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, 20202021
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, 2020, 147,285,880April 30, 2021, 148,599,905 shares of the registrant's common stock, $1.00 par value, were outstanding.
Table of Contents
| | | | | | | | | | | | | | |
| | | | Page |
| Financial Information | | | |
| | Index of Defined Terms | | |
| Item 1. | Financial Statements (Unaudited) | | |
| | Consolidated Balance Sheets as of March 31, 20202021 and December 31, 20192020 | | |
| | Consolidated Statements of Income for the Three Months Ended March 31, 20202021 and 20192020 | | |
| | Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 20202021 and 20192020 | | |
| | Consolidated Statements of Changes in Shareholders' Equity for the Three Months Ended March 31, 20202021 and 20192020 | | |
| | Consolidated Statements of Cash Flows for the Three Months Ended March 31, 20202021 and 20192020 | | |
| | Notes to Unaudited Interim Consolidated Financial Statements | | |
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | | |
| Item 3. | | | |
| Item 4. | Controls and Procedures | | |
| | | | |
| Other Information | | | |
| Item 1. | Legal Proceedings | | |
| Item 1A. | Risk Factors | | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | | |
| Item 3. | Defaults Upon Senior Securities | | |
| Item 4. | Mine Safety Disclosures | | |
| Item 5. | Other Information | | |
| Item 6. | Exhibits | | |
| Signatures | | | |
| | | | |
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 Accountantscommitments, 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.
CDI – Core Deposit Intangible
CECL – Current expected credit losses
CET1 – Common Equity Tier 1 Capital defined by Basel III capital rules
CMO – Collateralized Mortgage Obligationmortgage obligation
Code – Internal Revenue Code, as amended
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
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
FCBFCA – FCB Financial Holdings, Inc. and its wholly-owned subsidiaries, except where the context requires otherwiseConduct Authority
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
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
Merger AgreementMBS – 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 AgreementMortgage-backed security
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
OTTIP&I – Other-than-temporary impairmentPrincipal and interest
Parent Company – Synovus Financial Corp.
PCD – Purchased Credit Deteriorated
PCI – Purchased Credit Impaired
PPP – Paycheck Protection Program established as part of the CARES Act and launched on April 3, 2020 by the Small Business AdministrationSBA 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' 20192020 Form 10-K – Synovus' Annual Report on Form 10-K for the year ended December 31, 20192020
Synovus Forward – Synovus' revenue growth and expense efficiency initiatives announced in January of 2020
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
TJCATSR – U.S. Tax Cuts and Jobs Act of 2017Total 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
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) | March 31, 2021 | | December 31, 2020 |
| ASSETS | ASSETS | | | | ASSETS | | | |
| Cash and due from banks | Cash and due from banks | $ | 652,451 | | | $ | 535,846 | | Cash and due from banks | $ | 493,645 | | | $ | 531,625 | |
| 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 | 2,722,100 | | | 3,586,565 | |
| Interest earning deposits with banks | Interest earning deposits with banks | 20,717 | | | 20,635 | | Interest earning deposits with banks | 23,969 | | | 20,944 | |
| 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 | 88,552 | | | 113,783 | |
| Total cash, cash equivalents, restricted cash, and restricted cash equivalents | 1,823,834 | | | 1,186,918 | | |
| Total cash, cash equivalents, and restricted cash | | Total cash, cash equivalents, and restricted cash | 3,328,266 | | | 4,252,917 | |
| 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 | 8,825,757 | | | 7,962,438 | |
| Mortgage loans held for sale, at fair value | 119,841 | | | 115,173 | | |
| Loans held for sale (includes $242,010 and $216,647 measured at fair value, respectively) | | Loans held for sale (includes $242,010 and $216,647 measured at fair value, respectively) | 993,887 | | | 760,123 | |
| 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 | 38,805,101 | | | 38,252,984 | |
| Allowance for loan losses | Allowance for loan losses | (493,452) | | | (281,402) | | Allowance for loan losses | (563,214) | | | (605,736) | |
| Loans, net | Loans, net | 37,764,572 | | | 36,881,048 | | Loans, net | 38,241,887 | | | 37,647,248 | |
| 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 | 1,054,475 | | | 1,049,373 | |
| Premises and equipment | 482,462 | | | 493,940 | | |
| Premises, equipment and software, net | | Premises, equipment and software, net | 454,911 | | | 463,959 | |
| Goodwill | Goodwill | 497,267 | | | 497,267 | | Goodwill | 452,390 | | | 452,390 | |
| Other intangible assets | 53,032 | | | 55,671 | | |
| Other intangible assets, net | | Other intangible assets, net | 42,733 | | | 45,112 | |
| Other assets | Other assets | 1,909,793 | | | 1,418,930 | | Other assets | 1,764,705 | | | 1,760,599 | |
| Total assets | Total assets | $ | 50,619,585 | | | $ | 48,203,282 | | Total assets | $ | 55,159,011 | | | $ | 54,394,159 | |
| 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 | $ | 14,660,287 | | | $ | 13,477,854 | |
| Interest-bearing deposits | Interest-bearing deposits | 30,167,134 | | | 28,966,019 | | Interest-bearing deposits | 32,708,664 | | | 33,213,717 | |
| Total deposits | Total deposits | 39,826,585 | | | 38,405,504 | | Total deposits | 47,368,951 | | | 46,691,571 | |
| Federal funds purchased and securities sold under repurchase agreements | 312,776 | | | 165,690 | | |
| Securities sold under repurchase agreements | | Securities sold under repurchase agreements | 293,659 | | | 227,922 | |
| Other short-term borrowings | Other short-term borrowings | 1,175,000 | | | 1,753,560 | | Other short-term borrowings | 0 | | | 7,717 | |
| Long-term debt | Long-term debt | 3,152,339 | | | 2,153,897 | | Long-term debt | 1,202,825 | | | 1,202,494 | |
| Other liabilities | Other liabilities | 1,087,680 | | | 782,941 | | Other liabilities | 1,131,859 | | | 1,103,121 | |
| Total liabilities | Total liabilities | 45,554,380 | | | 43,261,592 | | Total liabilities | 49,997,294 | | | 49,232,825 | |
| 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 168,978,380 and 168,132,522; outstanding 148,888,513 and 148,039,495 | | Common stock - $1.00 par value; authorized 342,857,143 shares; issued 168,978,380 and 168,132,522; outstanding 148,888,513 and 148,039,495 | 168,978 | | | 168,133 | |
| Additional paid-in capital | Additional paid-in capital | 3,821,357 | | | 3,819,336 | | Additional paid-in capital | 3,864,281 | | | 3,851,208 | |
| Treasury stock, at cost; 20,093,027 and 19,643,027 shares | (731,806) | | | (715,560) | | |
| Treasury stock, at cost; 20,089,867 and 20,093,027 shares | | Treasury stock, at cost; 20,089,867 and 20,093,027 shares | (731,690) | | | (731,806) | |
| Accumulated other comprehensive income, net | Accumulated other comprehensive income, net | 256,911 | | | 65,641 | | Accumulated other comprehensive income, net | 15,278 | | | 158,635 | |
| Retained earnings | Retained earnings | 1,014,238 | | | 1,068,327 | | Retained earnings | 1,307,725 | | | 1,178,019 | |
| Total shareholders’ equity | 5,065,205 | | | 4,941,690 | | |
| Total shareholders' equity | | Total shareholders' equity | 5,161,717 | | | 5,161,334 | |
| Total liabilities and shareholders' equity | Total liabilities and shareholders' equity | $ | 50,619,585 | | | $ | 48,203,282 | | Total liabilities and shareholders' equity | $ | 55,159,011 | | | $ | 54,394,159 | |
|
See accompanying notes to unaudited interim consolidated financial statements.
SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | | | |
| (in thousands, except per share data) | 2020 | | 2019 | | | | |
| Interest income: | | | | | | | |
| Loans, including fees | $ | 427,337 | | | $ | 447,769 | | | | | |
| Investment securities available for sale | 51,653 | | | 49,938 | | | | | |
| Mortgage loans held for sale | 792 | | | 391 | | | | | |
| Federal Reserve Bank balances | 1,508 | | | 3,671 | | | | | |
| Other earning assets | 2,607 | | | 3,070 | | | | | |
| Total interest income | 483,897 | | | 504,839 | | | | | |
| Interest expense: | | | | | | | |
| Deposits | 86,002 | | | 87,684 | | | | | |
| Federal funds purchased, securities sold under repurchase agreements, and other short-term borrowings | 5,932 | | | 3,463 | | | | | |
| Long-term debt | 18,703 | | | 16,517 | | | | | |
| Total interest expense | 110,637 | | | 107,664 | | | | | |
| Net interest income | 373,260 | | | 397,175 | | | | | |
Provision for credit losses(1) | 158,722 | | | 23,569 | | | | | |
| Net interest income after provision for credit losses | 214,538 | | | 373,606 | | | | | |
| Non-interest revenue: | | | | | | | |
| Service charges on deposit accounts | 20,689 | | | 20,859 | | | | | |
| Fiduciary and asset management fees | 15,174 | | | 13,578 | | | | | |
| Card fees | 10,950 | | | 10,877 | | | | | |
| Brokerage revenue | 12,398 | | | 9,379 | | | | | |
| Mortgage banking income | 12,227 | | | 5,054 | | | | | |
| Capital markets income | 11,243 | | | 5,245 | | | | | |
| Income from bank-owned life insurance | 6,038 | | | 5,290 | | | | | |
| Investment securities gains, net | 8,734 | | | 75 | | | | | |
| Other non-interest revenue | 6,404 | | | 9,021 | | | | | |
| Total non-interest revenue | 103,857 | | | 79,378 | | | | | |
| Non-interest expense: | | | | | | | |
| Salaries and other personnel expense | 149,678 | | | 139,427 | | | | | |
| Net occupancy and equipment expense | 42,194 | | | 38,394 | | | | | |
| Third-party processing and other services | 21,480 | | | 17,758 | | | | | |
| Professional fees | 10,675 | | | 6,348 | | | | | |
| FDIC insurance and other regulatory fees | 5,278 | | | 6,761 | | | | | |
| Advertising expense | 4,752 | | | 5,123 | | | | | |
| Merger-related expense | — | | | 49,738 | | | | | |
| Other operating expenses | 42,222 | | | 28,861 | | | | | |
| Total non-interest expense | 276,279 | | | 292,410 | | | | | |
| Income before income taxes | 42,116 | | | 160,574 | | | | | |
| Income tax expense | 3,595 | | | 40,388 | | | | | |
| Net income | 38,521 | | | 120,186 | | | | | |
| Less: Preferred stock dividends | 8,291 | | | 3,150 | | | | | |
| Net income available to common shareholders | $ | 30,230 | | | $ | 117,036 | | | | | |
| Net income per common share, basic | $ | 0.21 | | | $ | 0.73 | | | | | |
| Net income per common share, diluted | 0.20 | | | 0.72 | | | | | |
| Weighted average common shares outstanding, basic | 147,311 | | | 160,927 | | | | | |
| Weighted average common shares outstanding, diluted | 148,401 | | | 162,760 | | | | | |
| | | | | | | |
(1) Beginning January 1, 2020, provision calculation is based on current expected loss methodology. Prior to January 1, 2020, calculation was based on incurred loss methodology. | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| (in thousands, except per share data) | 2021 | | 2020 | | | | |
| Interest income: | | | | | | | |
| Loans, including fees | $ | 372,491 | | | $ | 427,337 | | | | | |
| Investment securities available for sale | 29,458 | | | 51,653 | | | | | |
| Loans held for sale | 6,462 | | | 792 | | | | | |
| Federal Reserve Bank balances | 673 | | | 1,508 | | | | | |
| Other earning assets | 733 | | | 2,607 | | | | | |
| Total interest income | 409,817 | | | 483,897 | | | | | |
| Interest expense: | | | | | | | |
| Deposits | 25,018 | | | 86,002 | | | | | |
| Federal funds purchased, securities sold under repurchase agreements, and other short-term borrowings | 34 | | | 5,932 | | | | | |
| Long-term debt | 10,908 | | | 18,703 | | | | | |
| Total interest expense | 35,960 | | | 110,637 | | | | | |
| Net interest income | 373,857 | | | 373,260 | | | | | |
| (Reversal of) provision for credit losses | (18,575) | | | 158,722 | | | | | |
| Net interest income after provision for credit losses | 392,432 | | | 214,538 | | | | | |
| Non-interest revenue: | | | | | | | |
| Service charges on deposit accounts | 20,033 | | | 20,689 | | | | | |
| Fiduciary and asset management fees | 17,954 | | | 15,174 | | | | | |
| Card fees | 11,996 | | | 10,950 | | | | | |
| Brokerage revenue | 12,974 | | | 12,398 | | | | | |
| Mortgage banking income | 22,315 | | | 12,227 | | | | | |
| Capital markets income | 7,505 | | | 11,243 | | | | | |
| Income from bank-owned life insurance | 8,843 | | | 6,038 | | | | | |
| Investment securities (losses) gains, net | (1,990) | | | 8,734 | | | | | |
| Other non-interest revenue | 11,326 | | | 6,404 | | | | | |
| Total non-interest revenue | 110,956 | | | 103,857 | | | | | |
| Non-interest expense: | | | | | | | |
| Salaries and other personnel expense | 161,477 | | | 149,678 | | | | | |
| Net occupancy, equipment, and software expense | 41,134 | | | 42,194 | | | | | |
| Third-party processing and other services | 20,032 | | | 22,700 | | | | | |
| Professional fees | 9,084 | | | 10,675 | | | | | |
| FDIC insurance and other regulatory fees | 5,579 | | | 5,278 | | | | | |
| Other operating expenses | 29,828 | | | 45,754 | | | | | |
| Total non-interest expense | 267,134 | | | 276,279 | | | | | |
| Income before income taxes | 236,254 | | | 42,116 | | | | | |
| Income tax expense | 49,161 | | | 3,595 | | | | | |
| Net income | 187,093 | | | 38,521 | | | | | |
| Less: Preferred stock dividends | 8,291 | | | 8,291 | | | | | |
| Net income available to common shareholders | $ | 178,802 | | | $ | 30,230 | | | | | |
| Net income per common share, basic | $ | 1.20 | | | $ | 0.21 | | | | | |
| Net income per common share, diluted | 1.19 | | | 0.20 | | | | | |
| Weighted average common shares outstanding, basic | 148,467 | | | 147,311 | | | | | |
| Weighted average common shares outstanding, diluted | 149,780 | | | 148,401 | | | | | |
| | | | | | | |
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 March 31, |
| | 2020 | | | 2019 | | | 2021 | | 2020 |
| (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 | $ | 236,254 | | | $ | (49,161) | | | $ | 187,093 | | | $ | 42,116 | | | $ | (3,595) | | | $ | 38,521 | |
| 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 | (165,241) | | | 42,781 | | | (122,460) | | | 158,341 | | | (41,011) | | | 117,330 | |
| 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 | 1,990 | | | (515) | | | 1,475 | | | (8,734) | | | 2,262 | | | (6,472) | |
| Net change | Net change | 149,607 | | | (38,749) | | | 110,858 | | | 102,710 | | | (26,602) | | | 76,108 | | Net change | (163,251) | | | 42,266 | | | (120,985) | | | 149,607 | | | (38,749) | | | 110,858 | |
| 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 | (29,057) | | | 7,874 | | | (21,183) | | | 108,639 | | | (28,138) | | | 80,501 | |
| 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 | (1,599) | | | 410 | | | (1,189) | | | (120) | | | 31 | | | (89) | |
| Net change | Net change | 108,519 | | | (28,107) | | | 80,412 | | | — | | | — | | | — | | Net change | (30,656) | | | 8,284 | | | (22,372) | | | 108,519 | | | (28,107) | | | 80,412 | |
| Post-retirement unfunded health benefit: | | |
| Reclassification adjustment for realized (gains) losses included in net income | — | | | — | | | — | | | (35) | | | 5 | | | (30) | | |
| 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) | $ | (193,907) | | | $ | 50,550 | | | $ | (143,357) | | | $ | 258,126 | | | $ | (66,856) | | | $ | 191,270 | |
| Comprehensive income | Comprehensive income | | $ | 229,791 | | | $ | 196,264 | | Comprehensive income | | $ | 43,736 | | | $ | 229,791 | |
| | | | |
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, 2020 | | Balance, December 31, 2020 | $ | 537,145 | | | $ | 168,133 | | | $ | 3,851,208 | | | $ | (731,806) | | | $ | 158,635 | | | $ | 1,178,019 | | | $ | 5,161,334 | |
| Net income | | Net income | — | | | — | | | — | | | — | | | — | | | 187,093 | | | 187,093 | |
| Other comprehensive loss, net of income taxes | | Other comprehensive loss, net of income taxes | — | | | — | | | — | | | — | | | (143,357) | | | — | | | (143,357) | |
| Cash dividends declared on common stock - $0.33 per share | | Cash dividends declared on common stock - $0.33 per share | — | | | — | | | — | | | — | | | — | | | (49,093) | | | (49,093) | |
Cash dividends declared on preferred stock(1) | | Cash dividends declared on preferred stock(1) | — | | | — | | | — | | | — | | | — | | | (8,291) | | | (8,291) | |
| Restricted share unit vesting and taxes paid related to net share settlement | | Restricted share unit vesting and taxes paid related to net share settlement | — | | | 271 | | | (6,456) | | | — | | | — | | | 0 | | | (6,185) | |
| Stock options exercised, net | | Stock options exercised, net | — | | | 574 | | | 11,978 | | | — | | | — | | | — | | | 12,552 | |
| Warrants exercised with net settlement and common stock reissued | | Warrants exercised with net settlement and common stock reissued | — | | | — | | | (113) | | | 116 | | | — | | | (3) | | | 0 | |
| Share-based compensation expense | | Share-based compensation expense | — | | | — | | | 7,664 | | | — | | | — | | | — | | | 7,664 | |
| Balance at March 31, 2021 | | Balance at March 31, 2021 | $ | 537,145 | | | $ | 168,978 | | | $ | 3,864,281 | | | $ | (731,690) | | | $ | 15,278 | | | $ | 1,307,725 | | | $ | 5,161,717 | |
| | Balance, December 31, 2019 | Balance, December 31, 2019 | $ | 537,145 | | | $ | 166,801 | | | $ | 3,819,336 | | | $ | (715,560) | | | $ | 65,641 | | | $ | 1,068,327 | | | $ | 4,941,690 | | 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) | | |
| Cumulative-effect of change in accounting principle for credit losses (ASU 2016-13), net of tax | | Cumulative-effect of change in accounting principle for credit losses (ASU 2016-13), net of tax | — | | | — | | | — | | | — | | | — | | | (35,721) | | | (35,721) | |
| Net income | Net income | — | | | — | | | — | | | — | | | — | | | 38,521 | | | 38,521 | | Net income | — | | | — | | | — | | | — | | | — | | | 38,521 | | | 38,521 | |
| Other comprehensive income, net of income taxes | Other comprehensive income, net of income taxes | — | | | — | | | — | | | — | | | 191,270 | | | — | | | 191,270 | | Other comprehensive income, net of income taxes | — | | | — | | | — | | | — | | | 191,270 | | | — | | | 191,270 | |
| 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 | — | | | — | | | — | | | — | | | — | | | (48,598) | | | (48,598) | |
Cash dividends declared on preferred stock(2) | — | | | — | | | — | | | — | | | — | | | (8,291) | | | (8,291) | | |
Cash dividends declared on preferred stock(1) | | Cash dividends declared on preferred stock(1) | — | | | — | | | — | | | — | | | — | | | (8,291) | | | (8,291) | |
| Repurchases of common stock including costs to repurchase | Repurchases of common stock including costs to repurchase | — | | | — | | | — | | | (16,246) | | | — | | | — | | | (16,246) | | 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 | — | | | 345 | | | (7,602) | | | — | | | — | | | 0 | | | (7,257) | |
| Stock options exercised | — | | | 214 | | | 6,053 | | | — | | | — | | | — | | | 6,267 | | |
| Stock options exercised, net | | Stock options exercised, net | — | | | 214 | | | 6,053 | | | — | | | — | | | — | | | 6,267 | |
| Share-based compensation expense | Share-based compensation expense | — | | | — | | | 3,570 | | | — | | | — | | | — | | | 3,570 | | Share-based compensation expense | — | | | — | | | 3,570 | | | — | | | — | | | — | | | 3,570 | |
| Balance at March 31, 2020 | Balance at March 31, 2020 | $ | 537,145 | | | $ | 167,360 | | | $ | 3,821,357 | | | $ | (731,806) | | | $ | 256,911 | | | $ | 1,014,238 | | | $ | 5,065,205 | | Balance at March 31, 2020 | $ | 537,145 | | | $ | 167,360 | | | $ | 3,821,357 | | | $ | (731,806) | | | $ | 256,911 | | | $ | 1,014,238 | | | $ | 5,065,205 | |
| | 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 | — | | | — | | | — | | | — | | | — | | | 120,186 | | | 120,186 | | |
| Other comprehensive income, net of income taxes | — | | | — | | | — | | | — | | | 76,078 | | | — | | | 76,078 | | |
| 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 | — | | | — | | | — | | | — | | | — | | | (47,235) | | | (47,235) | | |
Cash dividends declared on preferred stock(2) | — | | | — | | | — | | | — | | | — | | | (3,150) | | | (3,150) | | |
| Repurchases of common stock including costs to repurchase | — | | | — | | | — | | | (320,167) | | | — | | | — | | | (320,167) | | |
| Restricted share unit vesting and taxes paid related to net share settlement | — | | | 235 | | | (8,647) | | | — | | | — | | | — | | | (8,412) | | |
| Stock options exercised | — | | | 351 | | | 6,029 | | | 269 | | | — | | | — | | | 6,649 | | |
| Share-based compensation expense | — | | | — | | | 10,244 | | | — | | | — | | | — | | | 10,244 | | |
| Balance at March 31, 2019 | $ | 195,140 | | | $ | 165,929 | | | $ | 3,794,262 | | | $ | (319,898) | | | $ | (18,342) | | | $ | 780,662 | | | $ | 4,597,753 | | |
| |
(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, 2021 and 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, 2019, dividends per share were $0.39 for Series D Preferred Stock.
See accompanying notes to unaudited interim consolidated financial statements.
SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| | | Three Months Ended March 31, | | | Three Months Ended March 31, |
| (in thousands) | (in thousands) | 2020 | | 2019 | (in thousands) | 2021 | | 2020 |
| Operating Activities | Operating Activities | | | | Operating Activities | | | |
| Net income | Net income | $ | 38,521 | | | $ | 120,186 | | Net income | $ | 187,093 | | | $ | 38,521 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | |
| Provision for credit losses | 158,722 | | | 23,569 | | |
| Adjustments to reconcile net income to net cash (used) provided by operating activities: | | Adjustments to reconcile net income to net cash (used) provided by operating activities: | |
| (Reversal of) provision for credit losses | | (Reversal of) provision for credit losses | (18,575) | | | 158,722 | |
| Depreciation, amortization, and accretion, net | Depreciation, amortization, and accretion, net | 23,649 | | | 7,000 | | Depreciation, amortization, and accretion, net | 52,395 | | | 23,649 | |
| 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 | | | — | | |
| Deferred income tax expense (benefit) | | Deferred income tax expense (benefit) | 17,926 | | | (10,978) | |
| Originations of loans held for sale | | Originations of loans held for sale | (1,075,343) | | | (254,395) | |
| Proceeds from sales and payments on loans held for sale | | Proceeds from sales and payments on loans held for sale | 857,872 | | | 259,224 | |
| Gain on sales of loans held for sale, net | | Gain on sales of loans held for sale, net | (16,293) | | | (9,497) | |
| Decrease (increase) in other assets | | Decrease (increase) in other assets | 17,437 | | | (442,711) | |
| (Decrease) increase in other liabilities | | (Decrease) increase in other liabilities | (11,936) | | | 260,486 | |
| Investment securities losses (gains), net | | Investment securities losses (gains), net | 1,990 | | | (8,734) | |
| Share-based compensation expense | Share-based compensation expense | 3,570 | | | 10,244 | | Share-based compensation expense | 7,664 | | | 3,570 | |
| Other | | Other | 0 | | | 1,904 | |
| Net cash provided by operating activities | Net cash provided by operating activities | 19,761 | | | 142,508 | | Net cash provided by operating activities | 20,230 | | | 19,761 | |
| Investing Activities | Investing Activities | | | | 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 | Proceeds from maturities and principal collections of investment securities available for sale | 341,431 | | | 197,726 | | Proceeds from maturities and principal collections of investment securities available for sale | 852,628 | | | 341,431 | |
| 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 | 223,977 | | | 413,180 | |
| Purchases of investment securities available for sale | Purchases of investment securities available for sale | (755,558) | | | (2,254,346) | | Purchases of investment securities available for sale | (2,125,567) | | | (755,558) | |
| Proceeds from sales of loans | Proceeds from sales of loans | 11,808 | | | 13,654 | | Proceeds from sales of loans | 21,535 | | | 11,808 | |
| 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) | | |
| Purchases of loans | | Purchases of loans | (606,985) | | | 0 | |
| Net decrease (increase) in loans | | Net decrease (increase) in loans | 5,084 | | | (1,065,125) | |
| Net purchases of Federal Home Loan Bank stock | | Net purchases of Federal Home Loan Bank stock | (1,200) | | | (978) | |
| Net purchases of Federal Reserve Bank stock | | Net purchases of Federal Reserve Bank stock | 0 | | | (454) | |
| Net proceeds from settlement (purchases) of bank-owned life insurance policies | | Net proceeds from settlement (purchases) of bank-owned life insurance policies | 3,784 | | | (249,942) | |
| Net increase in premises, equipment and software | | Net increase in premises, equipment and software | (4,027) | | | (6,941) | |
| Other | | Other | 1,247 | | | 8,547 | |
| Net cash used in investing activities | Net cash used in investing activities | (1,304,032) | | | (648,375) | | Net cash used in investing activities | (1,629,524) | | | (1,304,032) | |
| Financing Activities | Financing Activities | | | | Financing Activities | | | |
| Net increase in deposits | Net increase in deposits | 1,420,659 | | | 434,677 | | Net increase in deposits | 677,380 | | | 1,420,659 | |
| Net increase in federal funds purchased and securities sold under repurchase agreements | Net increase in federal funds purchased and securities sold under repurchase agreements | 147,086 | | | 47,552 | | Net increase in federal funds purchased and securities sold under repurchase agreements | 65,737 | | | 147,086 | |
| Net change in other short-term borrowings | (578,560) | | | 203,000 | | |
| Net decrease in other short-term borrowings | | Net decrease in other short-term borrowings | (7,717) | | | (578,560) | |
| Repayments and redemption of long-term debt | Repayments and redemption of long-term debt | (251,904) | | | — | | Repayments and redemption of long-term debt | 0 | | | (251,904) | |
| Proceeds from issuance of long-term debt, net | Proceeds from issuance of long-term debt, net | 1,248,441 | | | 297,045 | | Proceeds from issuance of long-term debt, net | 0 | | | 1,248,441 | |
| Dividends paid to common shareholders | Dividends paid to common shareholders | (44,149) | | | (28,966) | | Dividends paid to common shareholders | (48,834) | | | (44,149) | |
| Dividends paid to preferred shareholders | Dividends paid to preferred shareholders | (3,150) | | | (3,150) | | Dividends paid to preferred shareholders | (8,291) | | | (3,150) | |
| Stock options and warrants exercised | 6,267 | | | 6,649 | | |
| Repurchase of common stock | Repurchase of common stock | (16,246) | | | (320,167) | | Repurchase of common stock | 0 | | | (16,246) | |
| Taxes paid related to net share settlement of equity awards | (7,257) | | | (8,412) | | |
| Issuances, net of taxes paid, under equity compensation plans | | Issuances, net of taxes paid, under equity compensation plans | 6,368 | | | (990) | |
| Net cash provided by financing activities | Net cash provided by financing activities | 1,921,187 | | | 628,228 | | Net cash provided by financing activities | 684,643 | | | 1,921,187 | |
| 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 | | |
| (Decrease) increase in cash and cash equivalents including restricted cash | | (Decrease) increase in cash and cash equivalents including restricted cash | (924,651) | | | 636,916 | |
| Cash, cash equivalents, and restricted cash, at beginning of period | | Cash, cash equivalents, and restricted cash, at beginning of period | 4,252,917 | | | 1,186,918 | |
| Cash, cash equivalents, and restricted cash at end of period | | Cash, cash equivalents, and restricted cash at end of period | $ | 3,328,266 | | | $ | 1,823,834 | |
| | Supplemental Disclosures: | Supplemental Disclosures: | | Supplemental Disclosures: | |
| Income taxes paid | Income taxes paid | $ | 920 | | | $ | 1,050 | | Income taxes paid | $ | 48,505 | | | $ | 920 | |
| Interest paid | Interest paid | 109,340 | | | 95,630 | | Interest paid | 46,599 | | | 109,340 | |
| Non-cash Activities | Non-cash Activities | | 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 | Securities sold during the period but settled after period-end | 169,748 | | | — | | Securities sold during the period but settled after period-end | 0 | | | 169,748 | |
| Securities purchased during the period but settled after period-end | Securities purchased during the period but settled after period-end | 113,818 | | | — | | Securities purchased during the period but settled after period-end | 53,699 | | | 113,818 | |
| Premises and equipment transferred to other assets held for sale | 4,681 | | | 785 | | |
| Loans foreclosed and transferred to other real estate | Loans foreclosed and transferred to other real estate | 1,951 | | | 1,419 | | Loans foreclosed and transferred to other real estate | 720 | | | 1,951 | |
| 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 | Dividends declared on common stock during the period but paid after period-end | 48,598 | | | 47,235 | | Dividends declared on common stock during the period but paid after period-end | 49,093 | | | 48,598 | |
| Dividends declared on preferred stock during the period but paid after period-end | Dividends declared on preferred stock during the period but paid after period-end | 5,141 | | | — | | Dividends declared on preferred stock during the period but paid after period-end | 5,141 | | | 5,141 | |
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, mortgage services, premium finance, asset-based lending, structured lending, and international banking. Synovus also provides financial planning, and investment advisory services through its wholly-owned subsidiaries, Synovus Trust and Synovus Securities, as well at its GLOBALT and Creative Financial Group divisions. Synovus Bank is positioned in markets in the Southeast, with 299 288 branches and 386388 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' 20192020 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;value; income taxes; and contingent liabilities including legal matters, among others.
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 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, 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 criticize institutions for working with borrowers in a safe and sound manner. Moreover, the revised statement provides 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 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 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 in late March 2020, Synovus provided relief programs consisting primarily of 90-day payment deferral relief to borrowers negatively impacted by COVID-19.
Recently Adopted Accounting Standards
ASU 2016-13,2020-08, Financial Instruments-Credit Losses (ASC 326).Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable Fees and Other CostsOn January 1, 2020, Synovus adopted. The guidance in this 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 offsetpertains 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. Resultsshortened amortization period 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 | |
| | | | | |
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. March 31, 2020 regulatory capital ratios reflect Synovus' election of the five-year transition provision.
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 salecertain purchased callable debt securities to determine if the decline in fair value ofheld at a security below itspremium, which premium is 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") 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
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 Company elected not to measure 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") 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") 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 reportingearliest call date that a TDR will be executed with an individual borrower or the extension or renewal option is included in the contract at the reporting date and 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 1 year for Synovus), the Company reverts, on a straight-line basis back to the historical rates.
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 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 the discounted cash flow 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.
