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Section 1: 10-Q (10-Q)

Document
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, 2018
Commission file number 1-10312
 
______________________________
393372915_financialappendix930a42.jpg
SYNOVUS FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
______________________________
 
Georgia
 
58-1134883
(State or other jurisdiction of incorporation or organization)
 
   (I.R.S. Employer Identification No.)
1111 Bay Avenue
Suite 500, Columbus, Georgia
 
31901
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (706) 649-2311
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, $1.00 Par Value
Series B Participating Cumulative Preferred Stock Purchase Rights
Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series C
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
______________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES x  NO ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   YES x  NO ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer
x
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Smaller reporting company
¨
 
 
 
 
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 7(a)2(B) of the Securities Act.  ¨ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨    NO x
Indicate the number of shares outstanding of each of the issuer’s class of common stock, as of the latest practicable date.
Class
 
 
 
May 3, 2018

Common Stock, $1.00 Par Value
 
 
 
118,640,312




Table of Contents

Table of Contents
 
 
 
 
 
Page
Financial Information
 
 
 
Index of Defined Terms
 
Item 1.
Financial Statements (Unaudited)
 
 
 
Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017
 
 
Consolidated Statements of Income for the Three Months Ended March 31, 2018 and 2017
 
 
Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2018 and 2017
 
 
Consolidated Statements of Changes in Shareholders' Equity for the Three Months Ended March 31, 2018 and 2017
 
 
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017
 
 
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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Table of Contents



SYNOVUS FINANCIAL CORP.
INDEX OF DEFINED TERMS
ALCO – Synovus' Asset Liability Management 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
BOV – Broker’s opinion of value
bp(s) – Basis point(s)
C&I – Commercial and industrial loans
CET1 – Common Equity Tier 1 Capital defined by Basel III capital rules
CME – Chicago Mercantile Exchange
CMO – Collateralized Mortgage Obligation
Cabela’s Transaction – The transaction completed on September 25, 2017 whereby Synovus Bank acquired certain assets and assumed certain liabilities of World's Foremost Bank ("WFB") and then immediately thereafter sold WFB’s credit card assets and certain related liabilities to Capital One Bank (USA), National Association.  As a part of this transaction, Synovus Bank retained WFB’s $1.10 billion brokered time deposit portfolio and received a $75.0 million fee from Cabela’s Incorporated and Capital One.  Throughout this Report, we refer to this transaction as the “Cabela’s Transaction” and the associated $75.0 million fee received from Cabela’s and Capital One as the “Cabela’s Transaction Fee
Code – Internal Revenue Code of 1986, 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
CRE – Commercial real estate
DIF – Deposit Insurance Fund
Dodd-Frank Act – The Dodd-Frank Wall Street Reform and Consumer Protection Act
EVE – Economic value of equity
Exchange Act – Securities Exchange Act of 1934, as amended
FASB – Financial Accounting Standards Board
FDIC – Federal Deposit Insurance Corporation
Federal Reserve Bank – The 12 banks that are the operating arms of the U.S. central bank. They implement the policies of the Federal Reserve Board and also conduct economic research
Federal Reserve Board – The 7-member Board of Governors that oversees the Federal Reserve System, establishes monetary policy (interest rates, credit, etc.), and monitors the economic health of the country. Its members are appointed by the President subject to Senate confirmation, and serve 14-year terms
Federal Reserve System – The 12 Federal Reserve Banks, with each one serving member banks in its own district. This system, supervised by the Federal Reserve Board, has broad regulatory powers over the money supply and the credit structure
Federal Tax Reform – Enactment of H.R. 1, formerly known as the Tax Cuts and Jobs Act, on December 22, 2017, legislation in which a number of changes were made under the Internal Revenue Code, including a reduction of the corporate income tax rate, significant limitations on the deductibility of interest, allowance of the expensing of capital expenditures, limitation on deductibility of FDIC insurance premiums, and limitation of the deductibility of certain performance-based compensation, among others

