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SNV Synovus Financial

Filed: 6 May 21, 10:41am

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, 2021
Commission file number 1-10312
 
______________________________
syn-20210331_g1.jpg
SYNOVUS FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
______________________________
 
Georgia58-1134883
(State or other jurisdiction of incorporation or organization)
   (I.R.S. Employer Identification No.)

1111 Bay Avenue, Suite 500

Columbus,Georgia31901
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (706) 641-6500
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $1.00 Par ValueSNVNew York Stock Exchange
Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series DSNV - PrDNew York Stock Exchange
Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series ESNV - PrENew 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 filerAccelerated filer
Non-accelerated filerSmaller 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 April 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, 2021 and December 31, 2020
Consolidated Statements of Income for the Three Months Ended March 31, 2021 and 2020
Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2021 and 2020
Consolidated Statements of Changes in Shareholders' Equity for the Three Months Ended March 31, 2021 and 2020
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020
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 (ALL, reserve on unfunded loan commitments, and reserve, if required, on debt securities)
ALCO – Synovus' Asset Liability Management Committee
ALL – Allowance for loan losses
AOCI – Accumulated other comprehensive income
ARRC – Alternative Reference Rates Committee
ASC – Accounting Standards Codification
ASU – Accounting Standards Update
ATM – Automatic teller machine
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 Act
CDI – Core Deposit Intangible
CECL Current expected credit losses
CET1 – Common Equity Tier 1 Capital defined by Basel III capital rules
CMO – Collateralized mortgage 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
FCA – Financial Conduct 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
i


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
HELOC – Home equity line of credit
Interagency Supervisory Guidance – Interagency Supervisory Guidance on Allowance for Loan and Lease Losses Estimation Practices for Loans and Lines of Credit Secured by Junior Liens on 1-4 Family Residential Properties
LGD – Loss given default
LIBOR – London Interbank Offered Rate
LIHTC – Low Income Housing Tax Credit
LTV – Loan-to-collateral value ratio
MBS – Mortgage-backed security
MPS – Merchant processing servicer(s)
NAICS – North American Industry Classification System
nm – not meaningful
NPA – Non-performing assets
NPL – Non-performing loans
NSF – Non-sufficient funds
OCI – Other comprehensive income
ORE – Other real estate
P&I – Principal and interest
Parent Company – Synovus Financial Corp.
PPP Paycheck Protection Program established as part of the CARES Act and launched on April 3, 2020 by the SBA and Treasury
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
ii


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' 2020 Form 10-K – Synovus' Annual Report on Form 10-K for the year ended December 31, 2020
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)
TSR – Total shareholder return
UPB – Unpaid principal balance
Visa – The Visa U.S.A., Inc. card association or its affiliates, collectively
Visa Class A shares – Class A shares of common stock issued by Visa are publicly traded shares which are not subject to restrictions on sale
Visa Class B shares – Class B shares of common stock issued by Visa which are subject to restrictions with respect to sale until all of the Covered Litigation has been settled. Class B shares will be convertible into Visa Class A shares using a then-current conversion ratio upon the lifting of restrictions with respect to sale of Visa Class B shares
Visa Derivative – A derivative contract with the purchaser of Visa Class B shares which provides for settlements between the purchaser and Synovus based upon a change in the ratio for conversion of Visa Class B shares into Visa Class A shares

iii



PART I. FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
SYNOVUS FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except share and per share data)March 31, 2021December 31, 2020
ASSETS
Cash and due from banks$493,645 $531,625 
Interest-bearing funds with Federal Reserve Bank2,722,100 3,586,565 
Interest earning deposits with banks23,969 20,944 
Federal funds sold and securities purchased under resale agreements88,552 113,783 
     Total cash, cash equivalents, and restricted cash3,328,266 4,252,917 
Investment securities available for sale, at fair value8,825,757 7,962,438 
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 costs38,805,101 38,252,984 
Allowance for loan losses(563,214)(605,736)
Loans, net38,241,887 37,647,248 
Cash surrender value of bank-owned life insurance1,054,475 1,049,373 
Premises, equipment and software, net454,911 463,959 
Goodwill452,390 452,390 
Other intangible assets, net42,733 45,112 
Other assets1,764,705 1,760,599 
Total assets$55,159,011 $54,394,159 
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Non-interest-bearing deposits$14,660,287 $13,477,854 
Interest-bearing deposits32,708,664 33,213,717 
Total deposits47,368,951 46,691,571 
Securities sold under repurchase agreements293,659 227,922 
Other short-term borrowings0 7,717 
Long-term debt1,202,825 1,202,494 
Other liabilities1,131,859 1,103,121 
Total liabilities49,997,294 49,232,825 
Shareholders' Equity
Preferred stock - no par value; authorized 100,000,000 shares; issued 22,000,000537,145 537,145 
Common stock - $1.00 par value; authorized 342,857,143 shares; issued 168,978,380 and 168,132,522; outstanding 148,888,513 and 148,039,495168,978 168,133 
Additional paid-in capital3,864,281 3,851,208 
Treasury stock, at cost; 20,089,867 and 20,093,027 shares(731,690)(731,806)
Accumulated other comprehensive income, net15,278 158,635 
Retained earnings1,307,725 1,178,019 
Total shareholders' equity5,161,717 5,161,334 
Total liabilities and shareholders' equity$55,159,011 $54,394,159 
See accompanying notes to unaudited interim consolidated financial statements.
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SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended March 31,
(in thousands, except per share data)20212020
Interest income:
Loans, including fees$372,491 $427,337 
Investment securities available for sale29,458 51,653 
Loans held for sale6,462 792 
Federal Reserve Bank balances673 1,508 
Other earning assets733 2,607 
Total interest income409,817 483,897 
Interest expense:
Deposits25,018 86,002 
Federal funds purchased, securities sold under repurchase agreements, and other short-term borrowings34 5,932 
Long-term debt10,908 18,703 
Total interest expense35,960 110,637 
Net interest income373,857 373,260 
(Reversal of) provision for credit losses(18,575)158,722 
Net interest income after provision for credit losses392,432 214,538 
Non-interest revenue:
Service charges on deposit accounts20,033 20,689 
Fiduciary and asset management fees17,954 15,174 
Card fees11,996 10,950 
Brokerage revenue12,974 12,398 
Mortgage banking income22,315 12,227 
Capital markets income7,505 11,243 
Income from bank-owned life insurance8,843 6,038 
Investment securities (losses) gains, net(1,990)8,734 
Other non-interest revenue11,326 6,404 
Total non-interest revenue110,956 103,857 
Non-interest expense:
Salaries and other personnel expense161,477 149,678 
Net occupancy, equipment, and software expense41,134 42,194 
Third-party processing and other services20,032 22,700 
Professional fees9,084 10,675 
FDIC insurance and other regulatory fees5,579 5,278 
Other operating expenses29,828 45,754 
Total non-interest expense267,134 276,279 
Income before income taxes236,254 42,116 
Income tax expense49,161 3,595 
Net income187,093 38,521 
Less: Preferred stock dividends8,291 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, diluted1.19 0.20 
Weighted average common shares outstanding, basic148,467 147,311 
Weighted average common shares outstanding, diluted149,780 148,401 
See accompanying notes to unaudited interim consolidated financial statements.
2



SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)

Three Months Ended March 31,
20212020
(in thousands)Before-tax AmountIncome TaxNet of Tax AmountBefore-tax AmountIncome TaxNet of Tax Amount
Net income$236,254 $(49,161)$187,093 $42,116 $(3,595)$38,521 
Unrealized gains (losses) on investment securities available for sale:
Net unrealized gains (losses) arising during the period(165,241)42,781 (122,460)158,341 (41,011)117,330 
Reclassification adjustment for realized (gains) losses included in net income1,990 (515)1,475 (8,734)2,262 (6,472)
Net change(163,251)42,266 (120,985)149,607 (38,749)110,858 
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Net unrealized gains (losses) arising during the period(29,057)7,874 (21,183)108,639 (28,138)80,501 
Reclassification adjustment for realized (gains) losses included in net income(1,599)410 (1,189)(120)31 (89)
Net change(30,656)8,284 (22,372)108,519 (28,107)80,412 
Total other comprehensive income (loss)$(193,907)$50,550 $(143,357)$258,126 $(66,856)$191,270 
Comprehensive income$43,736 $229,791 
See accompanying notes to unaudited interim consolidated financial statements.
3



SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)
(in thousands, except per share data)Preferred StockCommon
Stock
Additional
Paid-in
Capital
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Retained EarningsTotal
Balance, December 31, 2020$537,145 $168,133 $3,851,208 $(731,806)$158,635 $1,178,019 $5,161,334 
Net income     187,093 187,093 
Other comprehensive loss, net of income taxes    (143,357) (143,357)
Cash dividends declared on common stock - $0.33 per share     (49,093)(49,093)
Cash dividends declared on preferred stock(1)
     (8,291)(8,291)
Restricted share unit vesting and taxes paid related to net share settlement 271 (6,456)  0 (6,185)
Stock options exercised, net 574 11,978    12,552 
Warrants exercised with net settlement and common stock reissued  (113)116  (3)0 
Share-based compensation expense  7,664    7,664 
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$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 credit losses (ASU 2016-13), net of tax— — — — — (35,721)(35,721)
Net income— — — — — 38,521 38,521 
Other comprehensive income, net of income taxes— — — — 191,270 — 191,270 
Cash dividends declared on common stock - $0.33 per share— — — — — (48,598)(48,598)
Cash dividends declared on preferred stock(1)
— — — — — (8,291)(8,291)
Repurchases of common stock including costs to repurchase— — — (16,246)— — (16,246)
Restricted share unit vesting and taxes paid related to net share settlement— 345 (7,602)— — (7,257)
Stock options exercised, net— 214 6,053 — — — 6,267 
Share-based compensation expense— — 3,570 — — — 3,570 
Balance at March 31, 2020$537,145 $167,360 $3,821,357 $(731,806)$256,911 $1,014,238 $5,065,205 
(1)    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.
See accompanying notes to unaudited interim consolidated financial statements.
4



SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended March 31,
(in thousands)20212020
Operating Activities
Net income$187,093 $38,521 
Adjustments to reconcile net income to net cash (used) provided by operating activities:
(Reversal of) provision for credit losses(18,575)158,722 
Depreciation, amortization, and accretion, net52,395 23,649 
Deferred income tax expense (benefit)17,926 (10,978)
Originations of loans held for sale(1,075,343)(254,395)
Proceeds from sales and payments on loans held for sale857,872 259,224 
Gain on sales of loans held for sale, net(16,293)(9,497)
Decrease (increase) in other assets17,437 (442,711)
(Decrease) increase in other liabilities(11,936)260,486 
Investment securities losses (gains), net1,990 (8,734)
Share-based compensation expense7,664 3,570 
 Other1,904 
Net cash provided by operating activities20,230 19,761 
Investing Activities
Proceeds from maturities and principal collections of investment securities available for sale852,628 341,431 
Proceeds from sales of investment securities available for sale223,977 413,180 
Purchases of investment securities available for sale(2,125,567)(755,558)
Proceeds from sales of loans21,535 11,808 
Purchases of loans(606,985)
Net decrease (increase) in loans5,084 (1,065,125)
Net purchases of Federal Home Loan Bank stock(1,200)(978)
Net purchases of Federal Reserve Bank stock0 (454)
Net proceeds from settlement (purchases) of bank-owned life insurance policies3,784 (249,942)
Net increase in premises, equipment and software(4,027)(6,941)
Other1,247 8,547 
Net cash used in investing activities(1,629,524)(1,304,032)
Financing Activities
Net increase in deposits677,380 1,420,659 
Net increase in federal funds purchased and securities sold under repurchase agreements65,737 147,086 
Net decrease in other short-term borrowings(7,717)(578,560)
Repayments and redemption of long-term debt0 (251,904)
Proceeds from issuance of long-term debt, net0 1,248,441 
Dividends paid to common shareholders(48,834)(44,149)
Dividends paid to preferred shareholders(8,291)(3,150)
Repurchase of common stock0 (16,246)
Issuances, net of taxes paid, under equity compensation plans6,368 (990)
Net cash provided by financing activities684,643 1,921,187 
(Decrease) increase in cash and cash equivalents including restricted cash(924,651)636,916 
Cash, cash equivalents, and restricted cash, at beginning of period4,252,917 1,186,918 
Cash, cash equivalents, and restricted cash at end of period$3,328,266 $1,823,834 
Supplemental Disclosures:
Income taxes paid$48,505 $920 
Interest paid46,599 109,340 
Non-cash Activities
Securities sold during the period but settled after period-end0 169,748 
Securities purchased during the period but settled after period-end53,699 113,818 
Loans foreclosed and transferred to other real estate720 1,951 
Dividends declared on common stock during the period but paid after period-end49,093 48,598 
Dividends declared on preferred stock during the period but paid after period-end5,141 5,141 
See accompanying notes to unaudited interim consolidated financial statements.
5