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, whereby310-20-25-33, and clarifies that an entity should reevaluate whether a callable debt security is within the amortized cost basisscope of the PCD asset is ‘grossed-up’ by the initial estimate of credit lossesparagraph 310-20-25-33 for each reporting period. The amendments in this ASU are effective for fiscal years beginning after December 15, 2020. Synovus adopted ASU 2020-08 effective January 1, 2021 with an offsetno material impact to the ALL. This acquisition date allowance hasunaudited consolidated financial statements.
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. In December 2019, the FASB issued ASU 2019-12 to simplify and reduce complexities when accounting for income taxes by removing certain exceptions. Among the provisions of this guidance are the requirement that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date.ASU 2019-12 is effective for public entities for fiscal years beginning after December 15, 2020. Synovus adopted ASU 2019-12 effective January 1, 2021 with no income statement effect. Post-acquisition, anymaterial impact to the unaudited consolidated financial statements unless there are 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 fortax law that require recognition as purchased credit-impairedset forth 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.this guidance.
Recently Issued Accounting Standards Not Yet Adopted
ASU 2021-01, Reference Rate Reform (Topic 848): Scope: In January 2021, the FASB issued ASU 2021-01 which provides optional expedients and exceptions in Topic 848 for derivative instruments and hedge accounting modifications resulting from the discounting transition of reference rate reform.The expedients and exceptions provided by ASU 2021-01 will not be available after December 31, 2022, other than for existing hedging relationships entered into by December 31, 2022. The ASU may be applied as of the beginning of an interim period that includes or is subsequent to March 12, 2020, until the sunset date of December 31, 2022. Synovus 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 providesOctober 1, 2020. Synovus has not yet elected optional expedients and exceptions for applying GAAP to affected contract modifications and hedge accounting relationships. The main provisions include:ASU 2021-01.
•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.
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.
In connection with the FCB acquisition, Synovus incurred merger-related expense presented in the table below totaling $49.7 million for the three months ended March 31, 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 to five-year period, with amounts based on a percentage of "Global One Earnings," as defined in the merger agreement. The Earnout Payments consist of shares of Synovus common stock as well as a smaller cash consideration component. The total fair value of the earnout liability at March 31, 2020 was $11.0 million.
Note 32 - 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, 20202021 and December 31, 20192020 are summarized below.
| | | March 31, 2020 | | | March 31, 2021 |
| (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 | $ | 70,085 | | | $ | 0 | | | $ | (3,629) | | | $ | 66,456 | |
| U.S. Government agency securities | U.S. Government agency securities | 72,424 | | | 2,469 | | | (37) | | | 74,856 | | U.S. Government agency securities | 79,148 | | | 2,026 | | | 0 | | | 81,174 | |
| 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 | 964,709 | | | 1,542 | | | (11,069) | | | 955,182 | |
| 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 | 6,100,521 | | | 78,507 | | | (77,253) | | | 6,101,775 | |
| 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 | 1,155,180 | | | 12,678 | | | (10,635) | | | 1,157,223 | |
| 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 | 440,556 | | | 12,006 | | | (7,348) | | | 445,214 | |
| State and municipal securities | 1,007 | | | 2 | | | (4) | | | 1,005 | | |
| 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 | 18,235 | | | 504 | | | (6) | | | 18,733 | |
| 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 | $ | 8,828,434 | | | $ | 107,263 | | | $ | (109,940) | | | $ | 8,825,757 | |
| | | December 31, 2019 | | | December 31, 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 | | $ | 19,855 | | | $ | — | | | $ | — | | | $ | 19,855 | | U.S. Treasury securities | $ | 20,257 | | | $ | 0 | | | $ | 0 | | | $ | 20,257 | |
| U.S. Government agency securities | U.S. Government agency securities | 35,499 | | | 1,042 | | | — | | | 36,541 | | U.S. Government agency securities | 79,638 | | | 2,682 | | | 0 | | | 82,320 | |
| 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 | 1,216,012 | | | 7,930 | | | (5,925) | | | 1,218,017 | |
| 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 | 4,865,858 | | | 134,188 | | | 0 | | | 5,000,046 | |
| 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 | 1,245,644 | | | 15,309 | | | (10,576) | | | 1,250,377 | |
| 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 | 354,244 | | | 16,677 | | | 0 | | | 370,921 | |
| State and municipal securities | 2,069 | | | 6 | | | — | | | 2,075 | | |
| 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 | 20,211 | | | 457 | | | (168) | | | 20,500 | |
| 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 | $ | 7,801,864 | | | $ | 177,243 | | | $ | (16,669) | | | $ | 7,962,438 | |
|
At both March 31, 20202021 and December 31, 2019,2020, investment securities with a carrying value of $2.16$3.84 billion and $1.71 billion, respectively, were pledged to secure certain deposits and other liabilities, as required by law or contractual agreements.
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, 20202021 and December 31, 20192020 are presented below.
| | | March 31, 2020 | | | March 31, 2021 |
| | Less than 12 Months | | | 12 Months of Longer | | | Total | | | Less than 12 Months | | 12 Months or 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 | $ | 38,502 | | | $ | (37) | | | $ | — | | | $ | — | | | $ | 38,502 | | | $ | (37) | | |
| U.S. Treasury securities | | U.S. Treasury securities | $ | 46,195 | | | $ | (3,629) | | | $ | 0 | | | $ | 0 | | | $ | 46,195 | | | $ | (3,629) | |
| 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 | 784,433 | | | (11,069) | | | 0 | | | 0 | | | 784,433 | | | (11,069) | |
| Mortgage-backed securities issued by U.S. Government sponsored enterprises | | Mortgage-backed securities issued by U.S. Government sponsored enterprises | 4,214,454 | | | (77,253) | | | 0 | | | 0 | | | 4,214,454 | | | (77,253) | |
| 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 | 770,319 | | | (10,635) | | | 0 | | | 0 | | | 770,319 | | | (10,635) | |
| 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 | 176,469 | | | (7,348) | | | 0 | | | 0 | | | 176,469 | | | (7,348) | |
| 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 | 9,498 | | | (6) | | | 0 | | | 0 | | | 9,498 | | | (6) | |
| Total | Total | $ | 285,770 | | | $ | (13,847) | | | $ | 32 | | | $ | (1) | | | $ | 285,802 | | | $ | (13,848) | | Total | $ | 6,001,368 | | | $ | (109,940) | | | $ | 0 | | | $ | 0 | | | $ | 6,001,368 | | | $ | (109,940) | |
| | | December 31, 2019 | | | December 31, 2020 |
| | Less than 12 Months | | | 12 Months of Longer | | | Total | | | Less than 12 Months | | 12 Months or 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 | $ | 566,896 | | | $ | (5,925) | | | $ | 0 | | | $ | 0 | | | $ | 566,896 | | | $ | (5,925) | |
| 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 | 803,429 | | | (10,576) | | | 0 | | | 0 | | | 803,429 | | | (10,576) | |
| 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 | 9,337 | | | (168) | | | 0 | | | 0 | | | 9,337 | | | (168) | |
| Total | Total | $ | 891,914 | | | $ | (2,468) | | | $ | 5,309 | | | $ | (38) | | | $ | 897,223 | | | $ | (2,506) | | Total | $ | 1,379,662 | | | $ | (16,669) | | | $ | 0 | | | $ | 0 | | | $ | 1,379,662 | | | $ | (16,669) | |
|
As of March 31, 2020,2021, Synovus had 17115 investment securities in a loss position for less than twelve months and 3 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 50 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.
Synovus has evaluated investment securities that are in an unrealized loss position as of March 31, 2020 and determined the following by investment category:
Asset-backed securities - 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-backed2021.
securities was unrelated to credit losses and was instead attributable to wider market spreads. As such, noAt March 31, 2021, 0 ACL was recorded duringestablished for investment securities. Substantially all of the period and unrealized losses on the securities portfolio were recognizedthe result of changes in other comprehensive income, net of tax.
Corporate debtmarket interest rates compared to the date the securities - Synovus considerswere acquired rather than the credit quality of each issuerthe issuers or underlying loans. U.S. Treasury and whether payments of principalagency securities and interestagency mortgage-backed securities are current. Noneissued, guaranteed or otherwise supported by the United States government, an agency of the investment securities described above are past due as of March 31, 2020. At March 31, 2020, these securities are rated investment grade and the decline in fair value was largely driven by wider market spreads. As such, no ACL was recorded during the period and unrealized losses were recognized in other comprehensive income, net of tax.United States government, or a government sponsored enterprise.
The amortized cost and fair value by contractual maturity of investment securities available for sale at March 31, 20202021 are shown below. The expected life of mortgage-backed securitiesMBSs 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 securitiesMBSs 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 | | | | | | | | |
| (in thousands) | Within One
Year | | 1 to 5
Years | | 5 to 10
Years | | More Than
10 Years | | Total |
| Amortized Cost | | | | | | | | | |
| U.S. Treasury securities | $ | 19,918 | | | $ | — | | | $ | — | | | $ | — | | | $ | 19,918 | |
| U.S. Government agency securities | 568 | | | 3,367 | | | 43,501 | | | 24,988 | | | 72,424 | |
| Mortgage-backed securities issued by U.S. Government agencies | — | | | 1,542 | | | 803 | | | 51,212 | | | 53,557 | |
| Mortgage-backed securities issued by U.S. Government sponsored enterprises | — | | | 517 | | | 86,523 | | | 5,225,658 | | | 5,312,698 | |
| Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | — | | | — | | | 296 | | | 601,289 | | | 601,585 | |
| Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises | — | | | 109,774 | | | 116,210 | | | 85,251 | | | 311,235 | |
| State and municipal securities | — | | | — | | | — | | | 1,007 | | | 1,007 | |
| Asset-backed securities | — | | | — | | | 154,954 | | | — | | | 154,954 | |
| Corporate debt securities and other debt securities | 24,127 | | | 94,619 | | | 8,630 | | | 2,000 | | | 129,376 | |
| Total amortized cost | $ | 44,613 | | | $ | 209,819 | | | $ | 410,917 | | | $ | 5,991,405 | | | $ | 6,656,754 | |
| | | | | | | | | |
| Fair Value | | | | | | | | | |
| U.S. Treasury securities | $ | 19,918 | | | $ | — | | | $ | — | | | $ | — | | | $ | 19,918 | |
| U.S. Government agency securities | 578 | | | 3,426 | | | 45,897 | | | 24,955 | | | 74,856 | |
| Mortgage-backed securities issued by U.S. Government agencies | — | | | 1,588 | | | 831 | | | 53,003 | | | 55,422 | |
| Mortgage-backed securities issued by U.S. Government sponsored enterprises | — | | | 536 | | | 92,059 | | | 5,457,230 | | | 5,549,825 | |
| Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | — | | | — | | | 309 | | | 628,571 | | | 628,880 | |
| Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises | — | | | 116,257 | | | 129,175 | | | 90,305 | | | 335,737 | |
| State and municipal securities | — | | | — | | | — | | | 1,005 | | | 1,005 | |
| Asset-backed securities | — | | | — | | | 145,975 | | | — | | | 145,975 | |
| Corporate debt securities and other debt securities | 24,068 | | | 92,574 | | | 7,418 | | | 1,562 | | | 125,622 | |
| Total fair value | $ | 44,564 | | | $ | 214,381 | | | $ | 421,664 | | | $ | 6,256,631 | | | $ | 6,937,240 | |
| | | | | | | | | |
8
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Distribution of Maturities at March 31, 2021 |
| (in thousands) | Within One
Year | | 1 to 5
Years | | 5 to 10
Years | | More Than
10 Years | | Total |
| Amortized Cost | | | | | | | | | |
| U.S. Treasury securities | $ | 20,261 | | | $ | 0 | | | $ | 49,824 | | | $ | 0 | | | $ | 70,085 | |
| U.S. Government agency securities | 430 | | | 1,594 | | | 77,124 | | | 0 | | | 79,148 | |
| Mortgage-backed securities issued by U.S. Government agencies | 0 | | | 1,232 | | | 162 | | | 963,315 | | | 964,709 | |
| Mortgage-backed securities issued by U.S. Government sponsored enterprises | 76 | | | 87 | | | 77,685 | | | 6,022,673 | | | 6,100,521 | |
| Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | 0 | | | 0 | | | 206 | | | 1,154,974 | | | 1,155,180 | |
| Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises | 4,126 | | | 109,488 | | | 227,357 | | | 99,585 | | | 440,556 | |
| Corporate debt securities and other debt securities | 0 | | | 9,504 | | | 8,731 | | | 0 | | | 18,235 | |
| Total amortized cost | $ | 24,893 | | | $ | 121,905 | | | $ | 441,089 | | | $ | 8,240,547 | | | $ | 8,828,434 | |
| | | | | | | | | |
| Fair Value | | | | | | | | | |
| U.S. Treasury securities | $ | 20,261 | | | $ | 0 | | | $ | 46,195 | | | $ | 0 | | | $ | 66,456 | |
| U.S. Government agency securities | 438 | | | 1,623 | | | 79,113 | | | 0 | | | 81,174 | |
| Mortgage-backed securities issued by U.S. Government agencies | 0 | | | 1,281 | | | 169 | | | 953,732 | | | 955,182 | |
| Mortgage-backed securities issued by U.S. Government sponsored enterprises | 77 | | | 88 | | | 80,469 | | | 6,021,141 | | | 6,101,775 | |
| Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | 0 | | | 0 | | | 215 | | | 1,157,008 | | | 1,157,223 | |
| Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises | 4,126 | | | 113,783 | | | 224,116 | | | 103,189 | | | 445,214 | |
| Corporate debt securities and other debt securities | 0 | | | 9,498 | | | 9,235 | | | 0 | | | 18,733 | |
| Total fair value | $ | 24,902 | | | $ | 126,273 | | | $ | 439,512 | | | $ | 8,235,070 | | | $ | 8,825,757 | |
| | | | | | | | | |
Proceeds from sales, gross gains, and gross losses on sales of securities available for sale for the three months ended March 31, 20202021 and 20192020 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 March 31, | |
| (in thousands) | (in thousands) | 2020 | | 2019 | | (in thousands) | 2021 | | 2020 | |
| 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 | $ | 223,977 | | | $ | 413,180 | | |
| Gross realized gains on sales | Gross realized gains on sales | 8,734 | | | 9,130 | | | Gross realized gains on sales | 0 | | | 8,734 | | |
| Gross realized losses on sales | Gross realized losses on sales | — | | | (9,055) | | | Gross realized losses on sales | (1,990) | | | 0 | | |
| Investment securities gains, net | $ | 8,734 | | | $ | 75 | | | |
| Investment securities gains (losses), net | | Investment securities gains (losses), net | $ | (1,990) | | | $ | 8,734 | | |
|
Note 43 - Loans and Allowance for Loan Losses
Aging and Non-Accrual Analysis
The following tables provide a summary of current, accruing past due, and non-accrual loans by portfolio class as of March 31, 20202021 and December 31, 2019.2020.
| | Current, Accruing Past Due, and Non-accrual Loans | | | |
| | March 31, 2020 | | | | March 31, 2021 | |
| (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 | | Accruing 90 Days or Greater Past Due | | Total Accruing Past Due | | Non-accrual with an ALL | | Non-accrual without an ALL | | 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 | $ | 12,573,032 | | | $ | 12,545 | | | $ | 292 | | | $ | 12,837 | | | $ | 59,145 | | | $ | 17,315 | | | $ | 12,662,329 | | |
| Owner-occupied | Owner-occupied | 6,614,799 | | | 10,279 | | | 852 | | | 11,131 | | | 7,718 | | | 9,639 | | | 6,643,287 | | | Owner-occupied | 7,009,586 | | | 4,422 | | | 305 | | | 4,727 | | | 17,192 | | | 0 | | | 7,031,505 | | |
| 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 | 19,582,618 | | | 16,967 | | | 597 | | | 17,564 | | | 76,337 | | | 17,315 | | | 19,693,834 | | |
| Investment properties | Investment properties | 9,252,438 | | | 3,056 | | | 85 | | | 3,141 | | | 2,212 | | | — | | | 9,257,791 | | | Investment properties | 9,305,441 | | | 4,295 | | | 400 | | | 4,695 | | | 16,880 | | | 8,709 | | | 9,335,725 | | |
| 1-4 family properties | 1-4 family properties | 744,451 | | | 4,636 | | | 56 | | | 4,692 | | | 2,325 | | | — | | | 751,468 | | | 1-4 family properties | 633,971 | | | 871 | | | 61 | | | 932 | | | 2,815 | | | 1,236 | | | 638,954 | | |
| Land and development | Land and development | 658,624 | | | 976 | | | 142 | | | 1,118 | | | 1,935 | | | 265 | | | 661,942 | | | Land and development | 553,698 | | | 3,661 | | | 89 | | | 3,750 | | | 1,801 | | | 0 | | | 559,249 | | |
| 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 | 10,493,110 | | | 8,827 | | | 550 | | | 9,377 | | | 21,496 | | | 9,945 | | | 10,533,928 | | |
| Consumer mortgages | Consumer mortgages | 5,583,714 | | | 10,836 | | | — | | | 10,836 | | | 13,017 | | | 554 | | | 5,608,121 | | | Consumer mortgages | 5,283,865 | | | 4,109 | | | 0 | | | 4,109 | | | 11,201 | | | 0 | | | 5,299,175 | | |
| Home equity lines | Home equity lines | 1,759,571 | | | 5,873 | | | 943 | | | 6,816 | | | 12,475 | | | — | | | 1,778,862 | | | Home equity lines | 1,417,714 | | | 2,446 | | | 16 | | | 2,462 | | | 12,191 | | | 0 | | | 1,432,367 | | |
| Credit cards | Credit cards | 256,445 | | | 2,465 | | | 2,671 | | | 5,136 | | | — | | | — | | | 261,581 | | | Credit cards | 263,660 | | | 1,835 | | | 1,876 | | | 3,711 | | | 0 | | | 0 | | | 267,371 | | |
| Other consumer loans | Other consumer loans | 2,277,102 | | | 17,567 | | | 820 | | | 18,387 | | | 6,860 | | | — | | | 2,302,349 | | | Other consumer loans | 1,563,272 | | | 7,705 | | | 765 | | | 8,470 | | | 6,684 | | | 0 | | | 1,578,426 | | |
| Total consumer | Total consumer | 9,876,832 | | | 36,741 | | | 4,434 | | | 41,175 | | | 32,352 | | | 554 | | | 9,950,913 | | | Total consumer | 8,528,511 | | | 16,095 | | | 2,657 | | | 18,752 | | | 30,076 | | | 0 | | | 8,577,339 | | |
| Total loans | $ | 38,044,034 | | | $ | 76,837 | | | $ | 6,398 | | | $ | 83,235 | | | $ | 124,805 | | | $ | 31,482 | | | $ | 38,283,556 | | (2) | | |
| Loans, net of deferred fees and costs | | Loans, net of deferred fees and costs | $ | 38,604,239 | | | $ | 41,889 | | | $ | 3,804 | | | $ | 45,693 | | | $ | 127,909 | | | $ | 27,260 | | | $ | 38,805,101 | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2019 | | | | | | | | | | | | | |
| (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 | $ | 9,137,585 | | | $ | 38,916 | | | $ | 1,206 | | | $ | 40,122 | | | $ | 56,017 | | | $ | 1,019,135 | | | $ | 10,252,859 | | |
| Owner-occupied | 5,691,095 | | | 5,164 | | | 576 | | | 5,740 | | | 9,780 | | | 823,196 | | | 6,529,811 | | |
| Total commercial and industrial | 14,828,680 | | | 44,080 | | | 1,782 | | | 45,862 | | | 65,797 | | | 1,842,331 | | | 16,782,670 | | |
| Investment properties | 7,303,146 | | | 1,344 | | | — | | | 1,344 | | | 1,581 | | | 1,736,608 | | | 9,042,679 | | |
| 1-4 family properties | 733,984 | | | 2,073 | | | 304 | | | 2,377 | | | 2,253 | | | 41,401 | | | 780,015 | | |
| Land and development | 577,711 | | | 808 | | | — | | | 808 | | | 1,110 | | | 78,161 | | | 657,790 | | |
| Total commercial real estate | 8,614,841 | | | 4,225 | | | 304 | | | 4,529 | | | 4,944 | | | 1,856,170 | | | 10,480,484 | | |
| Consumer mortgages | 3,681,553 | | | 4,223 | | | 730 | | | 4,953 | | | 11,369 | | | 1,848,493 | | | 5,546,368 | | |
| Home equity lines | 1,691,759 | | | 7,038 | | | 171 | | | 7,209 | | | 12,034 | | | 2,155 | | | 1,713,157 | | |
| Credit cards | 263,065 | | | 3,076 | | | 2,700 | | | 5,776 | | | — | | | — | | | 268,841 | | |
| Other consumer loans | 2,363,101 | | | 18,688 | | | 616 | | | 19,304 | | | 5,704 | | | 8,185 | | | 2,396,294 | | |
| Total consumer | 7,999,478 | | | 33,025 | | | 4,217 | | | 37,242 | | | 29,107 | | | 1,858,833 | | | 9,924,660 | | |
| 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 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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | |
| (in thousands) | Current | | Accruing 30-89 Days Past Due | | Accruing 90 Days or Greater Past Due | | Total Accruing Past Due | | Non-accrual with an ALL | | Non-accrual without an ALL | | Total | |
| Commercial, financial and agricultural | $ | 12,321,514 | | | $ | 10,256 | | | $ | 996 | | | $ | 11,252 | | | $ | 55,527 | | | $ | 21,859 | | | $ | 12,410,152 | | |
| Owner-occupied | 7,087,992 | | | 1,913 | | | 92 | | | 2,005 | | | 20,019 | | | 0 | | | 7,110,016 | | |
| Total commercial and industrial | 19,409,506 | | | 12,169 | | | 1,088 | | | 13,257 | | | 75,546 | | | 21,859 | | | 19,520,168 | | |
| Investment properties | 9,075,843 | | | 2,751 | | | 154 | | | 2,905 | | | 24,631 | | | 0 | | | 9,103,379 | | |
| 1-4 family properties | 621,492 | | | 3,548 | | | 36 | | | 3,584 | | | 2,383 | | | 1,236 | | | 628,695 | | |
| Land and development | 591,048 | | | 422 | | | 0 | | | 422 | | | 1,899 | | | 264 | | | 593,633 | | |
| Total commercial real estate | 10,288,383 | | | 6,721 | | | 190 | | | 6,911 | | | 28,913 | | | 1,500 | | | 10,325,707 | | |
| Consumer mortgages | 5,495,415 | | | 8,851 | | | 485 | | | 9,336 | | | 8,740 | | | 0 | | | 5,513,491 | | |
| Home equity lines | 1,521,575 | | | 4,006 | | | 0 | | | 4,006 | | | 12,145 | | | 0 | | | 1,537,726 | | |
| Credit cards | 276,778 | | | 2,363 | | | 1,877 | | | 4,240 | | | 0 | | | 0 | | | 281,018 | | |
| Other consumer loans | 1,062,899 | | | 9,122 | | | 477 | | | 9,599 | | | 2,376 | | | 0 | | | 1,074,874 | | |
| Total consumer | 8,356,667 | | | 24,342 | | | 2,839 | | | 27,181 | | | 23,261 | | | 0 | | | 8,407,109 | | |
| Loans, net of deferred fees and costs | $ | 38,054,556 | | | $ | 43,232 | | | $ | 4,117 | | | $ | 47,349 | | | $ | 127,720 | | | $ | 23,359 | | | $ | 38,252,984 | | |
| | | | | | | | | | | | | | |
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 $3.4 million and $2.1 million for each of the three months ended
March 31, 2021 and 2020, and 2019. Ofrespectively. Of the interest income recognized during the three months ended March 31, 20202021 and 2019,2020, cash-basis interest income was $622 thousand and $961 thousand, and $648 thousand, respectively.
Pledged Loans
Loans with carrying values of $15.24$14.27 billion and $12.11$15.05 billion, respectively, were pledged as collateral for borrowings and capacity at March 31, 20202021 and December 31, 2019,2020, respectively, to the FHLB and Federal Reserve Bank.
Portfolio Segment Risk Factors
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 $2.36 billion at March 31, 2021 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, personal, and auto loans from third-party lending. 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. The primary source of repayment for all consumer loans is generally the personal income of the borrower(s).
Credit Quality Indicators
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 –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.
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 and student 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. 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.
The following table summarizestables summarize each loan portfolio class by risk grade and origination year as of March 31, 2020.2021 and December 31, 2020 as required under CECL.
| | Loan Portfolio by Risk Grade and Origination | | |
| | March 31, 2020 | | | March 31, 2021 |
| | 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) | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | 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 | $ | 1,059,766 | | | $ | 3,169,156 | | | $ | 1,277,288 | | | $ | 784,112 | | | $ | 557,454 | | | $ | 1,181,305 | | | $ | 4,072,579 | | | $ | 45,856 | | | $ | 12,147,516 | |
| Special Mention | Special Mention | 1,884 | | | 6,304 | | | 18,293 | | | 30,775 | | | 2,090 | | | 13,352 | | | 57,251 | | | 2,223 | | | 132,172 | | Special Mention | 807 | | | 57,063 | | | 38,581 | | | 7,942 | | | 18,243 | | | 3,678 | | | 95,135 | | | 465 | | | 221,914 | |
Substandard(1) | Substandard(1) | 2,935 | | | 13,677 | | | 46,404 | | | 6,442 | | | 10,500 | | | 40,659 | | | 63,437 | | | 721 | | | 184,775 | | Substandard(1) | 772 | | | 64,917 | | | 33,901 | | | 11,166 | | | 23,815 | | | 42,824 | | | 90,617 | | | 114 | | | 268,126 | |
Doubtful(2) | Doubtful(2) | — | | | — | | | — | | | 198 | | | 915 | | | 91 | | | 6,919 | | | 728 | | | 8,851 | | Doubtful(2) | 0 | | | 512 | | | 4,055 | | | 19,894 | | | 0 | | | 0 | | | 312 | | | 0 | | | 24,773 | |
| 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 | 1,061,345 | | | 3,291,648 | | | 1,353,825 | | | 823,114 | | | 599,512 | | | 1,227,807 | | | 4,258,643 | | | 46,435 | | | 12,662,329 | |
| 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 | 250,215 | | | 1,306,635 | | | 1,271,373 | | | 1,089,766 | | | 880,566 | | | 1,640,599 | | | 383,907 | | | 0 | | | 6,823,061 | |
| Special Mention | Special Mention | | — | | | 5,742 | | | 5,000 | | | 12,431 | | | 5,058 | | | 15,252 | | | — | | | — | | | 43,483 | | Special Mention | 429 | | | 5,603 | | | 10,306 | | | 19,447 | | | 10,200 | | | 15,568 | | | 0 | | | 0 | | | 61,553 | |
Substandard(1) | Substandard(1) | 338 | | | 7,352 | | | 38,459 | | | 29,820 | | | 3,912 | | | 29,397 | | | 23 | | | — | | | 109,301 | | Substandard(1) | 92 | | | 3,783 | | | 26,473 | | | 45,438 | | | 26,186 | | | 35,281 | | | 0 | | | 0 | | | 137,253 | |
Doubtful(2) | | Doubtful(2) | 0 | | | 0 | | | 0 | | | 9,638 | | | 0 | | | 0 | | | 0 | | | 0 | | | 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 | 250,736 | | | 1,316,021 | | | 1,308,152 | | | 1,164,289 | | | 916,952 | | | 1,691,448 | | | 383,907 | | | 0 | | | 7,031,505 | |
| 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 | 1,312,081 | | | 4,607,669 | | | 2,661,977 | | | 1,987,403 | | | 1,516,464 | | | 2,919,255 | | | 4,642,550 | | | 46,435 | | | 19,693,834 | |
| 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 | 266,356 | | | 1,189,454 | | | 2,196,482 | | | 1,879,176 | | | 917,367 | | | 1,623,228 | | | 276,553 | | | 0 | | | 8,348,616 | |
| Special Mention | Special Mention | | 836 | | | 92 | | | 2,117 | | | 4,754 | | | 5 | | | 10,146 | | | — | | | — | | | 17,950 | | Special Mention | 0 | | | 1,321 | | | 81,524 | | | 229,161 | | | 163,844 | | | 284,980 | | | 56,102 | | | 0 | | | 816,932 | |
Substandard(1) | Substandard(1) | 160 | | | 1,668 | | | 1,718 | | | 2,124 | | | 1,278 | | | 48,802 | | | — | | | — | | | 55,750 | | Substandard(1) | 1,040 | | | 987 | | | 8,413 | | | 58,991 | | | 23,677 | | | 76,974 | | | 95 | | | 0 | | | 170,177 | |
| 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 | 267,396 | | | 1,191,762 | | | 2,286,419 | | | 2,167,328 | | | 1,104,888 | | | 1,985,182 | | | 332,750 | | | 0 | | | 9,335,725 | |
| 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 | 66,477 | | | 179,602 | | | 79,636 | | | 60,281 | | | 78,564 | | | 116,823 | | | 41,043 | | | 0 | | | 622,426 | |
| Special Mention | Special Mention | | 5 | | | 2,006 | | | — | | | — | | | 815 | | | 410 | | | 2,273 | | | — | | | 5,509 | | Special Mention | 271 | | | 399 | | | 0 | | | 366 | | | 0 | | | 894 | | | 0 | | | 0 | | | 1,930 | |
Substandard(1) | Substandard(1) | 69 | | | 2,920 | | | 3,726 | | | 988 | | | 387 | | | 1,923 | | | 86 | | | — | | | 10,099 | | Substandard(1) | 1,812 | | | 1,691 | | | 439 | | | 5,521 | | | 1,199 | | | 2,596 | | | 1,340 | | | 0 | | | 14,598 | |
| 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 | 68,560 | | | 181,692 | | | 80,075 | | | 66,168 | | | 79,763 | | | 120,313 | | | 42,383 | | | 0 | | | 638,954 | |
| Land and development | | | | | | | | | | | | | | | | | | | |
| Pass | | 21,204 | | | 205,099 | | | 104,987 | | | 87,990 | | | 26,427 | | | 96,809 | | | 90,201 | | | — | | | 632,717 | | |
| Special Mention | | — | | | 1,544 | | | 2,394 | | | 639 | | | — | | | 8,608 | | | 5,738 | | | — | | | 18,923 | | |
Substandard(1) | 115 | | | 1,327 | | | 2,905 | | | 635 | | | 964 | | | 4,356 | | | — | | | — | | | 10,302 | | |
| Total land and development | | 21,319 | | | | 207,970 | | | | 110,286 | | | | 89,264 | | | | 27,391 | | | | 109,773 | | | | 95,939 | | | | — | | | 661,942 | | |
| 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 | | |
|
| | Loan Portfolio by Risk Grade and Origination (continued) | | |
| | March 31, 2020 | | | March 31, 2021 |
| | 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) | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Amortized Cost Basis | | Converted to Term Loans | | Total |
| Land and development | | Land and development | |
| Pass | | Pass | 23,510 | | | 84,651 | | | 134,182 | | | 81,260 | | | 83,035 | | | 79,755 | | | 59,018 | | | 0 | | | 545,411 | |
| Special Mention | | Special Mention | 97 | | | 849 | | | 1,986 | | | 1,455 | | | 173 | | | 383 | | | 0 | | | 0 | | | 4,943 | |
Substandard(1) | | Substandard(1) | 22 | | | 1,221 | | | 50 | | | 3,980 | | | 893 | | | 2,729 | | | 0 | | | 0 | | | 8,895 | |
| Total land and development | | Total land and development | 23,629 | | | 86,721 | | | 136,218 | | | 86,695 | | | 84,101 | | | 82,867 | | | 59,018 | | | 0 | | | 559,249 | |
| Total commercial real estate | | Total commercial real estate | 359,585 | | | 1,460,175 | | | 2,502,712 | | | 2,320,191 | | | 1,268,752 | | | 2,188,362 | | | 434,151 | | | 0 | | | 10,533,928 | |
| 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 | 258,674 | | | 1,796,593 | | | 797,705 | | | 358,353 | | | 585,879 | | | 1,438,675 | | | 1,012 | | | 0 | | | 5,236,891 | |
Substandard(1) | Substandard(1) | — | | | 784 | | | 281 | | | 1,488 | | | 1,811 | | | 9,418 | | | — | | | — | | | 13,782 | | Substandard(1) | 206 | | | 181 | | | 2,615 | | | 11,939 | | | 11,008 | | | 36,034 | | | 0 | | | 0 | | | 61,983 | |
Loss(3) | Loss(3) | — | | | — | | | — | | | — | | | — | | | 74 | | | — | | | — | | | 74 | | Loss(3) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 301 | | | 0 | | | 0 | | | 301 | |
| 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 | 258,880 | | | 1,796,774 | | | 800,320 | | | 370,292 | | | 596,887 | | | 1,475,010 | | | 1,012 | | | 0 | | | 5,299,175 | |
| Home equity lines | Home equity lines | | | | | | | | | | | | | | | | | | | Home equity lines | | | | | | | | | | | | | | | | | |
| Pass | Pass | | — | | | — | | | — | | | — | | | — | | | — | | | 1,666,627 | | | 93,499 | | | 1,760,126 | | Pass | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 1,329,980 | | | 85,254 | | | 1,415,234 | |
Substandard(1) | Substandard(1) | — | | | — | | | — | | | — | | | — | | | — | | | 11,824 | | | 5,949 | | | 17,773 | | Substandard(1) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 9,717 | | | 6,422 | | | 16,139 | |
Doubtful(2) | Doubtful(2) | — | | | — | | | — | | | — | | | — | | | — | | | 17 | | | 20 | | | 37 | | Doubtful(2) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 19 | | | 19 | |
Loss(3) | Loss(3) | — | | | — | | | — | | | — | | | — | | | — | | | 736 | | | 190 | | | 926 | | Loss(3) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 832 | | | 143 | | | 975 | |
| Total home equity lines | Total home equity lines | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,679,204 | | | | 99,658 | | | 1,778,862 | | Total home equity lines | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 1,340,529 | | | 91,838 | | | 1,432,367 | |
| Credit cards | Credit cards | | | | | | | | | | | | | | | | | | | Credit cards | | | | | | | | | | | | | | | | | |
| Pass | Pass | | — | | | — | | | — | | | — | | | — | | | — | | | 258,904 | | | — | | | 258,904 | | Pass | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 265,496 | | | 0 | | | 265,496 | |
Substandard(1) | Substandard(1) | — | | | — | | | — | | | — | | | — | | | — | | | 736 | | | — | | | 736 | | Substandard(1) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 521 | | | 0 | | | 521 | |
Loss(4) | Loss(4) | — | | | — | | | — | | | — | | | — | | | — | | | 1,941 | | | — | | | 1,941 | | Loss(4) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 1,354 | | | 0 | | | 1,354 | |
| Total credit cards | Total credit cards | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 261,581 | | | | — | | | 261,581 | | Total credit cards | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 267,371 | | | 0 | | | 267,371 | |
| 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 | 7,626 | | | 797,532 | | | 169,798 | | | 74,833 | | | 88,716 | | | 126,009 | | | 306,096 | | | 0 | | | 1,570,610 | |
Substandard(1) | Substandard(1) | — | | | 1,117 | | | 588 | | | 3,849 | | | 1,439 | | | 1,111 | | | 215 | | | — | | | 8,319 | | Substandard(1) | 0 | | | 15 | | | 2,273 | | | 1,572 | | | 2,967 | | | 691 | | | 264 | | | 0 | | | 7,782 | |
Loss(4) | | Loss(4) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 34 | | | 0 | | | 0 | | | 34 | |
| 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 | 7,626 | | | 797,547 | | | 172,071 | | | 76,405 | | | 91,683 | | | 126,734 | | | 306,360 | | | 0 | | | 1,578,426 | |
| 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 | 266,506 | | | 2,594,321 | | | 972,391 | | | 446,697 | | | 688,570 | | | 1,601,744 | | | 1,915,272 | | | 91,838 | | | 8,577,339 | |
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 | | |
| Loans, net of deferred fees and costs | | Loans, net of deferred fees and costs | $ | 1,938,172 | | | $ | 8,662,165 | | | $ | 6,137,080 | | | $ | 4,754,291 | | | $ | 3,473,786 | | | $ | 6,709,361 | | | $ | 6,991,973 | | | $ | 138,273 | | | $ | 38,805,101 | |
|
(1) Includes $266.4 millionThe majority of loans within Substandard risk grade are accruing loans at March 31, 2020.2021.
