance sheet management actions, aimed at reducing FDIC expense.

Earnout liability fair value adjustments associated with the Global One acquisition are the result of ~~$1.5 million in estimated additional expense accrued during~~higher than projected earnings and higher earnings estimates over the ~~fourth quarter~~remaining contractual earnout period, reflecting the continued success of ~~2019.~~the Global One enterprise. The earnout period ends on June 30, 2021.

In connection with the FCB acquisition, Synovus incurred merger-related expense totaling ~~$49.7~~$7.4 million and $57.1 million for the three and six months ended ~~March 31,~~June 30, 2019, respectively, primarily related to employment compensation agreements, severance, and professional services. See "Part I - Item 1. Financial Statements and Supplementary Data - Note 2 - Acquisitions" in this Report for more information on the acquisition of FCB.

During the three and six months ended ~~March 31,~~June 30, 2020, Synovus recorded ~~$3.2~~$2.8 million and $6.0 million, respectively, in restructuring charges ~~from asset impairments, lease terminations, and severance~~ related to 7branch closures and restructuring of corporate real estate as part of the Synovus Forward initiative. Synovus Bank operated 293 branches ~~closed in~~at June 30, 2020, compared to 298 branches at December 31, 2019, following the closing of six branches during the first ~~quarter~~half of 2020 and opening of one new branch. During July, Synovus opened an additional branch and expects to close seven branches during the remainder of 2020.

On February 25, 2020, Synovus terminated a $250 million long-term FHLB obligation and incurred a $1.9 ~~million~~million loss on early extinguishment of debt.

Other operating expenses includes advertising, travel, insurance, network and communication, other taxes, subscriptions and dues, other loan and ORE expense, postage and freight, training, business development, supplies, donations, and other miscellaneous expenses. Other operating expenses were down $6.0 million and up ~~$8.3~~$1.9 million, for the three and six months ended ~~March 31,~~June 30, 2020, ~~including~~respectively. Advertising expense was down $3.0 million and $3.4 million for the three and six months ended June 30, 2020, respectively, and travel expense was down $2.5 million and $2.9 million for the three and six months ended June 30, 2020, respectively. Other operating expenses for the six months ended June 30, 2020 includes a $2.7 million valuation adjustment on a MPS receivable and a $2.5 million charge from termination of customer swaps.

Income Tax Expense

Income tax expense was ~~$3.6~~$34.5 million ~~and $40.4~~for the six months ended June 30, 2020, representing an effective tax rate of 20.7%, compared to income tax expense of $95.0 million for the ~~three~~six months ended ~~March 31, 2020 and~~June 30, 2019, ~~respectively. The~~representing an effective tax rate ~~for the same periods was 8.5% and 25.2%~~of 25.6%. The decrease in the effective tax rate for the ~~three~~six months ended ~~March 31,~~June 30, 2020, as compared to the ~~three~~effective tax rate for the six months ended ~~March 31,~~June 30, 2019, reflects a one-time benefit of $2.7 million for carrying back net operating loss deductions to pre-TJCA tax periods, as allowed by the CARES Act, and ~~$3.4~~$2.6 million in other net discrete benefit items, including discrete items related to prior periods. Additionally, the effective tax rate in the first ~~quarter~~six months of 2019 was higher largely due to non-deductible merger-related expenses associated with the FCB acquisition.

The effective tax rate is affected by many factors including, but not limited to, the level of pre-tax income, BOLI, 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.

With the exception of the net operating loss carryback ~~recorded in the first quarter of 2020,~~deductions and certain state concessions, we do not expect the provisions of the CARES Act to have a significant impact on the Company’s current tax provision.

5256

CREDIT QUALITY, CAPITAL RESOURCES AND LIQUIDITY

Credit Quality

Synovusus continuously monitors the quality of its loan portfolio by industry, property type, geography, as well as credit quality metrics. While we expect to experience stress in the portfolio as we progress through the current economic environment, which aligns with the reserve builds in the first half of the year under the pro-cyclical nature of CECL, the credit quality of the portfolio at ~~March 31,~~June 30, 2020 was generally ~~stable. If economic forecasts continue~~stable, due in part to ~~deteriorate, we would expect~~Synovus' deferral relief program offered in response to ~~see a further increase in~~ the ~~allowance for credit losses.~~impact of COVID-19.

At ~~March 31,~~June 30, 2020, ~~12%~~11.7% of Synovus' loan portfolio, or ~~approximately $4.6~~$4.67 billion, is in sectors we expect to be most sensitive to the COVID-19 pandemic. Within this group, hotels represented the largest exposure at ~~$1.31~~ $1.37 billion, followed by shopping centers (excluding those with a grocery, pharmacy, or discount store anchor) at ~~$1.01~~ $1.07billion, restaurants at$787 million, retail trade (excluding gas and ~~restaurants~~staples) at ~~$800~~$724 million, arts, entertainment, and recreation at $462 million, and oil-related industries at $265 million. While our entire loan portfolio is being continuously assessed, enhanced monitoring for these sectors ~~has been introduced.~~ is ongoing. We are continuously working with these customers to evaluate how the current economic conditions are impacting, and will continue to impact, their business operations. Solid underwriting and strong credit performance, coupled with stronger balance sheets that have been built during our extended expansionary period, give us confidence that these sectors enter this downturn in the best possible position.

The table below includes selected credit quality metrics.


Table 7 - Credit Quality Metrics	Table 7 - Credit Quality Metrics																	Table 7 - Credit Quality Metrics
(dollars in thousands)	(dollars in thousands)	March 31, 2020			December 31, 2019			March 31, 2019			(dollars in thousands)	June 30, 2020			December 31, 2019				June 30, 2019
Non-performing loans	Non-performing loans	$	156,287		$	101,636		$	143,976		Non-performing loans	$	147,437		$	101,636			$	124,083
ORE and other assets	ORE and other assets	33,679			35,810			11,341			ORE and other assets	30,242			35,810				15,479
Non-performing assets	Non-performing assets	$	189,966		$	137,446		$	155,317		Non-performing assets	$	177,679		$	137,446			$	139,562
Total loans	Total loans	$	38,258,024		$	37,162,450		$	35,634,501		Total loans	$	39,914,297		$	37,162,450			$	36,138,561
Non-performing loans as a % of total loans	Non-performing loans as a % of total loans	0.41		%	0.27		%	0.40		%	Non-performing loans as a % of total loans	0.37		%	0.27		%		0.34		%
Non-performing assets as a % of total loans, ORE, and specific other assets	Non-performing assets as a % of total loans, ORE, and specific other assets	0.50			0.37			0.44			Non-performing assets as a % of total loans, ORE, and specific other assets	0.44			0.37				0.39
Loans 90 days past due and still accruing	Loans 90 days past due and still accruing	$	6,398		$	15,943		$	4,486		Loans 90 days past due and still accruing	$	8,391		$	15,943			$	5,851
As a % of total loans	As a % of total loans	0.02		%	0.04		%	0.01		%	As a % of total loans	0.02		%	0.04		%		0.02		%
Total past due loans and still accruing	Total past due loans and still accruing	$	83,235		$	123,793		$	88,135		Total past due loans and still accruing	$	46,390		$	123,793			$	80,792
As a % of total loans	As a % of total loans	0.22		%	0.33		%	0.25		%	As a % of total loans	0.12		%	0.33		%		0.22		%
Net charge-offs, quarter	Net charge-offs, quarter	$	20,061		$	8,821		$	17,088		Net charge-offs, quarter	$	24,046		$	8,821			$	11,779
Net charge-offs annualized/average loans, quarter		0.21		%	0.10		%	0.19		%
Net charge-offs/average loans, quarter											Net charge-offs/average loans, quarter	0.24		%	0.10		%		0.13		%
Net charge-offs, year-to-date											Net charge-offs, year-to-date	$	44,107		$	57,612			$	28,867
Net charge-offs/average loans, year-to-date											Net charge-offs/average loans, year-to-date	0.23		%	0.16		%		0.16		%
Provision for loan losses, quarter	Provision for loan losses, quarter	$	149,117		$	24,470		$	23,569		Provision for loan losses, quarter	$	119,242		$	24,470			$	12,119
Provision for unfunded commitments, quarter	Provision for unfunded commitments, quarter	9,605			*			*			Provision for unfunded commitments, quarter	22,609			*				*
Provision for credit losses, quarter	Provision for credit losses, quarter	$	158,722		$	24,470		$	23,569		Provision for credit losses, quarter	$	141,851		$	24,470			$	12,119
Provision for loan losses, year-to-date											Provision for loan losses, year-to-date	268,359			87,720				35,688
Provision for unfunded commitments, year-to-date											Provision for unfunded commitments, year-to-date	32,214			*				*
Provision for credit losses, year-to-date											Provision for credit losses, year-to-date	300,573			87,720				35,688
Allowance for loan losses	Allowance for loan losses	493,452			281,402			257,036			Allowance for loan losses	588,648			281,402				257,376
Reserve for unfunded commitments	Reserve for unfunded commitments	38,420			1,375			1,070			Reserve for unfunded commitments	61,029			1,375				995
Allowance for credit losses	Allowance for credit losses	$	531,872		$	282,777		$	258,106		Allowance for credit losses	$	649,677		$	282,777			$	258,371
ACL to loans coverage ratio	ACL to loans coverage ratio	1.39		%	0.76		%	0.72		%	ACL to loans coverage ratio	1.63		%	0.76		%		0.71		%
ALL to loans coverage ratio	ALL to loans coverage ratio	1.29			0.76			0.72			ALL to loans coverage ratio	1.47			0.76				0.71
ACL/NPLs	ACL/NPLs	340.32			278.23			179.27			ACL/NPLs	440.65			278.23				208.22
ALL/NPLs	ALL/NPLs	315.74			276.87			178.53			ALL/NPLs	399.25			276.87				207.42

* Prior to CECL implementation on January 1, 2020, the provision for unfunded commitments was reflected within other non-interest expense.

Non-performing Assets

Total NPAs as a percentage of total loans, ORE, and specific other assets were ~~0.50%~~0.44% at ~~March 31,~~June 30, 2020 compared to 0.37% at December 31, 2019 and ~~0.44%~~0.39% at ~~March 31,~~June 30, 2019. Total NPAs were ~~$190.0~~$177.7 million at ~~March 31,~~June 30, 2020 compared to $137.4 million at December 31, 2019 and ~~$155.3~~$139.6 million at ~~March 31,~~June 30, 2019. The ~~sequential~~ increase in NPLs and NPAs compared to December 31,

2019 primarily related to the designation of a large C&I relationship as non-performing ~~which is collateralized and carries a specific reserve. The NPL ratio at 0.41% at March 31, 2020 is up only 1 bp over March 31, 2019, and total past dues~~in the first quarter of ~~0.22% at March 31, 2020 improved over both December 31, 2019 and March 31, 2019.~~2020.