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FFIEC – Federal Financial Institutions Examination Council
FHLB – Federal Home Loan Bank
FICO – Fair Isaac Corporation
FTE – Fully taxable-equivalent
GA DBF – Georgia Department of Banking and Finance
GAAP – Generally Accepted Accounting Principles in the United States of America
GGL – Government guaranteed loans
Global One – Entaire Global Companies, Inc., the parent company of Global One Financial, Inc., as acquired by Synovus on October 1, 2016. Throughout this Report, we refer to this acquisition as "Global One"
GSE – Government sponsored enterprise
HELOC – Home equity line of credit
LTV – Loan-to-collateral value ratio
NAICS – North American Industry Classification System
nm – not meaningful
NPA – Non-performing assets
NPL – Non-performing loans
NSF – Non-sufficient funds
OCI – Other comprehensive income
ORE – Other real estate
OTC– Over-the-counter
OTTI – Other-than-temporary impairment
Parent Company – Synovus Financial Corp.
SBA – Small Business Administration
SEC – U.S. Securities and Exchange Commission
Securities Act – Securities Act of 1933, as amended
Series C Preferred Stock – Synovus' Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series C, $25 liquidation preference
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' 2017 Form 10-K – Synovus' Annual Report on Form 10-K for the year ended December 31, 2017
Synovus Mortgage – Synovus Mortgage Corp., a wholly-owned subsidiary of Synovus Bank
Synovus Securities – Synovus Securities, Inc., a wholly-owned subsidiary of Synovus
Synovus Trust – Synovus Trust Company, N.A., a wholly-owned subsidiary of Synovus Bank
TDR – Troubled debt restructuring (as defined in ASC 310-40)
the Treasury – United States Department of the Treasury
VIE – Variable interest entity, as defined in ASC 810-10
Visa – The Visa U.S.A., Inc. card association or its affiliates, collectively
Visa Class A shares – Class A shares of common stock issued by Visa are publicly traded shares which are not subject to restrictions on sale

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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
Warrant – A warrant issued to the Treasury by Synovus to purchase up to 2,215,820 shares of Synovus common stock at a per share exercise price of $65.52 expiring on December 19, 2018, as was issued by Synovus to Treasury in 2008 in connection with the Capital Purchase Program, promulgated under the Emergency Stabilization Act of 2008
WFB – World's Foremost Bank, a wholly-owned subsidiary of Cabela's Incorporated

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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, 2018
 
December 31, 2017
ASSETS
 
 
 
Cash and due from banks
$
348,027

 
$
397,848

Interest bearing funds with Federal Reserve Bank
636,947

 
460,928

Interest earning deposits with banks
16,851

 
26,311

Federal funds sold and securities purchased under resale agreements
57,192

 
47,846

     Total cash, cash equivalents, restricted cash, and restricted cash equivalents(1)
1,059,017

 
932,933

Mortgage loans held for sale, at fair value
50,439

 
48,024

Investment securities available for sale, at fair value
3,990,978

 
3,987,069

Loans, net of deferred fees and costs
24,883,037

 
24,787,464

Allowance for loan losses
(257,764
)
 
(249,268
)
Loans, net
24,625,273

 
24,538,196

Cash surrender value of bank-owned life insurance
543,684

 
540,958

Premises and equipment, net
424,342

 
426,813

Goodwill
57,315

 
57,315

Other intangible assets
10,750

 
11,254

Deferred tax asset, net
179,343

 
165,788

Other assets
559,887

 
513,487

Total assets
$
31,501,028

 
$
31,221,837

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Liabilities
 
 
 
Deposits:
 
 
 
Non-interest bearing deposits
$
7,381,070

 
$
7,686,339

Interest bearing deposits, excluding brokered deposits
16,865,859

 
16,500,436

Brokered deposits
2,006,578

 
1,961,125

Total deposits
26,253,507

 
26,147,900

Federal funds purchased and securities sold under repurchase agreements
185,531

 
161,190

Long-term debt
1,856,392

 
1,706,138

Other liabilities
249,103

 
245,043

Total liabilities
28,544,533

 
28,260,271

Shareholders' Equity
 
 
 