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 288 branches and 388 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' 2020 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; income taxes; and contingent liabilities.
Recently Adopted Accounting Standards
ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs. The guidance in this ASU pertains to the shortened amortization period for certain purchased callable debt securities held at a premium, which premium is amortized to the earliest call date in accordance with ASC 310-20-25-33, and clarifies that an entity should reevaluate whether a callable debt security is within the scope of paragraph 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 no material impact to the unaudited 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 material impact to the unaudited consolidated financial statements unless there are changes in tax law that require recognition as set forth in 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
6



Reference Rate Reform on Financial Reporting on October 1, 2020. Synovus has not yet elected optional expedients for ASU 2021-01.
Note 2 - 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, 2021 and December 31, 2020 are summarized below.
March 31, 2021
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
U.S. Treasury securities$70,085 $0 $(3,629)$66,456 
U.S. Government agency securities79,148 2,026 0 81,174 
Mortgage-backed securities issued by U.S. Government agencies964,709 1,542 (11,069)955,182 
Mortgage-backed securities issued by U.S. Government sponsored enterprises6,100,521 78,507 (77,253)6,101,775 
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises1,155,180 12,678 (10,635)1,157,223 
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises440,556 12,006 (7,348)445,214 
Corporate debt securities and other debt securities18,235 504 (6)18,733 
Total investment securities available for sale$8,828,434 $107,263 $(109,940)$8,825,757 
December 31, 2020
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
U.S. Treasury securities$20,257 $$$20,257 
U.S. Government agency securities79,638 2,682 82,320 
Mortgage-backed securities issued by U.S. Government agencies1,216,012 7,930 (5,925)1,218,017 
Mortgage-backed securities issued by U.S. Government sponsored enterprises4,865,858 134,188 5,000,046 
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises1,245,644 15,309 (10,576)1,250,377 
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises354,244 16,677 370,921 
Corporate debt securities and other debt securities20,211 457 (168)20,500 
Total investment securities available for sale$7,801,864 $177,243 $(16,669)$7,962,438 
At both March 31, 2021 and December 31, 2020, investment securities with a carrying value of $3.84 billion were pledged to secure certain deposits and other liabilities, as required by law or contractual agreements.            

7



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, 2021 and December 31, 2020 are presented below.
March 31, 2021
Less than 12 Months12 Months or LongerTotal
(in thousands)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
U.S. Treasury securities$46,195 $(3,629)$0 $0 $46,195 $(3,629)
Mortgage-backed securities issued by U.S. Government agencies784,433 (11,069)0 0 784,433 (11,069)
Mortgage-backed securities issued by U.S. Government sponsored enterprises4,214,454 (77,253)0 0 4,214,454 (77,253)
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises770,319 (10,635)0 0 770,319 (10,635)
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises176,469 (7,348)0 0 176,469 (7,348)
Corporate debt securities and other debt securities9,498 (6)0 0 9,498 (6)
Total$6,001,368 $(109,940)$0 $0 $6,001,368 $(109,940)
December 31, 2020
Less than 12 Months12 Months or LongerTotal
(in thousands)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Mortgage-backed securities issued by U.S. Government agencies$566,896 $(5,925)$$$566,896 $(5,925)
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises803,429 (10,576)803,429 (10,576)
Corporate debt securities and other debt securities9,337 (168)9,337 (168)
Total$1,379,662 $(16,669)$$$1,379,662 $(16,669)
As of March 31, 2021, Synovus had 115 investment securities in a loss position for less than twelve months and 0 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 at March 31, 2021.
At March 31, 2021, 0 ACL was established for investment securities. Substantially all of the unrealized losses on the securities portfolio were the result of changes in market interest rates compared to the date the securities were acquired rather than the credit quality of the issuers or underlying loans. U.S. Treasury and agency securities and agency mortgage-backed securities are issued, guaranteed or otherwise supported by the United States government, an agency of the 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, 2021 are shown below. The expected life of MBSs or CMOs may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. For purposes of the maturity table, MBSs and CMOs, which are not due at a single maturity date, have been classified based on the final contractual maturity date.
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 securities430 1,594 77,124 0 79,148 
Mortgage-backed securities issued by U.S. Government agencies0 1,232 162 963,315 964,709 
Mortgage-backed securities issued by U.S. Government sponsored enterprises76 87 77,685 6,022,673 6,100,521 
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises0 0 206 1,154,974 1,155,180 
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises4,126 109,488 227,357 99,585 440,556 
Corporate debt securities and other debt securities0 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 securities438 1,623 79,113 0 81,174 
Mortgage-backed securities issued by U.S. Government agencies0 1,281 169 953,732 955,182 
Mortgage-backed securities issued by U.S. Government sponsored enterprises77 88 80,469 6,021,141 6,101,775 
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises0 0 215 1,157,008 1,157,223 
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises4,126 113,783 224,116 103,189 445,214 
Corporate debt securities and other debt securities0 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, 2021 and 2020 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,
(in thousands)20212020
Proceeds from sales of investment securities available for sale$223,977 $413,180 
Gross realized gains on sales0 8,734 
Gross realized losses on sales(1,990)
Investment securities gains (losses), net$(1,990)$8,734 

9



Note 3 - 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, 2021 and December 31, 2020.
March 31, 2021
(in thousands)CurrentAccruing 30-89 Days Past DueAccruing 90 Days or Greater Past DueTotal Accruing Past DueNon-accrual with an ALLNon-accrual without an ALLTotal
Commercial, financial and agricultural$12,573,032 $12,545 $292 $12,837 $59,145 $17,315 $12,662,329 
Owner-occupied7,009,586 4,422 305 4,727 17,192 0 7,031,505 
Total commercial and industrial19,582,618 16,967 597 17,564 76,337 17,315 19,693,834 
Investment properties9,305,441 4,295 400 4,695 16,880 8,709 9,335,725 
1-4 family properties633,971 871 61 932 2,815 1,236 638,954 
Land and development553,698 3,661 89 3,750 1,801 0 559,249 
Total commercial real estate10,493,110 8,827 550 9,377 21,496 9,945 10,533,928 
Consumer mortgages5,283,865 4,109 0 4,109 11,201 0 5,299,175 
Home equity lines1,417,714 2,446 16 2,462 12,191 0 1,432,367 
Credit cards263,660 1,835 1,876 3,711 0 0 267,371 
Other consumer loans1,563,272 7,705 765 8,470 6,684 0 1,578,426 
Total consumer8,528,511 16,095 2,657 18,752 30,076 0 8,577,339 
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, 2020
(in thousands)CurrentAccruing 30-89 Days Past DueAccruing 90 Days or Greater Past DueTotal Accruing Past DueNon-accrual with an ALLNon-accrual without an ALLTotal
Commercial, financial and agricultural$12,321,514 $10,256 $996 $11,252 $55,527 $21,859 $12,410,152 
Owner-occupied7,087,992 1,913 92 2,005 20,019 7,110,016 
Total commercial and industrial19,409,506 12,169 1,088 13,257 75,546 21,859 19,520,168 
Investment properties9,075,843 2,751 154 2,905 24,631 9,103,379 
1-4 family properties621,492 3,548 36 3,584 2,383 1,236 628,695 
Land and development591,048 422 422 1,899 264 593,633 
Total commercial real estate10,288,383 6,721 190 6,911 28,913 1,500 10,325,707 
Consumer mortgages5,495,415 8,851 485 9,336 8,740 5,513,491 
Home equity lines1,521,575 4,006 4,006 12,145 1,537,726 
Credit cards276,778 2,363 1,877 4,240 281,018 
Other consumer loans1,062,899 9,122 477 9,599 2,376 1,074,874 
Total consumer8,356,667 24,342 2,839 27,181 23,261 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 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 the three months ended March 31, 2021 and 2020, respectively. Of the interest income recognized during the three months ended March 31, 2021 and 2020, cash-basis interest income was $622 thousand and $961 thousand, respectively.

10




Pledged Loans
Loans with carrying values of $14.27 billion and $15.05 billion, respectively, were pledged as collateral for borrowings and capacity at March 31, 2021 and December 31, 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: 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
11



family residential properties also consider available information on the payment status of any associated senior liens with other financial institutions.
The following tables summarize each loan portfolio class by risk grade and origination year as of March 31, 2021 and December 31, 2020 as required under CECL.
March 31, 2021
Term Loans Amortized Cost Basis by Origination YearRevolving Loans
(in thousands)20212020201920182017PriorAmortized Cost BasisConverted to Term LoansTotal
Commercial, financial and agricultural
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 Mention807 57,063 38,581 7,942 18,243 3,678 95,135 465 221,914 
Substandard(1)
772 64,917 33,901 11,166 23,815 42,824 90,617 114 268,126 
Doubtful(2)
0 512 4,055 19,894 0 0 312 0 24,773 
Total commercial, financial and agricultural1,061,345 3,291,648 1,353,825 823,114 599,512 1,227,807 4,258,643 46,435 12,662,329 
Owner-occupied
Pass250,215 1,306,635 1,271,373 1,089,766 880,566 1,640,599 383,907 0 6,823,061 
Special Mention429 5,603 10,306 19,447 10,200 15,568 0 0 61,553 
Substandard(1)
92 3,783 26,473 45,438 26,186 35,281 0 0 137,253 
Doubtful(2)
0 0 0 9,638 0 0 0 0 9,638 
Total owner-occupied250,736 1,316,021 1,308,152 1,164,289 916,952 1,691,448 383,907 0 7,031,505 
Total commercial and industrial1,312,081 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
Pass266,356 1,189,454 2,196,482 1,879,176 917,367 1,623,228 276,553 0 8,348,616 
Special Mention0 1,321 81,524 229,161 163,844 284,980 56,102 0 816,932 
Substandard(1)
1,040 987 8,413 58,991 23,677 76,974 95 0 170,177 
Total investment properties267,396 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
Pass66,477 179,602 79,636 60,281 78,564 116,823 41,043 0 622,426 
Special Mention271 399 0 366 0 894 0 0 1,930 
Substandard(1)
1,812 1,691 439 5,521 1,199 2,596 1,340 0 14,598 
Total 1-4 family properties68,560 181,692 80,075 66,168 79,763 120,313 42,383 0 638,954 
12