Provision for Credit Losses and Allowance for Credit Losses

~~Synovus' adoption of CECL resulted in a January 1, 2020 ACL increase of $110.4 million, or 39.1%, over December 31, 2019.~~ Provision for credit losses of ~~$158.7~~$141.9 million and $300.6 million for the three and six months ended ~~March 31,~~June 30, 2020, ~~included~~respectively, resulted in the ~~impact~~building of the ~~COVID-19 healthcare crisis and~~ACL required under CECL primarily as a result of deterioration in the ~~first quarter under CECL.~~economic environment due to COVID-19. The ACL at ~~March 31,~~June 30, 2020 totaled ~~$531.9~~$649.7 million consisting of an ALL of ~~$493.5~~$588.6 million and reserve for unfunded commitments of ~~$38.4~~$61.0 million, resulting in an ACL to loans coverage ratio of ~~1.39%~~1.63% and an ACL to NPLs ratio of ~~340%~~441%.Excluding PPP loans, the ACL to loans coverage ratio was 1.74%.

Our modeling process incorporates quantitative and qualitative considerations that are used to inform CECL estimates. The internally developed economic forecast used to determine the allowance for credit losses as of March 31, 2020 was approved late in the first quarter, pursuant to Synovus' economic forecasting governance processes. Between that approval date and March 31, 2020, we saw further deterioration in the economic outlook which resulted in the need for a qualitative overlay to our allowance for credit losses. The qualitative overlay of $37.3 million adds 10 bps to the allowance for credit losses and better aligns the total allowance with the economic indicators and forecasts at March 31, 2020. Economic projections are an important consideration in CECL estimates. Significant economic uncertainty remains as a result of the continuing healthcare crisis and the ultimate impact of government stimulation efforts. If our economic outlook on June 30, 2020 evidences further deterioration, as might be suggested by certain external economic forecasts, then we would expect to see a further increase in the allowance for credit losses.


Table 8 - Accruing TDRs by Risk Grade	Table 8 - Accruing TDRs by Risk Grade													Table 8 - Accruing TDRs by Risk Grade
		March 31, 2020						December 31, 2019								March 31, 2019					June 30, 2020						December 31, 2019	June 30, 2019
(dollars in thousands)	(dollars in thousands)	Amount		%		Amount		%		Amount		%		(dollars in thousands)	Amount		%		Amount		%		Amount		%
Pass	Pass	$	75,073	46.9	%	$	70,574	53.0	%	$	54,999	49.0	%	Pass	$	74,619	44.8	%	$	70,574	53.0	%	$	60,586	47.9	%
Special Mention		10,925		6.8		11,735		8.8		13,188		11.8
Special mention														Special mention	16,228		9.8		11,735		8.8		12,841		10.2
Substandard accruing	Substandard accruing	74,130		46.3		50,836		38.2		44,018		39.2		Substandard accruing	75,614		45.4		50,836		38.2		52,942		41.9
Total accruing TDRs	Total accruing TDRs	$	160,128	100.0	%	$	133,145	100.0	%	$	112,205	100.0	%	Total accruing TDRs	$	166,461	100.0	%	$	133,145	100.0	%	$	126,369	100.0	%

Troubled Debt Restructurings

Accruing TDRs were ~~$160.1~~$166.5 million at ~~March 31,~~June 30, 2020, compared to $133.1 million at December 31, 2019 and ~~$112.2~~$126.4 million at ~~March 31,~~June 30, 2019. Accruing TDRs increased ~~$27.0~~$33.3 million from December 31, 2019 and ~~$47.9~~$40.1 million from ~~March 31,~~June 30, 2019. ~~Non-accruing TDRs were $12.8 million at March 31, 2020, compared to $17.1 million at December 31, 2019 and $22.3 million at March 31, 2019.~~ The primary driver of the increase in accruing TDRs compared to December 31, 2019 is a result of a large relationship being designated as an accruing TDR in the first quarter of 2020 due to interest rate and term concessions. Non-accruing TDRs were $8.5 million at June 30, 2020, compared to $17.1 million at December 31, 2019 and $12.8 million at June 30, 2019.

Accruing TDRs are considered performing because they are performing in accordance with the restructured terms. At ~~March 31,~~June 30, 2020, December 31, 2019, and ~~March 31,~~June 30, 2019, approximately ~~98%~~99%, 99%, 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 continued to remain at low levels.

Non-TDR Modifications due to COVID-19

Regulatory agencies ~~as set forth in~~have encouraged financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of COVID-19. In the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (initially issued on March 22, 2020 and revised on April 7, 2020), ~~have encouraged financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19. In this statement,~~ for example, the regulatory agencies expressed their view of loan modification programs as positive actions that may mitigate adverse effects on borrowers due to COVID-19 and ~~that the agencies will not~~their unwillingness to criticize institutions for working with borrowers in a safe and sound manner. Moreover, the ~~revised statement provides~~Interagency Statement provided that eligible loan modifications related to COVID-19 may be accounted for under section 4013 of the CARES Act or in accordance with ASC 310-40. Section 4013 of ~~The~~the CARES Act allows banks to elect to not consider loan modifications related to COVID-19 that are made between March 1, 2020 and the earlier of December 31, 2020, or 60 days after the ~~COVID-19 national emergency~~National Emergency ends to borrowers that are current (i.e., less than 30 days past due as of December 31, 2019) as TDRs. The regulatory agencies further stated that performing loans granted payment deferrals due to COVID-19 are not considered past due or non-accrual. FASB confirmed the foregoing regulatory agencies' view, that such short-term modifications (e.g., six months) made on a good-faith basis in response to COVID-19 for borrowers who are current are not ~~TDRs. Accordingly, beginning~~TDRs. Beginning in late March 2020, Synovus provided relief ~~programs~~programs consisting primarily of 90-day payment deferral relief to ~~borrowers~~borrowers negatively impacted by ~~COVID-19. At March 31, 2020,~~ COVID-19 and has accounted for these loan modifications in accordance with ASC 310-40.Synovus ~~had~~ approved payment deferral relief of principal and interest to borrowers due to the effects of COVID-19 on approximately ~~$2.4~~$6 billion ~~or approximately 6%,~~ of our ~~loan portfolio.~~loan portfolio. The deferred payments along with interest accrued during the deferral period are generally due and payable on the maturity date of the existing loan. Based on the terms of the deferral relief program which did not provide for forgiveness of interest, Synovus has recognized interest income on loans during the deferral period. As of ~~May 7,~~June 30, 2020, $2.11 billion of the total loan portfolio was in a 90-day deferral status, including $3.2 million under a second 90-day deferral period. Based on reviews of customer cash flows, client surveys, and conversations and interactions with customers, Synovus ~~had approved~~preliminarily estimates that approximately 3 to 5 percent of total loans will have a second deferral granted for a 90-day deferment. As of August 4, 2020, $701.9 million of the total loan portfolio was in a 90-day deferral status, including $246.0 million under a second 90-day deferral period. The majority of second 90-day payment deferral relief ~~on approximately $5.8 billion, or 15%,~~provided to borrowers, as of ~~our loan portfolio.~~August 4, 2020, includes deferral of scheduled principal payments only, with no deferral of interest payments.

5458

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.~~III. At ~~March 31,~~June 30, 2020, Synovus and Synovus Bank's capital levels ~~remained strong and~~ exceeded well-capitalized requirements currently in effect. The following table presents certain ratios used to measure Synovus and Synovus Bank's capitalization.


Table 9 - Capital Ratios	Table 9 - Capital Ratios							Table 9 - Capital Ratios
(dollars in thousands)	(dollars in thousands)	March 31, 2020			December 31, 2019			(dollars in thousands)	June 30, 2020			December 31, 2019
CET1 capital	CET1 capital							CET1 capital
Synovus Financial Corp.	Synovus Financial Corp.	$	3,744,415		$	3,743,459		Synovus Financial Corp.	$	3,827,229		$	3,743,459
Synovus Bank	Synovus Bank	4,607,218			4,640,501			Synovus Bank	4,633,418			4,640,501
Tier 1 risk-based capital	Tier 1 risk-based capital							Tier 1 risk-based capital
Synovus Financial Corp.	Synovus Financial Corp.	4,281,560			4,280,604			Synovus Financial Corp.	4,364,374			4,280,604
Synovus Bank	Synovus Bank	4,607,218			4,640,501			Synovus Bank	4,633,418			4,640,501
Total risk-based capital	Total risk-based capital							Total risk-based capital
Synovus Financial Corp.	Synovus Financial Corp.	5,289,039			5,123,381			Synovus Financial Corp.	5,459,568			5,123,381
Synovus Bank	Synovus Bank	5,054,697			4,923,279			Synovus Bank	5,168,612			4,923,279
CET1 capital ratio	CET1 capital ratio							CET1 capital ratio
Synovus Financial Corp.	Synovus Financial Corp.	8.70		%	8.95		%	Synovus Financial Corp.	8.90		%	8.95		%
Synovus Bank	Synovus Bank	10.69			11.10			Synovus Bank	10.76			11.10
Tier 1 risk-based capital ratio	Tier 1 risk-based capital ratio							Tier 1 risk-based capital ratio
Synovus Financial Corp.	Synovus Financial Corp.	9.95			10.23			Synovus Financial Corp.	10.15			10.23
Synovus Bank	Synovus Bank	10.69			11.10			Synovus Bank	10.76			11.10
Total risk-based capital to risk-weighted assets ratio	Total risk-based capital to risk-weighted assets ratio							Total risk-based capital to risk-weighted assets ratio
Synovus Financial Corp.	Synovus Financial Corp.	12.29			12.25			Synovus Financial Corp.	12.70			12.25
Synovus Bank	Synovus Bank	11.72			11.78			Synovus Bank	12.01			11.78
Leverage ratio	Leverage ratio							Leverage ratio
Synovus Financial Corp.	Synovus Financial Corp.	8.92			9.16			Synovus Financial Corp.	8.38			9.16
Synovus Bank	Synovus Bank	9.62			9.94			Synovus Bank	8.91			9.94
Tangible common equity ratio⁽¹⁾	Tangible common equity ratio⁽¹⁾							Tangible common equity ratio⁽¹⁾
Synovus Financial Corp.	Synovus Financial Corp.	7.94			8.08			Synovus Financial Corp.	7.41			8.08

⁽¹⁾See "Table 14 - Reconciliation of Non-GAAP Financial Measures” in this Report for the applicable reconciliation to the most comparable GAAP measure.