(2) The loansLoans within thisDoubtful risk grade are on non-accrual status and generally have an ALL equal to 50% of the loan amount.
(3) The loansLoans within thisLoss 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 million.13
| | Loan Portfolio by Risk Grade | | |
| | | December 31, 2020 |
| | December 31, 2019 | | | Term Loans Amortized Cost Basis by Origination Year | | Revolving Loans | |
| (in thousands) | (in thousands) | Pass | | Special Mention | | Substandard(1) | | Doubtful(2) | | Loss(3) | | 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 | $ | 9,940,359 | | | $ | 128,506 | | | $ | 182,831 | | | $ | 1,163 | | | $ | — | | | $ | 10,252,859 | | Commercial, financial and agricultural | | | | | | | | | | | | | | | | | |
| Pass | | Pass | $ | 3,819,048 | | | $ | 1,333,460 | | | $ | 847,283 | | | $ | 582,612 | | | $ | 551,413 | | | $ | 633,871 | | | $ | 4,102,751 | | | $ | 49,762 | | | $ | 11,920,200 | |
| Special Mention | | Special Mention | 63,307 | | | 40,618 | | | 12,723 | | | 22,070 | | | 1,665 | | | 5,545 | | | 60,741 | | | 489 | | | 207,158 | |
Substandard(1) | | Substandard(1) | 28,698 | | | 36,618 | | | 24,867 | | | 36,072 | | | 12,808 | | | 35,172 | | | 84,498 | | | 514 | | | 259,247 | |
Doubtful(2) | | Doubtful(2) | 0 | | | 3,721 | | | 19,778 | | | 0 | | | 0 | | | 0 | | | 48 | | | 0 | | | 23,547 | |
| Total commercial, financial and agricultural | | Total commercial, financial and agricultural | 3,911,053 | | | 1,414,417 | | | 904,651 | | | 640,754 | | | 565,886 | | | 674,588 | | | 4,248,038 | | | 50,765 | | | 12,410,152 | |
| Owner-occupied | Owner-occupied | 6,386,055 | | | 58,330 | | | 85,426 | | | — | | | — | | | 6,529,811 | | Owner-occupied | | | | | | | | | | | | | | | | | |
| Pass | | Pass | 1,321,680 | | | 1,275,435 | | | 1,131,183 | | | 982,056 | | | 555,932 | | | 1,297,070 | | | 349,566 | | | 0 | | | 6,912,922 | |
| Special Mention | | Special Mention | 6,170 | | | 9,995 | | | 10,682 | | | 14,138 | | | 1,582 | | | 13,768 | | | 0 | | | 0 | | | 56,335 | |
Substandard(1) | | Substandard(1) | 2,570 | | | 22,793 | | | 42,615 | | | 26,033 | | | 7,316 | | | 29,794 | | | 0 | | | 0 | | | 131,121 | |
Doubtful(2) | | Doubtful(2) | 0 | | | 0 | | | 9,638 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 9,638 | |
| Total owner-occupied | | Total owner-occupied | 1,330,420 | | | 1,308,223 | | | 1,194,118 | | | 1,022,227 | | | 564,830 | | | 1,340,632 | | | 349,566 | | | 0 | | | 7,110,016 | |
| Total commercial and industrial | Total commercial and industrial | 16,326,414 | | | 186,836 | | | 268,257 | | | 1,163 | | | — | | | 16,782,670 | | Total commercial and industrial | 5,241,473 | | | 2,722,640 | | | 2,098,769 | | | 1,662,981 | | | 1,130,716 | | | 2,015,220 | | | 4,597,604 | | | 50,765 | | | 19,520,168 | |
| Investment properties | Investment properties | 8,968,712 | | | 16,490 | | | 57,477 | | | — | | | — | | | 9,042,679 | | Investment properties | | | | | | | | | | | | | | | | | |
| Pass | | Pass | 1,055,440 | | | 2,126,667 | | | 1,999,345 | | | 1,091,880 | | | 483,780 | | | 1,301,088 | | | 229,044 | | | 0 | | | 8,287,244 | |
| Special Mention | | Special Mention | 1,482 | | | 66,160 | | | 176,794 | | | 136,004 | | | 138,362 | | | 129,401 | | | 55,440 | | | 0 | | | 703,643 | |
Substandard(1) | | Substandard(1) | 1,007 | | | 4,770 | | | 24,476 | | | 19,820 | | | 21,875 | | | 40,509 | | | 35 | | | 0 | | | 112,492 | |
| Total investment properties | | Total investment properties | 1,057,929 | | | 2,197,597 | | | 2,200,615 | | | 1,247,704 | | | 644,017 | | | 1,470,998 | | | 284,519 | | | 0 | | | 9,103,379 | |
| 1-4 family properties | 1-4 family properties | 766,529 | | | 3,249 | | | 10,237 | | | — | | | — | | | 780,015 | | 1-4 family properties | | | | | | | | | | | | | | | | | |
| Pass | | Pass | 197,320 | | | 95,145 | | | 70,267 | | | 88,454 | | | 38,729 | | | 97,374 | | | 27,657 | | | 0 | | | 614,946 | |
| Special Mention | | Special Mention | 402 | | | 0 | | | 508 | | | 109 | | | 786 | | | 118 | | | 0 | | | 0 | | | 1,923 | |
Substandard(1) | | Substandard(1) | 1,527 | | | 653 | | | 4,312 | | | 1,141 | | | 554 | | | 2,299 | | | 1,340 | | | 0 | | | 11,826 | |
| Total 1-4 family properties | | Total 1-4 family properties | 199,249 | | | 95,798 | | | 75,087 | | | 89,704 | | | 40,069 | | | 99,791 | | | 28,997 | | | 0 | | | 628,695 | |
| Land and development | Land and development | 629,351 | | | 18,643 | | | 9,796 | | | — | | | — | | | 657,790 | | Land and development | |
| Pass | | Pass | 84,985 | | | 173,302 | | | 83,734 | | | 92,911 | | | 12,249 | | | 76,380 | | | 53,250 | | | 0 | | | 576,811 | |
| Special Mention | | Special Mention | 857 | | | 1,995 | | | 2,866 | | | 282 | | | 0 | | | 1,332 | | | 636 | | | 0 | | | 7,968 | |
Substandard(1) | | Substandard(1) | 1,229 | | | 425 | | | 4,664 | | | 915 | | | 136 | | | 1,485 | | | 0 | | | 0 | | | 8,854 | |
| Total land and development | | Total land and development | 87,071 | | | 175,722 | | | 91,264 | | | 94,108 | | | 12,385 | | | 79,197 | | | 53,886 | | | 0 | | | 593,633 | |
| Total commercial real estate | Total commercial real estate | 10,364,592 | | | 38,382 | | | 77,510 | | | — | | | — | |
| 10,480,484 | | Total commercial real estate | 1,344,249 | | | 2,469,117 | | | 2,366,966 | | | 1,431,516 | | | 696,471 | | | 1,649,986 | | | 367,402 | | | 0 | | | 10,325,707 | |
| Consumer mortgages | 5,527,746 | | | — | | | 18,376 | | | 97 | | | 149 | �� |
| 5,546,368 | | |
| Home equity lines | 1,697,086 | | | — | | | 14,806 | | | 21 | | | 1,244 | |
| 1,713,157 | | |
| Credit cards | 266,146 | | | — | | | 818 | | | — | | | 1,877 | | (4) | 268,841 | | |
| Other consumer loans | 2,390,199 | | | — | | | 6,095 | | | — | | | — | |
| 2,396,294 | | |
| Total consumer | 9,881,177 | | | — | | | 40,095 | | | 118 | | | 3,270 | | | 9,924,660 | | |
Total loans(5) | $ | 36,572,183 | | | $ | 225,218 | | | $ | 385,862 | | | $ | 1,281 | | | $ | 3,270 | | | $ | 37,187,814 | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Term Loans Amortized Cost Basis by Origination Year | | Revolving Loans | | |
| (in thousands) | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | Amortized Cost Basis | | Converted to Term Loans | | Total |
| Consumer mortgages | | | | | | | | | | | | | | | | | |
| Pass | 1,871,512 | | | 874,769 | | | 425,711 | | | 678,255 | | | 685,810 | | | 965,382 | | | 1,040 | | | 0 | | | 5,502,479 | |
Substandard(1) | 33 | | | 961 | | | 748 | | | 889 | | | 866 | | | 7,224 | | | 0 | | | 0 | | | 10,721 | |
Loss(3) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 291 | | | 0 | | | 0 | | | 291 | |
| Total consumer mortgages | 1,871,545 | | | 875,730 | | | 426,459 | | | 679,144 | | | 686,676 | | | 972,897 | | | 1,040 | | | 0 | | | 5,513,491 | |
| Home equity lines | | | | | | | | | | | | | | | | | — | |
| Pass | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 1,429,755 | | | 90,832 | | | 1,520,587 | |
Substandard(1) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 9,698 | | | 5,996 | | | 15,694 | |
Doubtful(2) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 19 | | | 19 | |
Loss(3) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 1,283 | | | 143 | | | 1,426 | |
| Total home equity lines | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 1,440,736 | | | 96,990 | | | 1,537,726 | |
| Credit cards | | | | | | | | | | | | | | | | | |
| Pass | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 279,142 | | | 0 | | | 279,142 | |
Substandard(1) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 595 | | | 0 | | | 595 | |
Loss(4) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 1,281 | | | 0 | | | 1,281 | |
| Total credit cards | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 281,018 | | | 0 | | | 281,018 | |
| Other consumer loans | | | | | | | | | | | | | | | | | — | |
| Pass | 252,160 | | | 190,820 | | | 89,187 | | | 100,459 | | | 80,365 | | | 61,040 | | | 297,637 | | | 0 | | | 1,071,668 | |
Substandard(1) | 19 | | | 762 | | | 262 | | | 1,195 | | | 121 | | | 585 | | | 227 | | | 0 | | | 3,171 | |
Loss(4) | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 35 | | | 0 | | | 0 | | | 35 | |
| Total other consumer loans | 252,179 | | | 191,582 | | | 89,449 | | | 101,654 | | | 80,486 | | | 61,660 | | | 297,864 | | | 0 | | | 1,074,874 | |
| Total consumer | 2,123,724 | | | 1,067,312 | | | 515,908 | | | 780,798 | | | 767,162 | | | 1,034,557 | | | 2,020,658 | | | 96,990 | | | 8,407,109 | |
| Loans, net of deferred fees and costs | $ | 8,709,446 | | | $ | 6,259,069 | | | $ | 4,981,643 | | | $ | 3,875,295 | | | $ | 2,594,349 | | | $ | 4,699,763 | | | $ | 6,985,664 | | | $ | 147,755 | | | $ | 38,252,984 | |
| | | | | | | | | | | | | | | | | |
(1) Includes $288.8 millionThe majority of substandardloans within Substandard risk grade are accruing loans at December 31, 2019.2020.
(2) The loansLoans within thisDoubtful risk grade are on non-accrual status and generally have an ALL equal to 50% of the loan amount.
(3) The loansLoans within thisLoss 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 $25.4 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 months ended March 31, 2020.2021.
Rollforward of Allowance for Loan Losses
The following tables detail the changes in the ALL by loan segment for the three months ended March 31, 20202021 and 2019.2020.
| 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 | | | As Of and For the Three Months Ended March 31, 2021 |
| (in thousands) | (in thousands) | Commercial & Industrial | | Commercial Real Estate | | Consumer | | Total | (in thousands) | Commercial & Industrial | | Commercial Real Estate | | Consumer | | Total |
| Allowance for loan losses: | Allowance for loan losses: | | | | | | | | | Allowance for loan losses: | | | | | | | |
| Beginning balance | Beginning balance | | $ | 133,123 | | | $ | 68,796 | | | $ | 48,636 | | | $ | 250,555 | | Beginning balance | $ | 229,555 | | | $ | 130,742 | | | $ | 245,439 | | | $ | 605,736 | |
| Charge-offs | Charge-offs | | (13,039) | | | (1,233) | | | (6,427) | | | (20,699) | | Charge-offs | (9,417) | | | (10,319) | | | (5,589) | | | (25,325) | |
| Recoveries | Recoveries | | 1,990 | | | 344 | | | 1,277 | | | 3,611 | | Recoveries | 2,772 | | | 1,026 | | | 1,323 | | | 5,121 | |
| Provision for (reversal of) loan losses | | Provision for (reversal of) loan losses | 31,867 | | | (7,637) | | | (46,548) | | | (22,318) | |
| Ending balance | | Ending balance | $ | 254,777 | | | $ | 113,812 | | | $ | 194,625 | | | $ | 563,214 | |
| | | | As Of and For the Three Months Ended March 31, 2020 |
| (in thousands) | | (in thousands) | Commercial & Industrial | | Commercial Real Estate | | Consumer | | Total |
| Allowance for loan losses: | | Allowance for loan losses: | | | | | | | |
| Beginning balance, prior to adoption of ASC 326 | | Beginning balance, prior to adoption of ASC 326 | $ | 145,782 | | | $ | 67,430 | | | $ | 68,190 | | | $ | 281,402 | |
| Impact from adoption of ASC 326 | | Impact from adoption of ASC 326 | (2,310) | | | (651) | | | 85,955 | | | 82,994 | |
| Beginning balance, after adoption of ASC 326 | | Beginning balance, after adoption of ASC 326 | $ | 143,472 | | | $ | 66,779 | | | $ | 154,145 | | | $ | 364,396 | |
| Charge-offs | | Charge-offs | (14,885) | | | (1,017) | | | (7,972) | | | (23,874) | |
| Recoveries | | Recoveries | 1,741 | | | 399 | | | 1,673 | | | 3,813 | |
| Provision for loan losses | Provision for loan losses | | 13,565 | | | 1,102 | | | 8,902 | | | 23,569 | | Provision for loan losses | 86,622 | | | 40,956 | | | 21,539 | | | 149,117 | |
| Ending balance | Ending balance | $ | 135,639 | | | $ | 69,009 | | | $ | 52,388 | | | $ | 257,036 | | Ending balance | $ | 216,950 | | | $ | 107,117 | | | $ | 169,385 | | | $ | 493,452 | |
| | | | | | | | | |
| | | | |
Provision for credit losses and allowance for the quarter, which includes both theThe ALL of $563.2 million and the reserve for unfunded commitments were impactedof $51.5 million, which is recorded in other liabilities, comprise the total ACL of $614.7 million at March 31, 2021, which decreased during the first quarter of 2021 by $38.8 million, resulting in an ACL to loans coverage ratio of 1.58%. The modeling assumptions for the adoptionfirst quarter of CECL2021 utilized a two-year reasonable and supportable forecast period and comprised a multiple-scenario economic framework. 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, the Company reverts, on January 1, 2020.a straight-line basis back to the historical rates over a one-year period. The ACL at March 31, 2021 incorporates a baseline outlook with moderate economic expansion and benefits from the estimated impact onof government stimulus. Provision for credit losses includes the provisions for loan losses and unfunded commitments. The reversal of provision for credit losses of $18.6 million for the three months endingended March 31, 20202021included net charge-offs of $20.2 million and resulted from the allowance at March 31, 2020, compared to prior year, was amplifiedimproved economic outlook and stable loan portfolio metrics that were partially offset by the heightened economic distress resulting fromincreased size of the loan portfolio including $15.2 million in reserves added as result of purchases of $607.0 million of third-party lending loans, including a $476.2 million prime auto purchase.
TDRs
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.
Our 2019 disclosurespandemic, some of which have not been classified as TDRs, and therefore are not included in the discussion below. See "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" of in Synovus' 20192020 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 as of March 31, 2020 was approved late in the first quarter pursuant toinformation on Synovus' economic forecasting governance processes. Between that approval date and March 31, 2020, further deterioration in the economic outlook occurred 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.
The deterioration of the economic environment since January 1, 2020loan modifications due to the effects of COVID-19 resulted in an ACL to loans ratio of 1.39% 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, then we would expect to see a further increase in the allowance for credit losses.
Information about Synovus' TDRs is presented in the following tables.COVID-19. The following tables represent, by concession type, the post-modification balance for loans modified or renewed during the three months ended March 31, 20202021 and 20192020 that were reported as accruing or non-accruing TDRs.
22 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| TDRs by Concession Type | | |
| Three Months Ended March 31, 2021 | |
| (in thousands, except contract data) | Number of Contracts | | Below Market Interest Rate | | Other Concessions(1) | | Total | |
| Commercial, financial and agricultural | 40 | | | $ | 3,233 | | | $ | 2,563 | | | $ | 5,796 | | |
| Owner-occupied | 5 | | | 1,254 | | | 399 | | | 1,653 | | |
| Total commercial and industrial | 45 | | | 4,487 | | | 2,962 | | | 7,449 | | |
| Investment properties | 5 | | | 1,984 | | | 0 | | | 1,984 | | |
| 1-4 family properties | 5 | | | 463 | | | 39 | | | 502 | | |
| Land and development | 1 | | | 0 | | | 43 | | | 43 | | |
| Total commercial real estate | 11 | | | 2,447 | | | 82 | | | 2,529 | | |
| Consumer mortgages | 0 | | | 0 | | | 0 | | | 0 | | |
| Home equity lines | 13 | | | 587 | | | 162 | | | 749 | | |
| Other consumer loans | 73 | | | 129 | | | 4,619 | | | 4,748 | | |
| Total consumer | 86 | | | 716 | | | 4,781 | | | 5,497 | | |
| Total TDRs | 142 | | | $ | 7,650 | | | $ | 7,825 | | | $ | 15,475 | | (2) |
| | |
| Three Months Ended March 31, 2020 | |
| (in thousands, except contract data) | Number of Contracts | | Below Market Interest Rate | | Other Concessions(1) | | Total | |
| Commercial, financial and agricultural | 36 | | | $ | 3,724 | | | $ | 2,011 | | | $ | 5,735 | | |
| Owner-occupied | 5 | | | 1,367 | | | 96 | | | 1,463 | | |
| Total commercial and industrial | 41 | | | 5,091 | | | 2,107 | | | 7,198 | | |
| Investment properties | 2 | | | 23,070 | | | 0 | | | 23,070 | | |
| 1-4 family properties | 6 | | | 724 | | | 442 | | | 1,166 | | |
| Land and development | 1 | | | 449 | | | 0 | | | 449 | | |
| Total commercial real estate | 9 | | | 24,243 | | | 442 | | | 24,685 | | |
| Consumer mortgages | 6 | | | 515 | | | 1,083 | | | 1,598 | | |
| Home equity lines | 19 | | | 275 | | | 964 | | | 1,239 | | |
| Other consumer loans | 29 | | | 78 | | | 1,897 | | | 1,975 | | |
| Total consumer | 54 | | | 868 | | | 3,944 | | | 4,812 | | |
| Total TDRs | 104 | | | $ | 30,202 | | | $ | 6,493 | | | $ | 36,695 | | (3) |
| | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| TDRs by Concession Type | | | | | | | | |
| Three Months Ended March 31, 2020 | | | | | | | |
| (in thousands, except contract data) | Number of Contracts | | Below Market Interest Rate | | Other Concessions(1) | | Total | |
| Commercial, financial and agricultural | 36 | | | $ | 3,724 | | | $ | 2,011 | | | $ | 5,735 | | |
| Owner-occupied | 5 | | | 1,367 | | | 96 | | | 1,463 | | |
| Total commercial and industrial | 41 | | | 5,091 | | | 2,107 | | | 7,198 | | |
| Investment properties | 2 | | | 23,070 | | | — | | | 23,070 | | |
| 1-4 family properties | 6 | | | 724 | | | 442 | | | 1,166 | | |
| Land and development | 1 | | | 449 | | | — | | | 449 | | |
| Total commercial real estate | 9 | | | 24,243 | | | 442 | | | 24,685 | | |
| Consumer mortgages | 6 | | | 515 | | | 1,083 | | | 1,598 | | |
| Home equity lines | 19 | | | 275 | | | 964 | | | 1,239 | | |
| Other consumer loans | 29 | | | 78 | | | 1,897 | | | 1,975 | | |
| Total consumer | 54 | | | 868 | | | 3,944 | | | 4,812 | | |
| Total TDRs | 104 | | | $ | 30,202 | | | $ | 6,493 | | | $ | 36,695 | | (2) |
| | | | | | | | |
| Three Months Ended March 31, 2019 | | | | | | | |
| (in thousands, except contract data) | Number of Contracts | | Below Market Interest Rate | | Other Concessions(1) | | Total | |
| Commercial, financial and agricultural | 13 | | | $ | 1,783 | | | $ | 899 | | | $ | 2,682 | | |
| Owner-occupied | 2 | | | 949 | | | — | | | 949 | | |
| Total commercial and industrial | 15 | | | 2,732 | | | 899 | | | 3,631 | | |
| Investment properties | 1 | | | 482 | | | — | | | 482 | | |
| 1-4 family properties | 6 | | | 793 | | | — | | | 793 | | |
| Total commercial real estate | 7 | | | 1,275 | | | — | | | 1,275 | | |
| Consumer mortgages | 4 | | | 128 | | | 1,214 | | | 1,342 | | |
| Home equity lines | 1 | | | — | | | 105 | | | 105 | | |
| Other consumer loans | 18 | | | 108 | | | 1,046 | | | 1,154 | | |
| Total consumer | 23 | | | 236 | | | 2,365 | | | 2,601 | | |
| Total TDRs | 45 | | | $ | 4,243 | | | $ | 3,264 | | | $ | 7,507 | | (3) |
| | | | | | | | |
(1) Other concessions generally include term extensions, interest only payments for a period of time, or principal forgiveness, but there was no0 principal forgiveness for the three months ending March 31, 20202021 and 2019.2020.
(2) NaN net charge-offs were recorded during the three months ended March 31, 2020.2021.
(3) NaN net charge-offs were recorded during the three months ended March 31, 2019.2020.
For the three months ended March 31, 20202021 there were 30 defaults with a recorded investment of $618 thousand on accruing TDRs restructured during the previous twelve months (defaults are defined as the earlier of the TDR being placed on non-accrual status or reaching 90 days past due with respect to principal and/or interest payments) compared to 03 defaults with a recorded investment of $618 thousand for the three months ended March 31, 2019.2020. As of March 31, 20202021 and December 31, 2019,2020, there were0 commitments to lend a material amount of additional funds to any customer whose loan was classified as a TDR.
Note 54 - Goodwill and Other Intangible Assets
Goodwill allocated to each reporting unit at March 31, 20202021 and December 31, 20192020 is presented as follows (the FMS reportable segment includes 2 reporting units of Consumer MortgagesMortgage 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 Mortgage Reporting Unit | | Wealth Management Reporting Unit | | Total |
| Balance as of December 31, 2020 | $ | 256,323 | | | $ | 171,636 | | | $ | 0 | | | $ | 24,431 | | | $ | 452,390 | |
| Goodwill acquired and adjustments during the year | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
| Balance as of March 31, 2021 | $ | 256,323 | | | $ | 171,636 | | | $ | 0 | | | $ | 24,431 | | | $ | 452,390 | |
| | | | | | | | | |
Goodwill is not amortized but 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 aperforms its annual evaluation of goodwill impairment assessment asduring the fourth quarter 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.each year. See "Part II - Item 8. Financial Statements and Supplementary Data - Note 19 -Segment Reporting"7 - Goodwill and Other Intangible Assets" to the consolidated financial statements of Synovus' 20192020 Form 10-K for information on Synovus' reorganization during 2019.
During the first quarter of 2020, Synovus assessed the indicatorsquantitative assessments 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, necessitating an interim test. Triggering events included Synovus' stock price trading below book value for several weeks prior to quarter-end, a series of emergency rate cuts by the Federal Reserve in March, as well as general economic uncertainty surrounding the pandemic. As such, Synovus performed a quantitative assessment of goodwill impairment as of March 31, 2020, which included determining the estimated fair value of each reporting unit and comparing that fair value to the reporting unit's carrying amount. The results of this test indicated that the estimated fair value of each reporting unit exceeded its carrying amount as of March 31, 2020; therefore, goodwill is not impaired as of the testing date. A significant decline in Synovus’ expected future cash flows or estimated growth rates, or a prolonged decline in the price of Synovus’ common stock, due to further deterioration in the economic environment, may necessitate additional interim tests and/or the recording of an impairment charge on goodwill during 2020.
The following table shows the gross carrying amount and accumulated amortization of other intangible assets as of March 31, 20202021 and December 31, 2019,2020, which primarily consist of core deposit intangible assets acquired in the FCB acquisition.assets. 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 months ended March 31, 2021 and 2020 was $2.4 million and 2019 was $2.6 million, and $3.4 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 | | | | | | | | |
| CDI | $ | 57,400 | | | $ | (12,784) | | | $ | 44,616 | | |
| Other | 12,500 | | | (4,084) | | | 8,416 | | |
| Total other intangible assets | $ | 69,900 | | | $ | (16,868) | | | $ | 53,032 | | |
| December 31, 2019 | | | | | | |
| March 31, 2021 | | March 31, 2021 | | | | | |
| CDI | CDI | $ | 57,400 | | | $ | (10,436) | | | $ | 46,964 | | CDI | $ | 57,400 | | | $ | (21,916) | | | $ | 35,484 | |
| Other | Other | 12,500 | | | (3,793) | | | 8,707 | | Other | 12,500 | | | (5,251) | | | 7,249 | |
| Total other intangible assets | Total other intangible assets | $ | 69,900 | | | $ | (14,229) | | | $ | 55,671 | | Total other intangible assets | $ | 69,900 | | | $ | (27,167) | | | $ | 42,733 | |
| | December 31, 2020 | | December 31, 2020 | |
| CDI | | CDI | $ | 57,400 | | | $ | (19,829) | | | $ | 37,571 | |
| Other | | Other | 12,500 | | | (4,959) | | | 7,541 | |
| Total other intangible assets | | Total other intangible assets | $ | 69,900 | | | $ | (24,788) | | | $ | 45,112 | |
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Note 65 - Shareholders' Equity and Other Comprehensive Income (Loss)
Repurchases of Common Stock
During the three months ended March 31, 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 1011 - Shareholders' Equity and Other Comprehensive Income" to the consolidated financial statements of Synovus' 20192020 Form 10-K.
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| | Three Months Ended March 31, | | |
| | 2020 | | 2019 |
| Cash dividends declared per share | | $ | 0.33 | | | $ | 0.30 | |
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| Three Months Ended March 31, | | |
| 2021 | | 2020 | | | | |
| Cash dividends declared per common share | $ | 0.33 | | | $ | 0.33 | | | | | |
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Equity-Based Compensation Plans
The following tables summarizeSynovus announced on January 26, 2021 that its Board of Directors authorized share repurchases of up to $200 million in 2021. During the statusfirst quarter of Synovus' stock options, restricted2021, the Company did not complete any share units, market restricted share units, and performance share units as of March 31, 2020 and activity for the three months ended March 31, 2020.