March 31, 2021
Term Loans Amortized Cost Basis by Origination YearRevolving Loans
(in thousands)20212020201920182017PriorAmortized Cost BasisConverted to Term LoansTotal
Land and development
Pass23,510 84,651 134,182 81,260 83,035 79,755 59,018 0 545,411 
Special Mention97 849 1,986 1,455 173 383 0 0 4,943 
Substandard(1)
22 1,221 50 3,980 893 2,729 0 0 8,895 
Total land and development23,629 86,721 136,218 86,695 84,101 82,867 59,018 0 559,249 
Total commercial real estate359,585 1,460,175 2,502,712 2,320,191 1,268,752 2,188,362 434,151 0 10,533,928 
Consumer mortgages
Pass258,674 1,796,593 797,705 358,353 585,879 1,438,675 1,012 0 5,236,891 
Substandard(1)
206 181 2,615 11,939 11,008 36,034 0 0 61,983 
Loss(3)
0 0 0 0 0 301 0 0 301 
Total consumer mortgages258,880 1,796,774 800,320 370,292 596,887 1,475,010 1,012 0 5,299,175 
Home equity lines
Pass0 0 0 0 0 0 1,329,980 85,254 1,415,234 
Substandard(1)
0 0 0 0 0 0 9,717 6,422 16,139 
Doubtful(2)
0 0 0 0 0 0 0 19 19 
Loss(3)
0 0 0 0 0 0 832 143 975 
Total home equity lines0 0 0 0 0 0 1,340,529 91,838 1,432,367 
Credit cards
Pass0 0 0 0 0 0 265,496 0 265,496 
Substandard(1)
0 0 0 0 0 0 521 0 521 
Loss(4)
0 0 0 0 0 0 1,354 0 1,354 
Total credit cards0 0 0 0 0 0 267,371 0 267,371 
Other consumer loans
Pass7,626 797,532 169,798 74,833 88,716 126,009 306,096 0 1,570,610 
Substandard(1)
0 15 2,273 1,572 2,967 691 264 0 7,782 
Loss(4)
0 0 0 0 0 34 0 0 34 
Total other consumer loans7,626 797,547 172,071 76,405 91,683 126,734 306,360 0 1,578,426 
Total consumer266,506 2,594,321 972,391 446,697 688,570 1,601,744 1,915,272 91,838 8,577,339 
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)    The majority of loans within Substandard risk grade are accruing loans at March 31, 2021.
(2)    Loans within Doubtful risk grade are on non-accrual status and generally have an ALL equal to 50% of the loan amount.
(3)    Loans within Loss risk grade are on non-accrual status and have an ALL equal to the full loan amount.
(4)    Represent amounts that were 120 days past due. These credits are downgraded to the Loss category with an ALL equal to the full loan amount and are generally charged off upon reaching 181 days past due in accordance with the FFIEC Retail Credit Classification Policy.
13



December 31, 2020
Term Loans Amortized Cost Basis by Origination YearRevolving Loans
(in thousands)20202019201820172016PriorAmortized Cost BasisConverted to Term LoansTotal
Commercial, financial and agricultural
Pass$3,819,048 $1,333,460 $847,283 $582,612 $551,413 $633,871 $4,102,751 $49,762 $11,920,200 
Special Mention63,307 40,618 12,723 22,070 1,665 5,545 60,741 489 207,158 
Substandard(1)
28,698 36,618 24,867 36,072 12,808 35,172 84,498 514 259,247 
Doubtful(2)
3,721 19,778 48 23,547 
Total commercial, financial and agricultural3,911,053 1,414,417 904,651 640,754 565,886 674,588 4,248,038 50,765 12,410,152 
Owner-occupied
Pass1,321,680 1,275,435 1,131,183 982,056 555,932 1,297,070 349,566 6,912,922 
Special Mention6,170 9,995 10,682 14,138 1,582 13,768 56,335 
Substandard(1)
2,570 22,793 42,615 26,033 7,316 29,794 131,121 
Doubtful(2)
9,638 9,638 
Total owner-occupied1,330,420 1,308,223 1,194,118 1,022,227 564,830 1,340,632 349,566 7,110,016 
Total commercial and industrial5,241,473 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
Pass1,055,440 2,126,667 1,999,345 1,091,880 483,780 1,301,088 229,044 8,287,244 
Special Mention1,482 66,160 176,794 136,004 138,362 129,401 55,440 703,643 
Substandard(1)
1,007 4,770 24,476 19,820 21,875 40,509 35 112,492 
Total investment properties1,057,929 2,197,597 2,200,615 1,247,704 644,017 1,470,998 284,519 9,103,379 
1-4 family properties
Pass197,320 95,145 70,267 88,454 38,729 97,374 27,657 614,946 
Special Mention402 508 109 786 118 1,923 
Substandard(1)
1,527 653 4,312 1,141 554 2,299 1,340 11,826 
Total 1-4 family properties199,249 95,798 75,087 89,704 40,069 99,791 28,997 628,695 
Land and development
Pass84,985 173,302 83,734 92,911 12,249 76,380 53,250 576,811 
Special Mention857 1,995 2,866 282 1,332 636 7,968 
Substandard(1)
1,229 425 4,664 915 136 1,485 8,854 
Total land and development87,071 175,722 91,264 94,108 12,385 79,197 53,886 593,633 
Total commercial real estate1,344,249 2,469,117 2,366,966 1,431,516 696,471 1,649,986 367,402 10,325,707 
14



December 31, 2020
Term Loans Amortized Cost Basis by Origination YearRevolving Loans
(in thousands)20202019201820172016PriorAmortized Cost BasisConverted to Term LoansTotal
Consumer mortgages
Pass1,871,512 874,769 425,711 678,255 685,810 965,382 1,040 5,502,479 
Substandard(1)
33 961 748 889 866 7,224 10,721 
Loss(3)
291 291 
Total consumer mortgages1,871,545 875,730 426,459 679,144 686,676 972,897 1,040 5,513,491 
Home equity lines— 
Pass1,429,755 90,832 1,520,587 
Substandard(1)
9,698 5,996 15,694 
Doubtful(2)
19 19 
Loss(3)
1,283 143 1,426 
Total home equity lines1,440,736 96,990 1,537,726 
Credit cards
Pass279,142 279,142 
Substandard(1)
595 595 
Loss(4)
1,281 1,281 
Total credit cards281,018 281,018 
Other consumer loans— 
Pass252,160 190,820 89,187 100,459 80,365 61,040 297,637 1,071,668 
Substandard(1)
19 762 262 1,195 121 585 227 3,171 
Loss(4)
35 35 
Total other consumer loans252,179 191,582 89,449 101,654 80,486 61,660 297,864 1,074,874 
Total consumer2,123,724 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)    The majority of loans within Substandard risk grade are accruing loans at December 31, 2020.
(2)    Loans within Doubtful risk grade are on non-accrual status and generally have an ALL equal to 50% of the loan amount.
(3)    Loans within Loss risk grade are on non-accrual status and have an ALL equal to the full loan amount.
(4)    Represent amounts that were 120 days past due. These credits are downgraded to the Loss category with an ALL equal to the full loan amount and are generally charged off upon reaching 181 days past due in accordance with the FFIEC Retail Credit Classification Policy.
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, 2021.
15



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, 2021 and 2020.
As Of and For the Three Months Ended March 31, 2021
(in thousands)Commercial & IndustrialCommercial Real EstateConsumerTotal
Allowance for loan losses:
Beginning balance$229,555 $130,742 $245,439 $605,736 
Charge-offs(9,417)(10,319)(5,589)(25,325)
Recoveries2,772 1,026 1,323 5,121 
Provision for (reversal of) loan losses31,867 (7,637)(46,548)(22,318)
Ending balance$254,777 $113,812 $194,625 $563,214 
As Of and For the Three Months Ended March 31, 2020
(in thousands)Commercial & IndustrialCommercial Real EstateConsumerTotal
Allowance for loan losses:
Beginning balance, prior to adoption of ASC 326$145,782 $67,430 $68,190 $281,402 
Impact from adoption of ASC 326(2,310)(651)85,955 82,994 
Beginning balance, after adoption of ASC 326$143,472 $66,779 $154,145 $364,396 
Charge-offs(14,885)(1,017)(7,972)(23,874)
Recoveries1,741 399 1,673 3,813 
Provision for loan losses86,622 40,956 21,539 149,117 
Ending balance$216,950 $107,117 $169,385 $493,452 
The ALL of $563.2 million and the reserve for unfunded commitments of $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 first quarter of 2021 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 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 of 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 ended March 31, 2021 included net charge-offs of $20.2 million and resulted from the improved economic outlook and stable loan portfolio metrics that were partially offset by the increased 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.


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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, 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" in Synovus' 2020 Form 10-K for information on Synovus' loan modifications due to COVID-19. The following tables represent, by concession type, the post-modification balance for loans modified or renewed during the three months ended March 31, 2021 and 2020 that were reported as accruing or non-accruing TDRs.
TDRs by Concession Type
Three Months Ended March 31, 2021
(in thousands, except contract data)Number of ContractsBelow Market Interest Rate
Other Concessions(1)
Total
Commercial, financial and agricultural40 $3,233 $2,563 $5,796 
Owner-occupied5 1,254 399 1,653 
Total commercial and industrial45 4,487 2,962 7,449 
Investment properties5 1,984 0 1,984 
1-4 family properties5 463 39 502 
Land and development1 0 43 43 
Total commercial real estate11 2,447 82 2,529 
Consumer mortgages0 0 0 0 
Home equity lines13 587 162 749 
Other consumer loans73 129 4,619 4,748 
Total consumer86 716 4,781 5,497 
Total TDRs142 $7,650 $7,825 $15,475 (2)
Three Months Ended March 31, 2020
(in thousands, except contract data)Number of ContractsBelow Market Interest Rate
Other Concessions(1)
Total
Commercial, financial and agricultural36 $3,724 $2,011 $5,735 
Owner-occupied1,367 96 1,463 
Total commercial and industrial41 5,091 2,107 7,198 
Investment properties23,070 23,070 
1-4 family properties724 442 1,166 
Land and development449 449 
Total commercial real estate24,243 442 24,685 
Consumer mortgages515 1,083 1,598 
Home equity lines19 275 964 1,239 
Other consumer loans29 78 1,897 1,975 
Total consumer54 868 3,944 4,812 
Total TDRs104 $30,202 $6,493 $36,695 (3)
(1)    Other concessions generally include term extensions, interest only payments for a period of time, or principal forgiveness, but there was 0 principal forgiveness for the three months ending March 31, 2021 and 2020.
(2)    NaN net charge-offs were recorded during the three months ended March 31, 2021.
(3)    NaN net charge-offs were recorded during the three months ended March 31, 2020.
For the three months ended March 31, 2021 there were 0 defaults 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 3 defaults with a recorded investment of $618 thousand for the three months ended March 31, 2020. As of March 31, 2021 and December 31, 2020, there were 0 commitments to lend a material amount of additional funds to any customer whose loan was classified as a TDR.