At ~~March 31,~~June 30, 2020, Synovus' CET1 ratio was ~~8.70%~~8.90%, ~~well~~ in excess of regulatory requirements including the capital conservation buffer of 2.5%. The ~~25 bps decline in Synovus'~~June 30, 2020 CET1 ratio ~~from~~improved 20 bps compared to March 31, 2020 and was 5 bps below the December 31, 2019 ~~was largely due~~ratio. During the latter part of the second quarter of 2020, Synovus executed certain balance sheet management activities including repositioning the investment securities portfolio and transitioning certain third-party lending partnership loans to held for sale. These actions settled subsequent to quarter-end, at the ~~increase~~margin, and are expected to provide further support to capital ratios in ~~risk-weighted assets from loan growth~~the third quarter of ~~$1.10 billion.~~2020. For additional information on regulatory capital requirements, see "Part II - Item 8. Financial Statements and Supplementary Data - Note 11 - Regulatory Capital" to the consolidated financial statements of Synovus' 2019 Form 10-K. Management ~~currently~~reviews the Company's capital position on an on-going basis and believes, based on internal capital analyses and earnings projections, that ~~Synovus' capital position~~Synovus is ~~adequate~~well positioned to meet ~~current and future~~relevant regulatory ~~minimum~~ capital ~~requirements inclusive~~standards.

As a result of the ~~capital conservation buffer.~~

greater economic uncertainty associated with the current pandemic, Synovus ~~is suspending~~suspended its share repurchase activity beyond the $16.2 million (450 thousand shares) of its common stock repurchased during the first ~~quarter under the share repurchase program announced on January 24, 2020, due to greater economic uncertainty.~~quarter.

On March 27, 2020, the federal banking regulators issued an interim final rule, updating CECL transition options, which allows electing banking organizations to delay an estimate of the effect of CECL on regulatory capital for up to two years, followed by a three-year phase-in transition period. Synovus adopted CECL on January 1, 2020 and the ~~March 31,~~June 30, 2020 regulatory capital ratios reflect Synovus' election of the five-year transition provision. For additional information on Synovus' adoption of CECL, see "Part I - Item 1. Financial Statements and Supplementary Data - Note 1 - Basis of Presentation and Accounting Policies" in this Report.

5559

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~~dividends from subsidiaries), financial markets and other economic trends, as well as regulatory requirements regarding the payment of dividends. As Synovus navigates through the current recession and regulatory guidelines, the approach to common stock dividends will be continually evaluated based on an assessment of long-term earnings, capital projections, and liquidity.

Synovus' ability to pay dividends on its common stock and 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.

Synovus declared common stock dividends of ~~$48.6~~$97.2 million, or ~~$0.33~~$0.66 per common share, for the ~~three~~six months ended ~~March 31,~~June 30, 2020, up from $~~47.2~~$94.5 million, or ~~$0.30~~$0.60 per common share, for the ~~three~~six months ended ~~March 31,~~June 30, 2019, respectively. In addition, Synovus declared dividends on its preferred stock of ~~$8.3~~$16.6 million and ~~$3.2~~$6.3 million during the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019, respectively.

Liquidity

Liquidity represents the extent to which Synovus has readily available sources of funding 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~~as well as market risk.

In accordance with Synovus policies and regulatory guidance, ALCO evaluates contractual and anticipated cash flows under normal and stressed conditions to properly manage the Company’s liquidity profile. Synovus places an emphasis on maintaining numerous sources of current and contingent liquidity to meet its obligations to depositors, borrowers, and creditors on a timely basis. Liquidity is generated through various sources, including, but not limited to, maturities and repayments of loans by customers, maturities and sales of investment securities, and growth in core or wholesale 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 other funding demands.

Synovus Bank also generates liquidity 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. Synovus Bank also has ~~the~~the capacity to access funding through its membership in the FHLB system and through the Federal Reserve ~~Discount Window.~~ discount window. During the first quarter of 2020, Synovus increased its FHLB availability by over $2.0 billion through expanding pledged collateral. At ~~March 31,~~June 30, 2020, based on currently pledged collateral, Synovus Bank had access to incremental FHLB funding of ~~$3.20~~$4.90 billion, subject to FHLB credit policies. ~~In addition, Synovus expects to have considerable liquidity available through the Federal Reserve's Paycheck Protection Program Lending Facility.~~

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. 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, both the GA DBF and Federal Reserve Bank may require approval to pay dividends, based on certain regulatory statutes and limitations.

On February 12, 2020, Synovus Bank issued $400.0 million aggregate principal amount of 2.289% Fixed-to-Floating Rate Senior Bank Notes due 2023. From and including the original issue date to, but excluding, February 10, 2022, the Notes bear interest at a fixed rate of 2.289% per annum, payable semi-annually in arrears on each February 10 and August 10, beginning on August 10, 2020. Unless redeemed, from and including February 10, 2022 to but excluding the Maturity Date, the interest rate on the Notes is computed quarterly using an interest rate based on the SOFR with a daily index maturity plus a spread of 94.5 bps per annum, payable quarterly in arrears. Synovus Bank may redeem the Notes, at its option, on February 10, 2022 (which is the date that is one year prior to the Maturity Date) upon not less than 10 nor more than 60 days’ prior notice given to holders of the Notes. The redemption price for any redemption is 100% of the principal amount of the Notes, plus accrued and unpaid interest thereon to but excluding the date of redemption. The Notes are not redeemable at the option or election of holders.

On February 25, 2020, Synovus terminated a $250.0 million long-term FHLB obligation and incurred a $1.9 million loss on early extinguishment of debt.

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 - the COVID-19 pandemic has resulted in significant market volatility and lower interest rates that could materially affect Synovus’ results of operations and access to capital" of this Report and "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" of Synovus' 2019 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, or strengthen its liquidity or capital position.

Earning Assets and Sources of Funds

Average total assets for the ~~three~~six months ended ~~March 31,~~June 30, 2020 increased ~~$2.90~~$4.54 billion, or ~~6.3%~~9.8%, to ~~$48.70~~$50.78 billion as compared to ~~$45.79~~$46.24 billion for the first ~~three~~six months of 2019. Average earning assets increased ~~$2.40~~$3.78 billion, or ~~5.6%~~8.8%, in the first ~~three~~six months of 2020 compared to the same period in 2019 and represented ~~92.3%~~92.0% of average total assets at ~~March 31,~~June 30, 2020, as compared to ~~92.9%~~92.8% at ~~March 31,~~June 30, 2019. The increase in average earning assets primarily resulted from a ~~$2.16~~$3.14 billion increase in average loans, net, ~~and~~which included average PPP loans of $1.11 billion (Synovus funded nearly $2.9 billion of PPP loans during the second quarter of 2020) as well as a ~~$143.8~~$513.5 million increase in average ~~investment securities.~~interest-bearing funds held at the Federal Reserve Bank.

Average interest-bearing liabilities increased ~~$2.00~~$2.35 billion, or ~~6.4%~~7.4%, to ~~$33.51~~$34.16 billion for the first ~~three~~six months of 2020 compared to the same period in 2019. The increase in average interest-bearing liabilities resulted from a ~~$1.74~~$2.60 billion ~~or 15.6%,~~ increase in average money market deposits, a ~~$866.9 million increase in other short-term borrowings, and a $694.7~~$706.7 million increase in average long-term debt, including $400.0 million of senior notes issued in February ~~2020.~~2020, and a $161.6 million increase in other short-term borrowings. These increases were partially offset by a ~~$1.32~~$1.62 billion, or ~~12.8%~~15.5%, decrease in average time deposits. Average non-interest-bearing demand deposits increased ~~$354.8 million,~~$1.49 billion, or ~~3.9%~~16.2%, to ~~$9.41~~$10.67 billion for the first ~~three~~six months of 2020 compared to the same period in ~~2019.~~2019, due largely to liquidity associated with PPP lending.

Net interest income ~~was $373.3 million~~ for the ~~three~~six months ended ~~March 31,~~June 30, 2020 was $749.8 million, down ~~$23.9~~$44.6 million, or ~~6.0%~~5.6%, compared to the same period in 2019. The decrease in year-over-year net interest income was due to declines of ~~2019~~$36.2 million in PAA (primarily comprised of declines of $13.5 million of loan accretion and $21.9 million of deposit premium amortization) associated with the FCB acquisition and declines in market interest rates, which were somewhat offset by higher average earning assets. ~~The net~~Net interest margin was down 4149 bps over the comparable six-month periods to ~~3.37%~~3.25%, due primarily to the decline in market ~~interest~~interest rates ~~and decline of $17.3 million~~ in ~~PAA primarily comprised of $5.8 million of loan accretion and $11.0 million of deposit premium amortization associated with the FCB acquisition.~~addition to declines in PAA. For the ~~three~~six months ended ~~March 31,~~June 30, 2020, the yield on earning assets was ~~4.33%~~4.03%, a decrease of 4777 bps compared to the ~~three~~six months ended ~~March 31,~~June 30, 2019, while the ~~total~~effective cost of funds decreased 328 bps to ~~1.04%~~0.78%. The yield on loans decreased 5583 bps to ~~4.62%~~4.34% while the yield on investment securities ~~increased 3~~decreased 14 bps to ~~3.09%~~2.91% over the ~~three~~six months ended ~~March 31,~~June 30, 2019.

On a sequential quarter basis, net interest income was ~~down $26.0~~up $3.3 million, or ~~6.5%~~0.9%, and ~~the~~ net interest margin for the ~~first~~second quarter was ~~3.37%~~3.13%, which was down 2824 bps compared to the ~~fourth~~first quarter of ~~2019.~~2020. The sequential quarter decline in net interest ~~income and~~ margin ~~included a decline~~was primarily driven by the full quarter impact of ~~$24.8 million in PAA primarily comprised of $13.6 million of loan accretion and $11.0 million of deposit premium amortization associated with~~ the ~~FCB acquisition as well as declines in market interest rates including a series of~~March 2020 emergency rate cuts by the Federal Reserve, as well as excess liquidity. The second quarter included average PPP loan balances of $2.21 billion and $9.2 million in ~~March. The net interest margin, excluding~~accretion of associated PPP processing fees. For the ~~impact of purchase accounting adjustments, was down 5 bps sequentially to 3.35% for the first~~second quarter of 2020, ~~driven by a 13 bp decrease in~~ the yield on earning assets ~~and a 8 bp decrease in~~decreased 58 bps, while the effective cost of ~~funds.~~funds decreased 34 bps compared to the first quarter of 2020.