Series C Preferred Stock – no par value. Authorized 100,000,000 shares; 5,200,000 shares issued and outstanding at March 31, 2018 and December 31, 2017
125,980

 
125,980

Common stock - $1.00 par value. Authorized 342,857,143 shares; 143,017,301 issued at March 31, 2018 and 142,677,449 issued at December 31, 2017; 118,702,497 outstanding at March 31, 2018 and 118,897,295 outstanding at December 31, 2017
143,017

 
142,678

Additional paid-in capital
3,039,757

 
3,043,129

Treasury stock, at cost – 24,314,804 shares at March 31, 2018 and 23,780,154 shares at December 31, 2017
(866,407
)
 
(839,674
)
Accumulated other comprehensive loss
(107,777
)
 
(54,754
)
Retained earnings
621,925

 
544,207

Total shareholders’ equity
2,956,495

 
2,961,566

Total liabilities and shareholders' equity
$
31,501,028

 
$
31,221,837

 
 
 
 
See accompanying notes to unaudited interim consolidated financial statements.
(1) See "Note 1 - Significant Accounting Policies" of this Report for information on Synovus' change in presentation of cash and cash equivalents.

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Table of Contents

SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
 
 
Three Months Ended March 31,
(in thousands, except per share data)
 
2018
 
2017
Interest income:
 
 
 
 
      Loans, including fees
 
$
285,340

 
$
249,348

      Investment securities available for sale
 
23,928

 
19,834

      Trading account assets
 
54

 
28

      Mortgage loans held for sale
 
379

 
467

      Federal Reserve Bank balances
 
1,750

 
1,211

      Other earning assets
 
1,683

 
1,513

Total interest income
 
313,134

 
272,401

Interest expense:
 
 
 
 
Deposits
 
26,375

 
16,958

Federal funds purchased and securities sold under repurchase agreements
 
107

 
38

Long-term debt
 
12,368

 
15,478

Total interest expense
 
38,850

 
32,474

Net interest income
 
274,284

 
239,927

Provision for loan losses
 
12,776

 
8,674

Net interest income after provision for loan losses
 
261,508

 
231,253

Non-interest income:
 
 
 
 
Service charges on deposit accounts
 
19,940

 
20,118

Fiduciary and asset management fees
 
13,435

 
12,151

Card fees
 
10,199

 
9,844

Brokerage revenue
 
8,695

 
7,226

Mortgage banking income
 
5,047

 
5,766

Income from bank-owned life insurance
 
4,217

 
3,056

Investment securities gains, net
 

 
7,668

Decrease in fair value of private equity investments, net
 
(3,056
)
 
(1,814
)
Other fee income
 
4,618

 
4,868

Other non-interest income
 
3,951

 
2,956

Total non-interest income
 
67,046

 
71,839

Non-interest expense:
 
 
 
 
Salaries and other personnel expense
 
113,720

 
107,191

Net occupancy and equipment expense
 
31,480

 
29,331

Third-party processing expense
 
13,945

 
12,603

FDIC insurance and other regulatory fees
 
6,793

 
6,770

Professional fees
 
5,505

 
5,355

Advertising expense
 
5,092

 
5,912

Foreclosed real estate expense, net
 
856

 
2,134

Restructuring charges, net
 
(315
)
 
6,511

Other operating expenses
 
18,103

 
21,581

Total non-interest expense
 
195,179

 
197,388

Income before income taxes
 
133,375

 
105,704

Income tax expense
 
30,209

 
33,847

Net income
 
103,166

 
71,857

Dividends on preferred stock
 
2,559

 
2,559

Net income available to common shareholders
 
$
100,607

 
$
69,298

Net income per common share, basic
 
$
0.85

 
$
0.57

Net income per common share, diluted
 
0.84

 
0.56

Weighted average common shares outstanding, basic
 
118,666

 
122,300

Weighted average common shares outstanding, diluted
 
119,321

 
123,059

 
 
 
 
 
See accompanying notes to unaudited interim consolidated financial statements.