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Note 4 - Goodwill and Other Intangible Assets
Goodwill allocated to each reporting unit at March 31, 2021 and December 31, 2020 is presented as follows (the FMS reportable segment includes 2 reporting units of Consumer Mortgage and Wealth Management):
(in thousands)Community Banking Reporting UnitWholesale Banking Reporting UnitConsumer Mortgage Reporting UnitWealth Management Reporting UnitTotal
Balance as of December 31, 2020$256,323 $171,636 $$24,431 $452,390 
Goodwill acquired and adjustments during the year0 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 performs its annual evaluation of goodwill impairment during the fourth quarter of each year. See "Part II - Item 8. Financial Statements and Supplementary Data - Note 7 - Goodwill and Other Intangible Assets" to the consolidated financial statements of Synovus' 2020 Form 10-K for information on Synovus' quantitative assessments of goodwill impairment during 2020.
The following table shows the gross carrying amount and accumulated amortization of other intangible assets as of March 31, 2021 and December 31, 2020, which primarily consist of core deposit intangible 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 $2.6 million, respectively.
(in thousands)Gross Carrying AmountAccumulated AmortizationNet Carrying Value
March 31, 2021
CDI$57,400 $(21,916)$35,484 
Other12,500 (5,251)7,249 
Total other intangible assets$69,900 $(27,167)$42,733 
December 31, 2020
CDI$57,400 $(19,829)$37,571 
Other12,500 (4,959)7,541 
Total other intangible assets$69,900 $(24,788)$45,112 

Note 5 - Shareholders' Equity and Other Comprehensive Income (Loss)
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 11 - Shareholders' Equity and Other Comprehensive Income" to the consolidated financial statements of Synovus' 2020 Form 10-K.
Three Months Ended March 31,
20212020
Cash dividends declared per common share$0.33 $0.33 
Repurchases of Common Stock
Synovus announced on January 26, 2021 that its Board of Directors authorized share repurchases of up to $200 million in 2021. During the first quarter of 2021, the Company did not complete any share repurchases.
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, 2021 and 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 benefitTotal
Balance, December 31, 2020$105,669 $52,966 $0 $158,635 
Other comprehensive income (loss) before reclassifications(122,460)(21,183)0 (143,643)
Amounts reclassified from AOCI1,475 (1,189)0 286 
Net current period other comprehensive income (loss)(120,985)(22,372)0 (143,357)
Balance at March 31, 2021$(15,316)$30,594 $0 $15,278 
Balance, December 31, 2019$83,666 $(18,487)$462 $65,641 
Other comprehensive income (loss) before reclassifications117,330 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 
(1)    For all periods presented, the ending balance in net unrealized gains (losses) on investment securities available for sale and cash flow hedges includes unrealized losses of $13.3 million and $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.
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Note 6 - Fair Value Accounting
See "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" of Synovus' 2020 Form 10-K for a description of valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis.

The following table presents assets and liabilities measured at estimated fair value on a recurring basis.
March 31, 2021December 31, 2020
(in thousands)Level 1Level 2Level 3Total Estimated Fair ValueLevel 1Level 2Level 3Total Estimated Fair Value
Recurring fair value measurements
Trading securities:
Mortgage-backed securities issued by U.S. Government agencies$0 $0 $0 $0 $$10,185 $$10,185 
Collateralized mortgage obligations issued by U.S. Government sponsored enterprises0 555 0 555 158 158 
Other mortgage-backed securities0 375 0 375 178 178 
State and municipal securities0 1,541 0 1,541 176 176 
Asset-backed securities0 1,915 0 1,915 183 183 
Total trading securities$0 $4,386 $0 $4,386 $$10,880 $$10,880 
Investment securities available for sale:
U.S. Treasury securities$66,456 $0 $0 $66,456 $20,257 $$$20,257 
U.S. Government agency securities0 81,174 0 81,174 82,320 82,320 
Mortgage-backed securities issued by U.S. Government agencies0 955,182 0 955,182 1,218,017 1,218,017 
Mortgage-backed securities issued by U.S. Government sponsored enterprises0 6,101,775 0 6,101,775 5,000,046 5,000,046 
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises0 1,157,223 0 1,157,223 1,250,377 1,250,377 
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises0 445,214 0 445,214 370,921 370,921 
Corporate debt securities and other debt securities0 18,733 0 18,733 18,479 2,021 20,500 
Total investment securities available for sale$66,456 $8,759,301 $0 $8,825,757 $20,257 $7,940,160 $2,021 $7,962,438 
Mortgage loans held for sale$0 $242,010 $0 $242,010 $$216,647 $$216,647 
Private equity investments0 0 1,053 1,053 1,021 1,021 
Mutual funds and mutual funds held in rabbi trusts39,943 0 0 39,943 37,650 37,650 
GGL/SBA loans servicing asset0 0 3,305 3,305 3,258 3,258 
Derivative assets0 276,831 0 276,831 401,295 401,295 
Trading liability for short positions0 0 0 0 7,717 7,717 
Earnout liability0 0 5,677 5,677 5,677 5,677 
Derivative liabilities0 135,725 1,768 137,493 155,119 2,048 157,167 
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.
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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
(in thousands)As of March 31, 2021As of December 31, 2020
Fair value$242,010 $216,647 
Unpaid principal balance240,287 210,292 
Fair value less aggregate unpaid principal balance$1,723 $6,355 

Changes in Fair Value Included in Net IncomeThree Months Ended March 31,
(in thousands)20212020
Mortgage loans held for sale$(4,632)$619 
Activity for Level 3 Assets and Liabilities
See "Part II - Item 8. Financial Statements and Supplementary Data - Note 14 - Fair Value 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. The following tables provide rollforwards of Level 3 assets and liabilities measured at fair value on a recurring basis.
Three Months Ended March 31, 2021
(in thousands)Investment Securities Available for SalePrivate Equity InvestmentsGGL / 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 earnings0 32 (178)0 0 
Sales(2,021)0 0 0 0 
Additions0 0 225 0 0 
Settlements0 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 
Three Months Ended March 31, 2020
(in thousands)Investment Securities Available for SalePrivate Equity InvestmentsGGL / 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(632)(264)
Unrealized gains (losses) included in OCI(543)
Additions373 
Settlements289 
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$$(632)$$$



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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.
March 31, 2021March 31, 2020
(in thousands)Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Loans(1)
$0 $0 $14,026 $14,026 $$$$
Other real estate0 0 0 0 460 460 
MPS receivable0 0 0 0 18,490 18,490 
Other assets held for sale0 0 0 0 1,206 1,206 
(1) 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, 2021 and December 31, 2020 was $1.4 million and $1.8 million, respectively.
The following table presents fair value adjustments recognized in earnings for the three months ended March 31, 2021 and 2020 for assets measured at fair value on a non-recurring basis still held at period-end.
Three Months Ended March 31,Location in Consolidated Statements of Income
(in thousands)20212020
Loans(1)
$7,002 $Provision for credit losses
Other real estate0 Other operating expenses
MPS receivable0 2,663 Other operating expenses
Other assets held for sale0 1,391 Other operating expenses
(1) Collateral-dependent loans that were written down to fair value of collateral.
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Fair Value of Financial Instruments
The following tables present the carrying and estimated fair values of financial instruments at March 31, 2021 and December 31, 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' 2020 Form 10-K for a description of how fair value measurements are determined.
March 31, 2021
(in thousands)Carrying ValueFair ValueLevel 1Level 2Level 3
Financial assets
Total cash, cash equivalents, and restricted cash$3,328,266 $3,328,266 $3,328,266 $0 $0 
Trading securities4,386 4,386 0 4,386 0 
Investment securities available for sale8,825,757 8,825,757 66,456 8,759,301 0 
Loans held for sale993,887 993,902 0 242,010 751,892 
Private equity investments1,053 1,053 0 0 1,053 
Mutual funds and mutual funds held in rabbi trusts39,943 39,943 39,943 0 0 
Loans, net38,241,887 38,126,309 0 0 38,126,309 
GGL/SBA loans servicing asset3,305 3,305 0 0 3,305 
Derivative assets276,831 276,831 0 276,831 0 
Financial liabilities
Non-interest-bearing deposits$14,660,287 $14,660,287 $$14,660,287 $0 
Non-time interest-bearing deposits27,492,165 27,492,165 0 27,492,165 0 
Time deposits5,216,499 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 agreements293,659 293,659 293,659 0 0 
Long-term debt1,202,825 1,274,158 0 1,274,158 0 
Earnout liability5,677 5,677 0 0 5,677 
Derivative liabilities137,493 137,493 0 135,725 1,768 
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December 31, 2020
(in thousands)Carrying ValueFair ValueLevel 1Level 2Level 3
Financial assets
Total cash, cash equivalents, and restricted cash$4,252,917 $4,252,917 $4,252,917 $$
Trading securities10,880 10,880 10,880 
Investment securities available for sale7,962,438 7,962,438 20,257 7,940,160 2,021 
Loans held for sale760,123 760,939 216,647 544,292 
Private equity investments1,021 1,021 1,021 
Mutual funds and mutual funds held in rabbi trusts37,650 37,650 37,650 
Loans, net37,647,248 37,605,881 37,605,881 
GGL/SBA loans servicing asset3,258 3,258 3,258 
Derivative assets401,295 401,295 401,295 
Financial liabilities
Non-interest-bearing deposits$13,477,854 $13,477,854 $$13,477,854 $
Non-time interest-bearing deposits27,265,521 27,265,521 27,265,521 
Time deposits5,948,196 5,970,146 5,970,146 
Total deposits$46,691,571 $46,713,521 $$46,713,521 $
Securities sold under repurchase agreements227,922 227,922 227,922 
Trading liability for short positions7,717 7,717 7,717 
Long-term debt1,202,494 1,266,825 1,266,825 
Earnout liability5,677 5,677 5,677 
Derivative liabilities157,167 157,167 155,119 2,048 
Note 7 - 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' 2020 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 on the derivative instrument is reported initially as a component of accumulated other comprehensive income (loss), net of the tax impact, and subsequently reclassified into earnings when the hedged transaction affects earnings with the impacts recorded in the same income statement line item used to present the earnings effect of the hedged 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 unrealized gains 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 first quarter of 2020, related to terminated cash flow hedges, which are being recognized into earnings in conjunction with the effective terms of the original swaps through the fourth
24



quarter of 2025. Synovus recognized pre-tax income of $1.6 million during the three months ended March 31, 2021 related to the amortization of terminated cash flow hedges.
As of March 31, 2021, Synovus expects to reclassify into earnings approximately $43 million in pre-tax income due to the receipt or payment of interest payments on all cash flow hedges within the next twelve months. Included in this amount is approximately $13 million in pre-tax income related to the amortization of terminated cash flow hedges. As of March 31, 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 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 risk rating, collateral value, and customer standing with regards to its swap contractual obligations and other related matters. Such asset values fluctuate based upon changes in interest rates regardless of changes in notional amounts and changes in customer specific risk.
Collateral Requirements
Pursuant to the Dodd-Frank Act, certain derivative transactions have collateral requirements, both at the inception of the trade and as the value of each derivative position changes. As of March 31, 2021 and December 31, 2020, collateral totaling $121.7 million and $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, 2021 and December 31, 2020, Synovus had a variation margin of $81.8 million and $162.7 million respectively, each reducing the derivative liability.

25




The following table reflects the notional amount and fair value of derivative instruments included on the consolidated balance sheets.
March 31, 2021December 31, 2020
Fair ValueFair Value
(in thousands)Notional Amount
Derivative Assets (1)
Derivative Liabilities (2)
Notional Amount
Derivative Assets (1)
Derivative Liabilities (2)
Derivatives in cash flow hedging relationships:
Interest rate contracts$3,250,000 $55,873 $4,885 $3,000,000 $80,802 $
Total derivatives designated as hedging instruments    $55,873 $4,885 $80,802 $
Derivatives not designated
  as hedging instruments:
Interest rate contracts(3)
$8,891,025 $211,787 $130,737 $8,784,141 $314,234 $153,204 
Mortgage derivatives - interest rate lock commitments284,662 4,540 0 306,138 6,259 
Mortgage derivatives - forward commitments to sell fixed-rate mortgage loans298,000 4,631 0 230,500 1,611 
Other contracts(4)
170,131 0 103 234,884 304 
Visa derivative0 0 1,768 0 0 2,048 
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 $2.5 million and $2.6 million at March 31, 2021 and December 31, 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 $18.4 million and $24.1 million at March 31, 2021 and December 31, 2020, respectively. The fair value of foreign currency exchange forwards was negligible at March 31, 2021 and December 31, 2020 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, 2021 and 2020.
Three Months Ended March 31,
(in thousands)20212020
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)
Interest rate swaps:
Realized gains (losses) reclassified from AOCI, pre-tax, to interest income on loans1,599 120 
Pre-tax income recognized on cash flow hedges$1,599 $120 
(1)    See "Part I - Item 1. Financial Statements and Supplementary Data - Note 5 - Shareholders' Equity and Other Comprehensive Income (Loss) in this Report for additional information.