~~Synovus expects~~While the second half of the year is expected to be favorably impacted by additional PPP fee accretion as PPP loans are forgiven, net interest income ~~in the second quarter~~and net interest margin are expected to be relatively flat compared to first quarter levels as a result of significant loan growth associated with the PPP. However, with this growth, along with a depressed rate environment and an elevated cash position, we expect continuedexperience downward pressure ~~on our net interest margin~~due to certain strategic balance sheet management activities which were completed late in the second quarter.

5761

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.


Table 10 - Average Balances and Yields/Rates	Table 10 - Average Balances and Yields/Rates	2020			2019										Table 10 - Average Balances and Yields/Rates	2020		2019
(dollars in thousands) (yields and rates annualized)	(dollars in thousands) (yields and rates annualized)	First Quarter			Fourth Quarter	Third Quarter	Second Quarter	First Quarter	(dollars in thousands) (yields and rates annualized)	Second Quarter			First Quarter	Fourth Quarter		Third Quarter	Second Quarter
Interest Earning Assets:	Interest Earning Assets:								Interest Earning Assets:
Investment securities⁽¹⁾⁽²⁾	Investment securities⁽¹⁾⁽²⁾	$	6,680,047		6,696,768	6,831,036	6,955,386	6,536,199	Investment securities⁽¹⁾⁽²⁾	$	6,618,533		6,680,047	6,696,768		6,831,036	6,955,386
Yield	Yield	3.09		%	3.12	3.14	3.03	3.06	Yield	2.72		%	3.09	3.12		3.14	3.03
Trading account assets⁽³⁾	Trading account assets⁽³⁾	$	6,306		7,986	5,519	4,853	2,049	Trading account assets⁽³⁾	$	6,173		6,306	7,986		5,519	4,853
Yield	Yield	2.70		%	2.69	4.01	1.83	1.30	Yield	2.19		%	2.70	2.69		4.01	1.83
Commercial loans⁽²⁾⁽⁴⁾	Commercial loans⁽²⁾⁽⁴⁾	$	27,607,343		26,698,202	26,568,194	26,353,973	26,140,672	Commercial loans⁽²⁾⁽⁴⁾	$	30,236,919		27,607,343	26,698,202		26,567,719	26,353,701
Yield	Yield	4.57		%	4.82	5.09	5.13	5.16	Yield	3.95		%	4.57	4.82		5.09	5.13
Consumer loans⁽⁴⁾	Consumer loans⁽⁴⁾	$	9,985,702		9,809,832	9,633,603	9,423,427	9,180,679	Consumer loans⁽⁴⁾	$	9,899,172		9,985,702	9,809,832		9,633,603	9,423,427
Yield	Yield	4.60		%	5.07	5.08	5.17	5.10	Yield	4.34		%	4.60	5.07		5.08	5.17
Allowance for loan losses	Allowance for loan losses	$	(368,033)		(269,052)	(258,024)	(259,284)	(252,815)	Allowance for loan losses	$	(498,545)		(368,033)	(269,052)		(258,024)	(259,284)
Loans, net⁽⁴⁾	Loans, net⁽⁴⁾	$	37,225,012		36,238,982	35,943,773	35,518,116	35,068,536	Loans, net⁽⁴⁾	$	39,637,546		37,225,012	36,238,982		35,943,298	35,517,844
Yield	Yield	4.62		%	4.93	5.13	5.17	5.17	Yield	4.08		%	4.62	4.93		5.13	5.17
Mortgage loans held for sale	Mortgage loans held for sale	$	86,415		117,909	99,556	70,497	34,913	Mortgage loans held for sale	$	221,157		86,415	117,909		99,556	70,497
Yield									Yield	3.09		%	3.67	3.77		3.93	4.27
Other loans held for sale									Other loans held for sale	$	19,246		—	—		475	272
Yield	Yield	3.67		%	3.77	3.93	4.27	4.48	Yield	4.19		%	—	—		—	—
Other earning assets⁽⁵⁾	Other earning assets⁽⁵⁾	$	652,130		514,635	513,160	511,488	679,477	Other earning assets⁽⁵⁾	$	1,709,086		652,130	514,635		513,160	511,488
Yield	Yield	1.02		%	1.71	2.08	2.37	2.45	Yield	0.11		%	1.02	1.71		2.08	2.37
Federal Home Loan Bank and Federal Reserve Bank Stock⁽³⁾	Federal Home Loan Bank and Federal Reserve Bank Stock⁽³⁾	$	284,082		278,586	254,994	234,949	211,408	Federal Home Loan Bank and Federal Reserve Bank Stock⁽³⁾	$	247,801		284,082	278,586		254,994	234,949
Yield	Yield	3.38		%	2.85	3.85	3.29	4.82	Yield	3.60		%	3.38	2.85		3.85	3.29
Total interest earning assets	Total interest earning assets	$	44,933,992		43,854,866	43,648,038	43,295,289	42,532,582	Total interest earning assets	$	48,459,542		44,933,992	43,854,866		43,648,038	43,295,289
Yield	Yield	4.33		%	4.60	4.78	4.79	4.80	Yield	3.75		%	4.33	4.60		4.78	4.79
Interest-Bearing Liabilities:	Interest-Bearing Liabilities:								Interest-Bearing Liabilities:
Interest-bearing demand deposits	Interest-bearing demand deposits	$	6,445,986		6,381,282	6,138,810	6,335,953	6,393,304	Interest-bearing demand deposits	$	7,260,940		6,445,986	6,381,282		6,138,810	6,335,953
Rate	Rate	0.51		%	0.60	0.69	0.71	0.68	Rate	0.21		%	0.51	0.60		0.69	0.71
Money market accounts, excluding brokered deposits	Money market accounts, excluding brokered deposits	$	11,548,014		10,526,296	10,138,783	10,024,836	10,244,556	Money market accounts, excluding brokered deposits	$	12,238,479		11,548,014	10,526,296		10,138,783	10,024,836
Rate	Rate	1.00		%	1.13	1.26	1.23	1.18	Rate	0.46		%	1.00	1.13		1.26	1.23
Savings deposits	Savings deposits	$	926,822		915,640	900,366	904,183	901,059	Savings deposits	$	1,036,024		926,822	915,640		900,366	904,183
Rate	Rate	0.05		%	0.05	0.05	0.05	0.06	Rate	0.02		%	0.05	0.05		0.05	0.05
Time deposits under $100,000	Time deposits under $100,000	$	1,761,741		1,873,350	2,100,492	2,245,878	2,238,568	Time deposits under $100,000	$	1,621,943		1,761,741	1,873,350		2,100,492	2,245,878
Rate	Rate	1.64		%	1.27	1.39	1.39	1.24	Rate	1.43		%	1.64	1.27		1.39	1.39
Time deposits over $100,000	Time deposits over $100,000	$	5,051,705		5,198,266	5,957,691	6,331,665	6,211,067	Time deposits over $100,000	$	4,772,555		5,051,705	5,198,266		5,957,691	6,331,665
Rate	Rate	2.04		%	1.51	1.69	1.70	1.60	Rate	1.80		%	2.04	1.51		1.69	1.70
Non-maturing brokered deposits		$	1,376,669		1,156,131	993,078	766,718	937,630
Other brokered deposits									Other brokered deposits	$	1,998,571		1,376,669	1,156,131		993,078	766,718
Rate	Rate	1.42		%	1.84	2.47	2.46	2.60	Rate	0.25		%	1.42	1.84		2.47	2.46
Brokered time deposits	Brokered time deposits	$	2,166,496		2,121,069	2,119,149	1,985,589	1,845,819	Brokered time deposits	$	2,244,429		2,166,496	2,121,069		2,119,149	1,985,589
Rate	Rate	2.11		%	2.16	2.27	2.28	2.13	Rate	1.86		%	2.11	2.16		2.27	2.28
Total interest-bearing deposits	Total interest-bearing deposits	$	29,277,433		28,172,034	28,348,369	28,594,822	28,772,003	Total interest-bearing deposits	$	31,172,941		29,277,433	28,172,034		28,348,369	28,594,822
Rate	Rate	1.18		%	1.16	1.32	1.30	1.24	Rate	0.73		%	1.18	1.16		1.32	1.30
Federal funds purchased and securities sold under repurchase agreements	Federal funds purchased and securities sold under repurchase agreements	$	167,324		192,731	221,045	300,168	233,076	Federal funds purchased and securities sold under repurchase agreements	$	250,232		167,324	192,731		221,045	300,168
Rate	Rate	0.30		%	0.24	0.22	0.20	0.22	Rate	0.12		%	0.30	0.24		0.22	0.20
Other short-term borrowings	Other short-term borrowings	$	1,384,362		1,565,507	1,307,370	1,090,581	517,456	Other short-term borrowings	$	550,000		1,384,362	1,565,507		1,307,370	1,090,581
Rate	Rate	1.66		%	1.87	2.31	2.59	2.58	Rate	1.23		%	1.66	1.87		2.31	2.59
Long-term debt	Long-term debt	$	2,678,651		2,153,983	2,286,221	2,114,819	1,983,910	Long-term debt	$	2,834,188		2,678,651	2,153,983		2,286,221	2,114,819
Rate	Rate	2.78		%	3.07	3.32	3.53	3.33	Rate	2.36		%	2.78	3.07		3.32	3.53
Total interest-bearing liabilities	Total interest-bearing liabilities	$	33,507,770		32,084,255	32,163,005	32,100,390	31,506,445	Total interest-bearing liabilities	$	34,807,361		33,507,770	32,084,255		32,163,005	32,100,390
Rate	Rate	1.30		%	1.30	1.47	1.48	1.38	Rate	0.86		%	1.30	1.30		1.47	1.48
Non-interest-bearing demand deposits	Non-interest-bearing demand deposits	$	9,409,774		9,706,784	9,365,776	9,304,839	9,054,949	Non-interest-bearing demand deposits	$	11,923,534		9,409,774	9,706,784		9,365,776	9,304,839
Cost of funds	Cost of funds	1.04		%	1.02	1.16	1.15	1.07	Cost of funds	0.65		%	1.04	1.02		1.16	1.15
Effective cost of funds⁽⁶⁾	Effective cost of funds⁽⁶⁾	0.96		%	0.95	1.09	1.10	1.02	Effective cost of funds⁽⁶⁾	0.62		%	0.96	0.95		1.09	1.10
Net interest margin	Net interest margin	3.37		%	3.65	3.69	3.69	3.78	Net interest margin	3.13		%	3.37	3.65		3.69	3.69
Taxable equivalent adjustment⁽²⁾	Taxable equivalent adjustment⁽²⁾	$	786		769	819	811	630	Taxable equivalent adjustment⁽²⁾	$	861		786	769		819	811

⁽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.