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

 
Three Months Ended March 31,
 
2018
 
2017
(in thousands)
Before-tax Amount
 
Tax (Expense) Benefit
 
Net of Tax Amount
 
Before-tax Amount
 
Tax (Expense) Benefit
 
Net of Tax Amount
Net income
$
133,375

 
$
(30,209
)
 
$
103,166

 
$
105,704

 
$
(33,847
)
 
$
71,857

Net change related to cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
  Reclassification adjustment for losses realized in net income

 

 

 
65

 
(25
)
 
40

Net unrealized (losses) gains on investment securities available for sale:


 


 
 
 
 
 
 
 
 
Reclassification adjustment for net gains realized in net income

 

 

 
(7,668
)
 
2,952

 
(4,716
)
Net unrealized (losses) gains arising during the period
(61,445
)
 
15,914

 
(45,531
)
 
9,099

 
(3,503
)
 
5,596

Net unrealized (losses) gains
(61,445
)
 
15,914

 
(45,531
)
 
1,431

 
(551
)
 
880

Post-retirement unfunded health benefit:
 
 


 
 
 
 
 
 
 
 
Reclassification adjustment for gains realized in net income
(34
)
 
13

 
(21
)
 
(20
)
 
8

 
(12
)
Other comprehensive (loss) income
$
(61,479
)
 
$
15,927

 
$
(45,552
)
 
$
1,476

 
$
(568
)
 
$
908

Comprehensive income
 
 
 
 
$
57,614

 
 
 
 
 
$
72,765

 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to unaudited interim consolidated financial statements.




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Table of Contents

SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)
(in thousands, except per share data)
Series C Preferred Stock
 
Common
Stock
 
Additional
Paid-in
Capital
 
Treasury
Stock
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained Earnings
 
Total
Balance at December 31, 2016
$
125,980

 
$
142,026

 
$
3,028,405

 
$
(664,595
)
 
$
(55,659
)
 
$
351,767

 
$
2,927,924

Net income

 

 

 

 

 
71,857

 
71,857

Other comprehensive income, net of income taxes

 

 

 

 
908

 

 
908

Cash dividends declared on common stock -$0.15 per share

 

 

 

 

 
(18,347
)
 
(18,347
)
Cash dividends paid on Series C Preferred Stock

 

 

 

 

 
(2,559
)
 
(2,559
)
Repurchases of common stock

 

 

 
(15,151
)
 

 

 
(15,151
)
Restricted share unit activity

 
305

 
(7,799
)
 

 

 
(290
)
 
(7,784
)
Stock options exercised

 
110

 
1,809

 

 

 

 
1,919

Share-based compensation expense

 

 
3,360

 

 

 

 
3,360

Balance at March 31, 2017
$
125,980

 
$
142,441

 
$
3,025,775

 
$
(679,746
)
 
$
(54,751
)
 
$
402,428

 
$
2,962,127

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
$
125,980

 
$
142,678

 
$
3,043,129

 
$
(839,674
)
 
$
(54,754
)
 
$
544,207

 
$
2,961,566

Cumulative-effect adjustment from adoption of ASU 2014-09
 
 
 
 
 
 
 
 
 
 
(685
)
 
(685
)
Reclassification from adoption of ASU 2018-02
 
 
 
 
 
 
 
 
(7,588
)
 
7,588

 

Cumulative-effect adjustment from adoption of ASU 2016-01
 
 
 
 
 
 
 
 
117

 
(117
)
 

Net income

 

 

 

 

 
103,166

 
103,166

Other comprehensive income, net of income taxes

 

 

 

 
(45,552
)
 

 
(45,552
)
Cash dividends declared on common stock - $0.25 per share

 

 

 

 

 
(29,675
)
 
(29,675
)
Cash dividends paid on Series C Preferred Stock

 

 

 