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The pre-tax effect of changes in fair value from derivative instruments not designated as hedging instruments on the consolidated statements of income for the three months ended March 31, 2021 and 2020 is presented below.
Gain (Loss) Recognized in Consolidated Statements of Income
Three Months Ended March 31,
(in thousands)Location in Consolidated Statements of Income20212020
Derivatives not designated as hedging instruments:
Interest rate contracts(1)    
Capital markets income$947 $(604)
Other contracts(2)
Capital markets income201 (337)
Mortgage derivatives - interest rate lock commitmentsMortgage banking income(1,719)7,024 
Mortgage derivatives - forward commitments to sell fixed-rate mortgage loansMortgage banking income6,242 (4,929)
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 customer swaps and offsetting positions.
(2) Includes risk participation agreements sold.

Note 8 - Net Income Per Common Share
The following table displays a reconciliation of the information used in calculating basic and diluted net income per common share for the three months ended March 31, 2021 and 2020. Diluted net income per common share incorporates the potential impact of contingently issuable shares, including awards which require future service as a condition of delivery of the underlying common stock.
Three Months Ended March 31,
(in thousands, except per share data)20212020
Basic Net Income Per Common Share:
Net income available to common shareholders$178,802 $30,230 
Weighted average common shares outstanding148,467 147,311 
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 outstanding148,467 147,311 
Effect of dilutive outstanding equity-based awards, warrants, and earnout payments1,313 1,090 
Weighted average diluted common shares149,780 148,401 
Net income per common share, diluted$1.19 $0.20 
As of March 31, 2021 and 2020, there were 32 thousand and 557 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 9 - 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.
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The ACL associated with unfunded commitments and letters of credit is recorded within other liabilities on the consolidated balance sheets. At March 31, 2021, the ACL for unfunded commitments was $51.5 million, compared to a reserve of $47.8 million at December 31, 2020. Additionally, an immaterial amount of unearned fees relating to letters of credit are recorded within other liabilities on the consolidated balance sheets.
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)March 31, 2021December 31, 2020
Letters of credit*$191,359 $190,562 
Commitments to fund commercial and industrial loans8,464,375 8,200,608 
Commitments to fund commercial real estate, construction, and land development loans3,229,163 3,290,041 
Commitments under home equity lines of credit1,643,659 1,602,831 
Unused credit card lines984,268 1,012,313 
Other loan commitments511,084 472,233 
Total letters of credit and unfunded lending commitments$15,023,908 $14,768,588 

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 amount166,390 133,946 
Permanent and short-term construction loans and letter of credit commitments155,060 84,552 
Funded portion of permanent and short-term loans and letters of credit17,404 9,762 
*    Represent the contractual amount net of risk participations purchased of approximately $29.6 million and $30.2 million at March 31, 2021 and December 31, 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 a sponsored MPS fails to meet its obligations, then Synovus, as the sponsor, could be held liable for the disputed amount. Synovus seeks to mitigate this risk through its contractual arrangements with the MPS and the merchants by withholding future settlements, retaining cash reserve accounts and/or obtaining other security. For the three months ended March 31, 2021 and 2020, Synovus and the sponsored entities processed and settled $26.03 billion and $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, 2021, the remaining amount, net of reserves, included in other assets and classified in 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.
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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, 2021 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 10 - Segment Reporting
Synovus' business segments are based on the products and services provided or the customers served and reflect the manner in which financial information is evaluated by the chief operating decision 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, unlike financial accounting, are not based on authoritative guidance similar to GAAP. As a result, reported segment results are not necessarily comparable with similar information reported by other financial institutions.
The Community Banking business segment serves customers using a relationship-based approach through its branch, ATM, commercial, and private wealth network in addition to mobile, Internet, and telephone banking. This segment primarily provides individual, small business, and corporate customers with an array of comprehensive banking products and services including commercial, home equity, and other consumer loans, credit and debit cards, and deposit accounts.
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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 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, 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 is based on a number of factors and assumptions, including prevailing market interest rates, the expected lives of various assets and liabilities, and the Company's broader funding profile.
The following tables present certain financial information for each reportable business segment for the three months ended March 31, 2021 and 2020. 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)Community BankingWholesale BankingFinancial Management ServicesTreasury and Corporate OtherSynovus Consolidated
Net interest income$206,242 $134,074 $20,995 $12,546 $373,857 
Non-interest revenue29,754 7,319 58,583 15,300 110,956 
Non-interest expense68,058 20,724 47,674 130,678 267,134 
Pre-provision net revenue$167,938 $120,669 $31,904 $(102,832)$217,679 

Three Months Ended March 31, 2020
(in thousands)Community BankingWholesale BankingFinancial Management ServicesTreasury and Corporate OtherSynovus Consolidated
Net interest income$196,504 $123,170 $17,384 $36,202 $373,260 
Non-interest revenue30,324 9,327 47,384 16,822 103,857 
Non-interest expense73,973 20,713 43,391 138,202 276,279 
Pre-provision net revenue$152,855 $111,784 $21,377 $(85,178)$200,838 



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March 31, 2021
(dollars in thousands)Community BankingWholesale BankingFinancial Management ServicesTreasury and Corporate OtherSynovus Consolidated
Loans, net of deferred fees and costs$10,745,585 $19,305,649 $5,175,578 $3,578,289 $38,805,101 
Total deposits$30,897,797 $11,288,606 $744,745 $4,437,803 $47,368,951 
Total full-time equivalent employees2,173 282 833 1,773 5,061 
December 31, 2020
(dollars in thousands)Community BankingWholesale BankingFinancial Management ServicesTreasury and Corporate OtherSynovus Consolidated
Loans, net of deferred fees and costs$11,171,013 $18,810,729 $5,370,790 $2,900,452 $38,252,984 
Total deposits$29,141,242 $11,958,105 $739,200 $4,853,024 $46,691,571 
Total full-time equivalent employees2,199 285 832 1,818 5,134 

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ITEM 2. – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In this Report, the words “Synovus,” “the Company,” “we,” “us,” and “our” refer to Synovus Financial Corp. together with Synovus Bank and Synovus' other wholly-owned subsidiaries, except where the context requires otherwise.
FORWARD-LOOKING STATEMENTS
Certain statements made or incorporated by reference in this Report which are not statements of historical fact, including those under “Management's Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Report, constitute forward-looking statements within the meaning of, and subject to the protections of, Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements include statements with respect to Synovus' beliefs, plans, objectives, goals, targets, expectations, anticipations, assumptions, estimates, intentions and future performance and involve known and unknown risks, many of which are beyond Synovus' control and which may cause Synovus' actual results, performance or achievements or the financial services industry or economy generally, to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.
All statements other than statements of historical fact are forward-looking statements. You can identify these forward-looking statements through Synovus' use of words such as “believes,” “anticipates,” “expects,” “may,” “will,” “assumes,” “predicts,” “could,” “should,” “would,” “intends,” “targets,” “estimates,” “projects,” “plans,” “potential” and other similar words and expressions of the future or otherwise regarding the outlook for Synovus' future business and financial performance and/or the performance of the financial services industry and economy in general. Forward-looking statements are based on the current beliefs and expectations of Synovus' management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statements in this document. Many of these factors are beyond Synovus' ability to control or predict. These factors include, but are not limited to:
(1)the risks and uncertainties related to the impact of the COVID-19 pandemic on our assets, business, capital and liquidity, financial condition, prospects and results of operations;

(2)the risk that we may not realize the expected 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;

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

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

(5)our ability to attract and retain employees and the impact of executive management transitions that are key to our growth and efficiency strategies;

(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;

(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;

(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;

(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;

(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;

(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;

(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;

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

(15) 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 by virtue of our relationships with third-party business partners, as well as our relationship with third-party vendors and other service providers;

(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;

(17) 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;

(18)the impact on our financial results, reputation, and business if we are unable to comply with all applicable federal and state regulations or other supervisory actions or directives and any necessary capital initiatives;

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

(20) risks related to the continued use, availability and reliability of LIBOR and the risks related to the transition from LIBOR to other benchmark rates;

(21) restrictions or limitations on access to funds from historical and alternative sources of liquidity could adversely affect our overall liquidity, which could restrict our ability to make payments on our obligations and our ability to support asset growth and sustain our operations and the operations of Synovus Bank;

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

(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 acquisitions;

(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;

(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;

(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;