⁽⁴⁾Average loans are shown net of deferred fees and costs. NPLs 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.

5862

Net Interest Income and Rate/Volume Analysis

The following table sets forth the major components of net interest income and the related annualized yields and rates for the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019, as well as the variances between the periods caused by changes in interest rates versus changes in volume.


Table 11 - 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
		Three Months Ended March 31,																										2020 Compared to 2019														Six Months Ended June 30,									2020 Compared to 2019
		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)	(dollars in thousands)	2020		2019		2020		2019		2020		2019		Volume		Rate				Increase (Decrease)		(dollars in thousands)	2020			2019			2020			2019			2020			2019			Volume			Rate			Increase (Decrease)
Assets	Assets
Interest earning assets:	Interest earning assets:																			Interest earning assets:
Investment securities	Investment securities	$	6,680,047	$	6,536,199	$	51,655	$	49,986	3.09	%	3.06	%	$	1,094	$	575	$	1,669	Investment securities	$	6,649,290		$	6,746,950		$	96,593		$	102,789		2.91	%		3.05	%		$	(1,481)		$	(4,715)		$	(6,196)
Trading account assets	Trading account assets	6,306		2,049		43		7		2.70		1.30		14		22		36		Trading account assets	6,240			3,459			76			29			2.45			1.67			23			24			47
Taxable loans, net⁽¹⁾	Taxable loans, net⁽¹⁾	37,177,611		34,987,418		424,387		445,602		4.59		5.17		28,154		(49,369)		(21,215)		Taxable loans, net⁽¹⁾	38,396,237			35,206,985			823,156			900,129			4.31			5.16			81,833			(158,806)			(76,973)
Tax-exempt loans, net⁽¹⁾⁽²⁾	Tax-exempt loans, net⁽¹⁾⁽²⁾	415,434		333,933		3,734		2,770		3.61		3.36		681		283		964		Tax-exempt loans, net⁽¹⁾⁽²⁾	468,330			342,848			7,820			6,587			3.36			3.87			2,415			(1,182)			1,233
Allowance for loan losses	Allowance for loan losses	(368,033)		(252,815)																Allowance for loan losses	(433,289)			(256,067)
Loans, net	Loans, net	37,225,012		35,068,536		428,121		448,372		4.62		5.17		28,835		(49,086)		(20,251)		Loans, net	38,431,278			35,293,766			830,976			906,716			4.34			5.17			84,248			(159,988)			(75,740)
Mortgage loans held for sale	Mortgage loans held for sale	86,415		34,913		792		391		3.67		4.48		574		(173)		401		Mortgage loans held for sale	153,786			52,803			2,502			1,143			3.25			4.33			2,175			(816)			1,359
Other loans held for sale																				Other loans held for sale	9,623			802			204			22			4.19			5.35			235			(53)			182
Other earning assets⁽³⁾	Other earning assets⁽³⁾	652,130		679,477		1,675		4,164		1.02		2.45		(166)		(2,323)		(2,489)		Other earning assets⁽³⁾	1,180,608			595,018			2,133			7,233			0.36			2.42			7,018			(12,118)			(5,100)
Federal Home Loan Bank and Federal Reserve Bank stock	Federal Home Loan Bank and Federal Reserve Bank stock	284,082		211,408		2,397		2,549		3.38		4.82		871		(1,023)		(152)		Federal Home Loan Bank and Federal Reserve Bank stock	265,942			223,244			4,629			4,479			3.48			4.01			851			(701)			150
Total interest earning assets	Total interest earning assets	44,933,992		42,532,582		484,683		505,469		4.33		4.80		31,222		(52,008)		(20,786)		Total interest earning assets	46,696,767			42,916,042			937,113			1,022,411			4.03			4.80			93,069			(178,367)			(85,298)
Cash and due from banks	Cash and due from banks	515,153		519,073																Cash and due from banks	536,180			517,958
Premises and equipment, net	Premises and equipment, net	491,244		479,200																Premises and equipment, net	489,246			483,420
Other real estate	Other real estate	13,395		14,078																Other real estate	13,523			14,056
Cash surrender value of bank-owned life insurance	Cash surrender value of bank-owned life insurance	892,861		764,590																Cash surrender value of bank-owned life insurance	963,428			763,741
Other assets⁽⁴⁾	Other assets⁽⁴⁾	1,849,950		1,485,098																Other assets⁽⁴⁾	2,075,995			1,544,423
Total assets	Total assets	$	48,696,595	$	45,794,621															Total assets	$	50,775,139		$	46,239,640

Liabilities and Shareholders' Equity	Liabilities and Shareholders' Equity																					Liabilities and Shareholders' Equity
Interest-bearing liabilities:	Interest-bearing liabilities:																			Interest-bearing liabilities:
Interest-bearing demand deposits	Interest-bearing demand deposits	$	6,445,986	$	6,393,304	$	8,109	$	10,681	0.51	%	0.68	%	$	89	$	(2,661)	$	(2,572)	Interest-bearing demand deposits	$	6,853,463		$	6,364,470		$	11,871		$	21,974		0.35	%		0.70	%		$	1,702		$	(11,805)		$	(10,103)
Money market accounts	Money market accounts	12,924,683		11,182,186		33,625		35,833		1.05		1.30		5,632		(7,840)		(2,208)		Money market accounts	13,580,867			10,985,791			48,832			71,264			0.72			1.31			16,905			(39,337)			(22,432)
Savings deposits	Savings deposits	926,822		901,059		110		138		0.05		0.06		4		(32)		(28)		Savings deposits	981,423			902,630			161			258			0.03			0.06			23			(120)			(97)
Time deposits	Time deposits	8,979,942		10,295,454		44,158		41,032		1.98		1.62		(5,299)		8,425		3,126		Time deposits	8,809,434			10,430,033			81,612			86,887			1.86			1.68			(13,539)			8,264			(5,275)
Federal funds purchased and securities sold under repurchase agreements	Federal funds purchased and securities sold under repurchase agreements	167,324		233,076		127		127		0.30		0.22		(36)		36		—		Federal funds purchased and securities sold under repurchase agreements	208,778			266,807			201			281			0.19			0.21			(61)			(19)			(80)
Other short-term borrowings	Other short-term borrowings	1,384,362		517,456		5,805		3,336		1.66		2.58		5,561		(3,092)		2,469		Other short-term borrowings	967,181			805,602			7,509			10,476			1.54			2.59			2,081			(5,048)			(2,967)
Long-term debt	Long-term debt	2,678,651		1,983,910		18,703		16,517		2.78		3.33		5,752		(3,566)		2,186		Long-term debt	2,756,419			2,049,726			35,454			35,392			2.52			3.43			12,054			(11,992)			62
Total interest-bearing liabilities	Total interest-bearing liabilities	33,507,770		31,506,445		110,637		107,664		1.30		1.38		11,703		(8,730)		2,973		Total interest-bearing liabilities	34,157,565			31,805,059			185,640			226,532			1.08			1.43			19,165			(60,057)			(40,892)
Non-interest-bearing deposits	Non-interest-bearing deposits	9,409,774		9,054,949																Non-interest-bearing deposits	10,666,654			9,180,584
Other liabilities	Other liabilities	817,627		716,527																Other liabilities	918,009			689,462
Shareholders' equity	Shareholders' equity	4,961,424		4,516,700																Shareholders' equity	5,032,911			4,564,535
Total liabilities and equity	Total liabilities and equity	$	48,696,595	$	45,794,621															Total liabilities and equity	$	50,775,139		$	46,239,640
Interest rate spread:	Interest rate spread:									3.03	%	3.42	%							Interest rate spread:													2.95	%		3.37	%
Net interest income - FTE/margin⁽⁵⁾	Net interest income - FTE/margin⁽⁵⁾					$	374,046	$	397,805	3.37	%	3.78	%	$	19,519	$	(43,278)	$	(23,759)	Net interest income - FTE/margin⁽⁵⁾							$	751,473		$	795,879		3.25	%		3.74	%		$	73,904		$	(118,310)		$	(44,406)
Taxable equivalent adjustment	Taxable equivalent adjustment					786		630												Taxable equivalent adjustment							1,647			1,441
Net interest income, actual	Net interest income, actual					$	373,260	$	397,175											Net interest income, actual							$	749,826		$	794,438

⁽¹⁾Average loans are shown net of unearned income. NPLs are included. Interest income includes fees as follows: 2020 - ~~$7.9~~$24.4 million, 2019 - ~~$8.2~~$17.1 million.

⁽²⁾Reflects taxable-equivalent adjustments, using the statutory federal income tax rate of 21%, in adjusting interest on tax-exempt loans to a taxable-equivalent basis.

⁽³⁾Includes interest-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 ~~$166.8~~$218.7 million and ~~$(85.6)~~$(36.5) million for the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019, respectively.

⁽⁵⁾The net interest margin is calculated by dividing annualized net interest income - FTE by average total interest earnings assets.

5963

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 which incorporates all of Synovus’ earning assets and liabilities. These simulations are used to determine a baseline net interest income ~~forecast~~projection and the sensitivity of ~~this forecast to~~the income profile based on changes in interest rates. These ~~simulations include all~~simulations incorporate assumptions and factors, including, but not limited to, changes in market rates, in the size or composition of ~~Synovus’ earning assets and liabilities. Forecasted~~the 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~~repricing characteristics as well as customer behaviors. This process is reviewed and updated on an ~~ongoing~~on-going basis ~~and are reviewed and approved by~~in a manner consistent with Synovus’ ALCO ~~and the Risk Committee of the Board of Directors.~~governance framework.