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| | Stock Options | | |
| (in thousands, except per share amounts) | | Quantity | | Weighted-Average Exercise Price Per Share |
| Outstanding at January 1, 2020 | | 3,037 | | | $ | 22.74 | |
| Exercised | | (220) | | | 29.05 | |
| Expired/canceled | | (6) | | | 20.99 | |
| Outstanding at March 31, 2020 | | 2,811 | | | $ | 22.25 | |
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| | RSUs, MRSUs, and PSUs | | |
| (in thousands, except per share amounts) | | Quantity | | Weighted-Average Grant Date Fair Value Per Share |
| Non-vested at January 1, 2020 | | 1,312 | | | $ | 39.28 | |
| Granted | | 689 | | | 36.63 | |
| Quantity change based on TSR and performance factors | | 23 | | | 36.63 | |
| Dividend equivalents granted | | 12 | | | 36.63 | |
| Vested | | (556) | | | 39.25 | |
| Forfeited | | (5) | | | 36.63 | |
| Non-vested at March 31, 2020 | | 1,475 | | | $ | 38.01 | |
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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 months ended March 31, 20202021 and 2019.2020.
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| 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 | |
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| 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) | |
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| 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, 2020 | $ | 105,669 | | | $ | 52,966 | | | $ | 0 | | | $ | 158,635 | |
| Other comprehensive income (loss) before reclassifications | (122,460) | | | (21,183) | | | 0 | | | (143,643) | |
| Amounts reclassified from AOCI | 1,475 | | | (1,189) | | | 0 | | | 286 | |
| Net current period other comprehensive income (loss) | (120,985) | | | (22,372) | | | 0 | | | (143,357) | |
| Balance at March 31, 2021 | $ | (15,316) | | | $ | 30,594 | | | $ | 0 | | | $ | 15,278 | |
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| Balance, December 31, 2019 | $ | 83,666 | | | $ | (18,487) | | | $ | 462 | | | $ | 65,641 | |
| Other comprehensive income (loss) before reclassifications | 117,330 | | | 80,501 | | | 0 | | | 197,831 | |
| Amounts reclassified from AOCI | (6,472) | | | (89) | | | 0 | | | (6,561) | |
| Net current period other comprehensive income (loss) | 110,858 | | | 80,412 | | | 0 | | | 191,270 | |
| Balance at March 31, 2020 | $ | 194,524 | | | $ | 61,925 | | | $ | 462 | | | $ | 256,911 | |
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(1) For all periods presented, the ending balance in net unrealized gains (losses) on cash flow hedges and investment securities available for sale and cash flow hedges includes unrealized losses of $12.1$13.3 million and $13.3$12.1 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.
Note 76 - 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' 20192020 Form 10-K for a description of how fair value measurements are determined.
Assetsvaluation methodologies for assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables present all financial instrumentsliabilities measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019.non-recurring basis.
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| March 31, 2020 | | | | | | |
| (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 | $ | — | | | $ | 637 | | | $ | — | | | $ | 637 | |
| Other mortgage-backed securities | — | | | 1,582 | | | — | | | 1,582 | |
| State and municipal securities | — | | | 680 | | | — | | | 680 | |
| Asset-backed securities | — | | | 1,913 | | | — | | | 1,913 | |
| Other investments | — | | | 45 | | | — | | | 45 | |
| Total trading securities | $ | — | | | $ | 4,857 | | | $ | — | | | $ | 4,857 | |
| Investment securities available for sale: | | | | | | | |
| U.S. Treasury securities | $ | 19,918 | | | $ | — | | | $ | — | | | $ | 19,918 | |
| U.S. Government agency securities | — | | | 74,856 | | | — | | | 74,856 | |
| Mortgage-backed securities issued by U.S. Government agencies | — | | | 55,422 | | | — | | | 55,422 | |
| Mortgage-backed securities issued by U.S. Government sponsored enterprises | — | | | 5,549,825 | | | — | | | 5,549,825 | |
| Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | — | | | 628,880 | | | — | | | 628,880 | |
| Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises | — | | | 335,737 | | | — | | | 335,737 | |
| State and municipal securities | — | | | 1,005 | | | — | | | 1,005 | |
| Asset-backed securities | — | | | 145,975 | | | — | | | 145,975 | |
| Corporate debt securities and other debt securities | — | | | 124,060 | | | 1,562 | | | 125,622 | |
| Total investment securities available for sale | $ | 19,918 | | | $ | 6,915,760 | | | $ | 1,562 | | | $ | 6,937,240 | |
| Mortgage loans held for sale | — | | | 119,841 | | | — | | | 119,841 | |
| Private equity investments | 11,877 | | | — | | | 3,255 | | | 15,132 | |
| Mutual funds and mutual funds held in rabbi trusts | 31,241 | | | — | | | — | | | 31,241 | |
| GGL/SBA loans servicing asset | — | | | — | | | 3,149 | | | 3,149 | |
| Derivative assets | — | | | 466,401 | | | — | | | 466,401 | |
| Liabilities | | | | | | | |
| Earnout liability | $ | — | | | $ | — | | | $ | 11,016 | | | $ | 11,016 | |
| Derivative liabilities | — | | | 184,021 | | | 2,050 | | | 186,071 | |
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The following table presents assets and liabilities measured at estimated fair value on a recurring basis.
| | | December 31, 2019 | | | March 31, 2021 | | | December 31, 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 Estimated Fair Value | | | Level 1 | | Level 2 | | Level 3 | | Total Estimated Fair Value |
| Assets | | | | | | | | |
| Recurring fair value measurements | | Recurring fair value measurements | | | | | | | | | | | | | | | | |
| Trading securities: | Trading securities: | | Trading securities: | | | |
| Commercial mortgage-backed securities issued by U.S. Government sponsored enterprises | $ | — | | | $ | 2,486 | | | $ | — | | | $ | 2,486 | | |
| Mortgage-backed securities issued by U.S. Government agencies | | Mortgage-backed securities issued by U.S. Government agencies | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | $ | 0 | | | $ | 10,185 | | | $ | 0 | | | $ | 10,185 | |
| Collateralized mortgage obligations issued by U.S. Government sponsored enterprises | | Collateralized mortgage obligations issued by U.S. Government sponsored enterprises | 0 | | | 555 | | | 0 | | | 555 | | | | 0 | | | 158 | | | 0 | | | 158 | |
| Other mortgage-backed securities | Other mortgage-backed securities | — | | | 1,284 | | | — | | | 1,284 | | Other mortgage-backed securities | 0 | | | 375 | | | 0 | | | 375 | | | | 0 | | | 178 | | | 0 | | | 178 | |
| State and municipal securities | State and municipal securities | — | | | 65 | | | — | | | 65 | | State and municipal securities | 0 | | | 1,541 | | | 0 | | | 1,541 | | | | 0 | | | 176 | | | 0 | | | 176 | |
| Asset-backed securities | Asset-backed securities | — | | | 3,227 | | | — | | | 3,227 | | Asset-backed securities | 0 | | | 1,915 | | | 0 | | | 1,915 | | | | 0 | | | 183 | | | 0 | | | 183 | |
| Other investments | — | | | 150 | | | — | | | 150 | | |
| Total trading securities | Total trading securities | $ | — | | | $ | 7,212 | | | $ | — | | | $ | 7,212 | | Total trading securities | $ | 0 | | | $ | 4,386 | | | $ | 0 | | | $ | 4,386 | | | | $ | 0 | | | $ | 10,880 | | | $ | 0 | | | $ | 10,880 | |
| Investment securities available for sale: | Investment securities available for sale: | | Investment securities available for sale: | | | |
| U.S. Treasury securities | U.S. Treasury securities | $ | 19,855 | | | $ | — | | | $ | — | | | $ | 19,855 | | U.S. Treasury securities | $ | 66,456 | | | $ | 0 | | | $ | 0 | | | $ | 66,456 | | | | $ | 20,257 | | | $ | 0 | | | $ | 0 | | | $ | 20,257 | |
| U.S. Government agency securities | U.S. Government agency securities | — | | | 36,541 | | | — | | | 36,541 | | U.S. Government agency securities | 0 | | | 81,174 | | | 0 | | | 81,174 | | | | 0 | | | 82,320 | | | 0 | | | 82,320 | |
| Mortgage-backed securities issued by U.S. Government agencies | Mortgage-backed securities issued by U.S. Government agencies | — | | | 56,816 | | | — | | | 56,816 | | Mortgage-backed securities issued by U.S. Government agencies | 0 | | | 955,182 | | | 0 | | | 955,182 | | | | 0 | | | 1,218,017 | | | 0 | | | 1,218,017 | |
| Mortgage-backed securities issued by U.S. Government sponsored enterprises | Mortgage-backed securities issued by U.S. Government sponsored enterprises | — | | | 5,180,815 | | | — | | | 5,180,815 | | Mortgage-backed securities issued by U.S. Government sponsored enterprises | 0 | | | 6,101,775 | | | 0 | | | 6,101,775 | | | | 0 | | | 5,000,046 | | | 0 | | | 5,000,046 | |
| Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | — | | | 636,851 | | | — | | | 636,851 | | Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | 0 | | | 1,157,223 | | | 0 | | | 1,157,223 | | | | 0 | | | 1,250,377 | | | 0 | | | 1,250,377 | |
| 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 | — | | | 371,592 | | | — | | | 371,592 | | Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises | 0 | | | 445,214 | | | 0 | | | 445,214 | | | | 0 | | | 370,921 | | | 0 | | | 370,921 | |
| State and municipal securities | — | | | 2,075 | | | — | | | 2,075 | | |
| Asset-backed securities | — | | | 327,400 | | | — | | | 327,400 | | |
| Corporate debt securities and other debt securities | Corporate debt securities and other debt securities | — | | | 144,620 | | | 2,105 | | | 146,725 | | Corporate debt securities and other debt securities | 0 | | | 18,733 | | | 0 | | | 18,733 | | | | 0 | | | 18,479 | | | 2,021 | | | 20,500 | |
| Total investment securities available for sale | Total investment securities available for sale | $ | 19,855 | | | $ | 6,756,710 | | | $ | 2,105 | | | $ | 6,778,670 | | Total investment securities available for sale | $ | 66,456 | | | $ | 8,759,301 | | | $ | 0 | | | $ | 8,825,757 | | | | $ | 20,257 | | | $ | 7,940,160 | | | $ | 2,021 | | | $ | 7,962,438 | |
| Mortgage loans held for sale | Mortgage loans held for sale | — | | | 115,173 | | | — | | | 115,173 | | Mortgage loans held for sale | $ | 0 | | | $ | 242,010 | | | $ | 0 | | | $ | 242,010 | | | | $ | 0 | | | $ | 216,647 | | | $ | 0 | | | $ | 216,647 | |
| Private equity investments | Private equity investments | 15,502 | | | — | | | 3,887 | | | 19,389 | | Private equity investments | 0 | | | 0 | | | 1,053 | | | 1,053 | | | | 0 | | | 0 | | | 1,021 | | | 1,021 | |
| Mutual funds and mutual funds held in rabbi trusts | Mutual funds and mutual funds held in rabbi trusts | 32,348 | | | — | | | — | | | 32,348 | | Mutual funds and mutual funds held in rabbi trusts | 39,943 | | | 0 | | | 0 | | | 39,943 | | | | 37,650 | | | 0 | | | 0 | | | 37,650 | |
| GGL/SBA loans servicing asset | GGL/SBA loans servicing asset | — | | | — | | | 3,040 | | | 3,040 | | GGL/SBA loans servicing asset | 0 | | | 0 | | | 3,305 | | | 3,305 | | | | 0 | | | 0 | | | 3,258 | | | 3,258 | |
| Derivative assets | Derivative assets | — | | | 140,016 | | | — | | | 140,016 | | Derivative assets | 0 | | | 276,831 | | | 0 | | | 276,831 | | | | 0 | | | 401,295 | | | 0 | | | 401,295 | |
| Liabilities | | |
| Trading liability for short positions | Trading liability for short positions | $ | 1,560 | | | $ | — | | | $ | — | | | $ | 1,560 | | Trading liability for short positions | 0 | | | 0 | | | 0 | | | 0 | | | | 0 | | | 7,717 | | | 0 | | | 7,717 | |
| Earnout liability | Earnout liability | — | | | — | | | 11,016 | | | 11,016 | | Earnout liability | 0 | | | 0 | | | 5,677 | | | 5,677 | | | | 0 | | | 0 | | | 5,677 | | | 5,677 | |
| Derivative liabilities | Derivative liabilities | — | | | 34,732 | | | 2,339 | | | 37,071 | | Derivative liabilities | 0 | | | 135,725 | | | 1,768 | | | 137,493 | | | | 0 | | | 155,119 | | | 2,048 | | | 157,167 | |
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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 March 31, 2021 | | As of December 31, 2020 |
| Fair value | Fair value | $ | 119,841 | | | $ | 115,173 | | Fair value | $ | 242,010 | | | $ | 216,647 | |
| Unpaid principal balance | Unpaid principal balance | 116,268 | | | 112,218 | | Unpaid principal balance | 240,287 | | | 210,292 | |
| 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 | $ | 1,723 | | | $ | 6,355 | |
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| Changes in Fair Value Included in Net Income | Three Months Ended March 31, | | |
| (in thousands) | 2021 | | 2020 | | | | |
| Mortgage loans held for sale | $ | (4,632) | | | $ | 619 | | | | | |
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27Activity for Level 3 Assets and Liabilities
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| Changes in Fair Value Included in Net Income | | | | | | | |
| Three Months Ended March 31, | | | | | | |
| (in thousands) | 2020 | | 2019 | | | | |
| Mortgage loans held for sale | $ | 619 | | | $ | 356 | | | | | |
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e "Part II - Item 8. Financial Statements and Supplementary Data - Note 14 - Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Accounting" of Synovus' 2020 Form 10-K for a description of the valuation techniques and significant inputs for Level 3 assets and liabilities that are measured at fair value on a recurring and non-recurring basis. During the three months ended March 31, 2021 and 2020, Synovus did not have any transfers in or out of Level 3 in the fair value hierarchy. During the three months ended March 31, 2019, Synovus had transfers outThe following tables provide rollforwards of Level 3 into Level 1 in the fair value hierarchy as certain funds within private equity investments became public with traded securities.
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| Three Months Ended March 31, 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 | — | | | (632) | | | (264) | | | — | | | — | |
| Unrealized gains (losses) included in OCI | (543) | | | — | | | — | | | — | | | — | |
| Additions | — | | | — | | | 373 | | | — | | | — | |
| Settlements | — | | | — | | | — | | | — | | | 289 | |
| 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) | | | $ | — | | | $ | — | | | $ | — | |
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| (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 gains (losses) realized/unrealized: | | | | | | | | | |
| Included in earnings | — | | | 28 | | | (488) | | | — | | | — | |
| Unrealized gains (losses) included in OCI | 196 | | | — | | | — | | | — | | | — | |
| Additions | — | | | — | | | 206 | | | — | | | — | |
| Settlements | — | | | — | | | — | | | — | | | 307 | |
| 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 | | | $ | — | | | $ | — | | | $ | — | |
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The table below provides an overview of the valuation techniquesassets and significant unobservable inputs used in those techniques to measure financial instruments that are classified within Level 3 of the valuation hierarchy and areliabilities 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.
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| Three Months Ended March 31, 2021 |
| (in thousands) | Investment Securities Available for Sale | | Private Equity Investments | | GGL / SBA
Loans Servicing Asset | | Earnout
Liability | | Visa Derivative |
| Beginning balance | $ | 2,021 | | | $ | 1,021 | | | $ | 3,258 | | | $ | (5,677) | | | $ | (2,048) | |
| Total gains (losses) realized/unrealized: | | | | | | | | | |
| Included in earnings | 0 | | | 32 | | | (178) | | | 0 | | | 0 | |
| Sales | (2,021) | | | 0 | | | 0 | | | 0 | | | 0 | |
| Additions | 0 | | | 0 | | | 225 | | | 0 | | | 0 | |
| Settlements | 0 | | | 0 | | | 0 | | | 0 | | | 280 | |
| Ending balance | $ | 0 | | | $ | 1,053 | | | $ | 3,305 | | | $ | (5,677) | | | $ | (1,768) | |
| 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, 2021 | $ | 0 | | | $ | 32 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
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| Three Months Ended March 31, 2020 |
| (in thousands) | Investment Securities Available for Sale | | Private Equity Investments | | GGL / SBA
Loans Servicing Asset | | Earnout
Liability | | Visa Derivative |
| Beginning balance | $ | 2,105 | | | $ | 3,887 | | | $ | 3,040 | | | $ | (11,016) | | | $ | (2,339) | |
| Total gains (losses) realized/unrealized: | | | | | | | | | |
| Included in earnings | 0 | | | (632) | | | (264) | | | 0 | | | 0 | |
| Unrealized gains (losses) included in OCI | (543) | | | 0 | | | 0 | | | 0 | | | 0 | |
| Additions | 0 | | | 0 | | | 373 | | | 0 | | | 0 | |
| Settlements | 0 | | | 0 | | | 0 | | | 0 | | | 289 | |
| Ending balance | $ | 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 | $ | 0 | | | $ | (632) | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
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| | | | | | March 31, 2020 | | |
(dollars in thousands) | | Valuation Technique | | Significant Unobservable Input | | Level 3 Fair Value | | Range / Weighted Average |
Assets measured at fair value on a recurring basis | | | | | | | | |
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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 | | 7.01% 3.56% |
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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 | | N/A |
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GGL/SBA loans servicing asset | | Discounted cash flow analysis | | Discount rate
Prepayment speeds | | $3,149 | | 12.16% 16.10% |
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Earnout liability | | Option pricing methods and Monte Carlo simulation | | Financial projections of Global One | | $11,016 | | N/A |
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Visa derivative liability | | Discounted cash flow analysis | | Estimated timing of resolution of covered litigation and future cumulative deposits to the litigation escrow for settlement of the Covered Litigation | | $2,050 | | 0-2 years
(4Q 2021)
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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.adjustment.
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| March 31, 2020 | | | December 31, 2019 | | | March 31, 2021 | | | March 31, 2020 |
| (in thousands) | (in thousands) | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total | (in thousands) | Level 1 | | Level 2 | | Level 3 | | Total | | | Level 1 | | Level 2 | | Level 3 | | Total |
Loans(1) | | Loans(1) | $ | 0 | | | $ | 0 | | | $ | 14,026 | | | $ | 14,026 | | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
| Other real estate | Other real estate | $ | — | | | $ | — | | | $ | 460 | | | $ | 460 | | | $ | — | | | $ | — | | | $ | 8,023 | | | $ | 8,023 | | Other real estate | 0 | | | 0 | | | 0 | | | 0 | | | | 0 | | | 0 | | | 460 | | | 460 | |
| MPS receivable | MPS receivable | — | | | — | | | 18,490 | | | 18,490 | | | — | | | — | | | 21,437 | | | 21,437 | | MPS receivable | 0 | | | 0 | | | 0 | | | 0 | | | | 0 | | | 0 | | | 18,490 | | | 18,490 | |
| Other assets held for sale | Other assets held for sale | — | | | — | | | 1,206 | | | 1,206 | | | — | | | — | | | 1,238 | | | 1,238 | | Other assets held for sale | 0 | | | 0 | | | 0 | | | 0 | | | | 0 | | | 0 | | | 1,206 | | | 1,206 | |
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Collateral-dependent loans that were written down to fair value of collateral.ORE properties are included in other assets on the consolidated balance sheets. The carrying value of ORE at March 31, 20202021 and December 31, 20192020 was $15.2$1.4 million and $14.4$1.8 million, respectively.
The following table presents fair value adjustments recognized in earnings for the three months ended March 31, 20202021 and 20192020 for assets measured at fair value on a non-recurring basis still held at period-end.
| | | Three Months Ended March 31, | | | Three Months Ended March 31, | | Location in Consolidated Statements of Income | |
| (in thousands) | (in thousands) | 2020 | | 2019 | | (in thousands) | 2021 | | 2020 | | Location in Consolidated Statements of Income | |
Loans(1) | | Loans(1) | $ | 7,002 | | | $ | 0 | | | |
| Other real estate | Other real estate | $ | 5 | | | $ | 18 | | | Other real estate | 0 | | | 5 | | | Other operating expenses | |
| MPS receivable | MPS receivable | 2,663 | | | — | | | MPS receivable | 0 | | | 2,663 | | | Other operating expenses | |
| Other assets held for sale | Other assets held for sale | 1,391 | | | 96 | | | Other assets held for sale | 0 | | | 1,391 | | | Other operating expenses | |
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The table below provides an overview of the valuation techniques and significant unobservable inputs used in those techniques(1) Collateral-dependent loans that were written down to measure financial instruments that are classified within Level 3 of the valuation hierarchy and are measured at fair value on a non-recurring basis.of collateral.
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| | | | | | March 31, 2020 |
| | Valuation Technique | | Significant Unobservable Input | | Range
(Weighted Average)(1)
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Other real estate | | Third-party appraised value of real estate less estimated selling costs | | Discount to appraised value
Estimated selling costs | | 0%-1% (1%) 0%-10% (7%) |
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MPS receivable(2)
| | Third-party appraised value of business less estimated selling costs | | Discount to appraised value
Estimated selling costs | | N/A |
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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%) 0%-10% (7%) |
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(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, 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, 20202021 and December 31, 2019.2020. 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' 20192020 Form 10-K for a description of how fair value measurements are determined.
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| March 31, 2021 |
| (in thousands) | Carrying Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 |
| Financial assets | | | | | | | | | |
| Total cash, cash equivalents, and restricted cash | $ | 3,328,266 | | | $ | 3,328,266 | | | $ | 3,328,266 | | | $ | 0 | | | $ | 0 | |
| Trading securities | 4,386 | | | 4,386 | | | 0 | | | 4,386 | | | 0 | |
| Investment securities available for sale | 8,825,757 | | | 8,825,757 | | | 66,456 | | | 8,759,301 | | | 0 | |
| Loans held for sale | 993,887 | | | 993,902 | | | 0 | | | 242,010 | | | 751,892 | |
| Private equity investments | 1,053 | | | 1,053 | | | 0 | | | 0 | | | 1,053 | |
| Mutual funds and mutual funds held in rabbi trusts | 39,943 | | | 39,943 | | | 39,943 | | | 0 | | | 0 | |
| Loans, net | 38,241,887 | | | 38,126,309 | | | 0 | | | 0 | | | 38,126,309 | |
| GGL/SBA loans servicing asset | 3,305 | | | 3,305 | | | 0 | | | 0 | | | 3,305 | |
| Derivative assets | 276,831 | | | 276,831 | | | 0 | | | 276,831 | | | 0 | |
| Financial liabilities | | | | | | | | | |
| Non-interest-bearing deposits | $ | 14,660,287 | | | $ | 14,660,287 | | | $ | 0 | | | $ | 14,660,287 | | | $ | 0 | |
| Non-time interest-bearing deposits | 27,492,165 | | | 27,492,165 | | | 0 | | | 27,492,165 | | | 0 | |
| Time deposits | 5,216,499 | | | 5,240,983 | | | 0 | | | 5,240,983 | | | 0 | |
| Total deposits | $ | 47,368,951 | | | $ | 47,393,435 | | | $ | 0 | | | $ | 47,393,435 | | | $ | 0 | |
| Securities sold under repurchase agreements | 293,659 | | | 293,659 | | | 293,659 | | | 0 | | | 0 | |
| Long-term debt | 1,202,825 | | | 1,274,158 | | | 0 | | | 1,274,158 | | | 0 | |
| Earnout liability | 5,677 | | | 5,677 | | | 0 | | | 0 | | | 5,677 | |
| Derivative liabilities | 137,493 | | | 137,493 | | | 0 | | | 135,725 | | | 1,768 | |
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| March 31, 2020 | | | | | | | | |
| (in thousands) | Carrying Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 |
| Financial assets | | | | | | | | | |
| Total cash, cash equivalents, restricted cash, and restricted cash equivalents | $ | 1,823,834 | | | $ | 1,823,834 | | | $ | 1,823,834 | | | $ | — | | | $ | — | |
| Trading securities | 4,857 | | | 4,857 | | | — | | | 4,857 | | | — | |
| Investment securities available for sale | 6,937,240 | | | 6,937,240 | | | 19,918 | | | 6,915,760 | | | 1,562 | |
| Mortgage loans held for sale | 119,841 | | | 119,841 | | | — | | | 119,841 | | | — | |
| Private equity investments | 15,132 | | | 15,132 | | | 11,877 | | | — | | | 3,255 | |
| Mutual funds and mutual funds held in rabbi trusts | 31,241 | | | 31,241 | | | 31,241 | | | — | | | — | |
| Loans, net | 37,764,572 | | | 38,168,063 | | | — | | | — | | | 38,168,063 | |
| GGL/SBA loans servicing asset | 3,149 | | | 3,149 | | | — | | | — | | | 3,149 | |
| Derivative assets | 466,401 | | | 466,401 | | | — | | | 466,401 | | | — | |
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| Financial liabilities | | | | | | | | | |
| Non-interest-bearing deposits | $ | 9,659,451 | | | $ | 9,659,451 | | | $ | — | | | $ | 9,659,451 | | | $ | — | |
| Non-time interest-bearing deposits | 21,305,350 | | | 21,305,350 | | | — | | | 21,305,350 | | | — | |
| Time deposits | 8,861,784 | | | 8,934,652 | | | — | | | 8,934,652 | | | — | |
| Total deposits | $ | 39,826,585 | | | $ | 39,899,453 | | | $ | — | | | $ | 39,899,453 | | | $ | — | |
| Federal funds purchased and securities sold under repurchase agreements | 312,776 | | | 312,776 | | | 312,776 | | | — | | | — | |
| Other short-term borrowings | 1,175,000 | | | 1,175,000 | | | — | | | 1,175,000 | | | — | |
| Long-term debt | 3,152,339 | | | 3,122,480 | | | — | | | 3,122,480 | | | — | |
| Earnout liability | 11,016 | | | 11,016 | | | — | | | — | | | 11,016 | |
| Derivative liabilities | 186,071 | | | 186,071 | | | — | | | 184,021 | | | 2,050 | |
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| 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 | | | — | |
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| 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 | |
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| December 31, 2020 |
| (in thousands) | Carrying Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 |
| Financial assets | | | | | | | | | |
| Total cash, cash equivalents, and restricted cash | $ | 4,252,917 | | | $ | 4,252,917 | | | $ | 4,252,917 | | | $ | 0 | | | $ | 0 | |
| Trading securities | 10,880 | | | 10,880 | | | 0 | | | 10,880 | | | 0 | |
| Investment securities available for sale | 7,962,438 | | | 7,962,438 | | | 20,257 | | | 7,940,160 | | | 2,021 | |
| Loans held for sale | 760,123 | | | 760,939 | | | 0 | | | 216,647 | | | 544,292 | |
| Private equity investments | 1,021 | | | 1,021 | | | 0 | | | 0 | | | 1,021 | |
| Mutual funds and mutual funds held in rabbi trusts | 37,650 | | | 37,650 | | | 37,650 | | | 0 | | | 0 | |
| Loans, net | 37,647,248 | | | 37,605,881 | | | 0 | | | 0 | | | 37,605,881 | |
| GGL/SBA loans servicing asset | 3,258 | | | 3,258 | | | 0 | | | 0 | | | 3,258 | |
| Derivative assets | 401,295 | | | 401,295 | | | 0 | | | 401,295 | | | 0 | |
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| Financial liabilities | | | | | | | | | |
| Non-interest-bearing deposits | $ | 13,477,854 | | | $ | 13,477,854 | | | $ | 0 | | | $ | 13,477,854 | | | $ | 0 | |
| Non-time interest-bearing deposits | 27,265,521 | | | 27,265,521 | | | 0 | | | 27,265,521 | | | 0 | |
| Time deposits | 5,948,196 | | | 5,970,146 | | | 0 | | | 5,970,146 | | | 0 | |
| Total deposits | $ | 46,691,571 | | | $ | 46,713,521 | | | $ | 0 | | | $ | 46,713,521 | | | $ | 0 | |
| Securities sold under repurchase agreements | 227,922 | | | 227,922 | | | 227,922 | | | 0 | | | 0 | |
| Trading liability for short positions | 7,717 | | | 7,717 | | | 0 | | | 7,717 | | | 0 | |
| Long-term debt | 1,202,494 | | | 1,266,825 | | | 0 | | | 1,266,825 | | | 0 | |
| Earnout liability | 5,677 | | | 5,677 | | | 0 | | | 0 | | | 5,677 | |
| Derivative liabilities | 157,167 | | | 157,167 | | | 0 | | | 155,119 | | | 2,048 | |
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Note 87 - 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' 20192020 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, if the hedged exposure is a cash flow exposure, the effective portion of the gain or loss related toon the derivative instrument is reported initially reported as a component of accumulated other comprehensive income (loss), net of the tax impact, and subsequently reclassified into earnings when the forecastedhedged transaction affects earnings or whenearnings with the hedge is terminated and includedimpacts recorded in the same income statement line item asused to present the earnings effect of the hedged item.item. When a cash flow hedge relationship is discontinued but the hedged cash flows, or forecasted transactions, are still expected to occur, gains or losses that were accumulated in OCI are amortized into earnings over the same periods which the hedged transactions would have affected earnings. If, however, it is probable the forecasted transactions will no longer occur, the remaining accumulated amounts in OCI at the de-designation date are immediately recognized in earnings.
Synovus recorded an unrealized gaingains of $757 thousand, or $565 thousand, after tax, in OCI during the first quarter of 2021 and $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 amortizedare being recognized into earnings in conjunction with the effective terms of the original swaps through the third fourth
quarter of 2025. Synovus recognized pre-tax income of $120 thousand$1.6 million during the three months ended March 31, 20202021 related to thethe amortization ofof terminated cash flow hedges.
As of March 31, 2020,2021, Synovus expects to reclassify into earnings approximately $32$43 million in pre-tax income due to the receipt or payment of pre-tax gains from AOCI into interest incomepayments on all cash flow hedges overwithin the next twelve months. Included in this amount is approximately $3$13 million in pre-tax gainsincome related to the amortization of terminated cash flow hedges.As of March 31, 2020,2021, 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 2024.2026.
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 creditrisk 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, 20202021 and December 31, 2019,2020, collateral totaling $157.8$121.7 million and $84.6$155.4 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, 20202021 and December 31, 2019,2020, Synovus had a variation margin of $193.4$81.8 million and $113.7$162.7 million respectively, each reducing the derivative liability.