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

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

(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 - Item 1A. Risk Factors” and other information contained in Synovus' 2020 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 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 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, 2021 and financial condition as of March 31, 2021 and December 31, 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' 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.
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DISCUSSION OF RESULTS OF OPERATIONS
Table 1 - Consolidated Financial Highlights
Three Months Ended March 31,
(dollars in thousands, except per share data)20212020Change
Net interest income$373,857 $373,260 — %
(Reversal of) provision for credit losses(18,575)158,722 (112)
Non-interest revenue110,956 103,857 
Adjusted non-interest revenue(1)
112,946 99,378 14 
Total FTE revenue485,587 477,903 
Adjusted total revenue(1)
487,577 473,424 
Non-interest expense267,134 276,279 (3)
Adjusted non-interest expense(1)
266,603 271,155 (2)
Income before income taxes236,254 42,116 461 
Net income187,093 38,521 386 
Net income available to common shareholders178,802 30,230 492 
Net income per common share, basic1.20 0.21 487 
Net income per common share, diluted1.19 0.20 486 
Adjusted net income per common share, diluted(1)
1.21 0.21 483 
Net interest margin(2)
3.04 %3.37 %(33)  bps
Net charge-off ratio(2)
0.21 0.21 — 
Return on average assets(2)
1.40 0.32 108 
Adjusted return on average assets(1)(2)
1.41 0.32 109 
Efficiency ratio-FTE55.01 57.81 (280)
Adjusted tangible efficiency ratio(1)
54.19 56.72 (253)
(1)    See "Table 14 - Reconciliation of Non-GAAP Financial Measures” in this Report for the applicable reconciliation to the most comparable GAAP measure.
(2)    Annualized
March 31, 2021December 31, 2020Sequential Quarter ChangeMarch 31, 2020Year-Over-Year Change
(dollars in thousands)
Loans, net of deferred fees and costs$38,805,101 $38,252,984 $552,117 $38,258,024 $547,077 
Total average loans38,212,267 38,884,551 (672,284)37,593,045 619,222 
Total deposits47,368,951 46,691,571 677,380 39,826,585 7,542,366 
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)34,804,575 32,754,609 2,049,966 24,790,621 10,013,954 
Total average deposits46,454,878 45,973,980 480,898 38,687,207 7,767,671 
Non-performing assets ratio0.50 %0.50 %—   bps0.50 %— bps
Non-performing loans ratio0.40 0.39 0.41 (1)
Past due loans over 90 days0.01 0.01 — 0.02 (1)
CET1 capital$4,184,715 $4,034,865 $149,850 $3,744,415 $440,300 
Tier 1 capital4,721,860 4,572,010 149,850 4,281,560 440,300 
Total risk-based capital5,733,956 5,604,230 129,726 5,289,039 444,917 
CET1 capital ratio9.74 %9.66 %  bps8.70 %104 bps
Tier 1 capital ratio10.99 10.95 9.95 104 
Total risk-based capital ratio13.34 13.42 (8)12.29 105 
Total shareholders’ equity to total assets ratio9.36 9.49 (13)10.01 (65)
Tangible common equity ratio(1)
7.55 7.66 (11)7.94 (39)
Return on average common equity(2)
15.77 12.31 346 2.75 1,302 
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)
18.04 15.79 225 3.39 1,465 
(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
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Executive Summary
Net income available to common shareholders for the first quarter of 2021 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, in the first quarter of 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 due to the onset of COVID-19 following the adoption of CECL on January 1, 2020.
Net interest income 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 33 bps over the comparable three-month period to 3.04%, due primarily to the decline in market interest rates and accelerated prepayment activity. On a sequential quarter basis, net interest income was down $12.1 million and net interest margin was down 8 bps. The sequential quarter decline 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 year, we expect to see increases in net interest income, excluding PPP fees, driven by loan growth, deployment of liquidity, a deceleration of prepayments, and further deposit cost reductions.
Non-interest revenue for the first quarter of 2021 was $111.0 million, up $7.1 million, or 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 2021 was $112.9 million, up $13.6 million, or 14%, from the first quarter of 2020. Net mortgage banking income of $22.3 million remained strong and drove the year-over-year increase in non-interest revenue. While first quarter 2021 mortgage production levels remained elevated, the recent increase in interest rates is likely to reduce production levels going forward.
Non-interest expense for the first quarter of 2021 was $267.1 million, down $9.1 million, or 3%, compared to the first quarter of 2020 and adjusted non-interest expense(1) of $266.6 million was down $4.6 million, or 2%. The adjusted tangible efficiency ratio(1) for the first three months of 2021 was 54.19%, down 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.
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 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 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 liquidity and continued economic recovery, particularly in the Southeast, we are not expecting a significant change in net charge-offs in the near term. The ACL at March 31, 2021 totaled $614.7 million, a decrease of $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 the loan portfolio. The ACL to loans coverage ratio at March 31, 2021 was 1.58%, or 1.69% excluding PPP loans, and incorporates an outlook with moderate economic expansion and benefits from the recently approved government stimulus.
Total period-end deposits at March 31, 2021 increased $677.4 million, or 1%, compared to December 31, 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 deposits associated with PPP loans.
At March 31, 2021, Synovus' CET1 ratio was 9.74%, well in excess of regulatory requirements including the capital conservation buffer of 2.5%, and was up 8 bps compared to December 31, 2020, 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 first quarter of 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, 2021 may be found in subsequent sections of "Item 2. – Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Report. See also "Item 1A. - Risk Factors" of this Report.
(1) See "Table 14 - Reconciliation of Non-GAAP Financial Measures” in this Report for applicable reconciliation to the most comparable GAAP measure.
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Changes in Financial Condition
During the three months ended March 31, 2021, total assets increased $764.9 million from $54.39 billion at December 31, 2020 to $55.16 billion. Loans increased $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 $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 and cash flow hedges of $121.0 million and $22.4 million, respectively, and dividends declared on common and preferred stock of $49.1 million and $8.3 million, respectively.
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.
Loans
The following table compares the composition of the loan portfolio at March 31, 2021, December 31, 2020, and March 31, 2020.
Table 2 - Loans by Portfolio Class
March 31, 2021 vs. December 31, 2020 ChangeMarch 31, 2021 vs. March 31, 2020 Change
(dollars in thousands)March 31, 2021December 31, 2020March 31, 2020
Commercial, financial and agricultural$12,662,329 32.6 %$12,410,152 32.4 %$252,177 %$10,902,455 28.4 %$1,759,874 16 %
Owner-occupied7,031,505 18.1 7,110,016 18.6 (78,511)(1)6,907,893 18.1 123,612 
Total commercial and industrial19,693,834 50.7 19,520,168 51.0 173,666 17,810,348 46.5 1,883,486 11 
Investment properties9,335,725 24.1 9,103,379 23.8 232,346 9,024,916 23.6 310,809 
1-4 family properties638,954 1.6 628,695 1.6 10,259 736,937 1.9 (97,983)(13)
Land and development559,249 1.4 593,633 1.6 (34,384)(6)713,505 1.9 (154,256)(22)
Total commercial real estate10,533,928 27.1 10,325,707 27.0 208,221 10,475,358 27.4 58,570 
Consumer mortgages5,299,175 13.7 5,513,491 14.4 (214,316)(4)5,613,997 14.7 (314,822)(6)
Home equity lines1,432,367 3.7 1,537,726 4.0 (105,359)(7)1,793,486 4.7 (361,119)(20)
Credit cards267,371 0.7 281,018 0.7 (13,647)(5)261,581 0.7 5,790 
Other consumer loans1,578,426 4.1 1,074,874 2.9 503,552 47 2,303,254 6.0 (724,828)(31)
Total consumer8,577,339 22.2 8,407,109 22.0 170,230 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 %$38,258,024 100.0 %$547,077 %
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 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 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 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 loans remain the largest component of our loan portfolio, representing 50.7% of total loans, while CRE and consumer loans represent 27.1% and 22.2%, respectively. Our portfolio composition is established through a comprehensive concentration management policy which sets limits for C&I, CRE, and consumer 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
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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, 2021 were $30.23 billion, or 77.9%, of the total loan portfolio, compared to $29.85 billion, or 78.0%, at December 31, 2020 and $28.29 billion, or 73.9%, at March 31, 2020.
At March 31, 2021, Synovus had eight commercial loan relationships with total commitments of $100 million or more (including amounts funded), with one 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 wide 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. As of March 31, 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 compared to 83.2% (93.8% excluding PPP loans) as of December 31, 2020. C&I loans grew $173.7 million, or 1%, from December 31, 2020, driven primarily by a $170.1 million increase in PPP loans at March 31, 2021.
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Table 3 - Commercial and Industrial Loans by Industry
March 31, 2021December 31, 2020
(dollars in thousands)Amount
%(1)
Amount
%(1)
Health care and social assistance$3,962,288 20.1 %$3,891,162 19.9 %
Finance and insurance1,772,701 9.0 1,685,797 8.6 
Accommodation and food services1,325,876 6.7 1,205,107 6.2 
Manufacturing1,323,787 6.7 1,275,169 6.5 
Retail trade1,256,529 6.4 1,303,263 6.7 
Wholesale trade1,163,470 5.9 1,152,082 5.9 
Professional, scientific, and technical services1,122,222 5.7 1,133,549 5.8 
Real estate and rental and leasing1,118,034 5.7 1,158,367 5.9 
Other services1,104,261 5.6 1,123,109 5.8 
Construction1,056,487 5.4 1,036,652 5.3 
Transportation and warehousing938,935 4.8 924,275 4.7 
Arts, entertainment, and recreation702,007 3.6 777,905 4.0 
Real estate other701,448 3.6 686,350 3.5 
Educational services439,818 2.2 395,193 2.0 
Public Administration437,142 2.2 435,636 2.2 
Administration, support, waste management, and remediation368,172 1.9 377,065 1.9 
Agriculture, forestry, fishing, and hunting357,473 1.8 383,010 2.0 
Information312,333 1.6 291,425 1.5 
Other industries230,851 1.1 285,052 1.6 
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, 2021, $12.66 billion of C&I loans, or 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, 2021, $7.03 billion of C&I loans, or 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 $10.53 billion increased $208.2 million, or 2%, from December 31, 2020, driven primarily by growth in income-producing investment properties as the recovery of commercial real estate markets continues.
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. Total investment properties loans as of March 31, 2021 were $9.34 billion, or 88.6%, of the CRE loan portfolio, and increased $232.3 million, or 3%, from December 31, 2020 with most sub-categories experiencing growth other than warehouses, which were down $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, 2021, 1-4 family properties loans totaled $639.0 million, or 6.1% of the CRE loan portfolio, and increased by $10.3 million, or 2%, from December 31, 2020.
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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 $559.2 million at March 31, 2021 decreased $34.4 million, or 6%, from $593.6 million at December 31, 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 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. As of March 31, 2021, weighted-average FICO scores within the residential real estate portfolio based on committed balances were 790 for HELOCs and 773 for Consumer Mortgages.
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 reductions in consumer mortgages, HELOCs, and credit card loans are primarily a result of consumers continuing to use government stimulus to reduce revolving credit balances and deleverage as well as the competitive low rate environment. Other consumer loans, which primarily includes third-party lending, increased $503.6 million, or 47%, from December 31, 2020. As of March 31, 2021, third-party lending balances totaled $1.18 billion, or 3.0%, of the total 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, including a $476.2 million prime auto loans purchase. We believe that the risk-return profile, the 2-year average life, and the liquidity of the asset class is a good fit under current market conditions. We will continue to use third-party lending to manage the balance sheet, which could lead to increases in 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