Synovus has modeled its baseline net interest income ~~forecast~~projection assuming a flat interest rate environment with the federal funds rate at the Federal Reserve’s current targeted range of 0% to 0.25% and the current prime rate of 3.25%. Synovus has modeled the impact of a gradual increase in market interest rates across the ~~targeted federal funds range and the prime rate~~yield curve of 100 and 200 bps and a gradual decline of 25 bps to determine the sensitivity of net interest income for the next twelve months. The lesser decline of the downrate scenario presented was selected in light of the low absolute level of monetary policy rates and generally incorporates an assumption that rates are floored at the zero-lower-bound. Synovus' current rate risk position is considered modestly asset-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 at ~~March 31,~~June 30, 2020, with comparable information for December 31, 2019.


Table 12 - Twelve Month Net Interest Income Sensitivity	Table 12 - Twelve Month Net Interest Income Sensitivity						Table 12 - Twelve Month Net Interest Income Sensitivity
		Estimated % Change in Net Interest Income as Compared to Unchanged Rates (for the next twelve months)				Estimated % Change in Net Interest Income as Compared to Unchanged Rates (for the next twelve months)
								Estimated % Change in Net Interest Income as Compared to Unchanged Rates (for the next twelve months)
Change in Short-term Interest Rates (in bps)	Change in Short-term Interest Rates (in bps)	March 31, 2020	December 31, 2019	Change in Short-term Interest Rates (in bps)	June 30, 2020	December 31, 2019
+200	+200	2.8%	2.8%	+200	1.9%	2.8%
+100	+100	0.6%	2.0%	+100	1.0%	2.0%
Flat	Flat	—%	—%	Flat	—%	—%
-25	-25	(0.7)%	N/A	-25	0.2%	N/A

The net interest income simulation model is the primary tool utilized to evaluate potential interest rate risks over a shorter-term time horizon. Synovus also evaluates potential longer-term interest rate risk through modeling and evaluation of EVE. Simulation modeling is utilized to measure the EVE 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 EVE 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 EVE. 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.

LIBOR

In July 2017, the Financial Conduct Authority, ~~(FCA),~~ which regulates LIBOR, announced that it intends to stop persuading or compelling banks to submit rates for the calculation of LIBOR after 2021, confirming the continuation of LIBOR will not be guaranteed beyond that date. However, due to the COVID-19 pandemic, the FCA has since softened its stance on the pre-cessation end dates scheduled in 2020 and early 2021 on the issuance of instruments tied to LIBOR. The ARRC has proposed SOFR as its preferred rate as an alternative to LIBOR and has proposed a paced market transition plan to SOFR from LIBOR. The ARRC recently recommended a spread adjustment methodology for cash products based on a historical median over a five-year lookback period calculating the difference between LIBOR and SOFR. Organizations are currently working on industry-wide and company-specific transition plans as it relates to derivatives and cash markets exposed to LIBOR. As noted within our 10-K Risk Factors, Synovus holds instruments that may be impacted by the discontinuance of LIBOR including floating rate obligations, loans, deposits, derivatives and hedges, and other financial instruments but is not able to currently predict the associated financial impacts of the transition to an alternative reference rate. Synovus has established a cross-functional LIBOR transition working group that is in the process of i) assessing the Company's current exposure to LIBOR indexed instruments and the data, systems and processes that may also be impacted; ii) establishing an implementation plan; and iii) developing a formal governance structure for the transition.

6064

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, fair value 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' 2019 Form 10-K should be reviewed for a greater understanding of how we record and report our financial performance. Excluding the adoption of ASU 2016-13, Financial Instruments-Credit Losses (CECL) on January 1, 2020 as disclosed in "Part I - Item 1. Financial Statements and Supplementary Data - Note 1 - Basis of Presentation and Accounting Policies" 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' 2019 Form 10-K.

Goodwill

Goodwill assessments are highly sensitive to economic projections and the related assumptions and estimates used by management. Synovus includes goodwill impairment analysis and reporting unit valuations as part of its critical accounting policy for fair value measurements. For additional information, see "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" in Synovus' 2019 Form 10-K and "Part I - Item 1. Financial Statements and Supplementary Data - Note 5 - Goodwill and Other Intangible Assets" in this Report.

Non-GAAP Financial Measures

The measures entitled adjusted non-interest revenue; 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; return on average tangible common equity, adjusted return on average tangible common equity; and tangible common equity ratio 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 revenue; total non-interest expense; total revenues; efficiency ratio-FTE; net income per common share, diluted; return on average assets; return on average common equity; and the ratio of total shareholders' equity to total assets, 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 revenue are measures used by management to evaluate non-interest revenue exclusive of net investment securities gains (losses) and gains on sale 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. ~~Adjusted~~Return on average tangible common equity and adjusted return on average tangible common equity ~~is a measure~~are measures 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. The tangible common equity ratio is used by management to assess the strength of our capital position. The computations of these measures are set forth in the tables below.

Table 14 - Reconciliation of Non-GAAP Financial Measures
Three Months Ended
(in thousands) March 31, 2020 March 31, 2019
Adjusted non-interest revenue
Total non-interest revenue $ 103,857 $ 79,378
Subtract: Investment securities gains, net (8,734) (75)
Add/subtract: Decrease (increase) in fair value of private equity investments, net 4,255 (858)
Adjusted non-interest revenue $ 99,378 $ 78,445
Adjusted non-interest expense
Total non-interest expense $ 276,279 $ 292,410
Subtract: Merger-related expense — (49,738)
Subtract: Restructuring charges, net (3,220) (19)
Subtract: Loss on early extinguishment of debt, net (1,904) —
Adjusted non-interest expense $ 271,155 $ 242,653

6265

Table 14 - Reconciliation of Non-GAAP Financial Measures, continued
Three Months Ended
(in thousands, except per share data) March 31, 2020 March 31, 2019
Adjusted total revenues and adjusted tangible efficiency ratio
Adjusted non-interest expense $ 271,155 $ 242,653
Subtract: Amortization of intangibles (2,640) (3,392)
Adjusted tangible non-interest expense $ 268,515 $ 239,261
Net interest income $ 373,260 $ 397,175
Add: Tax equivalent adjustment 786 630
Add: Total non-interest revenue 103,857 79,378
Total FTE revenues $ 477,903 $ 477,183
Subtract: Investment securities gains, net (8,734) (75)
Add/subtract: Decrease (increase) in fair value of private equity investments, net 4,255 (858)
Adjusted total revenues $ 473,424 $ 476,250
Efficiency ratio-FTE 57.81 % 61.28 %
Adjusted tangible efficiency ratio 56.72 50.24
Adjusted net income per common share, diluted
Net income available to common shareholders $ 30,230 $ 117,036
Add: Merger-related expense — 49,738
Add: Restructuring charges, net 3,220 19
Add: Loss on early extinguishment of debt, net 1,904 —
Subtract: Investment securities gains, net (8,734) (75)
Add/subtract: Decrease (increase) in fair value of private equity investments, net 4,255 (858)
Subtract: Tax effect of adjustments (167) (5,705)
Adjusted net income available to common shareholders $ 30,708 $ 160,155
Weighted average common shares outstanding, diluted 148,401 162,760
Adjusted net income per common share, diluted $ 0.21 $ 0.98


Table 14 - Reconciliation of Non-GAAP Financial Measures
	Three Months Ended						Six Months Ended
(in thousands)	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Adjusted non-interest revenue
Total non-interest revenue	$	173,484	$	89,807	$	277,341	$	169,185
Subtract/add: Investment securities (gains) losses, net	(69,409)		1,845		(78,144)		1,771
Subtract: Gain on sale and increase in fair value of private equity investments, net	(8,707)		(1,455)		(4,452)		(2,313)
Adjusted non-interest revenue	$	95,368	$	90,197	$	194,745	$	168,643

Adjusted non-interest expense
Total non-interest expense	$	284,141	$	264,126	$	560,421	$	556,537
Subtract: Earnout liability adjustments	(4,908)		—		(4,908)		—
Subtract: Merger-related expense	—		(7,401)		—		(57,140)
Subtract: Restructuring charges, net	(2,822)		(18)		(6,042)		(37)
Subtract: Loss on early extinguishment of debt, net	—		—		(1,904)		—
Adjusted non-interest expense	$	276,411	$	256,707	$	547,567	$	499,360

Three Months Ended
(dollars in thousands) March 31, 2020 March 31, 2019
Adjusted return on average assets (annualized)
Net income $ 38,521 $ 120,186
Add: Merger-related expense — 49,738
Add: Restructuring charges, net 3,220 19
Add: Loss on early extinguishment of debt, net 1,904 —
Subtract: Investment securities gains, net (8,734) (75)
Add/subtract: Decrease (increase) in fair value of private equity investments, net 4,255 (858)
Subtract: Tax effect of adjustments (167) (5,705)
Adjusted net income $ 38,999 $ 163,305
Net income annualized 154,931 487,421
Adjusted net income annualized 156,853 662,293
Total average assets 48,696,595 45,794,621
Return on average assets (annualized) 0.32 % 1.06 %
Adjusted return on average assets (annualized) 0.32 1.45



	Three Months Ended									Six Months Ended
(in thousands, except per share data)	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Adjusted total revenues and adjusted tangible efficiency ratio
Adjusted non-interest expense	$	276,411		$	256,707		$	547,567		$	499,360
Subtract: Amortization of intangibles	(2,640)			(2,410)			(5,280)			(5,802)
Adjusted tangible non-interest expense	$	273,771		$	254,297		$	542,287		$	493,558

Net interest income	$	376,566		$	397,262		$	749,826		$	794,438
Add: Tax equivalent adjustment	861			811			1,647			1,441
Add: Total non-interest revenue	173,484			89,807			277,341			169,185
Total FTE revenues	$	550,911		$	487,880		$	1,028,814		$	965,064
Subtract/add: Investment securities (gains) losses, net	(69,409)			1,845			(78,144)			1,771
Subtract: Gain on sale and increase in fair value of private equity investments, net	(8,707)			(1,455)			(4,452)			(2,313)
Adjusted total revenues	$	472,795		$	488,270		$	946,218		$	964,522
Efficiency ratio-FTE	51.58		%	54.14		%	54.47		%	57.67		%
Adjusted tangible efficiency ratio	57.91			52.08			57.31			51.17