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 | | | March 31, 2021 | | December 31, 2020 |
| | | 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 | $ | 3,250,000 | | | $ | 55,873 | | | $ | 4,885 | | | $ | 3,000,000 | | | $ | 80,802 | | | $ | 0 | |
| Total derivatives designated as hedging instruments | Total derivatives designated as hedging instruments | | $ | 90,246 | | | $ | — | | | $ | 54 | | | $ | 8,624 | | Total derivatives designated as hedging instruments | | $ | 55,873 | | | $ | 4,885 | | | $ | 80,802 | | | $ | 0 | |
| 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) | $ | 8,891,025 | | | $ | 211,787 | | | $ | 130,737 | | | $ | 8,784,141 | | | $ | 314,234 | | | $ | 153,204 | |
| 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 | 284,662 | | | 4,540 | | | 0 | | | 306,138 | | | 6,259 | | | 0 | |
| 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 | 298,000 | | | 4,631 | | | 0 | | | 230,500 | | | 0 | | | 1,611 | |
Other contracts(4) | Other contracts(4) | 159,412 | | | — | | | 428 | | | 145,764 | | | — | | | 91 | | Other contracts(4) | 170,131 | | | 0 | | | 103 | | | 234,884 | | | 0 | | | 304 | |
| Visa derivative | Visa derivative | — | | | — | | | 2,050 | | | — | | | — | | | 2,339 | | Visa derivative | 0 | | | 0 | | | 1,768 | | | 0 | | | 0 | | | 2,048 | |
| 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 | | $ | 220,958 | | | $ | 132,608 | | | $ | 320,493 | | | $ | 157,167 | |
|
(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$2.5 million and $3.0$2.6 million at March 31, 20202021 and December 31, 2019,2020, 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$18.4 million and $32.9$24.1 million at March 31, 20202021 and December 31, 2019,2020, respectively. The fair value of foreign currency exchange forwards was negligible at March 31, 20202021 and December 31, 20192020 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 months ended March 31, 20202021 and 2019.2020.
| | | Three Months Ended March 31, | | | Three Months Ended March 31, | |
| (in thousands) | (in thousands) | 2020 | | 2019 | (in thousands) | 2021 | | 2020 | |
| 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 | $ | 8,342 | | | $ | 3,637 | | |
| | | | |
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 | 1,599 | | | 120 | | |
| 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 | $ | 1,599 | | | $ | 120 | | |
|
(1) See "Part I - Item 1. Financial Statements and Supplementary Data - Note 65 - Shareholders' Equity and Other Comprehensive Income (Loss) in this Report for additional information.
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 months ended March 31, 20202021 and 20192020 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 March 31, | |
| (in thousands) | (in thousands) | | Location in Consolidated Statements of Income | | 2020 | | 2019 | | (in thousands) | | Location in Consolidated Statements of Income | | 2021 | | 2020 | |
| 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 | | $ | 947 | | | $ | (604) | | |
Other contracts(2) | Other contracts(2) | | Capital markets income | | (337) | | | — | | | Other contracts(2) | | Capital markets income | | 201 | | | (337) | | |
| 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 | | (1,719) | | | 7,024 | | |
| 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 | | 6,242 | | | (4,929) | | |
| | Total derivatives not designated as hedging instruments | Total derivatives not designated as hedging instruments | | $ | 1,154 | | | $ | 576 | | | Total derivatives not designated as hedging instruments | | $ | 5,671 | | | $ | 1,154 | | |
|
(1) Additionally, losses related to termination of customer swaps of $2.5 million were recorded in other non-interest expense during the first quarter of 2020. Gain (loss) represents net fair value adjustments (including credit related adjustments) for the three months ended March 31, 2020.customer swaps and offsetting positions.
(2)Includes risk participation agreements sold.
Note 98 - Net Income Per Common Share
The following table displays a reconciliation of the information used in calculating basic and diluted earningsnet income per common share for the three months ended March 31, 20202021 and 2019.
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | | | |
| (in thousands, except per share data) | 2020 | | 2019 | | | | |
| Basic Net Income Per Common Share: | | | | | | | |
| Net income available to common shareholders | $ | 30,230 | | | $ | 117,036 | | | | | |
| Weighted average common shares outstanding | 147,311 | | | 160,927 | | | | | |
| Net income per common share, basic | $ | 0.21 | | | $ | 0.73 | | | | | |
| Diluted Net Income Per Common Share: | | | | | | | |
| Net income available to common shareholders | $ | 30,230 | | | $ | 117,036 | | | | | |
| Weighted average common shares outstanding | 147,311 | | | 160,927 | | | | | |
| Effect of dilutive outstanding equity-based awards, warrants, and earnout payments | 1,090 | | | 1,833 | | | | | |
| Weighted average diluted common shares | 148,401 | | | 162,760 | | | | | |
| Net income per common share, diluted | $ | 0.20 | | | $ | 0.72 | | | | | |
| | | | | | | |
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.2020. Diluted net income per common share reflectsincorporates the dilution that could occur if securities or other contracts to issue common stock were exercised or converted. The dilutive effectpotential impact 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 applicationcontingently issuable shares, including awards which require future service as a condition of delivery of the treasury stock method.underlying common stock.
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| (in thousands, except per share data) | 2021 | | 2020 | | | | |
| Basic Net Income Per Common Share: | | | | | | | |
| Net income available to common shareholders | $ | 178,802 | | | $ | 30,230 | | | | | |
| Weighted average common shares outstanding | 148,467 | | | 147,311 | | | | | |
| Net income per common share, basic | $ | 1.20 | | | $ | 0.21 | | | | | |
| Diluted Net Income Per Common Share: | | | | | | | |
| Net income available to common shareholders | $ | 178,802 | | | $ | 30,230 | | | | | |
| Weighted average common shares outstanding | 148,467 | | | 147,311 | | | | | |
| Effect of dilutive outstanding equity-based awards, warrants, and earnout payments | 1,313 | | | 1,090 | | | | | |
| Weighted average diluted common shares | 149,780 | | | 148,401 | | | | | |
| Net income per common share, diluted | $ | 1.19 | | | $ | 0.20 | | | | | |
| | | | | | | |
As of March 31, 20202021 and 2019,2020, there were 55732 thousand and 40557 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 109 - 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.
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, 2020,2021, the ACL for unfunded commitments was $38.4$51.5 million, including the impact of CECL and COVID-19, compared to a reserve of $1.4$47.8 million at December 31, 2019.2020. 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) | March 31, 2021 | | December 31, 2020 |
| Letters of credit* | Letters of credit* | $ | 182,629 | | | $ | 202,614 | | Letters of credit* | $ | 191,359 | | | $ | 190,562 | |
| 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 | 8,464,375 | | | 8,200,608 | |
| 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 | 3,229,163 | | | 3,290,041 | |
| 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 | 1,643,659 | | | 1,602,831 | |
| Unused credit card lines | Unused credit card lines | 940,016 | | | 877,929 | | Unused credit card lines | 984,268 | | | 1,012,313 | |
| Other loan commitments | Other loan commitments | 469,958 | | | 485,371 | | Other loan commitments | 511,084 | | | 472,233 | |
| 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 | $ | 15,023,908 | | | $ | 14,768,588 | |
| | | | | | | | | | | |
| 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 | |
| | | |
| | | | | | | | | | | |
| LIHTC, solar energy tax credit and other CRA partnerships: | | | |
| Carrying amount included in other assets | $ | 303,676 | | | $ | 262,855 | |
| Amount of future funding commitments included in carrying amount | 166,390 | | | 133,946 | |
| Permanent and short-term construction loans and letter of credit commitments | 155,060 | | | 84,552 | |
| Funded portion of permanent and short-term loans and letters of credit | 17,404 | | | 9,762 | |
| | | |
* Represent the contractual amount net of risk participations purchased of approximately $32$29.6 million and $33$30.2 million at March 31, 20202021 and December 31, 2019,2020, respectively.
Merchant Services
In accordance with credit and debit card association rules, Synovus provides merchant processing services for customers with a 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 thea 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 months ended March 31, 2021 and 2020, Synovus and 2019, the sponsored entities processed and settled $18.37$26.03 billion and $17.71$18.37 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, 2020,2021, the remaining amount, due to Synovus from the MPS is $21.2 million, compared to $21.4 million at December 31, 2019. During the three months ended March 31, 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 million at March 31, 2020 isreserves, included in other assets and classified in NPAs.NPAs, is $15.5 million, compared to $15.6 million at December 31, 2020. 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.MPS.
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 and governmental 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, 20202021 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 1110 - 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. Prior to the fourth quarter of 2019, Synovus identified its overall banking operations as its only reportable segment.makers. 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 consumer loans and held for sale loans as well as PPP loans are included in Treasury and Corporate Other. The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlikeunlike 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, asset-based lending, and asset-based lending.community investment capital.
The Financial Management Services (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, and family office 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 includes certain assets and/or liabilities managed within that function. Additionally, Treasury and Corporate Other also charges (credits) an internal cost of funds for assets held in (or pays for funding provided by) each business segment. The process for determining FTP rate is based on a number of factors and assumptions, including prevailing market interest rates, for comparable durationthe expected lives of various assets (or liabilities).and liabilities, and the Company's broader funding profile.
The following table presents certaintables present certain financial information for each reportable business segment for the first quarter ofthree months ended March 31, 2021 and 2020. To provide comparable information, Synovus has included proforma business segment financial information for the first quarter of 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 March 31, 2021 |
| (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 | $ | 206,242 | | | $ | 134,074 | | | $ | 20,995 | | | $ | 12,546 | | | $ | 373,857 | |
| Non-interest revenue | Non-interest revenue | 33,449 | | | 9,256 | | | 47,275 | | | 13,877 | | | 103,857 | | Non-interest revenue | 29,754 | | | 7,319 | | | 58,583 | | | 15,300 | | | 110,956 | |
| Non-interest expense | Non-interest expense | 75,304 | | | 18,202 | | | 43,289 | | | 139,484 | | | 276,279 | | Non-interest expense | 68,058 | | | 20,724 | | | 47,674 | | | 130,678 | | | 267,134 | |
| Pre-provision net revenue | Pre-provision net revenue | $ | 155,391 | | | $ | 114,224 | | | $ | 20,768 | | | $ | (89,545) | | | $ | 200,838 | | Pre-provision net revenue | $ | 167,938 | | | $ | 120,669 | | | $ | 31,904 | | | $ | (102,832) | | | $ | 217,679 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended March 31, 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 2019 Proforma | | | | | | | | | | | | | | | | | | | |
| Net interest income | Net interest income | $ | 214,759 | | | | $ | 125,611 | | | | $ | 28,865 | | | | $ | 27,940 | | | | $ | 397,175 | | Net interest income | $ | 196,504 | | | $ | 123,170 | | | $ | 17,384 | | | $ | 36,202 | | | $ | 373,260 | |
| Non-interest revenue | Non-interest revenue | 32,776 | | | | 6,758 | | | | 32,279 | | | | 7,565 | | | | 79,378 | | Non-interest revenue | 30,324 | | | 9,327 | | | 47,384 | | | 16,822 | | | 103,857 | |
| Non-interest expense | Non-interest expense | 74,816 | | | | 15,019 | | | | 33,218 | | | | 169,357 | | | | 292,410 | | Non-interest expense | 73,973 | | | 20,713 | | | 43,391 | | | 138,202 | | | 276,279 | |
| Pre-provision net revenue | Pre-provision net revenue | $ | 172,719 | | | | $ | 117,350 | | | | $ | 27,926 | | | | $ | (133,852) | | | | $ | 184,143 | | Pre-provision net revenue | $ | 152,855 | | | $ | 111,784 | | | $ | 21,377 | | | $ | (85,178) | | | $ | 200,838 | |
|
| | | March 31, 2020 | | | March 31, 2021 |
| (dollars in thousands) | (dollars in thousands) | Community Banking | | Wholesale Banking | | Financial Management Services | | Treasury and Corporate Other | | Synovus Consolidated | (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 | | |
| Loans, net of deferred fees and costs | | Loans, net of deferred fees and costs | $ | 10,745,585 | | | $ | 19,305,649 | | | $ | 5,175,578 | | | $ | 3,578,289 | | | $ | 38,805,101 | |
| | Total deposits | Total deposits | 25,364,034 | | | | 9,111,207 | | | | 266,839 | | | | 5,084,505 | | | | 39,826,585 | | Total deposits | $ | 30,897,797 | | | $ | 11,288,606 | | | $ | 744,745 | | | $ | 4,437,803 | | | $ | 47,368,951 | |
| Total full-time equivalent employees | Total full-time equivalent employees | 2,291 | | | | 237 | | | | 838 | | | | 1,936 | | | | 5,302 | | Total full-time equivalent employees | 2,173 | | | 282 | | | 833 | | | 1,773 | | | 5,061 | |
| | | December 31, 2019 | | | December 31, 2020 |
| (dollars in thousands) | (dollars in thousands) | Community Banking | | Wholesale Banking | | Financial Management Services | | Treasury and Corporate Other | | Synovus Consolidated | (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 | | |
| Loans, net of deferred fees and costs | | Loans, net of deferred fees and costs | $ | 11,171,013 | | | $ | 18,810,729 | | | $ | 5,370,790 | | | $ | 2,900,452 | | | $ | 38,252,984 | |
| Total deposits | Total deposits | 25,610,777 | | | | 8,314,184 | | | | 284,716 | | | | 4,195,827 | | | | 38,405,504 | | Total deposits | $ | 29,141,242 | | | $ | 11,958,105 | | | $ | 739,200 | | | $ | 4,853,024 | | | $ | 46,691,571 | |
| Total full-time equivalent employees | Total full-time equivalent employees | 2,301 | | | | 213 | | | | 839 | | | | 1,911 | | | | 5,264 | | Total full-time equivalent employees | 2,199 | | | 285 | | | 832 | | | 1,818 | | | 5,134 | |
|
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:
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| (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; |
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| (2) | | | the risk that we may not realize the currentexpected benefits from our efficiency and growth initiatives or that we may not be able to realize such cost savings or revenue benefits in the time period expected, which could negatively affect our future profitability; |
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| (3) | | the risk that 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;unsuccessful; |
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(3)(4) | | | the risk that competition in the financial services industry may adversely affect our future earnings and growth; |
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(4) | (5) | | our ability to attract and retain employees and the riskimpact of executive management transitions that we may not realize the expected benefits fromare key to our growth and 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;strategies; |
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(5)(6) | | risks 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; |
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| (7) | | 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 monetary policy and in the regulation and taxation of banks and financial institutions, or the interpretation or application thereof and the uncertainty of future implementation and enforcement of these regulations; |
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| (8) | | changes in the interest rate environment, including changes to the federal funds rate to include a negative interest rate environment, and competition in our primary market area may result in increased funding costs or reduced earning assets yields, thus reducing margins and net interest income; |
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| (9) | | the risk that our current and future information technology system enhancements and operational initiatives may not be successfully implemented, which could negatively impact our operations; |
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| (10) | | risks related to our implementation of new lines of business, new products and services or new technologies; |
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| (11) | | 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; |
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| (12) | | the risk that our enterprise risk management framework, our compliance program, or our corporate governance and supervisory oversight functions may not identify or address risks adequately, which may result in unexpected losses; |
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| (13) | | the risk that we may be required to make substantial expenditures to keep pace with regulatory initiatives and the rapid technological changes in the financial services market; |
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| (14) | | changes in the cost and availability of funding due to changes in the deposit market and credit market; |
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(6)(15) | | | restrictions or limitations on accessrisks related to funds from historicalthe ability of our operational framework to identify and alternative sourcesmanage risks associated with our business such as credit risk, compliance risk, reputational risk, and operational risk, including by virtue of liquidity could adversely affect our overall liquidity, which could restrictrelationships with third-party business partners, as well as our ability to make payments on our obligationsrelationship with third-party vendors and our ability to support asset growth and sustain our operations and the operations of Synovus Bank;other service providers; |
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(7) | | | 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; |
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(8) | (16) | | 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; |
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(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; |
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(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; |
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(11) | | | the risk that our current and future information technology system enhancements and operational initiatives may not be successfully implemented, which could negatively impact our operations; |
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(12) | | | the risk that our enterprise risk management framework, our compliance program, or our corporate governance and supervisory oversight functions may not identify or address risks adequately, which may result in unexpected losses; |
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(13) | | | our ability to attract and retain employees that are key to our strategic and growth initiatives; |
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(14) | | | our ability to receive dividends from our subsidiaries could affect our liquidity, including our ability to pay dividends or take other capital actions; |
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(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; |
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(16) | | | 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; |
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| (17) | | | 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; |
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(18) | | | the risk related to our implementation of new lines of business, new products and services or new technologies; |
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(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; |
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(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; |
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(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; |
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(22)(18) | | | risks related to the fluctuation in our stock price and general volatility in the stock market; |
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(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; |
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(24)(19) | | | the risks related to regulatory approval to take certain actions, including any dividends on our common stockthat if economic conditions worsen further or preferred stock, any repurchases of common stock or any issuance or redemption of any other regulatory capital instruments;rules are modified, we may be required to undertake initiatives to improve or conserve our capital position; |
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(25) | (20) | | risks related to the continued use, availability and reliability of LIBOR and the risks related to the transition from LIBOR to other "benchmark"benchmark rates; |
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(26)(21) | | | restrictions or limitations on access to funds from historical and alternative sources of liquidity could adversely affect our overall liquidity, which could restrict our ability to make payments on our obligations and our ability to support asset growth and sustain our operations and the costs and effectsoperations 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;Synovus Bank; |
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(27)(22) | | | the risk that we may failour ability to realize all of the anticipated benefits of the Mergerreceive dividends from our subsidiaries could affect our liquidity, including our ability to pay dividends or those benefits may take longer to realize than expected;other capital actions; |
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(28) | (23) | | 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 the anticipated benefits from such transactions;acquisitions; |
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| (24) | | the risk that we could realize losses if we sell non-performing assets and the proceeds we receive are lower than the carrying value of such assets; |
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| (25) | | 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 other issuance or redemption of any other regulatory capital instruments; |
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| (26) | | the risk that our concentrated operations in the Southeastern U.S. make us vulnerable to local economic conditions, local weather catastrophes, public health issues, and other external events; |
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| (27) | | the costs and effects of litigation, investigations 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; |
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| (28) | | risks related to the fluctuation in our stock price and general volatility in the stock market; |
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| (29) | | | the effects of any damages to our reputation resulting from developments related to any of the items identified above; and |
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| (30) | | | 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-ItemI - Item 1A. Risk Factors” and other information contained in Synovus' 20192020 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,statement 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, asset-based lending, structured lending, 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 brancheswith 288 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 months ended March 31, 20202021 and financial condition as of March 31, 20202021 and December 31, 2019.2020. 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’ 2019Synovus' 2020 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.
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 March 31, | |
| (dollars in thousands, except per share data) | (dollars in thousands, except per share data) | 2020 | | 2019 | | Change | | (dollars in thousands, except per share data) | 2021 | | 2020 | | Change | |
| Net interest income | Net interest income | $ | 373,260 | | | $ | 397,175 | | | (6.0) | % | | Net interest income | $ | 373,857 | | | $ | 373,260 | | | — | % | |
Provision for credit losses(1) | 158,722 | | | 23,569 | | | 573.4 | | | |
| (Reversal of) provision for credit losses | | (Reversal of) provision for credit losses | (18,575) | | | 158,722 | | | (112) | | |
| Non-interest revenue | Non-interest revenue | 103,857 | | | 79,378 | | | 30.8 | | | Non-interest revenue | 110,956 | | | 103,857 | | | 7 | | |
Adjusted non-interest revenue(2)(1) | Adjusted non-interest revenue(2)(1) | 99,378 | | | 78,445 | | | 26.7 | | | Adjusted non-interest revenue(2)(1) | 112,946 | | | 99,378 | | | 14 | | |
| Total FTE revenues | 477,903 | | | 477,183 | | | 0.2 | | | |
Adjusted total revenues(2) | 473,424 | | | 476,250 | | | (0.6) | | | |
| Total FTE revenue | | Total FTE revenue | 485,587 | | | 477,903 | | | 2 | | |
Adjusted total revenue(1) | | Adjusted total revenue(1) | 487,577 | | | 473,424 | | | 3 | | |
| Non-interest expense | Non-interest expense | 276,279 | | | 292,410 | | | (5.5) | | | Non-interest expense | 267,134 | | | 276,279 | | | (3) | | |
Adjusted non-interest expense(2)(1) | Adjusted non-interest expense(2)(1) | 271,155 | | | 242,653 | | | 11.7 | | | Adjusted non-interest expense(2)(1) | 266,603 | | | 271,155 | | | (2) | | |
| Income before income taxes | Income before income taxes | 42,116 | | | 160,574 | | | (73.8) | | | Income before income taxes | 236,254 | | | 42,116 | | | 461 | | |
| Net income | Net income | 38,521 | | | 120,186 | | | (67.9) | | | Net income | 187,093 | | | 38,521 | | | 386 | | |
| Net income available to common shareholders | Net income available to common shareholders | 30,230 | | | 117,036 | | | (74.2) | | | Net income available to common shareholders | 178,802 | | | 30,230 | | | 492 | | |
| Net income per common share, basic | Net income per common share, basic | 0.21 | | | 0.73 | | | (71.8) | | | Net income per common share, basic | 1.20 | | | 0.21 | | | 487 | | |
| Net income per common share, diluted | Net income per common share, diluted | 0.20 | | | 0.72 | | | (71.7) | | | Net income per common share, diluted | 1.19 | | | 0.20 | | | 486 | | |
Adjusted net income per common share, diluted(2)(1) | Adjusted net income per common share, diluted(2)(1) | 0.21 | | | 0.98 | | | (79.0) | | | Adjusted net income per common share, diluted(2)(1) | 1.21 | | | 0.21 | | | 483 | | |
Net interest margin(3)(2) | Net interest margin(3)(2) | 3.37 | % | | 3.78 | % | | (41) | bps | | Net interest margin(3)(2) | 3.04 | % | | 3.37 | % | | (33) | bps | |
Net charge-off ratio(3)(2) | Net charge-off ratio(3)(2) | 0.21 | | | 0.19 | | | 2 | | | Net charge-off ratio(3)(2) | 0.21 | | | 0.21 | | | — | | |
Return on average assets(3)(2) | Return on average assets(3)(2) | 0.32 | | | 1.06 | | | (74) | | | Return on average assets(3)(2) | 1.40 | | | 0.32 | | | 108 | | |
Adjusted return on average assets(3)(2) | Adjusted return on average assets(3)(2) | 0.32 | | | 1.45 | | | (113) | | | Adjusted return on average assets(3)(2) | 1.41 | | | 0.32 | | | 109 | | |
| Efficiency ratio-FTE | Efficiency ratio-FTE | 57.81 | | | 61.28 | | | (347) | | | Efficiency ratio-FTE | 55.01 | | | 57.81 | | | (280) | | |
Adjusted tangible efficiency ratio(2)(1) | Adjusted tangible efficiency ratio(2)(1) | 56.72 | | | 50.24 | | | 648 | | | Adjusted tangible efficiency ratio(2)(1) | 54.19 | | | 56.72 | | | (253) | | |
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(1) Beginning January 1, 2020, provision calculation is based on current expected 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) (2) Annualized
| | | March 31, 2020 | | December 31, 2019 | | Sequential Quarter Change | | March 31, 2019 | | Year-Over-Year Change | | | March 31, 2021 | | December 31, 2020 | | Sequential Quarter Change | | March 31, 2020 | | Year-Over-Year Change |
| (dollars in thousands) | (dollars in thousands) | | | December 31, 2020 | | Sequential Quarter Change | | March 31, 2020 | | 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 | $ | 38,805,101 | | | $ | 38,252,984 | | | $ | 552,117 | | | $ | 38,258,024 | | | $ | 547,077 | | |
| Total average loans | Total average loans | 37,593,045 | | | 36,508,035 | | | 1,085,010 | | | 35,320,014 | | | 2,273,031 | | | Total average loans | 38,212,267 | | | 38,884,551 | | | (672,284) | | | 37,593,045 | | | 619,222 | | |
| Total deposits | Total deposits | 39,826,585 | | | 38,405,504 | | | 1,421,081 | | | 38,075,190 | | | 1,751,395 | | | Total deposits | 47,368,951 | | | 46,691,571 | | | 677,380 | | | 39,826,585 | | | 7,542,366 | | |
| 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) | 44,174,284 | | | 43,121,165 | | | 1,053,119 | | | 35,838,637 | | | 8,335,647 | | |
| Core transaction deposits (excludes brokered and public fund deposits) | | Core transaction deposits (excludes brokered and public fund deposits) | 34,804,575 | | | 32,754,609 | | | 2,049,966 | | | 24,790,621 | | | 10,013,954 | | |
| Total average deposits | Total average deposits | 38,687,207 | | | 37,878,818 | | | 808,389 | | | 37,826,952 | | | 860,255 | | | Total average deposits | 46,454,878 | | | 45,973,980 | | | 480,898 | | | 38,687,207 | | | 7,767,671 | | |
| Non-performing assets ratio | Non-performing assets ratio | 0.50 | % | | 0.37 | % | | 13 | bps | | 0.44 | % | | 6 | | bps | | Non-performing assets ratio | 0.50 | % | | 0.50 | % | | — | bps | | 0.50 | % | | — | | bps |
| Non-performing loans ratio | Non-performing loans ratio | 0.41 | | | 0.27 | | | 14 | | | 0.40 | | | 1 | | | Non-performing loans ratio | 0.40 | | | 0.39 | | | 1 | | | 0.41 | | | (1) | | |
| 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 | 0.01 | | | 0.01 | | | — | | | 0.02 | | | (1) | | |
| CET1 capital | CET1 capital | $ | 3,744,415 | | | $ | 3,743,459 | | | $ | 956 | | | $ | 3,790,393 | | | $ | (45,978) | | | CET1 capital | $ | 4,184,715 | | | $ | 4,034,865 | | | $ | 149,850 | | | $ | 3,744,415 | | | $ | 440,300 | | |
| Tier 1 capital | Tier 1 capital | 4,281,560 | | | 4,280,604 | | | 956 | | | 3,985,533 | | | 296,027 | | | Tier 1 capital | 4,721,860 | | | 4,572,010 | | | 149,850 | | | 4,281,560 | | | 440,300 | | |
| 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 | 5,733,956 | | | 5,604,230 | | | 129,726 | | | 5,289,039 | | | 444,917 | | |
| CET1 capital ratio | CET1 capital ratio | 8.70 | % | | 8.95 | % | | (25) | bps | | 9.52 | % | | (82) | | bps | | CET1 capital ratio | 9.74 | % | | 9.66 | % | | 8 | bps | | 8.70 | % | | 104 | | bps |
| Tier 1 capital ratio | Tier 1 capital ratio | 9.95 | | | 10.23 | | | (28) | | | 10.01 | | | (6) | | | Tier 1 capital ratio | 10.99 | | | 10.95 | | | 4 | | | 9.95 | | | 104 | | |
| Total risk-based capital ratio | Total risk-based capital ratio | 12.29 | | | 12.25 | | | 4 | | | 12.06 | | | 23 | | | Total risk-based capital ratio | 13.34 | | | 13.42 | | | (8) | | | 12.29 | | | 105 | | |
| 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 | 9.36 | | | 9.49 | | | (13) | | | 10.01 | | | (65) | | |
Tangible common equity ratio(1) | Tangible common equity ratio(1) | 7.94 | | | 8.08 | | | (14) | | | 8.34 | | | (40) | | | Tangible common equity ratio(1) | 7.55 | | | 7.66 | | | (11) | | | 7.94 | | | (39) | | |
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) | 15.77 | | | 12.31 | | | 346 | | | 2.75 | | | 1,302 | | |
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) | 15.93 | | | 13.91 | | | 202 | | | 2.79 | | | 1,314 | | |
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) | 18.04 | | | 15.79 | | | 225 | | | 3.39 | | | 1,465 | | |
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(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
COVID-19 Healthcare Crisis and Economic Environment
The COVID-19 outbreak and public health response to contain it have resulted in recessionary economic and financial market conditions as of the end of the first quarter. During March 2020 in response, 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 the following actions:
•Over 95% 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 team members were repositioned to work remotely;
•Offered bonus payments to hourly team members required to work on-site 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 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;
•Synovus participated in delivering PPP loans to customers beginning on April 3, 2020.
Additionally, in light of current economic uncertainty, Synovus has suspended 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.
Executive Summary
Net income available to common shareholders for the first quarter of 20202021 was $178.8 million, or $1.19 per diluted common share, a significant increase compared to $30.2 million, or $0.20 per diluted common share, a decrease of 74.2% and 71.7%, respectively, compared toin the first quarter of 2019.2020. Adjusted net income per common share, diluted(1) was $1.21, compared to $0.21 for the first quarters of 2021 and 2020, respectively. The year-over-year increase was impacted by a significant provision for credit losses recorded during the first quarter of 2020 down 79.0% compareddue to $0.98 for the first quarteronset of 2019. The year-over-year decline was driven by a significant increase in provision for credit lossesCOVID-19 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,.2020.
Net interest income was $373.3 million for the three months ended March 31, 2021 was $373.9 million, up $597 thousand compared to the same period in 2020 including $24.9 million in PPP processing fees during the first quarter of 2021. Net interest margin was down 6.0% from33 bps over the comparable three-month period in 2019 and down 6.5% from the fourth quarter of 2019,to 3.04%, due primarily to the decline in market interest rates and decline in PAA associated with the FCB acquisition. Theaccelerated prepayment activity. On a sequential quarter basis, net interest income was down $12.1 million and net interest margin was 3.37% for the firstdown 8 bps. The sequential quarter of 2020, down 41 bps and 28 bps from the first and fourth quarter of 2019, respectively. Synovus expectsdecline in net interest income was primarily due to a lower day count and a continuation of low-rate pressure, partially offset by further declines in deposit pricing and continued deployment of excess liquidity. As we progress through the second quarteryear, we expect to be relatively flat compared to first quarter levels as a result of significantsee increases in net interest income, excluding PPP fees, driven by loan growth, associated with the PPP. However, with this growth, along withdeployment of liquidity, a depressed rate environmentdeceleration of prepayments, and an elevated cash position, we expect continued downward pressure on our net interest margin in the second quarter.further deposit cost reductions.
Non-interest revenue for the first quarter of 20202021 was $103.9$111.0 million, up $24.5$7.1 million, or 30.8%7%, compared to the same period in 2020. Adjusted non-interest revenue(1), which excludes net investment securities gains/(losses) and increase/(decrease) in fair value of private equity investments, for the first quarter of 2019 and adjusted non-interest revenue(1) of $99.42021 was $112.9 million, was up $20.9$13.6 million, or 26.7%14%, from the first quarter of 2020. The increase in adjusted non-interest revenue was due primarily to strong growth inNet mortgage banking income capital markets income,of $22.3 million remained strong and growth in fiduciary businesses. The disruption from COVID-19 will likely resultdrove the year-over-year increase in non-interest revenue declining 15-25%revenue. While first quarter 2021 mortgage production levels remained elevated, the recent increase in the second quarter from our recent run rate of approximately $90 million. We expect non-interest revenuesinterest rates is likely to normalize, assuming the economy stabilizes.reduce production levels going forward.
Non-interest expense for the first quarter of 20202021 was $276.3$267.1 million, down $16.1$9.1 million, or 5.5%3%, compared to the first quarter of 20192020 and adjusted non-interest expense(1) of $271.2$266.6 million was up $28.5down $4.6 million, or 11.7%2%. The increase in adjusted expense over the first quarter of 2019 was largely driven by investments in talent and technology and growth in production related commissions and fees. The efficiency ratio-FTE for the first three months of 2020 was 57.81%, compared to 61.28% for the first three months of 2019. The adjusted tangible efficiency ratio(1) for the first three months of 20202021 was 56.72%54.19%, up 648down 253 bps compared to the same period a year ago. WithWe remain committed to prudent expense management, enabling us to continue investing in areas that position us for greater success, deliver a superior customer experience, and promote profitable growth.