(dollars in thousands)March 31, 2021
%(1)
December 31, 2020
%(1)
March 31, 2020
%(1)
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)
5,841,749 12.3 5,674,416 12.2 4,617,368 11.6 
Money market accounts(2)
13,943,717 29.5 13,541,236 29.0 10,255,014 25.8 
Savings deposits(2)
1,277,034 2.7 1,156,249 2.5 949,483 2.4 
Public funds6,154,948 13.0 6,760,628 14.5 5,261,383 13.2 
Time deposits(2)
3,214,761 6.8 3,605,928 7.7 5,786,633 14.5 
Brokered deposits3,194,667 6.7 3,570,406 7.6 3,987,948 10.0 
Total deposits$47,368,951 100.0 %$46,691,571 100.0 %$39,826,585 100.0 %
Core deposits(3)    
$44,174,284 93.3 %$43,121,165 92.4 %$35,838,637 90.0 %
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$4,105,424 8.7 %$4,748,029 10.2 %$7,176,468 18.0 %
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.
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Total period-end deposits at March 31, 2021 increased $677.4 million, or 1%, compared to December 31, 2020. Core transaction deposits increased $2.05 billion, or 6%, compared to December 31, 2020, 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 accounts of $2.05 billion included growth in non-interest-bearing demand deposits of $1.36 billion, money market accounts of $402.5 million, NOW 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 6 bps during the first quarter of 2021, compared to the fourth quarter of 2020, due to repricing and remixing within the deposit portfolio.
On an average basis, the increase in total deposits was $480.9 million, or 1%, compared to the fourth quarter of 2020.
Non-interest Revenue
Non-interest revenue for the first quarter of 2021 was $111.0 million, up $7.1 million, or 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 2021 was $112.9 million, up $13.6 million, or 14%, from the first quarter of 2020. Net mortgage banking income of $22.3 million remained strong and drove the year-over-year increase in non-interest revenue. While first quarter 2021 mortgage production levels remained elevated, the recent increase in 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
Three Months Ended March 31,
(dollars in thousands)20212020% Change
Service charges on deposit accounts$20,033 $20,689 (3)%
Fiduciary and asset management fees17,954 15,174 18 
Card fees11,996 10,950 10 
Brokerage revenue12,974 12,398 
Mortgage banking income22,315 12,227 83 
Capital markets income7,505 11,243 (33)
Income from bank-owned life insurance8,843 6,038 47 
Investment securities (losses) gains, net(1,990)8,734 nm
Decrease in fair value of private equity investments (4,255)nm
Other non-interest revenue11,326 10,659 
Total non-interest revenue$110,956 $103,857 %
Three Months Ended March 31, 2021 compared to March 31, 2020
Service charges on deposit accounts for the three months ended March 31, 2021 were down $656 thousand, or 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 down $3.0 million, or 34%, for the three months ended March 31, 2021. Account analysis fees were up $2.2 million, or 32%, for the three months ended March 31, 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, 2021, were up $132 thousand, or 3%.
Fiduciary and asset management fees are derived from providing estate administration, personal trust, corporate trust, corporate bond, investment management, financial planning, and family office services. Fiduciary and asset management fees increased $2.8 million, or 18%, for the three months ended March 31, 2021. The increases were driven by growth in total assets under management which increased by 35% year-over-year to $20.59 billion.
Card fees for the three months ended March 31, 2021 were up $1.0 million, or 10%, with increased transaction volume in 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.
Brokerage revenue of $13.0 million for the three months ended March 31, 2021 was up $576 thousand, or 5%. The year-over-year increase was driven by growth in assets under management and higher transaction revenue driven by favorable
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market conditions. Brokerage revenue consists primarily of brokerage commissions as well as advisory fees earned from the management of customer assets.
Mortgage banking income was significantly higher in the first three months of 2021, with an increase of $10.1 million compared to the three months ended March 31, 2020. Mortgage banking income was driven by higher production and sales, including an increase in refinance volume. Total secondary market mortgage loan production was $573.1 million, up $318.6 million, for the three months ended March 31, 2021. While first quarter 2021 mortgage production levels remained elevated, the recent increase in interest rates is likely to reduce production levels going forward.
Capital markets income primarily includes fee income from customer derivative transactions. Additionally, capital markets income includes fee income from capital raising investment banking transactions and foreign exchange as well as other miscellaneous income from capital market transactions. Capital markets income was $3.7 million lower for the three months ended March 31, 2021, as commercial client activity to lock in lower rates was elevated in 2020.
Income from BOLI, which includes increases in the cash surrender value of policies and proceeds from insurance benefits, increased $2.8 million, or 47%, for the three months ended March 31, 2021, due primarily to income on proceeds from insurance benefits. The first three months of 2021 included income on proceeds from insurance benefits of $2.1 million compared to $118 thousand in 2020.
Investment securities losses, net, of $2.0 million for the three months ended March 31, 2021 reflected strategic sales of 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. The three 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.
Non-interest Expense
Non-interest expense for the first quarter of 2021 was $267.1 million, down $9.1 million, or 3%, compared to the first quarter of 2020 and adjusted non-interest expense of $266.6 million was down $4.6 million, or 2%. The adjusted tangible efficiency ratio for the first three months of 2021 was 54.19%, down 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
Three Months Ended March 31,
(dollars in thousands)20212020% Change
Salaries and other personnel expense$161,477 $149,678 %
Net occupancy, equipment, and software expense41,134 42,194 (3)
Third-party processing and other services20,032 22,700 (12)
Professional fees9,084 10,675 (15)
FDIC insurance and other regulatory fees5,579 5,278 
Amortization of intangibles2,379 2,640 (10)
Restructuring charges531 3,220 nm
Loss on early extinguishment of debt 1,904 nm
Other operating expenses26,918 37,990 (29)
Total non-interest expense$267,134 $276,279 (3)%
Three Months Ended March 31, 2021 compared to March 31, 2020
Salaries and other personnel expense increased $11.8 million, or 8%, for the three months ended March 31, 2021, due primarily to higher mortgage production-based commissions with commission expense up $2.3 million, higher share-based compensation expense of $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 other non-interest revenue). Total headcount of 5,175 declined 72 from December 31, 2020 and 253 from
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March 31, 2020 led by Synovus' voluntary early retirement program offered during the fourth quarter of 2020 and branch closures.
Net occupancy, equipment, and software expense decreased $1.1 million, or 3%, during the three months ended March 31, 2021, due primarily to a reduction of 10 branches, as compared to December 31, 2019.
Third-party processing and other services includes all third-party core operating system and processing charges as well as third-party loan servicing charges. Third-party processing expense decreased $2.7 million, or 12%, for the three months ended March 31, 2021. The decline is primarily associated with Synovus' restructure of certain of its third-party consumer-based lending 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 decreased $1.6 million, or 15%, for the three months ended March 31, 2021, from decreases in consulting fees related to Synovus Forward, our revenue growth and efficiency initiatives.
FDIC insurance and other regulatory fees for the three months ended March 31, 2020 included the benefit of a $1.5 million reversal of estimated additional expense accrued during the fourth quarter of 2019.
During the three months ended March 31, 2021, Synovus recorded $531 thousand in restructuring charges primarily associated with two branch closures that will occur in April 2021 as part of Synovus Forward. During the three months ended March 31, 2020, Synovus recorded restructuring charges of $3.2 million from asset impairments, lease terminations, and severance related to seven branches closed in the first quarter of 2020.
Other operating expenses includes advertising, travel, insurance, network and communication, other taxes, subscriptions and dues, other loan and ORE expense, postage and freight, training, business development, supplies, donations, and other miscellaneous expenses. Other operating expenses were down $11.1 million for the three months ended March 31, 2021 driven by declines in most all expense categories including declines of $3.0 million in advertising and $1.3 million 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 for the three months ended March 31, 2020, representing an effective tax rate of 8.5%. The effective tax rate for the three months ended March 31, 2021 is lower than the statutory tax rate primarily due to discrete benefits of $6.2 million related to changes in amounts taxable by jurisdictions and $1.8 million related to share-based compensation, partly offset by discrete expense of $4.1 million related to other accrual adjustments. The effective tax rate for the three months ended March 31, 2020 was lower than the statutory tax rate primarily due to a one-time discrete benefit of $2.7 million for the carryback of net operating loss deductions as permitted by the CARES Act, and $3.4 million of other discrete benefit items.
Synovus’ effective tax rate considers 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, and changes to unrecognized tax benefits. Accordingly, the comparability of the effective tax rate between periods may be impacted.
On March 31, 2021, the Biden Administration released the details of the Made in America Tax Plan which proposes an increase in the federal corporate income tax rate to 28%, up from the current 21%, among numerous other proposals. We continue to monitor the legislative process and the potential impact to the Company and its customers.
CREDIT QUALITY, CAPITAL RESOURCES AND LIQUIDITY
Credit Quality
Synovus continuously monitors the quality of its loan portfolio by industry, property type, geography, as well as credit quality metrics. At 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 $20.2 million, or 21 basis points. Given elevated levels of liquidity and continued economic recovery, particularly in the Southeast, we are not currently expecting a significant change in net charge-offs in the near term.
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The table below includes selected credit quality metrics.
Table 7 - Credit Quality Metrics
(dollars in thousands)March 31, 2021December 31, 2020March 31, 2020
Non-performing loans$155,169 $151,079 $156,287 
Impaired loans held for sale23,590 23,590 — 
ORE and other assets16,849 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 loans0.40 %0.39 %0.41 %
Non-performing assets as a % of total loans, ORE, and specific other assets0.50 0.50 0.50 
Loans 90 days past due and still accruing$3,804 $4,117 $6,398 
As a % of total loans0.01 %0.01 %0.02 %
Total past due loans and still accruing$45,693 $47,349 $83,235 
As a % of total loans0.12 %0.12 %0.22 %
Net charge-offs, quarter$20,204 $22,139 $20,061 
Net charge-offs/average loans, quarter0.21 %0.23 %0.21 %
(Reversal of) provision for loan losses, quarter$(22,318)$24,075 $149,117 
Provision for (reversal of) unfunded commitments, quarter3,743 (13,009)9,605 
(Reversal of) provision for credit losses, quarter$(18,575)$11,066 $158,722 
Allowance for loan losses$563,214 $605,736 $493,452 
Reserve for unfunded commitments51,528 47,785 38,420 
Allowance for credit losses$614,742 $653,521 $531,872 
ACL to loans coverage ratio1.58 %1.71 %1.39 %
ALL to loans coverage ratio1.45 1.58 1.29 
ACL/NPLs396.18 432.57 340.32 
ALL/NPLs362.97 400.94 315.74 
Non-performing Assets
Total NPAs as a percentage of total loans, ORE, and specific other assets were 0.50% at March 31, 2021, unchanged from both December 31, 2020 and March 31, 2020. Total NPAs were $195.6 million at March 31, 2021 compared to $192.1 million at December 31, 2020 and $190.0 million at March 31, 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 following table presents a summary of criticized and classified loans. The increase in criticized and classified loans at March 31, 2021 compared to December 31, 2020 was primarily hospitality-related with increases in special mention and 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.