Adjusted net income per common share, diluted
Net income available to common shareholders	$	84,901		$	153,034		$	115,131		$	270,070
Add: Earnout liability adjustments	4,908			—			4,908			—
Add: Merger-related expense	—			7,401			—			57,140
Add: Restructuring charges, net	2,822			18			6,042			37
Add: Loss on early extinguishment of debt, net	—			—			1,904			—
Subtract/add: Investment securities (gains) losses, net	(69,409)			1,845			(78,144)			1,771
Subtract: Gain on sale and increase in fair value of private equity investments, net	(8,707)			(1,455)			(4,452)			(2,313)
Add/subtract: Tax effect of adjustments	19,500			(1,951)			19,335			(7,659)
Adjusted net income available to common shareholders	$	34,015		$	158,892		$	64,724		$	319,046
Weighted average common shares outstanding, diluted	147,733			159,077			148,067			160,908
Adjusted net income per common share, diluted	$	0.23		$	1.00		$	0.44		$	1.98

6366

Table 14 - Reconciliation of Non-GAAP Financial Measures, continued
Three Months Ended
(dollars in thousands) March 31, 2020 December 31, 2019 March 31, 2019
Adjusted return on average common equity and adjusted return on average tangible common equity (annualized)
Net income available to common shareholders $ 30,230 $ 143,393 $ 117,036
Subtract/add: Merger-related expense — (913) 49,738
Add: Restructuring charges, net 3,220 1,259 19
Add: Valuation adjustment to Visa derivative — 1,111 —
Add: Loss on early extinguishment of debt, net 1,904 — —
Subtract/add: Investment securities (gains) losses, net (8,734) 2,157 (75)
Add/subtract: Decrease (increase) in fair value of private equity investments 4,255 (8,100) (858)
Subtract/add: Tax effect of adjustments (167) 1,162 (5,705)
Net income available to common shareholders $ 30,708 $ 140,069 $ 160,155
Adjusted net income available to common shareholders' annualized $ 123,507 $ 555,709 $ 649,518
Add: Amortization of intangibles 7,868 8,528 10,317
Adjusted net income available to common shareholders excluding amortization of intangibles annualized $ 131,375 $ 564,237 $ 659,835
Net income available to common shareholders annualized $ 121,584 $ 568,896 $ 474,646
Add: Amortization of intangibles 7,868 8,528 10,317
Net income available to common shareholders excluding amortization of intangibles $ 129,452 $ 577,424 $ 484,963
Total average shareholders' equity less preferred stock $ 4,424,278 $ 4,348,250 $ 4,321,561
Subtract: Goodwill (497,267) (488,223) (480,215)
Subtract: Other intangible assets, net (54,514) (57,149) (75,191)
Total average tangible shareholders' equity less preferred stock $ 3,872,497 $ 3,802,878 $ 3,766,155
Return on average common equity (annualized) 2.75 % 13.08 % 10.98 %
Adjusted return on average common equity (annualized) 2.79 12.78 15.03
Return on average tangible common equity (annualized) 3.34 15.18 12.88
Adjusted return on average tangible common equity (annualized) 3.39 14.84 17.52

(dollars in thousands)
Tangible common equity ratio March 31, 2020 December 31, 2019 March 31, 2019
Total assets $ 50,619,585 $ 48,203,282 $ 46,630,025
Subtract: Goodwill (497,267) (497,267) (485,000)
Subtract: Other intangible assets, net (53,032) (55,671) (74,683)
Tangible assets $ 50,069,286 $ 47,650,344 $ 46,070,342
Total shareholders' equity $ 5,065,205 $ 4,941,690 $ 4,597,753
Subtract: Goodwill (497,267) (497,267) (485,000)
Subtract: Other intangible assets, net (53,032) (55,671) (74,683)
Subtract: Preferred Stock, no par value (537,145) (537,145) (195,140)
Tangible common equity $ 3,977,761 $ 3,851,607 $ 3,842,930
Total shareholders' equity to total assets ratio 10.01 % 10.25 % 9.86 %
Tangible common equity ratio 7.94 8.08 8.34



Table 14 - Reconciliation of Non-GAAP Financial Measures, continued
	Three Months Ended									Six Months Ended
(dollars in thousands)	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Adjusted return on average assets (annualized)
Net income	$	93,192		$	156,184		$	131,712		$	276,370
Add: Earnout liability adjustments	4,908			—			4,908			—
Add: Merger-related expense	—			7,401			—			57,140
Add: Restructuring charges, net	2,822			18			6,042			37
Add: Loss on early extinguishment of debt, net	—			—			1,904			—
Subtract/add: Investment securities (gains) losses, net	(69,409)			1,845			(78,144)			1,771
Subtract: Gain on sale and increase in fair value of private equity investments, net	(8,707)			(1,455)			(4,452)			(2,313)
Add/subtract: Tax effect of adjustments	19,500			(1,951)			19,335			(7,659)
Adjusted net income	$	42,306		$	162,042		$	81,305		$	325,346
Net income annualized	374,816			626,452			264,871			557,321
Adjusted net income annualized	170,154			649,949			163,503			656,084
Total average assets	52,853,685			46,679,769			50,775,139			46,239,640
Return on average assets (annualized)	0.71		%	1.34		%	0.52		%	1.21		%
Adjusted return on average assets (annualized)	0.32			1.39			0.32			1.42

6467


Table 14 - Reconciliation of Non-GAAP Financial Measures, continued
	Three Months Ended
(dollars in thousands)	June 30, 2020			March 31, 2020			June 30, 2019
Adjusted return on average common equity, return on average tangible common equity, and adjusted return on average tangible common equity (annualized)
Net income available to common shareholders	$	84,901		$	30,230		$	153,034
Add: Earnout liability adjustments	4,908			—			—
Add: Merger-related expense	—			—			7,401
Add: Restructuring charges, net	2,822			3,220			18
Add: Loss on early extinguishment of debt, net	—			1,904			—
Subtract/add: Investment securities (gains) losses, net	(69,409)			(8,734)			1,845
Subtract/add: (Increase) decrease in fair value of private equity investments	(8,707)			4,255			(1,455)
Add/subtract: Tax effect of adjustments	19,500			(167)			(1,951)
Net income available to common shareholders	$	34,015		$	30,708		$	158,892

Adjusted net income available to common shareholders' annualized	$	136,808		$	123,507		$	637,314
Add: Amortization of intangibles	7,868			7,868			7,250
Adjusted net income available to common shareholders excluding amortization of intangibles annualized	$	144,676		$	131,375		$	644,564

Net income available to common shareholders annualized	$	341,470		$	121,584		$	613,818
Add: Amortization of intangibles	7,868			7,868			7,250
Net income available to common shareholders excluding amortization of intangibles	$	349,338		$	129,452		$	621,068

Total average shareholders' equity less preferred stock	$	4,567,254		$	4,424,278		$	4,416,705
Subtract: Goodwill	(497,267)			(497,267)			(487,601)
Subtract: Other intangible assets, net	(51,667)			(54,514)			(69,853)
Total average tangible shareholders' equity less preferred stock	$	4,018,320		$	3,872,497		$	3,859,251
Return on average common equity (annualized)	7.48		%	2.75		%	13.90		%
Adjusted return on average common equity (annualized)	3.00			2.79			14.43
Return on average tangible common equity (annualized)	8.69			3.34			16.09
Adjusted return on average tangible common equity (annualized)	3.60			3.39			16.70




(dollars in thousands)	June 30, 2020			March 31, 2020			June 30, 2019
Tangible common equity ratio
Total assets	$	54,121,989		$	50,619,585		$	47,318,203
Subtract: Goodwill	(497,267)			(497,267)			(492,390)
Subtract: Other intangible assets, net	(50,392)			(53,032)			(61,473)
Tangible assets	$	53,574,330		$	50,069,286		$	46,764,340
Total shareholders' equity	$	5,052,968		$	5,065,205		$	4,753,816
Subtract: Goodwill	(497,267)			(497,267)			(492,390)
Subtract: Other intangible assets, net	(50,392)			(53,032)			(61,473)
Subtract: Preferred Stock, no par value	(537,145)			(537,145)			(195,140)
Tangible common equity	$	3,968,164		$	3,977,761		$	4,004,813
Total shareholders' equity to total assets ratio	9.34		%	10.01		%	10.05		%
Tangible common equity ratio	7.41			7.94			8.56

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 ~~March 31,~~June 30, 2020, 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 ~~March 31,~~June 30, 2020 that have materially affected, or are reasonably likely to materially affect, Synovus' internal control over financial reporting.

6569

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, allegations of violations of state and federal laws and regulations relating to banking practices, and allegations related to Synovus' participation in government stimulus programs, 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 of 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 "Part I - Item 1. Financial Statements and Supplementary Data - Note 10 - Commitments and 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' 2019 Form 10-K and "Item 1A. - Risk Factors" of Synovus' Form 10-Q for the period ended March 31, 2020 ("1Q 2020 Form 10-Q"), 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. In addition, these risks may be heightened by the disruption and uncertainty resulting from COVID-19. 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.

~~Other than the risk factors set forth below related to COVID-19, there~~There are no material changes during the period covered by this Report to the risk factors previously disclosed in Synovus' 2019 Form ~~10-K.~~

~~The COVID-19 pandemic has resulted in significant economic uncertainty~~10-K and ~~disruption in Synovus’ markets.~~

~~In March~~1Q 2020 the outbreak of COVID-19 caused by a novel strain of the coronavirus was recognized as a pandemic by the World Health Organization. Shortly thereafter, the President of the U.S. declared a national emergency throughout the U.S. attributable to such outbreak. The outbreak has become increasingly widespread in the U.S., including in the markets in which Synovus operates. Though the magnitude of the impact remains to be seen, Synovus has taken a number of steps to assess the effects of the outbreak and mitigate the adverse consequences to its businesses. Nonetheless, Synovus’s business will likely be adversely impacted by the outbreak of COVID-19.

~~As previously disclosed in “Part I - Item IA - Risk Factors” of Synovus' 2019~~ Form 10-K, Synovus’ operations and profitability are impacted by business and economic conditions generally, as well as those in the primary banking markets in which it operates. The COVID-19 pandemic has resulted in historic job losses and decreases in economic activity. While the duration and full extent of job losses and magnitude of economic dislocation are not yet known, it is clear that they may impact the ability of individuals and businesses to make payments, adversely affect the value of underlying collateral and the ability of guarantors to make payments in the case of default, which may decrease demand for Synovus’ products and services and otherwise adversely impact Synovus’ financial condition, results of operations and business. While the U.S. and various state and local governments have implemented various programs designed to aid individuals and businesses, the impact of, and extent to which, these efforts will be successful cannot be determined at this time.