At March 31, 2021, loans, net of deferred fees and costs, of $38.81 billion, increased $552.1 million, or 1%, from December 31, 2020 led by CRE growth of $208.2 million as the increasedrecovery of commercial real estate markets continued, C&I growth of $173.7 million driven by a $170.1 million increase in PPP loans, and consumer growth of $170.2 million primarily due to purchases of $607.0 million of third-party lending loans, including a $476.2 million prime auto portfolio purchase. These growth metrics were partially offset by declines in consumer mortgages and HELOCs of $214.3 million and $105.4 million, respectively, as consumers across the industry continued to use government stimulus to reduce revolving credit balances and deleverage.
At March 31, 2021, credit metrics remained stable with NPAs, NPLs, and past dues all near historical lows at Synovus, and net charge-offs remained low and declined $1.9 million on a sequential quarter basis to $20.2 million, or 21 basis points. Given elevated levels of COVID-19 related expenses, which we currently estimate at $5-6 millionliquidity and continued economic recovery, particularly in the second quarter,Southeast, we expect adjusted expenses to remain relatively stable quarter-on quarter, before decliningare not expecting a significant change in net charge-offs 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, 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, or11.9% 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
crisis and the first quarter under CECL.near term. The ACL at March 31, 20202021 totaled $531.9$614.7 million, consistinga decrease of an ALL$38.8 million from December 31, 2020, resulting from the improved economic outlook and stable loan portfolio metrics that were partially offset by the increased size of $493.5 million and reserve on unfunded commitments of $38.4 million resulting in anthe loan portfolio. 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%, the NPL ratio is up only one bp over prior year and total past dues declined to 0.22% from 0.33%, sequentially. Net charge-offs for the first quarter of 2020 were 21 bps, annualized, up from 10 bps in the fourth quarter of 2019. While Synovus does expect to experience stress in the portfolio as we progress through the current economic environment, the credit quality of the portfolio at March 31, 20202021 was generally stable. If1.58%, or 1.69% excluding PPP loans, and incorporates an outlook with moderate economic forecasts continue to deteriorate, we would expect to see a further increase inexpansion and benefits from the ACL.recently approved government stimulus.
Total period-end deposits at March 31, 20202021 increased $1.42 billion,$677.4 million, or 14.9% annualized,1%, compared to December 31, 2019,2020. Core transaction deposits (non-interest bearing, NOW/savings, and money market deposits excluding public and brokered funds) increased $2.05 billion, or 6%, compared to December 31, 2020. The increase in deposit balances compared to December 31, 2020 is due largely to government stimulus programs including strong core transaction deposit growth of $623.0 million, or 10.4% annualized.deposits associated with PPP loans.
At March 31, 2020,2021, Synovus' CET1 ratio was 8.70%9.74%, well in excess of regulatory requirements including the capital conservation buffer of 2.5%. The 23, and was up 8 bps decline in Synovus' CET1 ratio fromcompared to December 31, 2019 was largely due2020, driven by earnings. Synovus announced on January 26, 2021 that its Board of Directors authorized share repurchases of up to $200 million in 2021. During the increase in risk-weighted assets from loan growthfirst quarter of $1.10 billion.2021, the Company did not complete any share repurchases. During the second quarter of 2021, Synovus had repurchased $23.2 million, or 499 thousand shares of its common stock, at an average price of $46.52 per share, as of May 5, 2021.
More detail on Synovus' financial results for the three months ended March 31, 2020 and current and expected effects from COVID-192021 may be found in subsequentsubsequent 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 months ended March 31, 2020,2021, total assets increased $2.42 billion$764.9 million from $48.20$54.39 billion at December 31, 20192020 to $50.62$55.16 billion. Loans increased $1.10 billion,$552.1 million, including increases of $170.1 million in PPP loans net of unearned fees and a $476.2 million indirect auto portfolio purchase. Loans held for sale increased $233.8 million. Investment securities available for sale increased $863.3 million while cash and cash equivalents decreased $924.7 million.
The growth in assets was primarily funded by increases of $677.4 million in deposits. Securities sold under repurchase agreements increased $636.9$65.7 million. Total shareholders' equity at March 31, 2021 was flat, as compared to December 31, 2020, and included net income of $187.1 million and proceeds from stock option exercises of $12.6 million, offset by unrealized losses in investment securities available for sale increased $158.6 million. Additional investments in BOLI policies of $250.0 million during the three months ended March 31, 2020 also contributed to the increase in total assets. Other assets increased $490.9 million including increases in the fair valueand cash flow hedges of derivative assets of $326.4$121.0 million and a $169.7$22.4 million, receivable for securities available for sale sold during the quarter that will settle after quarter-end. The growth in assets was funded primarily by increasesrespectively, and dividends declared on common and preferred stock of $1.42 billion in deposits and the issuance of $400.0 million in long-term debt on February 12, 2020. Other liabilities increased $304.7 million including an increase in the fair value of derivative liabilities of $149.0$49.1 million and an accrued liability of $113.8$8.3 million, for purchases of securities available for sale that will settle after quarter-end.respectively.
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 loan to deposit ratio was 81.9% at both March 31, 2021 and December 31, 2020, compared to 96.1% at March 31, 2020, compared to 96.8% at December 31, 2019, and 93.6% at March 31, 2019.2020.
Loans
The following table compares the composition of the loan portfolio at March 31, 2020,2021, December 31, 2019,2020, and March 31, 2019.2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | | | | | | | | | | | | | | | | | | |
| | | | | | | | | March 31, 2021 vs. December 31, 2020 Change | | | | | | March 31, 2021 vs. March 31, 2020 Change |
| (dollars in thousands) | March 31, 2021 | | December 31, 2020 | | | March 31, 2020 | |
| Commercial, financial and agricultural | $ | 12,662,329 | | | 32.6 | % | | $ | 12,410,152 | | | 32.4 | % | | $ | 252,177 | | | 2 | % | | $ | 10,902,455 | | | 28.4 | % | | $ | 1,759,874 | | | 16 | % |
| Owner-occupied | 7,031,505 | | | 18.1 | | | 7,110,016 | | | 18.6 | | | (78,511) | | | (1) | | | 6,907,893 | | | 18.1 | | | 123,612 | | | 2 | |
| Total commercial and industrial | 19,693,834 | | | 50.7 | | | 19,520,168 | | | 51.0 | | | 173,666 | | | 1 | | | 17,810,348 | | | 46.5 | | | 1,883,486 | | | 11 | |
| Investment properties | 9,335,725 | | | 24.1 | | | 9,103,379 | | | 23.8 | | | 232,346 | | | 3 | | | 9,024,916 | | | 23.6 | | | 310,809 | | | 3 | |
| 1-4 family properties | 638,954 | | | 1.6 | | | 628,695 | | | 1.6 | | | 10,259 | | | 2 | | | 736,937 | | | 1.9 | | | (97,983) | | | (13) | |
| Land and development | 559,249 | | | 1.4 | | | 593,633 | | | 1.6 | | | (34,384) | | | (6) | | | 713,505 | | | 1.9 | | | (154,256) | | | (22) | |
| Total commercial real estate | 10,533,928 | | | 27.1 | | | 10,325,707 | | | 27.0 | | | 208,221 | | | 2 | | | 10,475,358 | | | 27.4 | | | 58,570 | | | 1 | |
| Consumer mortgages | 5,299,175 | | | 13.7 | | | 5,513,491 | | | 14.4 | | | (214,316) | | | (4) | | | 5,613,997 | | | 14.7 | | | (314,822) | | | (6) | |
| Home equity lines | 1,432,367 | | | 3.7 | | | 1,537,726 | | | 4.0 | | | (105,359) | | | (7) | | | 1,793,486 | | | 4.7 | | | (361,119) | | | (20) | |
| Credit cards | 267,371 | | | 0.7 | | | 281,018 | | | 0.7 | | | (13,647) | | | (5) | | | 261,581 | | | 0.7 | | | 5,790 | | | 2 | |
| Other consumer loans | 1,578,426 | | | 4.1 | | | 1,074,874 | | | 2.9 | | | 503,552 | | | 47 | | | 2,303,254 | | | 6.0 | | | (724,828) | | | (31) | |
| Total consumer | 8,577,339 | | | 22.2 | | | 8,407,109 | | | 22.0 | | | 170,230 | | | 2 | | | 9,972,318 | | | 26.1 | | | (1,394,979) | | | (14) | |
| Loans, net of deferred fees and costs | $ | 38,805,101 | | | 100.0 | % | | $ | 38,252,984 | | | 100.0 | % | | $ | 552,117 | | | 1 | % | | $ | 38,258,024 | | | 100.0 | % | | $ | 547,077 | | | 1 | % |
| | | | | | | | | | | | | | | | | | | |
At March 31, 2020, total2021, loans, net of deferred fees and costs, of $38.26$38.81 billion, increased $1.10 billion,$552.1 million, or 11.9% annualized,1%, from December 31, 20192020 led by CRE growth of $208.2 million as the recovery of commercial real estate markets continued, C&I growth of $173.7 million driven by a $170.1 million increase in PPP loans, and $2.62 billion, or 7.4%, comparedconsumer growth of $170.2 million primarily due to March 31, 2019.purchases of $607.0 million of third-party lending loans, including a $476.2 million prime auto loans purchase. These growth metrics were partially offset by declines in consumer mortgages and HELOCs of $214.3 million and $105.4 million, respectively, as consumers across the industry continued to use government stimulus to reduce revolving credit balances and deleverage. C&I loansloans remain the largest component of our balance sheetloan portfolio, representing 46.1%50.7% of total loans, while CRE and consumer loans represent 27.9%,27.1% and 26.0%22.2%, respectively. Our portfolio composition is established through a comprehensive concentration management policy which sets limits for C&I, CRE, and Consumerconsumer loan levels as well as for sub-categories therein.
U.S. Small Business Administration Paycheck Protection Program (PPP)
Synovus is participating in the 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, which was signed into law on April 24, 2020. Under the initial program, 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 provided nearly $2.9 billion in funding to close to 19,000 customers through the initial PPP, at
an average loan size of approximately $150 thousand. In the fourth quarter of 2020, Synovus began receiving first draw PPP loan forgiveness that totals $1.25 billion, or $1.20 billion net of unearned fees, life-to-date through March 31, 2021, including PPP loan forgiveness of $711 million, or $687 million net of unearned fees, during the first quarter of 2021.
On December 27, 2020, the Economic Aid to Hard-Hit Businesses, Nonprofits, and Venues Act was signed into law, and authorized the SBA to reopen the PPP for first draw loans, as well as guarantee second draw PPP loans of up to $2 million for certain eligible borrowers that previously received a PPP loan. These loans carry a fixed rate of 1.00% and a term of five 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 based on the size of the loan.
On March 11, 2021, the American Rescue Plan Act of 2021 was enacted which primarily expanded and clarified eligibility for first and second draw PPP loans and revised the exclusions from payroll costs for purposes of loan forgiveness.
Synovus began participating in the second phase of the PPP on January 19, 2021 with almost 10,000 applications submitted totaling $1.09 billion and total fundings of $894 million, or $857 million net of unearned fees, as of March 31, 2021. The total balance of PPP loans was $2.36 billion as of March 31, 2021, compared to $2.19 billion as of December 31, 2020.
Commercial Loans
Total commercial loans (which are comprised of C&I and CRE loans) at March 31, 20202021 were $28.33$30.23 billion, or 74.0%77.9%, of the total loan portfolio, compared to $27.26$29.85 billion, or 73.4%78.0%, at December 31, 20192020 and $26.40$28.29 billion, or 74.0%73.9%, at March 31, 2019.2020.
At March 31, 2020,2021, Synovus had eight 6 commercial loan relationships with total commitments of $100 million or more (including amounts funded), with noone 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 setwide range 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, 2020, 92.3%2021, 82.5% (93.7% excluding PPP loans) of Synovus' C&I loans are secured by real estate, business equipment, inventory, and other types of collateral.collateral compared to 83.2% (93.8% excluding PPP loans) as of December 31, 2020. C&I loans of $17.66 billion, or 46.1% of the loan portfolio, grew $878.8$173.7 million, or 21.1% annualized,1%, from December 31, 2019,2020, driven primarily by strong productivity from our Wholesale Banking segment across many specialty divisions as well as ana $170.1 million increase in line utilization due to the economic and financial market conditions as of the end of the first quarter of 2020.PPP loans at March 31, 2021.
| | 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 | | | March 31, 2021 | | December 31, 2020 |
| (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 | $ | 3,962,288 | | | 20.1 | % | | $ | 3,891,162 | | | 19.9 | % |
| Finance and insurance | Finance and insurance | 1,506,106 | | | 8.5 | | | 1,263,521 | | | 7.5 | | Finance and insurance | 1,772,701 | | | 9.0 | | | 1,685,797 | | | 8.6 | |
| Accommodation and food services | | Accommodation and food services | 1,325,876 | | | 6.7 | | | 1,205,107 | | | 6.2 | |
| Manufacturing | Manufacturing | 1,282,100 | | | 7.3 | | | 1,208,688 | | | 7.2 | | Manufacturing | 1,323,787 | | | 6.7 | | | 1,275,169 | | | 6.5 | |
| Retail trade | Retail trade | 1,214,539 | | | 6.9 | | | 1,202,958 | | | 7.2 | | Retail trade | 1,256,529 | | | 6.4 | | | 1,303,263 | | | 6.7 | |
| Wholesale trade | Wholesale trade | 1,163,175 | | | 6.6 | | | 1,138,145 | | | 6.8 | | Wholesale trade | 1,163,470 | | | 5.9 | | | 1,152,082 | | | 5.9 | |
| Professional, scientific, and technical services | | Professional, scientific, and technical services | 1,122,222 | | | 5.7 | | | 1,133,549 | | | 5.8 | |
| Real estate and rental and leasing | Real estate and rental and leasing | 1,147,800 | | | 6.5 | | | 1,126,828 | | | 6.7 | | Real estate and rental and leasing | 1,118,034 | | | 5.7 | | | 1,158,367 | | | 5.9 | |
| Accommodation and food services | 1,002,118 | | | 5.7 | | | 921,515 | | | 5.5 | | |
| Professional, scientific, and technical services | 1,000,676 | | | 5.7 | | | 883,433 | | | 5.3 | | |
| Other services | Other services | 986,081 | | | 5.6 | | | 1,005,420 | | | 6.0 | | Other services | 1,104,261 | | | 5.6 | | | 1,123,109 | | | 5.8 | |
| Construction | | Construction | 1,056,487 | | | 5.4 | | | 1,036,652 | | | 5.3 | |
| Transportation and warehousing | Transportation and warehousing | 863,306 | | | 4.9 | | | 854,954 | | | 5.1 | | Transportation and warehousing | 938,935 | | | 4.8 | | | 924,275 | | | 4.7 | |
| Construction | 825,388 | | | 4.7 | | | 716,192 | | | 4.3 | | |
| Arts, entertainment and recreation | 789,778 | | | 4.5 | | | 771,846 | | | 4.6 | | |
| Arts, entertainment, and recreation | | Arts, entertainment, and recreation | 702,007 | | | 3.6 | | | 777,905 | | | 4.0 | |
| Real estate other | Real estate other | 625,449 | | | 3.5 | | | 615,441 | | | 3.7 | | Real estate other | 701,448 | | | 3.6 | | | 686,350 | | | 3.5 | |
| Educational services | Educational services | 483,554 | | | 2.7 | | | 409,639 | | | 2.4 | | Educational services | 439,818 | | | 2.2 | | | 395,193 | | | 2.0 | |
| 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 | 437,142 | | | 2.2 | | | 435,636 | | | 2.2 | |
| 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 | 368,172 | | | 1.9 | | | 377,065 | | | 1.9 | |
| Agriculture, forestry, fishing, and hunting | | Agriculture, forestry, fishing, and hunting | 357,473 | | | 1.8 | | | 383,010 | | | 2.0 | |
| Information | Information | 307,495 | | | 1.7 | | | 314,740 | | | 1.9 | | Information | 312,333 | | | 1.6 | | | 291,425 | | | 1.5 | |
| Other Industries | 259,528 | | | 1.3 | | | 251,770 | | | 1.4 | | |
| Other industries | | Other industries | 230,851 | | | 1.1 | | | 285,052 | | | 1.6 | |
| 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 | $ | 19,693,834 | | | 100.0 | % | | $ | 19,520,168 | | | 100.0 | % |
|
(1) Loan balance in each category expressed as a percentage of total C&I loans.
At March 31, 2020, $11.022021, $12.66 billion of C&I loans, or 28.8%32.6% of the total loan portfolio (including PPP loans of $2.36 billion), 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, 2020, $6.642021, $7.03 billion of C&I loans, or 17.3%18.1% 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$10.53 billion or 27.9% of the loan portfolio, increased $190.7208.2 million, or 7.3% annualized,2%, from December 31, 2019,2020, driven primarily by growth in income-producing investment properties.properties as the recovery of commercial real estate markets continues.
Investment properties loans consist of construction and mortgage loans for income-producingincome-producing properties and are primarily made to finance multi-family properties, hotels, office buildings, shopping centers, warehouses and other commercial development properties. Total investment properties loans as of March 31, 20202021 were $9.26$9.34 billion, or 86.8%88.6%, of the CRE loan portfolio, and 24.2% of the loan portfolio, and increased $215.1$232.3 million, or 9.6% annualized, 3%,from December 31, 20192020 with most sub-categories experiencing growth other than office buildings and shopping centers,warehouses, which were flat and down 10.0% annualized, respectively.$7.8 million, or 1%, from December 31, 2020.
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, 2020,2021, 1-4 family properties loans totaled
$751.5 $639.0 million, or 7.0%6.1% of the CRE loan portfolio, and 2.0% of the loan portfolio, and decreasedincreased by $28.5$10.3 million, or 14.7% annualized2%, from December 31, 2019.2020.
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$559.2 million at March 31, 2020, or 1.7% of the loan portfolio, increased slightly by $4.22021 decreased $34.4 million, or 2.5% annualized,6%, from $593.6 million at December 31, 2019.2020.
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, personal, and personal loansauto loans from third-party lending partnerships.lending. 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, 2020 of $9.95 billion, or 26.0% of the loan portfolio, increased $26.3 million, or 1.1% annualized, compared to $9.92 billion at December 31, 2019. Consumer mortgages grew $61.8 million, or 4.5% annualized, from December 31, 2019 primarily as a result of the rate environment and additional mortgage loan originators. HELOCs increased $65.7 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. Credit card loans of $261.6 million at March 31, 2020 included $62.4 million of commercial credit card loans,and decreased marginally from $268.8 million at December 31, 2019. Other consumer loans decreased $93.9 million, or 15.8% annualized, from December 31, 2019, primarily due to pay-downs related to our third-party lending partnerships. As of March 31, 2020, these partnerships had combined balances of $1.89 billion, or 4.9% of the loan portfolio.
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, 2020,2021, weighted-average FICO scores within the residential real estate portfolio based on committed balances were 786 790for HELOCs and 775 773for Consumer Mortgages.
U.S. Small Business Administration Paycheck Protection Program
Consumer loans at March 31, 2021 of $8.58 billion increased $170.2 million, or 2%, compared to December 31, 2020. Consumer mortgages decreased $214.3 million, or 4%, from December 31, 2020, and HELOCs decreased $105.4 million, or 7%, from December 31, 2020. Credit card loans of $267.4 million at March 31, 2021 decreased $13.6 million, or 5% from $281.0 million at December 31, 2020. The CARES Act included an allocationreductions in consumer mortgages, HELOCs, and credit card loans are primarily a result of $349 billion for loansconsumers continuing to be issued by financial institutions through the Small Business Administration (“SBA”). This program is knownuse government stimulus to reduce revolving credit balances and deleverage as well as the Paycheck Protection Program (“PPP”). PPPcompetitive low rate environment. Other consumer loans, are forgivable, in wholewhich primarily includes third-party lending, increased $503.6 million, or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements47%, from December 31, 2020. As of March 31, 2021, third-party lending balances totaled $1.18 billion, or 3.0%, of the PPP. Thesetotal loan portfolio, and increased $503.2 million, or 74%, compared to December 31, 2020, led by purchases of $607.0 million of third-party lending loans, carryincluding a fixed rate of 1.00%$476.2 million prime auto loans purchase. We believe that the risk-return profile, the 2-year average life, and a term of two years, if not forgiven, in whole or in part. Payments are deferred for the first six monthsliquidity of the loan. The loans are 100% guaranteed byasset class is a good fit under current market conditions. We will continue to use third-party lending to manage the SBA. The SBA pays the originating bank a processing fee ranging from 1%balance sheet, which could lead 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 billionincreases in funding to over 18,000 customers through the PPP, as of May 7, 2020.
this portfolio.
Deposits
Deposits provide the most significant funding source for interest earning assets. The following table shows the composition of period-end deposits as 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) | March 31, 2021 | | %(1) | | December 31, 2020 | | %(1) | | | March 31, 2020 | | %(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) | $ | 13,742,075 | | | 29.0 | % | | $ | 12,382,708 | | | 26.5 | % | | | $ | 8,968,756 | | | 22.5 | % |
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) | 5,841,749 | | | 12.3 | | | 5,674,416 | | | 12.2 | | | | 4,617,368 | | | 11.6 | |
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) | 13,943,717 | | | 29.5 | | | 13,541,236 | | | 29.0 | | | | 10,255,014 | | | 25.8 | |
Savings deposits(2) | Savings deposits(2) | 949,483 | | | 2.4 | | | 909,500 | | | 2.4 | | | | 903,822 | | | 2.4 | | Savings deposits(2) | 1,277,034 | | | 2.7 | | | 1,156,249 | | | 2.5 | | | | 949,483 | | | 2.4 | |
| Public funds | Public funds | 5,261,383 | | | 13.2 | | | 4,622,318 | | | 12.0 | | | | 4,630,022 | | | 12.2 | | Public funds | 6,154,948 | | | 13.0 | | | 6,760,628 | | | 14.5 | | | | 5,261,383 | | | 13.2 | |
Time deposits(2) | Time deposits(2) | 5,786,633 | | | 14.5 | | | 6,185,611 | | | 16.1 | | | | 7,568,079 | | | 19.9 | | Time deposits(2) | 3,214,761 | | | 6.8 | | | 3,605,928 | | | 7.7 | | | | 5,786,633 | | | 14.5 | |
| Brokered deposits | Brokered deposits | 3,987,948 | | | 10.0 | | | 3,429,993 | | | 8.9 | | | | 2,709,004 | | | 7.1 | | Brokered deposits | 3,194,667 | | | 6.7 | | | 3,570,406 | | | 7.6 | | | | 3,987,948 | | | 10.0 | |
| Total deposits | Total deposits | $ | 39,826,585 | | | 100.0 | % | | $ | 38,405,504 | | | 100.0 | % | | | $ | 38,075,190 | | | 100.0 | % | Total deposits | $ | 47,368,951 | | | 100.0 | % | | $ | 46,691,571 | | | 100.0 | % | | | $ | 39,826,585 | | | 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) | $ | 44,174,284 | | | 93.3 | % | | $ | 43,121,165 | | | 92.4 | % | | | $ | 35,838,637 | | | 90.0 | % |
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) | $ | 34,804,575 | | | 73.5 | % | | $ | 32,754,609 | | | 70.2 | % | | | $ | 24,790,621 | | | 62.2 | % |
| | 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 | $ | 4,105,424 | | | 8.7 | % | | $ | 4,748,029 | | | 10.2 | % | | | $ | 7,176,468 | | | 18.0 | % |
| Brokered time deposits | Brokered time deposits | $ | 2,229,596 | | | 5.6 | % | | $ | 2,154,095 | | | 5.6 | % | | | $ | 1,902,962 | | | 5.0 | % | Brokered time deposits | $ | 1,281,027 | | | 2.7 | % | | $ | 1,590,096 | | | 3.4 | % | | | $ | 2,229,596 | | | 5.6 | % |
|
(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 March 31, 20202021 increased $1.42 billion,$677.4 million, or 14.9% annualized,1%, compared to December 31, 2019.2020. Core transaction deposit growth was very strong, up $623.0 million,deposits increased $2.05 billion, or 10.4% annualized,6%, compared to December 31, 2019. Within2020, due largely to government stimulus programs including deposits associated with the second phase of PPP loans. The sequential quarter growth in lower cost core transaction deposit category,accounts of $2.05 billion included growth in non-interest-bearing demand deposits increased $307.5 million andof $1.36 billion, money market accounts increased $427.7 million. Public fund deposits increased $639.1of $402.5 million, while higher costNOW accounts of $167.3 million, and savings balances of $120.8 million, and more than offset decreases of $391.2 million and $375.7 million in time deposits and brokered deposits, respectively, as well as declines of $605.7 million in public funds. Total deposit costs declined $399.0 million,6 bps during the first quarter of 2021, compared to year-end 2019. Additionally, Synovus increased funding by $558.0 million in lower priced brokered deposits, at March 31,the fourth quarter of 2020, compareddue to December 31, 2019.repricing and remixing within the deposit portfolio.
On an average basis, the increase in total deposits was $808.4$480.9 million, or 8.6% annualized,1%, compared to the fourth quarter of 2019.2020.
Non-interest Revenue
Non-interest revenue for the first quarter of 20202021 was $103.9$111.0 million, up $24.5$7.1 million, or 30.8%7%, compared to the same period in 2020. Adjusted non-interest revenue, which excludes net investment securities gains/(losses) and increase/(decrease) in fair value of private equity investments, for the first quarter of 2019 and adjusted non-interest revenue of $99.42021 was $112.9 million, was up $20.9$13.6 million, or 26.7%14%, from the first quarter of 2020. The increase in adjusted non-interest revenue was due primarily to strong growth inNet mortgage banking income capital markets income,of $22.3 million remained strong and growthdrove the year-over-year increase in fiduciary businesses including growthnon-interest revenue. While first quarter 2021 mortgage production levels remained elevated, the recent increase in brokerage revenue.interest rates is likely to reduce production levels going forward. See "Table 14 - Reconciliation of Non-GAAP Financial Measures” in this Report for applicable reconciliation to GAAP measures.
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 March 31, | |
| (dollars in thousands) | (dollars in thousands) | 2020 | | 2019 | | % Change | | (dollars in thousands) | 2021 | | 2020 | | % Change | |
| Service charges on deposit accounts | Service charges on deposit accounts | $ | 20,689 | | | $ | 20,859 | | | (0.8) | % | | Service charges on deposit accounts | $ | 20,033 | | | $ | 20,689 | | | (3) | % | |
| Fiduciary and asset management fees | Fiduciary and asset management fees | 15,174 | | | 13,578 | | | 11.8 | | | Fiduciary and asset management fees | 17,954 | | | 15,174 | | | 18 | | |
| Card fees | Card fees | 10,950 | | | 10,877 | | | 0.7 | | | Card fees | 11,996 | | | 10,950 | | | 10 | | |
| Brokerage revenue | Brokerage revenue | 12,398 | | | 9,379 | | | 32.2 | | | Brokerage revenue | 12,974 | | | 12,398 | | | 5 | | |
| Mortgage banking income | Mortgage banking income | 12,227 | | | 5,054 | | | 141.9 | | | Mortgage banking income | 22,315 | | | 12,227 | | | 83 | | |
| Capital markets income | Capital markets income | 11,243 | | | 5,245 | | | 114.4 | | | Capital markets income | 7,505 | | | 11,243 | | | (33) | | |
| Income from bank-owned life insurance | Income from bank-owned life insurance | 6,038 | | | 5,290 | | | 14.1 | | | Income from bank-owned life insurance | 8,843 | | | 6,038 | | | 47 | | |
| Investment securities gains, net | 8,734 | | | 75 | | | nm | | | |
| (Decrease) increase in fair value of private equity investments | (4,255) | | | 858 | | | nm | | | |
| Investment securities (losses) gains, net | | Investment securities (losses) gains, net | (1,990) | | | 8,734 | | | nm | |
| Decrease in fair value of private equity investments | | Decrease in fair value of private equity investments | — | | | (4,255) | | | nm | |
| Other non-interest revenue | Other non-interest revenue | 10,659 | | | 8,163 | | | 30.6 | | | Other non-interest revenue | 11,326 | | | 10,659 | | | 6 | | |
| Total non-interest revenue | Total non-interest revenue | $ | 103,857 | | | $ | 79,378 | | | 30.8 | % | | Total non-interest revenue | $ | 110,956 | | | $ | 103,857 | | | 7 | % | |
|
Three Months Ended March 31, 20202021 compared to March 31, 20192020
Service charges on deposit accounts for the three months ended March 31, 20202021 were down $170$656 thousand, or 0.8%3%, due largely to the impact of higher average balances as a result of 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 $3.0 million, or 2.5%34%, for the three months ended March 31, 2020.2021. Account analysis fees were down $19 thousand,up $2.2 million, or 0.3%32%, for the three months ended March 31, 2020.2021, following our pricing for value initiative implemented during the first quarter of 2021 as part of Synovus Forward. 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 months ended March 31, 2020,2021, were down $366up $132 thousand, or 7.1%3%. Beginning in March, to help customers through the period of financial distress, Synovus is offering to waive NSF 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.
Fiduciary and asset management fees are derived from providing estate administration, personal trust, corporate trust, corporate bond, investment management, and financial planning, and family office services. Fiduciary and asset management fees increased $1.6$2.8 million, or 11.8%18%, for the three months ended March 31, 2020, due primarily to2021. 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 due35% year-over-year to COVID-19.$20.59 billion.
Card fees for the three months ended March 31, 20202021 were essentially flat compared to the same periodup $1.0 million, or 10%, with increased transaction volume in 2019.all card fee categories. 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 $12.4of $13.0 million for the three months ended March 31, 2020,2021 was up $3.0 million,$576 thousand, or 32.2%, compared to the three months ended March 31, 2019,5%. The year-over-year increase was driven by growth in assets under management increasing contributions from 2019 new hires, and higher transaction revenue from elevated driven by favorable
market volatility.conditions. 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 billion at March 31, 2020, an increase of 11.5% from $3.1 billion at March 31, 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 $7.2was significantly higher in the first three months of 2021, with an increase of $10.1 million forcompared to the three months ended March 31, 2020. 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.volume. Total secondary market mortgage loan production was $250.8$573.1 million, up $318.6 million, for the three months ended March 31, 2020, up $127.5 million, or 103.4%, compared2021. While first quarter 2021 mortgage production levels remained elevated, the recent increase in interest rates is likely to the three months ended March 31, 2019.reduce production levels going forward.
Capital markets income primarily includes fee income from customer derivativederivative 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 markets income increased $6.0was $3.7 million lower for the three months ended March 31, 20202021, as commercial clients lockedclient activity to lock in lower rates on borrowings.
Income from BOLI, which includes increases in the cash surrender value of policies and proceeds from insurance benefits, increased $748 thousand,$2.8 million, or 14.1%47%, for the three months ended March 31, 2020,2021, due primarilyprimarily to additional investments in BOLI policies during the first quarter of 2020.income on proceeds from insurance benefits. The first three months of 20202021 included income on proceeds from insurance benefits of $2.1 million compared to $118 thousand compared to $233 thousand in 2019.2020.
Investment securities gainslosses, net, of $8.7$2.0 million for the three months ended March 31, 20202021 reflected strategic repositioningsales of the portfolio.
(Decrease)/increase in the fair value of private equity investments included unrealized decreases in fair value of $4.3 million during the three months ended March 31, 2020, due primarily to market volatility in certain investments which recently became public and contain lock-up periods.mortgage-backed securities.
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 and loan servicing fees, income from insurance commissions, gains from sales of GGL/SBA loans, and other miscellaneous items.items. The first quarterthree months ended March 31, 2021 included unrealized valuation gains of $3.5 million associated with deferred compensation and the three months ended March 31, 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 the second quarter of 2020.million.