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Table 8 - Criticized and Classified Loans
(dollars in thousands)March 31, 2021December 31, 2020
Special mention loans$1,107,272 $977,028 
Substandard loans685,474 553,720 
Doubtful loans34,430 33,204 
Loss loans2,664 3,032 
Criticized and Classified loans$1,829,840 $1,566,984 
As a % of total loans4.7 %4.1 %
Provision for Credit Losses and Allowance for Credit Losses
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 ended March 31, 2021 included net charge-offs of $20.2 million and resulted from the improved economic outlook and stable loan portfolio metrics that were partially offset by the increased 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. The ACL at March 31, 2021 totaled $614.7 million consisting of an ALL of $563.2 million and reserve for unfunded commitments of $51.5 million, resulting in an ACL to loans coverage ratio of 1.58% and an ACL to NPLs ratio of 396%. Excluding PPP loans, the ACL to loans coverage ratio was 1.69%. The ACL at March 31, 2021 incorporates an outlook with moderate economic expansion and benefits from the estimated impact of government stimulus.
Table 9 - Accruing TDRs by Risk Grade
March 31, 2021December 31, 2020March 31, 2020
(dollars in thousands)Amount%Amount%Amount%
Pass$63,809 49.2 %$72,463 53.7 %$75,073 46.9 %
Special mention8,560 6.6 8,935 6.6 10,925 6.8 
Substandard accruing57,407 44.2 53,574 39.7 74,130 46.3 
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 $39.0 million at December 31, 2020 and $12.8 million at March 31, 2020.
Accruing TDRs are considered performing because they are performing in accordance with the restructured terms. At March 31, 2021, December 31, 2020, and March 31, 2020, approximately 99%, 99%, and 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 have encouraged financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of COVID-19. In the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (initially issued on March 22, 2020 and revised on April 7, 2020), 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 their unwillingness to criticize institutions for working with borrowers in a safe and sound manner. Moreover, the Interagency Statement provided that eligible loan modifications related to COVID-19 may be accounted for under section 4013 of the CARES Act or in accordance with ASC 310-40. On December 27, 2020, the Consolidated Appropriations Act, 2021 extended the applicable period of Section 4013 of the CARES Act. 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 January 1, 2022, or 60 days after the 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.
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During 2020, Synovus provided relief programs consisting primarily of 90-day payment deferral relief to borrowers negatively impacted by COVID-19, and as of March 31, 2021, 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 or amortization extensions on approximately 2% of total loans, 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 our primary federal regulator, the Federal Reserve. Synovus and Synovus Bank measure capital adequacy using the standardized approach under Basel III. At March 31, 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 10 - Capital Ratios
(dollars in thousands)March 31, 2021December 31, 2020
CET1 capital
Synovus Financial Corp.$4,184,715 $4,034,865 
Synovus Bank4,746,560 4,641,711 
Tier 1 risk-based capital
Synovus Financial Corp.4,721,860 4,572,010 
Synovus Bank4,746,560 4,641,711 
Total risk-based capital
Synovus Financial Corp.5,733,956 5,604,230 
Synovus Bank5,446,080 5,361,611 
CET1 capital ratio
Synovus Financial Corp.9.74 %9.66 %
Synovus Bank11.06 11.11 
Tier 1 risk-based capital ratio
Synovus Financial Corp.10.99 10.95 
Synovus Bank11.06 11.11 
Total risk-based capital to risk-weighted assets ratio
Synovus Financial Corp.13.34 13.42 
Synovus Bank12.69 12.83 
Leverage ratio
Synovus Financial Corp.8.80 8.50 
Synovus Bank8.85 8.73 
Tangible common equity ratio(1)
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, 2021, Synovus' CET1 ratio increased to 9.74%, well in excess of regulatory requirements including the capital conservation buffer of 2.5%. The March 31, 2021 CET1 ratio improved 8 bps compared to December 31, 2020 driven by earnings. For additional information on regulatory capital requirements, see "Part II - Item 8. Financial Statements and Supplementary Data - Note 12 - Regulatory Capital" to the consolidated financial statements of Synovus' 2020 Form 10-K. Management reviews the Company's capital position on an on-going basis and believes, based on internal capital analyses and earnings projections, that Synovus is well positioned to meet relevant regulatory capital standards.
Synovus announced on January 26, 2021 that its Board of Directors authorized share repurchases of up to $200 million in 2021. During the first quarter of 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.
On August 26, 2020, the federal banking regulators issued a final rule (following an interim final rule issued on March 27, 2020) that allowed electing banking organizations that adopt CECL during 2020 to mitigate the estimated effects of CECL on
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regulatory capital for two years, followed by a three-year phase-in transition period. Synovus adopted CECL on January 1, 2020 and the March 31, 2021 regulatory capital ratios reflect Synovus' election of the five-year transition provision. 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.
Synovus' ability to pay dividends on its common stock and preferred stock is primarily dependent upon dividends and distributions that it receives from its bank and non-banking subsidiaries, which are restricted by various regulations administered by federal and state bank regulatory authorities.
Synovus declared common stock dividends of $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. In addition, Synovus declared dividends on its preferred stock of $8.3 million during both the three months ended March 31, 2021 and 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 as well as market risk.
In accordance with Synovus policies and regulatory guidance, ALCO evaluates contractual and anticipated cash flows under normal and stressed conditions to properly manage the Company’s liquidity profile. Synovus places an emphasis on maintaining numerous sources of current and contingent liquidity to meet its obligations to depositors, borrowers, and creditors on a timely basis. Liquidity is generated through various sources, including, but not limited to, maturities and repayments of loans by customers, maturities and sales of investment securities, and growth in core or wholesale deposits. Management continuously monitors and maintains appropriate levels of liquidity so as to provide adequate funding sources to manage customer deposit withdrawals, loan requests, and other funding demands.
Synovus Bank also generates liquidity through the issuance of brokered certificates of deposit and money market accounts. Synovus Bank accesses these funds from a broad geographic base to diversify its sources of funding and liquidity. Synovus Bank also has the capacity to access funding through its membership in the FHLB system and through the Federal Reserve discount window. At March 31, 2021, based on currently pledged collateral, Synovus Bank had access to incremental FHLB funding of $6.38 billion, subject to FHLB credit policies.
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.
Synovus presently believes that the sources of liquidity discussed above, including existing liquid funds on hand, are sufficient to meet its anticipated funding needs. However, if economic conditions were to significantly deteriorate, regulatory capital requirements for Synovus or Synovus Bank were to increase as the result of regulatory directives or otherwise, or Synovus believes it is prudent to enhance current liquidity levels, then Synovus may seek additional liquidity from external sources. See "Part I – Item 1A. Risk Factors - Changes in the cost and availability of funding due to changes in the deposit market and credit market may adversely affect our capital resources, liquidity and financial results" of Synovus' 2020 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.
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Earning Assets and Sources of Funds
Average total assets for the three months ended March 31, 2021 increased $5.49 billion, or 11%, to $54.19 billion as compared to $48.70 billion for the first three months of 2020. Average earning assets increased $5.02 billion, or 11%, in the first three months of 2021 compared to the same period in 2020 and represented 92.2% of average total assets at March 31, 2021, as compared to 92.3% at March 31, 2020. The increase in average earning assets primarily resulted from a $2.16 billion increase in average interest-bearing funds held at the Federal Reserve Bank, a $1.76 billion increase in average investment 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 $567.9 million, or 2%, to $34.08 billion for the first three months of 2021 compared to the same period in 2020. The increase in average interest-bearing liabilities resulted from a $4.37 billion, or 34%, increase in average money market deposits (includes an increase of $573.9 million in average other brokered deposits) and a $2.12 billion, or 33%, increase in average interest-bearing demand deposits. These increases were partially offset by a $3.41 billion, or 38%, decrease in average time 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 $4.38 billion, or 47%, to $13.79 billion for the first three months of 2021 compared to the same period in 2020, due largely to liquidity associated with PPP lending.
Net interest income 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 33 bps over the comparable three-month period to 3.04%, due primarily to the decline in market interest rates and accelerated prepayment activity. For the three months ended March 31, 2021, the yield on earning assets was 3.32%, a decrease of 101 bps compared to the three months ended March 31, 2020, while the effective cost of funds decreased 68 bps to 0.28%. The yield on loans decreased 60 bps to 4.02% while the yield on investment securities decreased 169 bps to 1.40% over the three months ended March 31, 2020.
On a sequential quarter basis, net interest income was down $12.1 million and net interest margin for the first quarter was 3.04%, which was down 8 bps compared to the fourth quarter of 2020. The sequential quarter decline 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. The first quarter of 2021 included average 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 the fourth quarter of 2020. For the first quarter of 2021, the yield on earning assets decreased 17 bps, while the effective cost of funds decreased 9 bps compared to the fourth quarter of 2020.
As we progress through the year, we expect to see increases in net interest income, excluding PPP fees, driven by loan growth, deployment of liquidity, a deceleration of prepayments, and further deposit cost reductions.
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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 11 - Average Balances and Yields/Rates20212020
(dollars in thousands) (yields and rates annualized)First QuarterFourth QuarterThird QuarterSecond QuarterFirst Quarter
Interest Earning Assets:
Investment securities(1)(2)
$8,437,563 7,493,822 7,227,400 6,618,533 6,680,047 
Yield1.40 %2.07 2.39 2.72 3.09 
Trading account assets(3)
$3,063 8,496 5,391 6,173 6,306 
Yield2.81 %1.03 1.69 2.19 2.70 
Commercial loans(2)(4)
$29,844,491 30,363,102 30,730,135 30,236,919 27,607,343 
Yield3.95 %3.96 3.80 3.95 4.57 
Consumer loans(4)
$8,367,776 8,521,449 9,032,437 9,899,172 9,985,702 
Yield3.98 %4.00 4.08 4.34 4.60 
Allowance for loan losses$(599,872)(595,547)(591,098)(498,545)(368,033)
    Loans, net(4)
$37,612,395 38,289,004 39,171,474 39,637,546 37,225,012 
Yield4.02 %4.03 3.92 4.08 4.62 
Mortgage loans held for sale$246,962 309,278 244,952 221,157 86,415 
Yield2.68 %2.74 2.92 3.09 3.67 
Other loans held for sale$660,753 544,301 493,940 19,246 — 
Yield2.91 %2.81 3.61 4.19 — 
Other earning assets(5)
$2,838,021 2,716,645 1,265,880 1,709,086 652,130 
Yield0.10 %0.10 0.11 0.11 1.02 
Federal Home Loan Bank and Federal Reserve Bank Stock(3)
$157,657 162,537 200,923 247,801 284,082 
Yield1.69 %2.64 2.73 3.60 3.38 
Total interest earning assets$49,956,414 49,524,083 48,609,960 48,459,542 44,933,992 
Yield3.32 %3.49 3.58 3.75 4.33 
Interest-Bearing Liabilities:
Interest-bearing demand deposits$8,570,753 8,531,415 7,789,095 7,260,940 6,445,986 
Rate0.14 %0.16 0.19 0.21 0.51 
Money market accounts, excluding brokered deposits$15,348,916 14,411,860 13,272,972 12,238,479 11,548,014 
Rate0.23 %0.26 0.36 0.46 1.00 
Savings deposits$1,219,288 1,147,667 1,114,956 1,036,024 926,822 
Rate0.02 %0.01 0.02 0.02 0.05 
Time deposits under $100,000$1,161,306 1,239,592 1,379,923 1,621,943 1,761,741 
Rate0.56 %0.74 1.03 1.43 1.64 
Time deposits over $100,000$2,993,996 3,302,959 3,863,821 4,772,555 5,051,705 
Rate0.74 %1.03 1.44 1.80 2.04 
Other brokered deposits$1,950,582 1,978,393 1,912,114 1,998,571 1,376,669 
Rate0.20 %0.23 0.23 0.25 1.42 
Brokered time deposits$1,418,751 1,795,982 2,232,940 2,244,429 2,166,496 
Rate1.50 %1.60 1.59 1.86 2.11 
   Total interest-bearing deposits$32,663,592 32,407,868 31,565,821 31,172,941 29,277,433 
Rate0.31 %0.39 0.54 0.73 1.18 
Federal funds purchased and securities sold under repurchase agreements$209,448 174,316 180,342 250,232 167,324 
Rate0.07 %0.07 0.09 0.12 0.30 
Other short-term borrowings$ — 46,739 550,000 1,384,362 
Rate %— 1.12 1.23 1.66 
Long-term debt$1,202,613 1,552,791 2,234,665 2,834,188 2,678,651 
Rate3.63 %3.96 2.71 2.36 2.78 
Total interest-bearing liabilities$34,075,653 34,134,975 34,027,567 34,807,361 33,507,770 
Rate0.42 %0.55 0.68 0.86 1.30 
Non-interest-bearing demand deposits$13,791,286 13,566,112 12,773,676 11,923,534 9,409,774 
Cost of funds0.30 %0.40 0.50 0.65 1.04 
Effective cost of funds(6)
0.28 %0.37 0.48 0.62 0.96 
Net interest margin3.04 %3.12 3.10 3.13 3.37 
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.
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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, 2021 and 2020, as well as the variances between the periods caused by changes in interest rates versus changes in volume.
Table 12 - Net Interest Income and Rate/Volume Analysis
Three Months Ended March 31,2021 Compared to 2020
Average BalancesInterestAnnualized Yield/RateChange due toIncrease (Decrease)
(dollars in thousands)202120202021202020212020VolumeRate
Assets
Interest earning assets:
Investment securities$8,437,563 $6,680,047 $29,458 $51,655 1.40 %3.09 %$13,391 $(35,588)$(22,197)
Trading account assets3,063 6,306 22 43 2.81 2.70 (22)(21)
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)
497,146 415,434 3,686 3,734 3.01 3.61 727 (775)(48)
Allowance for loan losses(599,872)(368,033)
Loans, net37,612,395 37,225,012 373,265 428,121 4.02 4.62 6,811 (61,667)(54,856)
Mortgage loans held for sale246,962 86,415 1,657 792 2.68 3.67 1,453 (588)865 
Other loans held for sale660,753 — 4,805 — 2.91 — — 4,805 4,805 
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 stock157,657 284,082 668 2,397 1.69 3.38 (1,054)(675)(1,729)
Total interest earning assets49,956,414 44,933,992 410,591 484,683 3.32 4.33 26,023 (100,115)(74,092)
Cash and due from banks518,780 515,153 
Premises and equipment, net460,466 491,244 
Other real estate1,823 13,395 
Cash surrender value of bank-owned life insurance1,051,520 892,861 
Other assets(4)
2,199,501 1,849,950 
Total assets$54,188,504 $48,696,595 
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
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 accounts17,299,498 12,924,683 9,706 33,625 0.23 1.05 11,327 (35,246)(23,919)
Savings deposits1,219,288 926,822 49 110 0.02 0.05 36 (97)(61)
Time deposits5,574,053 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 agreements209,448 167,324 34 127