Specifically, many of Synovus’ customers and counterparties have been and may continue to be adversely impacted by the COVID-19 pandemic and resulting economic downturn. As a result, Synovus has faced and may continue to face a decrease in demand for certain products, reduced access to its branches by its customers, and disruptions in the operations of its vendors and third party partners. The pandemic could also result in recognition of additional credit losses in Synovus’ loan portfolios and increase its allowance for credit losses as both businesses and consumers are negatively impacted by the economic downturn. In addition, in future periods Synovus will be required to evaluate the impact of COVID-19 on the carrying value of certain of its assets, including goodwill, and to conduct impairments tests on those assets, which may result in impairment charges on these assets in future periods that could be material. Synovus may also be required to take valuation allowances with respect to its deferred tax assets in future periods in the event it suffers losses or has reduced income or is unable to rely on future forecasts due to the uncertainty resulting from COVID-19.

~~Any of these occurrences could have a material adverse effect on Synovus’ financial condition, results of operations and business.~~The extent to which the pandemic impacts Synovus’ results will depend on future developments, which are highly uncertain and cannot be predicted, including the duration of the pandemic, government and regulatory responses to the pandemic, new information which may emerge concerning its severity and the actions necessary to contain it or address its impact, among others.~~Behavioral changes are not fully known and may not be temporary.~~

~~The COVID-19 pandemic has resulted in significant market volatility and lower interest rates that could materially affect Synovus’ results of operations and access to capital.~~

~~The COVID-19 pandemic has also caused signi~~ficant recent volatility in financial markets and adverse economic conditions and may have significant long-term adverse effects on the U.S. economy, including increased instability in capital markets, declines in business and consumer confidence, reduction in economic activity, increased unemployment and recession.~~This may result in decreased capital and liquidity.~~If the economic situation deteriorates, federal and state regulators may also consider taking actions such as suspension of dividends, share repurchases and other capital distributions in order to conserve capital and retain capacity, any of which could adversely impact Synovus’ business. Further, sustained adverse effects from the COVID-19 pandemic may also prevent us from satisfying our regulatory and other supervisory requirements or result in downgrades in our credit ratings, making it more difficult to access the capital markets.

Additionally, the economic disruption caused by COVID-19 has resulted in a number of Federal Reserve actions resulting in market interest rates declining significantly. On March 3, 2020, the 10-year Treasury yield fell below 1.00% for the first time, and the Federal Reserve reduced the target federal funds rate by 50 bps to 1.00% to 1.25%. On March 15, 2020, the Federal Reserve further reduced the target federal funds rate by 100 bps to 0.00% to 0.25% and announced a $700 billion quantitative easing program in response to the expected economic downturn caused by the COVID-19 pandemic. The Federal Reserve reduced the interest that it pays on excess reserves from 1.60% to 1.10% on March 3, 2020, and then to 0.10% on March 15, 2020. We expect that these reductions in interest rates, especially if prolonged, could adversely affect Synovus’ net interest income, net interest margins and profitability.

Furthermore, such low rates increase the risk of a negative interest rate environment in which interest rates drop below zero, either broadly or for some types of instruments. Such an occurrence would likely further reduce the interest Synovus earns on loans and other earning assets, while also likely requiring Synovus to pay to maintain its deposits with the Federal Reserve Bank. Synovus’ systems may not be able to handle adequately a negative interest rate environment and not all variable rate instruments are designed for such a circumstance. Synovus cannot predict the nature or timing of future changes in monetary policies in response to COVID-19 or the precise effects that they may have on Synovus’ activities and financial results.

T~~he COVID-19 pandemic has impacted, and will likely continue to impact, Synovus’ operations.~~

As a result of the COVID-19 pandemic, Synovus has taken significant precautions to ensure the health and safety of its team members and customers, which include operating over 95% of its branches as drive-thru and appointment only branches and having over 80% of its team member working remotely.~~These precautions could impact demand for Synovus’ products and services.The increased reliance on remote access to information systems increases Synovus’ exposure to potential cybersecurity breaches and could impact Synovus’ productivity.~~Additionally, Synovus’ business customers are increasingly required to work remotely as well and may not have appropriately secured remote networks may be more vulnerable to cyber-attacks or phishing schemes that could also affect us.Furthermore, if a large proportion of Synovus’ key employees were to contract COVID-19 or be quarantined as a result of the virus, Synovus’ operations could be adversely impacted and its business continuity plans may not prove effective.

Federal, state and local governments have mandated or encouraged financial services companies to make accommodations to borrowers and other customers affected by the COVID-19 pandemic. Legal and regulatory responses to ~~concerns about the COVID-19 pandemic could result in additional regulation or restrictions affecting the conduct of our business in the future.~~ In addition to the potential affects from negative economic conditions noted above, Synovus instituted a program to help COVID-19 impacted customers. This program includes waiving NSF and monthly service charges and offering payment deferment and other loan relief, as appropriate, for customers impacted by COVID-19. Synovus’ liquidity could be negatively impacted if a significant number of customers apply and are approved for the deferral of payments. In addition, if these deferrals are not effective in mitigating the effect of COVID-19 on Synovus’ customers, it may adversely affect its business and results of operations more substantially over a longer period of time. In addition, a significant amount of the loan growth Synovus experienced in April has been a direct result of PPP loans. This loan growth is likely to end in the near-tern. Furthermore, there has been meaningful litigation against banks such as Synovus related to their participation in the PPP and other government stimulus programs. The costs and effects of such litigation could be material to Synovus.

10-Q.

ITEM 2. – UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS

(a) None.

(b) None.

The Company announced on January 24, 2020 that its Board of Directors authorized share repurchases in 2020 at a level that would be consistent with Synovus retaining a 9% CET1 ratio target. ~~In light~~As a result of ~~current~~the greater economic uncertainty associated with the current pandemic, Synovus suspended its share repurchase activity beyond the $16.2 million ~~completed~~(450 thousand shares) of its common stock repurchased during the first quarter.

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
January 2020 100 $ 35.97 100 $ 196,403
February 2020 350 36.11 350 183,763
March 2020 — — — 183,763
Total 450 $ 36.08 450

⁽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 first quarter of 2020 were purchased through open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act.~~

ITEM 3. – DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. – MINE SAFETY DISCLOSURES

None.

ITEM 5. – OTHER INFORMATION

None.

6870

ITEM 6. – EXHIBITS



Exhibit Number						Description

3.1						Restated Articles of Incorporation of Synovus, incorporated by reference to Exhibit 3.1 of Synovus’ Current Report on Form 8-K dated April 22, 2020, as filed with the SEC on April 24, 2020.

3.2						Restated Bylaws of Synovus, incorporated by reference to Exhibit 3.2 of Synovus' Current Report on Form 8-K dated April 22, 2020, as filed with the SEC on April 24, 2020.

~~10.1~~						~~Summary of Board of Directors Compensation.~~

31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32						Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101						Interactive Data File

104						Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).

6971

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.

SYNOVUS FINANCIAL CORP.

~~May 11,~~August 6, 2020

By:

/s/ Andrew J. Gregory, Jr.

Date

Andrew J. Gregory, Jr.

Executive Vice President and Chief Financial Officer

(Duly Authorized Officer and Principal Financial Officer)

7072


Allowance for Loan Losses Roll Forward
	As Of and For the Three Months Ended March 31, 2020
(in thousands)	Commercial & Industrial		Commercial Real Estate		Consumer		Total
Allowance for loan losses:
Beginning balance, prior to adoption of ASU 2016-13	$	145,782	$	67,430	$	68,190	$	281,402
Impact from adoption of ASU 2016-13	(2,310)		(651)		85,955		82,994
Charge-offs	(14,885)		(1,017)		(7,972)		(23,874)
Recoveries	1,741		399		1,673		3,813
Provision for loan losses	86,622		40,956		21,539		149,117
Ending balance	$	216,950	$	107,117	$	169,385	$	493,452

	As Of and For the Three Months Ended March 31, 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	(13,039)		(1,233)		(6,427)		(20,699)
Recoveries	1,990		344		1,277		3,611
Provision for loan losses	13,565		1,102		8,902		23,569
Ending balance	$	135,639	$	69,009	$	52,388	$	257,036


Investments in low income housing, solar energy tax credit, and other CRA partnerships:
Carrying amount included in other assets	$	166,460	$	146,612
Amount of future funding commitments included in carrying amount	93,749		78,266
Short-term construction loans and letter of credit commitments	792		2,124
Funded portion of short-term loans and letters of credit	4,516		3,196


Table 2 - Loans by Portfolio Class
					March 31, 2020 vs. December 31, 2019 % Change⁽¹⁾					March 31, 2020 vs. March 31, 2019 % Change
(dollars in thousands)	March 31, 2020		December 31, 2019						March 31, 2019
Commercial, financial and agricultural	$	11,018,155	$	10,252.859	30.0	%	$	9,566,403		15.2	%
Owner-occupied	6,643,287		6,529.811		7.0		6,542,506			1.5
Total commercial and industrial	17,661,442		16,782,670		21.1		16,108,909			9.6
Investment properties	9,257,791		9,042,679		9.6		8,853,494			4.6
1-4 family properties	751,468		780,015		(14.7)		838,727			(10.4)
Land and development	661,942		657,790		2.5		594,925			11.3
Total commercial real estate	10,671,201		10,480,484		7.3		10,287,146			3.7
Consumer mortgages	5,608,121		5,546,368		4.5		5,365,635			4.5
Home equity lines	1,778,862		1,713,157		15.4		1,606,227			10.7
Credit cards	261,581		268,841		(10.9)		252,762			3.5
Other consumer loans	2,302,349		2,396,294		(15.8)		2,037,477			13.0
Total consumer	9,950,913		9,924,660		1.1		9,262,101			7.4
Total loans	38,283,556		37,187,814		11.9		35,658,156			7.4
Deferred fees and costs, net	(25,532)		(25,364)		2.7		(23,655)			7.9
Total loans, net of deferred fees and costs	$	38,258,024	$	37,162,450	11.9	%	$	35,634,501		7.4	%


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
January 2020	100	$	35.97	100	$	196,403
February 2020	350	36.11		350	183,763
March 2020	—	—		—	183,763
Total	450	$	36.08	450