Non-interest Expense
Non-interest expense for the first quarter of 20202021 was $276.3$267.1 million, down $16.1$9.1 million, or 5.5%3%, compared to the first quarter of 20192020 and adjusted non-interest expense which excludes merger-related expense, loss on early extinguishment of debt, and restructuring charges,of $271.2$266.6 million was up $28.5down $4.6 million, or 11.72%.%. The increase in adjusted expense over the first quarter of 2019 was largely driven by investments in talent and technology and growth in production-related commissions and fees. The efficiency ratio-FTE for the first three months of 2020 was 57.81%, compared to 61.28% for the first three months of 2019. The adjusted tangible efficiency ratio for the first three months of 20202021 was 56.72%54.19%, up 648down 253 bps compared to the same period a year ago. We remain committed to prudent expense management, enabling us to continue investing in areas that position us for greater success, deliver a superior customer experience, and promote profitable growth. 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 March 31, | |
| (dollars in thousands) | (dollars in thousands) | 2020 | | 2019 | | % Change | | (dollars in thousands) | 2021 | | 2020 | | % Change | |
| Salaries and other personnel expense | Salaries and other personnel expense | $ | 149,678 | | | $ | 139,427 | | | 7.4 | % | | Salaries and other personnel expense | $ | 161,477 | | | $ | 149,678 | | | 8 | % | |
| Net occupancy and equipment expense | 42,194 | | | 38,394 | | | 9.9 | | | |
| Net occupancy, equipment, and software expense | | Net occupancy, equipment, and software expense | 41,134 | | | 42,194 | | | (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 | 20,032 | | | 22,700 | | | (12) | | |
| Professional fees | Professional fees | 10,675 | | | 6,348 | | | 68.2 | | | Professional fees | 9,084 | | | 10,675 | | | (15) | | |
| FDIC insurance and other regulatory fees | FDIC insurance and other regulatory fees | 5,278 | | | 6,761 | | | (21.9) | | | FDIC insurance and other regulatory fees | 5,579 | | | 5,278 | | | 6 | | |
| Advertising expense | 4,752 | | | 5,123 | | | (7.2) | | | |
| Merger-related expense | — | | | 49,738 | | | nm | | | |
| Amortization of intangibles | | Amortization of intangibles | 2,379 | | | 2,640 | | | (10) | | |
| Restructuring charges | Restructuring charges | 3,220 | | | 19 | | | nm | | | Restructuring charges | 531 | | | 3,220 | | | nm | |
| Loss on early extinguishment of debt | Loss on early extinguishment of debt | 1,904 | | | — | | | nm | | | Loss on early extinguishment of debt | — | | | 1,904 | | | nm | |
| Other operating expenses | Other operating expenses | 37,098 | | | 28,842 | | | 28.6 | | | Other operating expenses | 26,918 | | | 37,990 | | | (29) | | |
| Total non-interest expense | Total non-interest expense | $ | 276,279 | | | $ | 292,410 | | | (5.5) | % | | Total non-interest expense | $ | 267,134 | | | $ | 276,279 | | | (3) | % | |
|
Three Months Ended March 31, 20202021 compared to March 31, 20192020
Salaries and other personnel expense increased $10.3$11.8 million, or 7.4%8%, for the three months ended March 31, 2020 including talent additions and2021, due primarily to higher mortgage production-based commissions with commission and incentiveexpense up $2.3 million, higher share-based compensation expense including $1.0of $4.1 million largely due to timing with higher level of retirement eligible expense acceleration, and valuation expense of $3.5 million associated with deferred compensation from higher market valuations (offset with unrealized valuation gains in COVID-19 related bonus payments to certain front-line employeeother non-interest revenue). Total headcount of 5,175 declined 72 from December 31, 2020 and 253 from
s. Synovus will continue to assess the need for bonus pay to front-line team members
March 31, 2020 led by Synovus' voluntary early retirement program offered during the healthcare crisis.fourth quarter of 2020 and branch closures.
Net occupancy, equipment, and equipmentsoftware expense increased $3.8decreased $1.1 million, or 9.9%3%, during the three months ended March 31, 2020,2021, due primarily due to investments in technology. Synovus expects minimal technology expense duea reduction of 10 branches, as compared to COVID-19.December 31, 2019.
Third-party processing and other services includes all third-party core operating system and processing chargescharges as well as third-party loan servicing charges. Third-party processing expense increased $3.7decreased $2.7 million, or 21.0%12%, for the three months ended March 31, 2020.2021. The increasedecline is primarily associated with loan growth from Synovus' restructure of certain of its third-party consumer-based lending partnerships.partnership arrangements during the second quarter of 2020 with a shift of new originations to held for sale and thereby reducing third-party loan servicing expense.
Professional fees increased $4.3decreased $1.6 million, or 68.2%15%, for the three months ended March 31, 2020 mostly2021, from increasesdecreases in consulting fees with $2.0 million related to Synovus' internalSynovus Forward, our revenue growth and efficiency initiative, "Synovus Forward".initiatives.
FDIC insurance and other regulatory fees were down $1.5 million for the three months ended March 31, 2020 due toincluded the benefit of a $1.5 million reversal of $1.5 million in estimated additional expense accrued during the fourth quarter of 2019.
In connection with the FCB acquisition, Synovus incurred merger-related expense totaling $49.7 million forDuring the three months ended March 31, 2019,2021, Synovus recorded $531 thousand in restructuring charges primarily related to employment compensation agreements, severance, and professional services. See "Part I - Item 1. Financial Statements and Supplementary Data - Note 2 - Acquisitions"associated with two branch closures that will occur in this Report for more information on the acquisitionApril 2021 as part of FCB.
Synovus Forward. During the three months ended March 31, 2020, Synovus recorded restructuring charges of $3.2 million in restructuring charges from asset impairments, lease terminations, and severance related to 7seven branches closed in the first quarter of 2020.
On February 25, 2020, Synovus terminated a $250 million long-term FHLB obligation and incurred a $1.9 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 up $8.3down $11.1 million for the three months ended March 31, 20202021 driven by declines in most all expense categories including a $2.7declines of $3.0 million valuation adjustment on a MPS receivablein advertising and a $2.5$1.3 million charge from termination of customer swaps.in travel.
Income Tax Expense
Income tax expense was $49.2 million for the three months ended March 31, 2021, representing an effective tax rate of 20.8%, compared to income tax expense of $3.6 million and $40.4 million ffor the orthree months ended March 31, 2020, representing an effective tax rate of 8.5%. The effective tax rate for the three months ended March 31, 2020 and 2019, respectively. The effective2021 is lower than the statutory tax rate for the same periods was 8.5%primarily due to discrete benefits of $6.2 million related to changes in amounts taxable by jurisdictions and 25.2%.$1.8 million related to share-based compensation, partly offset by discrete expense of $4.1 million related to other accrual adjustments. The decrease in the effective tax rate for the three months ended March 31, 2020 as comparedwas lower than the statutory tax rate primarily due to the three months ended March 31, 2019, reflects a one-time discrete benefit of $2.7 million for carrying backthe carryback of net operating loss deductions to pre-TJCA tax periods, as allowedpermitted by the CARES Act, and $3.4 million inof other discrete benefit items, including discrete items related to prior periods. Additionally, theitems.
Synovus’ effective tax rate in the first quarter of 2019 was higher largely due to non-deductible merger-related expenses associated with the FCB acquisition.
The effective tax rate is affected byconsiders many factors including, but not limited to, the level of pre-tax income, BOLI, tax-exempt interest, certain income tax credits, 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.
WithOn March 31, 2021, the exceptionBiden Administration released the details of the net operating loss carryback recordedMade in America Tax Plan which proposes an increase in the first quarter of 2020, we do not expectfederal corporate income tax rate to 28%, up from the provisions ofcurrent 21%, among numerous other proposals. We continue to monitor the CARES Actlegislative process and the potential impact to have a significant impact on the Company’s current tax provision.Company and its customers.
CREDIT QUALITY, CAPITAL RESOURCES AND LIQUIDITY
Credit Quality
SynovusSynovus continuously monitors the quality of its loan portfolio by industry, property type, geography, as well as credit quality metrics. While we expectAt March 31, 2021, credit metrics remained stable with NPAs, NPLs, and past dues all near historical lows, and net charge-offs remained low and declined $1.9 million on a sequential quarter basis to experience stress$20.2 million, or 21 basis points. Given elevated levels of liquidity and continued economic recovery, particularly in the portfolio asSoutheast, we progress through the current economic environment, the credit quality of the portfolio at March 31, 2020 was generally stable. If economic forecasts continue to deteriorate, we would expect to seeare not currently expecting a further increasesignificant change in net charge-offs in the allowance for credit losses.near term.
At March 31, 2020, 12% of Synovus' loan portfolio, or approximately $4.6 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 billion, followed by shopping centers (excluding those with a grocery, pharmacy, or discount store anchor) at $1.01 billion and restaurants at $800 million. While our entire loan portfolio is being continuously assessed, enhanced monitoring for these sectors has been introduced. 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 | | | | | |
| (dollars in thousands) | March 31, 2020 | | December 31, 2019 | | March 31, 2019 |
| Non-performing loans | $ | 156,287 | | | $ | 101,636 | | | $ | 143,976 | |
| ORE and other assets | 33,679 | | | 35,810 | | | 11,341 | |
| Non-performing assets | $ | 189,966 | | | $ | 137,446 | | | $ | 155,317 | |
| Total loans | $ | 38,258,024 | | | $ | 37,162,450 | | | $ | 35,634,501 | |
| Non-performing loans as a % of total loans | 0.41 | % | | 0.27 | % | | 0.40 | % |
| Non-performing assets as a % of total loans, ORE, and specific other assets | 0.50 | | | 0.37 | | | 0.44 | |
| Loans 90 days past due and still accruing | $ | 6,398 | | | $ | 15,943 | | | $ | 4,486 | |
| As a % of total loans | 0.02 | % | | 0.04 | % | | 0.01 | % |
| Total past due loans and still accruing | $ | 83,235 | | | $ | 123,793 | | | $ | 88,135 | |
| As a % of total loans | 0.22 | % | | 0.33 | % | | 0.25 | % |
| Net charge-offs, quarter | $ | 20,061 | | | $ | 8,821 | | | $ | 17,088 | |
| Net charge-offs annualized/average loans, quarter | 0.21 | % | | 0.10 | % | | 0.19 | % |
| Provision for loan losses, quarter | $ | 149,117 | | | $ | 24,470 | | | $ | 23,569 | |
| Provision for unfunded commitments, quarter | 9,605 | | | * | | * |
| Provision for credit losses, quarter | $ | 158,722 | | | $ | 24,470 | | | $ | 23,569 | |
| Allowance for loan losses | 493,452 | | | 281,402 | | | 257,036 | |
| Reserve for unfunded commitments | 38,420 | | | 1,375 | | | 1,070 | |
| Allowance for credit losses | $ | 531,872 | | | $ | 282,777 | | | $ | 258,106 | |
| ACL to loans coverage ratio | 1.39 | % | | 0.76 | % | | 0.72 | % |
| ALL to loans coverage ratio | 1.29 | | | 0.76 | | | 0.72 | |
| ACL/NPLs | 340.32 | | 278.23 | | 179.27 |
| ALL/NPLs | 315.74 | | 276.87 | | 178.53 |
| | | | | |
* Prior to CECL implementation on January 1, 2020, the provision for unfunded commitments was reflected within other non-interest expense. | | | | | | | | | | | | | | | | | |
| Table 7 - Credit Quality Metrics | |
| (dollars in thousands) | March 31, 2021 | | December 31, 2020 | | March 31, 2020 |
| Non-performing loans | $ | 155,169 | | | $ | 151,079 | | | $ | 156,287 | |
| Impaired loans held for sale | 23,590 | | | 23,590 | | | — | |
| ORE and other assets | 16,849 | | | 17,394 | | | 33,679 | |
| Non-performing assets | $ | 195,608 | | | $ | 192,063 | | | $ | 189,966 | |
| Total loans | $ | 38,805,101 | | | $ | 38,252,984 | | | $ | 38,258,024 | |
| Non-performing loans as a % of total loans | 0.40 | % | | 0.39 | % | | 0.41 | % |
| Non-performing assets as a % of total loans, ORE, and specific other assets | 0.50 | | | 0.50 | | | 0.50 | |
| Loans 90 days past due and still accruing | $ | 3,804 | | | $ | 4,117 | | | $ | 6,398 | |
| As a % of total loans | 0.01 | % | | 0.01 | % | | 0.02 | % |
| Total past due loans and still accruing | $ | 45,693 | | | $ | 47,349 | | | $ | 83,235 | |
| As a % of total loans | 0.12 | % | | 0.12 | % | | 0.22 | % |
| Net charge-offs, quarter | $ | 20,204 | | | $ | 22,139 | | | $ | 20,061 | |
| Net charge-offs/average loans, quarter | 0.21 | % | | 0.23 | % | | 0.21 | % |
| | | | | |
| | | | | |
| (Reversal of) provision for loan losses, quarter | $ | (22,318) | | | $ | 24,075 | | | $ | 149,117 | |
| Provision for (reversal of) unfunded commitments, quarter | 3,743 | | | (13,009) | | | 9,605 | |
| (Reversal of) provision for credit losses, quarter | $ | (18,575) | | | $ | 11,066 | | | $ | 158,722 | |
| | | | | |
| | | | | |
| | | | | |
| Allowance for loan losses | $ | 563,214 | | | $ | 605,736 | | | $ | 493,452 | |
| Reserve for unfunded commitments | 51,528 | | | 47,785 | | | 38,420 | |
| Allowance for credit losses | $ | 614,742 | | | $ | 653,521 | | | $ | 531,872 | |
| ACL to loans coverage ratio | 1.58 | % | | 1.71 | % | | 1.39 | % |
| ALL to loans coverage ratio | 1.45 | | | 1.58 | | | 1.29 | |
| ACL/NPLs | 396.18 | | | 432.57 | | | 340.32 | |
| ALL/NPLs | 362.97 | | | 400.94 | | | 315.74 | |
| | | | | |
Non-performing Assets
Total NPAs as a percentage of total loans, ORE, and specific other assets were 0.50% at March 31, 2020 compared to 0.37% at2021, unchanged from both December 31, 20192020 and 0.44% at March 31, 2019.2020. Total NPAs were $190.0$195.6 million at March 31, 20202021 compared to $137.4$192.1 million at December 31, 20192020 and $155.3$190.0 million at March 31, 2019.2020.
Criticized and Classified Loans
Our loan ratings are aligned to federal banking regulators' definitions of pass and criticized categories, which include special mention, substandard, doubtful, and loss. Substandard accruing and non-accruing loans, doubtful, and loss loans are often collectively referred to as classified. Special mention, substandard, doubtful, and loss loans are often collectively referred to as criticized and classified loans. The sequentialfollowing table presents a summary of criticized and classified loans. The increase in NPLscriticized and NPAs 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%classified loans at March 31, 2020 is up only 1 bp over March 31, 2019, and total past dues of 0.22% at March2021 compared to December 31, 2020 improved over both December 31, 2019was primarily hospitality-related with increases in special mention and March 31, 2019.substandard accruing loans in the hotel and full-service restaurant industry as a result of COVID-19. We expect the levels of criticized and classified loans to decline as borrowers' reported financial statements begin to reflect the current monthly improvement we are seeing in borrowers' cash flows.
| | | | | | | | | | | |
| Table 8 - Criticized and Classified Loans | |
| (dollars in thousands) | March 31, 2021 | | December 31, 2020 |
| Special mention loans | $ | 1,107,272 | | | $ | 977,028 | |
| Substandard loans | 685,474 | | | 553,720 | |
| Doubtful loans | 34,430 | | | 33,204 | |
| Loss loans | 2,664 | | | 3,032 | |
| Criticized and Classified loans | $ | 1,829,840 | | | $ | 1,566,984 | |
| As a % of total loans | 4.7 | % | | 4.1 | % |
| | | |
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 includes the provisions for loan losses and unfunded commitments. The reversal of $158.7provision for credit losses of $18.6 million for the three months ended March 31, 20202021 included net charge-offs of $20.2 million and resulted from the impactimproved economic outlook and stable loan portfolio metrics that were partially offset by the increased size of the COVID-19 healthcare crisis and the first quarter under CECL. loan portfolio including $15.2 million in reserves added as result of purchases of $607.0 million of third-party lending loans, including a $476.2 million prime auto purchase.The ACL at March 31, 20202021 totaled $531.9$614.7 million consisting of an ALL of $493.5$563.2 million and reserve for unfunded commitments of $38.4$51.5 million, resulting in an ACL to loans coverage ratio of 1.39%1.58% and an ACL to NPLs ratio of 340%396%.
Our modeling process incorporates quantitative and qualitative considerations that are used Excluding PPP loans, the ACL to inform CECL estimates.loans coverage ratio was 1.69%. 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 forecastsACL at March 31, 2020. Economic projections are2021 incorporates an important consideration in CECL estimates. Significantoutlook with moderate economic uncertainty remains as a result ofexpansion and benefits from the continuing healthcare crisis and the ultimateestimated 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.stimulus.
| | Table 8 - Accruing TDRs by Risk Grade | | |
| Table 9 - Accruing TDRs by Risk Grade | | Table 9 - Accruing TDRs by Risk Grade | |
| | March 31, 2020 | | | December 31, 2019 | | | March 31, 2019 | | | March 31, 2021 | | December 31, 2020 | | March 31, 2020 |
| (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 | $ | 63,809 | | | 49.2 | % | | $ | 72,463 | | | 53.7 | % | | $ | 75,073 | | | 46.9 | % |
| Special Mention | 10,925 | | | 6.8 | | | 11,735 | | | 8.8 | | | 13,188 | | | 11.8 | | |
| Special mention | | Special mention | 8,560 | | | 6.6 | | | 8,935 | | | 6.6 | | | 10,925 | | | 6.8 | |
| Substandard accruing | Substandard accruing | 74,130 | | | 46.3 | | | 50,836 | | | 38.2 | | | 44,018 | | | 39.2 | | Substandard accruing | 57,407 | | | 44.2 | | | 53,574 | | | 39.7 | | | 74,130 | | | 46.3 | |
| Total accruing TDRs | Total accruing TDRs | $ | 160,128 | | | 100.0 | % | | $ | 133,145 | | | 100.0 | % | | $ | 112,205 | | | 100.0 | % | Total accruing TDRs | $ | 129,776 | | | 100.0 | % | | $ | 134,972 | | | 100.0 | % | | $ | 160,128 | | | 100.0 | % |
|
Troubled Debt Restructurings
Accruing TDRs were $129.8 million at March 31, 2021, compared to $135.0 million at December 31, 2020 and $160.1 million at March 31, 2020. Accruing TDRs decreased $5.2 million from December 31, 2020 and $30.4 million from March 31, 2020. Non-accruing TDRs were $36.1 million at March 31, 2021, compared to $133.1$39.0 million at December 31, 20192020 and $112.2 million at March 31, 2019. Accruing TDRs increased $27.0 million from December 31, 2019 and $47.9 million from March 31, 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, 2019.2020. 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 due to interest rate and term concessions.
Accruing TDRs are considered performing because they are performing in accordance with the restructured terms. At March 31, 2020,2021, December 31, 2019,2020, and March 31, 2019,2020, approximately 98%99%,99%, and 99%98%, 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 inhave 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 nottheir unwillingness to criticize institutions for working with borrowers in a safe and sound manner. Moreover, the revised statement providesInteragency 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. On December 27, 2020, the Consolidated Appropriations Act, 2021 extended the applicable period of Section 4013 of Thethe CARES ActAct. This 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,January 1, 2022, or 60 days after the COVID-19 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 in late March
During 2020, Synovus provided relief programs consisting primarily of 90-day payment deferral relief to borrowers negatively impacted by COVID-19. AtCOVID-19, and as of March 31, 2020, Synovus had approved payment2021, 0.2%of the total loan portfolio was in a P&I deferral status as compared to 0.3% of the total loan portfolio at December 31, 2020.In addition to our P&I deferment program, under the CARES Act, we have also provided borrowers who have been impacted by COVID-19 with other modifications such as interest only relief to borrowers due to the effects of COVID-19or amortization extensions on approximately $2.4 billion, or approximately 6%,2% of ourtotal loan portfolio. As of May 7, 2020, Synovus had approved payment deferral relief on approximately $5.8 billion, or 15%, of our loan portfolio.s, at both March 31, 2021 and December 31, 2020.
Capital Resources
Synovus and Synovus Bank are required to comply with capital adequacy standards established by theirour primary federal regulator, the Federal Reserve. Synovus and Synovus Bank measure capital adequacy using the standardized approach to theunder Basel III Final Rule.III. At March 31, 2020,2021, 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 10 - Capital Ratios | | Table 10 - Capital Ratios | |
| (dollars in thousands) | (dollars in thousands) | March 31, 2020 | | December 31, 2019 | (dollars in thousands) | March 31, 2021 | | December 31, 2020 |
| CET1 capital | CET1 capital | | | | CET1 capital | | | |
| Synovus Financial Corp. | Synovus Financial Corp. | $ | 3,744,415 | | | $ | 3,743,459 | | Synovus Financial Corp. | $ | 4,184,715 | | | $ | 4,034,865 | |
| Synovus Bank | Synovus Bank | 4,607,218 | | | 4,640,501 | | Synovus Bank | 4,746,560 | | | 4,641,711 | |
| 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. | 4,721,860 | | | 4,572,010 | |
| Synovus Bank | Synovus Bank | 4,607,218 | | | 4,640,501 | | Synovus Bank | 4,746,560 | | | 4,641,711 | |
| 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. | 5,733,956 | | | 5,604,230 | |
| Synovus Bank | Synovus Bank | 5,054,697 | | | 4,923,279 | | Synovus Bank | 5,446,080 | | | 5,361,611 | |
| CET1 capital ratio | CET1 capital ratio | | CET1 capital ratio | |
| Synovus Financial Corp. | Synovus Financial Corp. | 8.70 | % | | 8.95 | % | Synovus Financial Corp. | 9.74 | % | | 9.66 | % |
| Synovus Bank | Synovus Bank | 10.69 | | | 11.10 | | Synovus Bank | 11.06 | | | 11.11 | |
| 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. | 10.99 | | | 10.95 | |
| Synovus Bank | Synovus Bank | 10.69 | | | 11.10 | | Synovus Bank | 11.06 | | | 11.11 | |
| 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. | 13.34 | | | 13.42 | |
| Synovus Bank | Synovus Bank | 11.72 | | | 11.78 | | Synovus Bank | 12.69 | | | 12.83 | |
| Leverage ratio | Leverage ratio | | Leverage ratio | |
| Synovus Financial Corp. | Synovus Financial Corp. | 8.92 | | | 9.16 | | Synovus Financial Corp. | 8.80 | | | 8.50 | |
| Synovus Bank | Synovus Bank | 9.62 | | | 9.94 | | Synovus Bank | 8.85 | | | 8.73 | |
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. | 7.55 | | | 7.66 | |
|
(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, 2020,2021, Synovus' CET1 ratio was 8.70%increased to 9.74%, well in excess of regulatory requirements including the capital conservation buffer of 2.5%. The 25 bps decline in Synovus'March 31, 2021 CET1 ratio fromimproved 8 bps compared to December 31, 2019 was largely due to the increase in risk-weighted assets from loan growth of $1.10 billion.2020 driven by earnings. For additional information on regulatory capital requirements, see "Part II - Item 8. Financial Statements and Supplementary Data - Note 1112 - Regulatory Capital" to the consolidated financial statements of Synovus' 20192020 Form 10-K. Management currentlyreviews the Company's capital position on an on-going basis and believes, based on internal capital analyses and earnings projections, that Synovus' capital positionSynovus is adequatewell positioned to meet current and futurerelevant regulatory minimum capital requirements inclusivestandards.
Synovus announced on January 26, 2021 that its Board of Directors authorized share repurchases of up to $200 million in 2021. During the capital conservation buffer.
first quarter of 2021, the Company did not complete any share repurchases. During the second quarter of 2021, Synovus is suspending share repurchase activity beyond the $16.2had repurchased $23.2 million, (450or 499 thousand shares)shares of its common stock, repurchased during the first quarter under theat an average price of $46.52 per share, repurchase program announced on January 24, 2020, due to greater economic uncertainty.as of May 5, 2021.
On March 27,August 26, 2020, the federal banking regulators issued a final rule (following an interim final rule updating CECL transition options, which allowsissued on March 27, 2020) that allowed electing banking organizations that adopt CECL during 2020 to delay an estimate ofmitigate the effectestimated effects 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, 20202021 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.At March 31, 2021, $84 million, or a cumulative 20 basis points benefit to CET1, was deferred.
Dividends
Synovus has historically paid a quarterly cash dividend to the holders of its common stock. Management and the Board of Directors closely monitor current and projected capital levels, liquidity (including dividends from subsidiaries), financial markets and other economic trends, as well as regulatory requirements regarding the payment of dividends. As Synovus navigates through the current recession, 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,subsidiaries, which are restricted by various regulations administered by federal and state bank regulatory authorities.
Synovus declared common stock dividends of $49.1 million, or $0.33 per common share, for the three months ended March 31, 2021, compared to $48.6 million, or $0.33 per common share, for the three months ended March 31, 2020, up from $47.2 million, or $0.30 per common share, for the three months ended March 31, 2019, respectively.2020. In addition, Synovus declared dividends on its preferred stock of $8.3 million and $3.2 million during both the three months ended March 31, 20202021 and 2019, respectively.2020.
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, andas 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 thethe capacity to access funding through its membership in the FHLB system and through the Federal Reserve Discount Window. During the first quarter of 2020, Synovus increased its FHLB availability by over $2.0 billion through expanding pledged collateral. discount window. At March 31, 2020,2021, based on currently pledged collateral, Synovus Bank had access to incremental FHLB funding of $3.20 $6.38 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' 20192020 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 months ended March 31, 20202021 increased $2.90$5.49 billion, or 6.3%11%, to $48.70$54.19 billion as compared to $45.79$48.70 billion for the first three months of 2019.2020. Average earning assets increased $2.40$5.02 billion, or 5.6%11%, in the first three months of 20202021 compared to the same period in 20192020 and represented 92.3%92.2% of average total assets at March 31, 2020,2021, as compared to 92.9%92.3% at March 31, 2019.2020. The increase in average earning assets primarily resulted from a $2.16 billion increase in average loans, net, andinterest-bearing funds held at the Federal Reserve Bank, a $143.8 million$1.76 billion increase in average investment securities.securities available for sale, an $821.3 million increase in loans held for sale, and a $619.2 million, or 2%, increase in average total loans, net of unearned, which included average PPP loans of $2.24 billion.
Average interest-bearing liabilities increased $2.00 billion,$567.9 million, or 6.4%2%, to $33.51$34.08 billion for the first three months of 20202021 compared to the same period in 2019.2020. The increase in average interest-bearing liabilities resulted from a $1.74$4.37 billion, or 15.6%34%, increase in average money market deposits a $866.9(includes an increase of $573.9 million increase in average other short-term borrowings,brokered deposits) and a $694.7 million$2.12 billion, or 33%, increase in average long-term debt, including $400.0 million of senior notes issued in February 2020.interest-bearing demand deposits. These increases were partially offset by a $1.32$3.41 billion, or 12.8%38%, decrease in average time deposits.deposits (includes a decrease of $747.7 million in brokered time deposits) a $1.48 billion decrease in average long-term debt, including redemption of $250.0 million in subordinated debt in the fourth quarter of 2020, and a $1.38 billion decrease in other short-term borrowings. Average non-interest-bearing demand deposits increased $354.8 million,$4.38 billion, or 3.9%47%, to $9.41$13.79 billion for the first three months of 20202021 compared to the same period in 2019.2020, due largely to liquidity associated with PPP lending.
Net interest income was $373.3 million for the three months ended March 31, 2020, down $23.92021 was $373.9 million, or 6.0%,up $597 thousand compared to the same period in 2020 including $24.9 million in PPP processing fees during the first quarter of 2019. The net2021. Net interest margin was down 4133 bps over the comparable three-month period to 3.37%3.04%, due primarily to the decline in market 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.accelerated prepayment activity. For the three months ended March 31, 2020,2021, the yield on earning assets was 4.33%3.32%, a decrease of 47101 bps compared to the three months ended March 31, 2019,2020, while the totaleffective cost of funds decreased 368 bps to 1.04%0.28%. The yield on loans decreased 5560 bps to 4.62%4.02% while the yield on investment securities increased 3decreased 169 bps to 3.09%1.40% over the three months ended March 31, 2019.2020.
On a sequential quarter basis, net interest income was down $26.0$12.1 million or 6.5%, and the net interest margin for the first quarter was 3.37%3.04%, which was down 288 bps compared to the fourth quarter of 2019.2020. The sequential quarter decline in net interest income was primarily due to a lower day count and margina continuation of low-rate pressure, partially offset by further declines in deposit pricing and continued deployment of excess liquidity. The first quarter of 2021 included a declineaverage PPP loan balances of $2.24 billion versus $2.55 billion in the fourth quarter of 2020 and $24.9 million recognized for associated PPP processing fees versus $24.8 million in PAA primarily comprisedthe fourth quarter 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 emergency rate cuts by the Federal Reserve in March. The net interest margin, excluding the impact of purchase accounting adjustments, was down 5 bps sequentially to 3.35% for2020. For the first quarter of 2020, driven by a 13 bp decrease in2021, the yield on earning assets and a 8 bp decrease indecreased 17 bps, while the effective cost of funds.funds decreased 9 bps compared to the fourth quarter of 2020.
Synovus expectsAs we progress through the year, we expect to see increases in net interest income, in the second quarter to be relatively flat compared to first quarter levels as a result of significantexcluding PPP fees, driven by loan growth, associated with the PPP. However, with this growth, along withdeployment of liquidity, a depressed rate environmentdeceleration of prepayments, and an elevated cash position, we expect continued downward pressure on our net interest margin in the second quarter.further deposit cost reductions.
48
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 | 2020 | | 2019 | | |
| Table 11 - Average Balances and Yields/Rates | | Table 11 - Average Balances and Yields/Rates | 2021 | | 2020 |
| (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) | First Quarter | | Fourth Quarter | | Third Quarter | | Second Quarter | | First 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) | $ | 8,437,563 | | | 7,493,822 | | | 7,227,400 | | | 6,618,533 | | | 6,680,047 | |
| Yield | Yield | 3.09 | % | | 3.12 | | | 3.14 | | | 3.03 | | | 3.06 | | Yield | 1.40 | % | | 2.07 | | | 2.39 | | | 2.72 | | | 3.09 | |
Trading account assets(3) | Trading account assets(3) | $ | 6,306 | | | 7,986 | | | 5,519 | | | 4,853 | | | 2,049 | | Trading account assets(3) | $ | 3,063 | | | 8,496 | | | 5,391 | | | 6,173 | | | 6,306 | |
| Yield | Yield | 2.70 | % | | 2.69 | | | 4.01 | | | 1.83 | | | 1.30 | | Yield | 2.81 | % | | 1.03 | | | 1.69 | | | 2.19 | | | 2.70 | |
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) | $ | 29,844,491 | | | 30,363,102 | | | 30,730,135 | | | 30,236,919 | | | 27,607,343 | |
| Yield | Yield | 4.57 | % | | 4.82 | | | 5.09 | | | 5.13 | | | 5.16 | | Yield | 3.95 | % | | 3.96 | | | 3.80 | | | 3.95 | | | 4.57 | |
Consumer loans(4) | Consumer loans(4) | $ | 9,985,702 | | | 9,809,832 | | | 9,633,603 | | | 9,423,427 | | | 9,180,679 | | Consumer loans(4) | $ | 8,367,776 | | | 8,521,449 | | | 9,032,437 | | | 9,899,172 | | | 9,985,702 | |
| Yield | Yield | 4.60 | % | | 5.07 | | | 5.08 | | | 5.17 | | | 5.10 | | Yield | 3.98 | % | | 4.00 | | | 4.08 | | | 4.34 | | | 4.60 | |
| Allowance for loan losses | Allowance for loan losses | $ | (368,033) | | | (269,052) | | | (258,024) | | | (259,284) | | | (252,815) | | Allowance for loan losses | $ | (599,872) | | | (595,547) | | | (591,098) | | | (498,545) | | | (368,033) | |
Loans, net(4) | Loans, net(4) | $ | 37,225,012 | | | 36,238,982 | | | 35,943,773 | | | 35,518,116 | | | 35,068,536 | | Loans, net(4) | $ | 37,612,395 | | | 38,289,004 | | | 39,171,474 | | | 39,637,546 | | | 37,225,012 | |
| Yield | Yield | 4.62 | % | | 4.93 | | | 5.13 | | | 5.17 | | | 5.17 | | Yield | 4.02 | % | | 4.03 | | | 3.92 | | | 4.08 | | | 4.62 | |
| 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 | $ | 246,962 | | | 309,278 | | | 244,952 | | | 221,157 | | | 86,415 | |
| Yield | | Yield | 2.68 | % | | 2.74 | | | 2.92 | | | 3.09 | | | 3.67 | |
| Other loans held for sale | | Other loans held for sale | $ | 660,753 | | | 544,301 | | | 493,940 | | | 19,246 | | | — | |
| Yield | Yield | 3.67 | % | | 3.77 | | | 3.93 | | | 4.27 | | | 4.48 | | Yield | 2.91 | % | | 2.81 | | | 3.61 | | | 4.19 | | | — | |
Other earning assets(5) | Other earning assets(5) | $ | 652,130 | | | 514,635 | | | 513,160 | | | 511,488 | | | 679,477 | | Other earning assets(5) | $ | 2,838,021 | | | 2,716,645 | | | 1,265,880 | | | 1,709,086 | | | 652,130 | |
| Yield | Yield | 1.02 | % | | 1.71 | | | 2.08 | | | 2.37 | | | 2.45 | | Yield | 0.10 | % | | 0.10 | | | 0.11 | | | 0.11 | | | 1.02 | |
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) | $ | 157,657 | | | 162,537 | | | 200,923 | | | 247,801 | | | 284,082 | |
| Yield | Yield | 3.38 | % | | 2.85 | | | 3.85 | | | 3.29 | | | 4.82 | | Yield | 1.69 | % | | 2.64 | | | 2.73 | | | 3.60 | | | 3.38 | |
| 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 | $ | 49,956,414 | | | 49,524,083 | | | 48,609,960 | | | 48,459,542 | | | 44,933,992 | |
| Yield | Yield | 4.33 | % | | 4.60 | | | 4.78 | | | 4.79 | | | 4.80 | | Yield | 3.32 | % | | 3.49 | | | 3.58 | | | 3.75 | | | 4.33 | |
| 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 | $ | 8,570,753 | | | 8,531,415 | | | 7,789,095 | | | 7,260,940 | | | 6,445,986 | |
| Rate | Rate | 0.51 | % | | 0.60 | | | 0.69 | | | 0.71 | | | 0.68 | | Rate | 0.14 | % | | 0.16 | | | 0.19 | | | 0.21 | | | 0.51 | |
| 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 | $ | 15,348,916 | | | 14,411,860 | | | 13,272,972 | | | 12,238,479 | | | 11,548,014 | |
| Rate | Rate | 1.00 | % | | 1.13 | | | 1.26 | | | 1.23 | | | 1.18 | | Rate | 0.23 | % | | 0.26 | | | 0.36 | | | 0.46 | | | 1.00 | |
| Savings deposits | Savings deposits | $ | 926,822 | | | 915,640 | | | 900,366 | | | 904,183 | | | 901,059 | | Savings deposits | $ | 1,219,288 | | | 1,147,667 | | | 1,114,956 | | | 1,036,024 | | | 926,822 | |
| Rate | Rate | 0.05 | % | | 0.05 | | | 0.05 | | | 0.05 | | | 0.06 | | Rate | 0.02 | % | | 0.01 | | | 0.02 | | | 0.02 | | | 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 | $ | 1,161,306 | | | 1,239,592 | | | 1,379,923 | | | 1,621,943 | | | 1,761,741 | |
| Rate | Rate | 1.64 | % | | 1.27 | | | 1.39 | | | 1.39 | | | 1.24 | | Rate | 0.56 | % | | 0.74 | | | 1.03 | | | 1.43 | | | 1.64 | |
| 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 | $ | 2,993,996 | | | 3,302,959 | | | 3,863,821 | | | 4,772,555 | | | 5,051,705 | |
| Rate | Rate | 2.04 | % | | 1.51 | | | 1.69 | | | 1.70 | | | 1.60 | | Rate | 0.74 | % | | 1.03 | | | 1.44 | | | 1.80 | | | 2.04 | |
| Non-maturing brokered deposits | $ | 1,376,669 | | | 1,156,131 | | | 993,078 | | | 766,718 | | | 937,630 | | |
| Other brokered deposits | | Other brokered deposits | $ | 1,950,582 | | | 1,978,393 | | | 1,912,114 | | | 1,998,571 | | | 1,376,669 | |
| Rate | Rate | 1.42 | % | | 1.84 | | | 2.47 | | | 2.46 | | | 2.60 | | Rate | 0.20 | % | | 0.23 | | | 0.23 | | | 0.25 | | | 1.42 | |
| Brokered time deposits | Brokered time deposits | $ | 2,166,496 | | | 2,121,069 | | | 2,119,149 | | | 1,985,589 | | | 1,845,819 | | Brokered time deposits | $ | 1,418,751 | | | 1,795,982 | | | 2,232,940 | | | 2,244,429 | | | 2,166,496 | |
| Rate | Rate | 2.11 | % | | 2.16 | | | 2.27 | | | 2.28 | | | 2.13 | | Rate | 1.50 | % | | 1.60 | | | 1.59 | | | 1.86 | | | 2.11 | |
| 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 | $ | 32,663,592 | | | 32,407,868 | | | 31,565,821 | | | 31,172,941 | | | 29,277,433 | |
| Rate | Rate | 1.18 | % | | 1.16 | | | 1.32 | | | 1.30 | | | 1.24 | | Rate | 0.31 | % | | 0.39 | | | 0.54 | | | 0.73 | | | 1.18 | |
| 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 | $ | 209,448 | | | 174,316 | | | 180,342 | | | 250,232 | | | 167,324 | |
| Rate | Rate | 0.30 | % | | 0.24 | | | 0.22 | | | 0.20 | | | 0.22 | | Rate | 0.07 | % | | 0.07 | | | 0.09 | | | 0.12 | | | 0.30 | |
| 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 | $ | — | | | — | | | 46,739 | | | 550,000 | | | 1,384,362 | |
| Rate | Rate | 1.66 | % | | 1.87 | | | 2.31 | | | 2.59 | | | 2.58 | | Rate | — | % | | — | | | 1.12 | | | 1.23 | | | 1.66 | |
| Long-term debt | Long-term debt | $ | 2,678,651 | | | 2,153,983 | | | 2,286,221 | | | 2,114,819 | | | 1,983,910 | | Long-term debt | $ | 1,202,613 | | | 1,552,791 | | | 2,234,665 | | | 2,834,188 | | | 2,678,651 | |
| Rate | Rate | 2.78 | % | | 3.07 | | | 3.32 | | | 3.53 | | | 3.33 | | Rate | 3.63 | % | | 3.96 | | | 2.71 | | | 2.36 | | | 2.78 | |
| 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 | $ | 34,075,653 | | | 34,134,975 | | | 34,027,567 | | | 34,807,361 | | | 33,507,770 | |
| Rate | Rate | 1.30 | % | | 1.30 | | | 1.47 | | | 1.48 | | | 1.38 | | Rate | 0.42 | % | | 0.55 | | | 0.68 | | | 0.86 | | | 1.30 | |
| 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 | $ | 13,791,286 | | | 13,566,112 | | | 12,773,676 | | | 11,923,534 | | | 9,409,774 | |
| Cost of funds | Cost of funds | 1.04 | % | | 1.02 | | | 1.16 | | | 1.15 | | | 1.07 | | Cost of funds | 0.30 | % | | 0.40 | | | 0.50 | | | 0.65 | | | 1.04 | |
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) | 0.28 | % | | 0.37 | | | 0.48 | | | 0.62 | | | 0.96 | |
| Net interest margin | Net interest margin | 3.37 | % | | 3.65 | | | 3.69 | | | 3.69 | | | 3.78 | | Net interest margin | 3.04 | % | | 3.12 | | | 3.10 | | | 3.13 | | | 3.37 | |
Taxable equivalent adjustment(2) | Taxable equivalent adjustment(2) | $ | 786 | | | 769 | | | 819 | | | 811 | | | 630 | | Taxable equivalent adjustment(2) | $ | 774 | | | 821 | | | 956 | | | 861 | | | 786 | |
|
`(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.
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 months ended March 31, 20202021 and 2019,2020, 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 12 - Net Interest Income and Rate/Volume Analysis | | Table 12 - Net Interest Income and Rate/Volume Analysis |
| | Three Months Ended March 31, | | | 2020 Compared to 2019 | | | Three Months Ended March 31, | | 2021 Compared to 2020 |
| | 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) | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 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 | $ | 8,437,563 | | | $ | 6,680,047 | | | $ | 29,458 | | | $ | 51,655 | | | 1.40 | % | | 3.09 | % | | $ | 13,391 | | | $ | (35,588) | | | $ | (22,197) | |
| Trading account assets | Trading account assets | 6,306 | | | 2,049 | | | 43 | | | 7 | | | 2.70 | | | 1.30 | | | 14 | | | 22 | | | 36 | | Trading account assets | 3,063 | | | 6,306 | | | 22 | | | 43 | | | 2.81 | | | 2.70 | | | (22) | | | 1 | | | (21) | |
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) | 37,715,121 | | | 37,177,611 | | | 369,579 | | | 424,387 | | | 3.96 | | | 4.59 | | | 6,084 | | | (60,892) | | | (54,808) | |
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) | 497,146 | | | 415,434 | | | 3,686 | | | 3,734 | | | 3.01 | | | 3.61 | | | 727 | | | (775) | | | (48) | |
| Allowance for loan losses | Allowance for loan losses | (368,033) | | | (252,815) | | | Allowance for loan losses | (599,872) | | | (368,033) | | |
| 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 | 37,612,395 | | | 37,225,012 | | | 373,265 | | | 428,121 | | | 4.02 | | | 4.62 | | | 6,811 | | | (61,667) | | | (54,856) | |
| 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 | 246,962 | | | 86,415 | | | 1,657 | | | 792 | | | 2.68 | | | 3.67 | | | 1,453 | | | (588) | | | 865 | |
| Other loans held for sale | | Other loans held for sale | 660,753 | | | — | | | 4,805 | | | — | | | 2.91 | | | — | | | — | | | 4,805 | | | 4,805 | |
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) | 2,838,021 | | | 652,130 | | | 716 | | | 1,675 | | | 0.10 | | | 1.02 | | | 5,444 | | | (6,403) | | | (959) | |
| 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 | 157,657 | | | 284,082 | | | 668 | | | 2,397 | | | 1.69 | | | 3.38 | | | (1,054) | | | (675) | | | (1,729) | |
| 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 | 49,956,414 | | | 44,933,992 | | | 410,591 | | | 484,683 | | | 3.32 | | | 4.33 | | | 26,023 | | | (100,115) | | | (74,092) | |
| Cash and due from banks | Cash and due from banks | 515,153 | | | 519,073 | | | | | | | | | | | | | | | | Cash and due from banks | 518,780 | | | 515,153 | | | | | | | | | | | | | | | |
| Premises and equipment, net | Premises and equipment, net | 491,244 | | | 479,200 | | | Premises and equipment, net | 460,466 | | | 491,244 | | |
| Other real estate | Other real estate | 13,395 | | | 14,078 | | | Other real estate | 1,823 | | | 13,395 | | |
| 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 | 1,051,520 | | | 892,861 | | |
Other assets(4) | Other assets(4) | 1,849,950 | | | 1,485,098 | | | Other assets(4) | 2,199,501 | | | 1,849,950 | | |
| Total assets | Total assets | $ | 48,696,595 | | | $ | 45,794,621 | | | Total assets | $ | 54,188,504 | | | $ | 48,696,595 | | |
| | 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 | $ | 8,570,753 | | | $ | 6,445,986 | | | $ | 2,973 | | | $ | 8,109 | | | 0.14 | % | | 0.51 | % | | $ | 2,672 | | | $ | (7,808) | | | $ | (5,136) | |
| 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 | 17,299,498 | | | 12,924,683 | | | 9,706 | | | 33,625 | | | 0.23 | | | 1.05 | | | 11,327 | | | (35,246) | | | (23,919) | |
| Savings deposits | Savings deposits | 926,822 | | | 901,059 | | | 110 | | | 138 | | | 0.05 | | | 0.06 | | | 4 | | | (32) | | | (28) | | Savings deposits | 1,219,288 | | | 926,822 | | | 49 | | | 110 | | | 0.02 | | | 0.05 | | | 36 | | | (97) | | | (61) | |
| 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 | 5,574,053 | | | 8,979,942 | | | 12,290 | | | 44,158 | | | 0.89 | | | 1.98 | | | (16,628) | | | (15,240) | | | (31,868) | |
| 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 | 209,448 | | | 167,324 | | | 34 | | | 127 | | | 0.07 | | | 0.30 | | | 31 | | | (124) | | | (93) | |
| 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 | — | | | 1,384,362 | | | — | | | 5,805 | | | — | | | 1.66 | | | (5,666) | | | (139) | | | (5,805) | |
| 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 | 1,202,613 | | | 2,678,651 | | | 10,908 | | | 18,703 | | | 3.63 | | | 2.78 | | | (10,118) | | | 2,323 | | | (7,795) | |
| 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 | 34,075,653 | | | 33,507,770 | | | 35,960 | | | 110,637 | | | 0.42 | | | 1.30 | | | (18,346) | | | (56,331) | | | (74,677) | |
| Non-interest-bearing deposits | Non-interest-bearing deposits | 9,409,774 | | | 9,054,949 | | | | | | | | | | | | | | | | Non-interest-bearing deposits | 13,791,286 | | | 9,409,774 | | | | | | | | | | | | | | | |
| Other liabilities | Other liabilities | 817,627 | | | 716,527 | | | Other liabilities | 1,185,344 | | | 817,627 | | |
| Shareholders' equity | Shareholders' equity | 4,961,424 | | | 4,516,700 | | | Shareholders' equity | 5,136,221 | | | 4,961,424 | | |
| Total liabilities and equity | Total liabilities and equity | $ | 48,696,595 | | | $ | 45,794,621 | | | Total liabilities and equity | $ | 54,188,504 | | | $ | 48,696,595 | | |
| Interest rate spread: | Interest rate spread: | | | | | 3.03 | % | | 3.42 | % | | Interest rate spread: | | | | | 2.90 | % | | 3.03 | % | |
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) | | $ | 374,631 | | | $ | 374,046 | | | 3.04 | % | | 3.37 | % | | $ | 44,369 | | | $ | (43,784) | | | $ | 585 | |
| Taxable equivalent adjustment | Taxable equivalent adjustment | | 786 | | | 630 | | | | | | | | | | | | Taxable equivalent adjustment | | 774 | | | 786 | | | | | | | | | | | |
| Net interest income, actual | Net interest income, actual | | $ | 373,260 | | | $ | 397,175 | | | Net interest income, actual | | $ | 373,857 | | | $ | 373,260 | | |
|
(1) Average loans are shown net of unearned income. NPLs are included. Interest income includes fees as follows: 2021 - $31.9 million, 2020 - $7.9 million, 2019 - $8.2 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$116.1 million and $(85.6)$166.8 million for the three months ended March 31, 20202021 and 2019,2020, respectively.
(5) The net interest margin is calculated by dividing annualized net interest income - FTE by average total interest earnings assets.
Market Risk Analysis
Interest rate risk is the primary market risk to which Synovus is potentially exposed. Synovus measures its sensitivity to changes in market interest rates through the use of a simulation model. Synovus uses this simulation model which incorporates all of Synovus’ earning assets and liabilities. These simulations are used to determine a baseline net interest income forecastprojection and the sensitivity of this forecast tothe income profile based on changes in interest rates. These simulations include allsimulations incorporate assumptions and factors, including, but not limited to, changes in market rates, in the size or composition of Synovus’ earning assets and liabilities. Forecastedthe 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 arerepricing characteristics as well as customer behaviors. This process is reviewed and updated on an ongoingon-going basis and are reviewed and approved byin 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 forecastprojection 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 rateyield 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 decline in sensitivity relative to the prior period-end is the result of a host of factors, including a reduction in reserve balances held with the Federal Reserve and the higher absolute level of long-term interest rates. The following table represents the estimated sensitivity of net interest income at March 31, 2020,2021, with comparable information for December 31, 2019.2020.
| | Table 12 - Twelve Month Net Interest Income Sensitivity | | |
| Table 13 - Twelve Month Net Interest Income Sensitivity | | Table 13 - 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) | | March 31, 2021 | | December 31, 2020 |
| +200 | +200 | | 2.8% | | 2.8% | +200 | | 4.9% | | 6.8% |
| +100 | +100 | | 0.6% | | 2.0% | +100 | | 2.4% | | 3.5% |
| Flat | Flat | | —% | | —% | Flat | | —% | | —% |
| -25 | -25 | | (0.7)% | | N/A | -25 | | (0.3)% | | (0.5)% |
|
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 inof the balance sheet. These simulations value only the current balance sheet and do not incorporate growth assumptions used in the net interest income simulation.Company's Economic Value of Equity (EVE). The EVE ismeasurement process estimates 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 inunder 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,scenarios. Management uses EVE sensitivity analyses as an additional means of measuring interest rate risk and non-maturity deposit duration have a significant impact on the resultsincorporates this form of the EVE simulations.analysis within its governance and limits framework.
LIBOR Transition
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 afterat the end of 2021. On March 5, 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 onconfirmed that all LIBOR settings will either cease to be provided by any administrator or no longer be representative immediately after December 31, 2021 for the pre-cessation end dates scheduled in 20201-week and early 2021 on the issuance of instruments tied to LIBOR. 2-month US dollar settings and immediately after June 30, 2023 for all remaining US dollar settings.
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 relatesrelated to derivatives and cash markets exposed to LIBOR. As noted within our"Part I - Item 1A. Risk Factors" of Synovus' 2020 Form 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 impactsimpact 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) assessinghas 1) assessed the Company's current exposure to LIBOR indexed instruments and the data, systems and processes that may alsowill be impacted; ii) establishing an2) established a detailed implementation plan; and iii) developing3) developed a formal governance structure for the transition.
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 loancredit 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 on a periodic basis, 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' 20192020 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, thereThere 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' 20192020 Form 10-K.
Non-GAAP Financial Measures
The measures entitled adjusted non-interest revenue; adjusted non-interest expense; adjusted total revenues;revenue; adjusted tangible efficiency ratio; adjusted net income per common share, diluted; adjusted return on average assets; adjusted return on average common equity; adjusted return on average tangible common equity; 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;FTE revenue; 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 revenuesrevenue and adjusted non-interest revenue are measures used by management to evaluate total FTE revenue and non-interest revenue exclusive of net investment securities gains (losses) and changes in fair value of private equity investments, net. Adjusted non-interest expense and the adjusted tangible efficiency ratio are measures utilized by management to measure the success of expense management initiatives focused on reducing recurring controllable operating costs. Adjusted net income per common share, diluted, adjusted return on average assets, and adjusted return on average common equity are measurements used by management to evaluate operating results exclusive of items that management believes are not indicative of ongoing operations and impact period-to-period comparisons. Adjusted return on average tangible common equity is a measure used by management to compare Synovus' performance with other financial institutions because it calculates the return available to common shareholders without the impact of intangible assets and their related amortization, thereby allowing management to evaluate the performance of the business consistently. 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 | | | | | |
| | | | | | | |
52
| | | | | | | | | | | | | | | |
| 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 | | |
| (in thousands) | March 31, 2021 | | March 31, 2020 | | | | |
| Adjusted non-interest revenue | | | | | | | |
| Total non-interest revenue | $ | 110,956 | | | $ | 103,857 | | | | | |
| Add/subtract: Investment securities losses (gains), net | 1,990 | | | (8,734) | | | | | |
| Add: Decrease in fair value of private equity investments, net | — | | | 4,255 | | | | | |
| Adjusted non-interest revenue | $ | 112,946 | | | $ | 99,378 | | | | | |
| | | | | | | |
| Adjusted non-interest expense | | | | | | | |
| Total non-interest expense | $ | 267,134 | | | $ | 276,279 | | | | | |
| Subtract: Restructuring charges | (531) | | | (3,220) | | | | | |
| Subtract: Loss on early extinguishment of debt | — | | | (1,904) | | | | | |
| Adjusted non-interest expense | $ | 266,603 | | | $ | 271,155 | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | |
| 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 | | |
| (in thousands, except per share data) | March 31, 2021 | | March 31, 2020 | | | | |
| Adjusted total revenue and adjusted tangible efficiency ratio | | | | | | | |
| Adjusted non-interest expense | $ | 266,603 | | | $ | 271,155 | | | | | |
| Subtract: Amortization of intangibles | (2,379) | | | (2,640) | | | | | |
| Adjusted tangible non-interest expense | $ | 264,224 | | | $ | 268,515 | | | | | |
| | | | | | | |
| Net interest income | $ | 373,857 | | | $ | 373,260 | | | | | |
| Add: Tax equivalent adjustment | 774 | | | 786 | | | | | |
| Add: Total non-interest revenue | 110,956 | | | 103,857 | | | | | |
| Total FTE revenue | $ | 485,587 | | | $ | 477,903 | | | | | |
| Add/subtract: Investment securities losses (gains), net | 1,990 | | | (8,734) | | | | | |
| Add: Decrease in fair value of private equity investments, net | — | | | 4,255 | | | | | |
| Adjusted total revenue | $ | 487,577 | | | $ | 473,424 | | | | | |
| Efficiency ratio-FTE | 55.01 | % | | 57.81 | % | | | | |
| Adjusted tangible efficiency ratio | 54.19 | | | 56.72 | | | | | |
| | | | | | | |
| Adjusted net income per common share, diluted | | | | | | | |
| Net income available to common shareholders | $ | 178,802 | | | $ | 30,230 | | | | | |
| Add: Restructuring charges | 531 | | | 3,220 | | | | | |
| Add: Loss on early extinguishment of debt | — | | | 1,904 | | | | | |
| Add/subtract: Investment securities losses (gains), net | 1,990 | | | (8,734) | | | | | |
| Add: Decrease in fair value of private equity investments, net | — | | | 4,255 | | | | | |
Subtract: Tax effect of adjustments (1) | (638) | | | (167) | | | | | |
| Adjusted net income available to common shareholders | $ | 180,685 | | | $ | 30,708 | | | | | |
| Weighted average common shares outstanding, diluted | 149,780 | | | 148,401 | | | | | |
| Adjusted net income per common share, diluted | $ | 1.21 | | | $ | 0.21 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | |
| 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 | |
| | | | | |
| | | | | | | | | | | | | | | |
| | | | |
| Table 14 - Reconciliation of Non-GAAP Financial Measures, continued |
| Three Months Ended | | |
| (dollars in thousands) | March 31, 2021 | | March 31, 2020 | | | | |
| Adjusted return on average assets (annualized) | | | | | | | |
| Net income | $ | 187,093 | | | $ | 38,521 | | | | | |
| Add: Restructuring charges | 531 | | | 3,220 | | | | | |
| Add: Loss on early extinguishment of debt | — | | | 1,904 | | | | | |
| Add/subtract: Investment securities losses (gains), net | 1,990 | | | (8,734) | | | | | |
| Add: Decrease in fair value of private equity investments, net | — | | | 4,255 | | | | | |
Subtract: Tax effect of adjustments (1) | (638) | | | (167) | | | | | |
| Adjusted net income | $ | 188,976 | | | $ | 38,999 | | | | | |
| Net income annualized | 758,766 | | | 154,931 | | | | | |
| Adjusted net income annualized | 766,403 | | | 156,853 | | | | | |
| Total average assets | 54,188,504 | | | 48,696,595 | | | | | |
| Return on average assets (annualized) | 1.40 | % | | 0.32 | % | | | | |
| Adjusted return on average assets (annualized) | 1.41 | | | 0.32 | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| (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 | |
| | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | |
| Three Months Ended |
| (dollars in thousands) | March 31, 2021 | | December 31, 2020 | | March 31, 2020 |
| Adjusted return on average common equity and adjusted return on average tangible common equity (annualized) | | | | | |
| Net income available to common shareholders | $ | 178,802 | | | $ | 142,118 | | | $ | 30,230 | |
| Add: Restructuring charges | 531 | | | 18,068 | | | 3,220 | |
| Add: Valuation adjustment to Visa derivative | — | | | 890 | | | — | |
| Add: Loss on early extinguishment of debt | — | | | 8,409 | | | 1,904 | |
| Add/subtract: Investment securities losses (gains), net | 1,990 | | | (2,337) | | | (8,734) | |
| Subtract/add: (Increase) decrease in fair value of private equity investments | — | | | (63) | | | 4,255 | |
Subtract: Tax effect of adjustments (1) | (638) | | | (6,467) | | | (167) | |
| Net income available to common shareholders | $ | 180,685 | | | $ | 160,618 | | | $ | 30,708 | |
| | | | | |
| Adjusted net income available to common shareholders' annualized | $ | 732,778 | | | $ | 638,980 | | | $ | 123,507 | |
| Add: Amortization of intangibles, annualized net of tax | 7,207 | | | 7,782 | | | 7,868 | |
| Adjusted net income available to common shareholders excluding amortization of intangibles annualized | $ | 739,985 | | | $ | 646,762 | | | $ | 131,375 | |
| | | | | |
| Net income available to common shareholders annualized | $ | 725,141 | | | $ | 565,382 | | | $ | 121,584 | |
| | | | | |
| Total average shareholders' equity less preferred stock | $ | 4,599,076 | | | $ | 4,594,199 | | | $ | 4,424,278 | |
| Subtract: Goodwill | (452,390) | | | (452,390) | | | (497,267) | |
| Subtract: Other intangible assets, net | (44,005) | | | (46,511) | | | (54,514) | |
| Total average tangible shareholders' equity less preferred stock | $ | 4,102,681 | | | $ | 4,095,298 | | | $ | 3,872,497 | |
| Return on average common equity (annualized) | 15.77 | % | | 12.31 | % | | 2.75 | % |
| Adjusted return on average common equity (annualized) | 15.93 | | | 13.91 | | | 2.79 | |
| Adjusted return on average tangible common equity (annualized) | 18.04 | | | 15.79 | | | 3.39 | |
| | | | | |
| | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| Table 14 - Reconciliation of Non-GAAP Financial Measures, continued | | | | |
| (dollars in thousands) | March 31, 2021 | | December 31,
2020 | | | | March 31, 2020 |
| Tangible common equity ratio | | | | | | | |
| Total assets | $ | 55,159,011 | | | $ | 54,394,159 | | | | | $ | 50,619,585 | |
| Subtract: Goodwill | (452,390) | | | (452,390) | | | | | (497,267) | |
| Subtract: Other intangible assets, net | (42,733) | | | (45,112) | | | | | (53,032) | |
| Tangible assets | $ | 54,663,888 | | | $ | 53,896,657 | | | | | $ | 50,069,286 | |
| Total shareholders' equity | $ | 5,161,717 | | | $ | 5,161,334 | | | | | $ | 5,065,205 | |
| Subtract: Goodwill | (452,390) | | | (452,390) | | | | | (497,267) | |
| Subtract: Other intangible assets, net | (42,733) | | | (45,112) | | | | | (53,032) | |
| Subtract: Preferred stock, no par value | (537,145) | | | (537,145) | | | | | (537,145) | |
| Tangible common equity | $ | 4,129,449 | | | $ | 4,126,687 | | | | | $ | 3,977,761 | |
| Total shareholders' equity to total assets ratio | 9.36 | % | | 9.49 | % | | | | 10.01 | % |
| Tangible common equity ratio | 7.55 | | | 7.66 | | | | | 7.94 | |
| | | | | | | |
(1) An assumed marginal tax rate of 25.3% for 2021 and 25.9% for 2020 was applied. |
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 section of this Report 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, 2020,2021, 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, 20202021 that have materially affected, or are reasonably likely to materially affect, Synovus' internal control over financial reporting.
PART II. – OTHER INFORMATION
ITEM 1. – LEGAL PROCEEDINGS
Synovus and its subsidiaries are subject to various legal proceedings, claims and disputes that arise in the ordinary course of its business. Additionally, in the ordinary course of its business, Synovus and its subsidiaries are subject to regulatory examinations, information gathering requests, inquiries and investigations. Synovus, like many other financial institutions, has been the target of legal actions and other proceedings asserting claims for damages and related relief for losses. These actions include mortgage loan and other loan put-back claims, claims and counterclaims asserted by individual borrowers related to their loans, 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, seeSee "Part I - Item 1. Financial Statements and Supplementary Data - Note 109 - Commitments and Contingencies" of this Report, which Note is incorporated herein by this reference.Report.
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' 20192020 Form 10-K which could materially affect its business, financial position, results of operations, cash flows, or future results. Please be aware that these risks may change over time and other risks may prove to be important in the future. 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, thereThere are no material changes during the period covered by this Report to the risk factors previously disclosed in Synovus' 20192020 Form 10-K.
The COVID-19 pandemic has resulted in significant economic uncertainty and disruption in Synovus’ markets.
In March 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 significant 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.
The 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.
ITEM 2. – UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS
(a) None.
(b) None.
(c) Issuer Purchases of Equity Securities:
The Company announced on January 24, 202026, 2021 that its Board of Directors authorized share repurchases of up to $200 million in 2020 at a level that would be consistent with Synovus retaining a 9% CET1 ratio tar2021get. In light of current economic uncertainty, Synovus suspended share repurchase activity beyond the $16.2 million completed 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. During the first quarter of 2020 were purchased through open market transactions, including under plans complying with Rule 10b5-1 under2021, the Exchange Act.Company did not complete any share repurchases. Synovus had repurchased $23.2 million, or 499 thousand shares of its common stock, at an average price of $46.52 per share, as of May 5, 2021.
ITEM 3. – DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. – MINE SAFETY DISCLOSURES
None.
ITEM 5. – OTHER INFORMATION
None.
ITEM 6. – EXHIBITS
| | | | | | | | |
| | |
Exhibit
Number | | Description |
| | |
| 3.1 | | | |
| | |
| 3.2 | | | |
| | |
| 10.1 | | | |
| | |
| 10.2 | | | |
| | |
| 10.3 | | | |
| | |
| 10.4 | | | |
| | |
| 10.5 | | | |
| | |
| 31.1 | | | |
| | |
| 31.2 | | | |
| | |
| 32 | | | |
| | |
| 101 | | | Interactive Data File | |
| | |
| 104 | | | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101). | |
| | |
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, 20206, 2021 | 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) |