 

 
(2,559
)
 
(2,559
)
Repurchases of common stock

 

 

 
(26,733
)
 

 

 
(26,733
)
Restricted share unit activity

 
266

 
(8,494
)
 

 

 

 
(8,228
)
Stock options exercised

 
73

 
1,167

 

 

 

 
1,240

Share-based compensation expense

 

 
3,955

 

 

 

 
3,955

Balance at March 31, 2018
$
125,980

 
$
143,017

 
$
3,039,757

 
$
(866,407
)
 
$
(107,777
)
 
$
621,925

 
$
2,956,495

 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to unaudited interim consolidated financial statements.



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Table of Contents

SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
Three Months Ended March 31,
(in thousands)
2018
 
2017
Operating Activities
 
 
 
Net income
$
103,166

 
$
71,857

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Provision for loan losses
12,776

 
8,674

Depreciation, amortization, and accretion, net
14,823

 
14,479

Deferred income tax expense
2,599

 
36,014

Originations of mortgage loans held for sale
(128,618
)
 
(156,043
)
Proceeds from sales of mortgage loans held for sale
130,805

 
155,245

Gain on sales of mortgage loans held for sale, net
(3,445
)
 
(3,560
)
(Increase) decrease in other assets
(52,159
)
 
7,375

(Decrease) increase in other liabilities
(8,466
)
 
4,963

Investment securities gains, net

 
(7,668
)
Share-based compensation expense
3,955

 
3,360

Net cash provided by operating activities
75,436

 
134,696

 
 
 
 
Investing Activities
 
 
 
Proceeds from maturities and principal collections of investment securities available for sale
139,929

 
163,386

Proceeds from sales of investment securities available for sale

 
282,629

Purchases of investment securities available for sale
(211,085
)
 
(410,814
)
Proceeds from sales of loans
10,885

 

Proceeds from sales of other real estate
2,090

 
2,773

Net increase in loans
(109,180
)
 
(419,552
)
Purchases of bank-owned life insurance policies, net of settlements
1,523

 
(73,110
)
Net increase in premises and equipment
(9,212
)
 
(5,497
)
Proceeds from sales of other assets held for sale

 
1,328

Net cash used in investing activities
(175,050
)
 
(458,857
)
 
 
 
 
Financing Activities
 
 
 
Net (decrease) increase in demand and savings deposits
(216,836
)
 
364,517

Net increase in certificates of deposit
322,338

 
92,955

Net increase (decrease) in federal funds purchased and securities sold under repurchase agreements
24,341

 
(13,219
)
Repayments and redemption of long-term debt
(2,130,030
)
 
(275,000
)
Proceeds from issuance of long-term debt
2,280,000

 
275,000

Dividends paid to common shareholders
(17,835
)
 
(18,347
)
Dividends paid to preferred shareholders
(2,559
)
 
(2,559
)
Stock options exercised
1,240

 
1,919

Repurchase of common stock
(26,733
)
 
(15,151
)
Taxes paid related to net share settlement of equity awards
(8,228
)
 
(7,784
)
Net cash provided by financing activities
225,698

 
402,331

Increase in cash and cash equivalents including restricted cash
126,084

 
78,170

Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period(1)
932,933

 
999,045

Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period(1)
$
1,059,017

 
$
1,077,215

 
 
 
 
Supplemental Cash Flow Information
 
 
 
Cash paid during the period for:
 
 
 
Income tax payments, net
$
183

 
$
210

Interest paid
33,431

 
31,714

Non-cash Activities
 
 
 
Loans foreclosed and transferred to other real estate
3,407

 
2,679

Loans transferred to other loans held for sale at fair value
5,233

 
8,442

   ASU 2014-09 cumulative effect adjustment to opening balance of retained earnings
(685
)
 

   Equity investment securities available for sale transferred to other assets at fair value
3,162

 

   Securities purchased during the period but settled after period-end

 
94,560

   Dividends declared on common stock during the period but paid after period-end
29,675

 

 
 
 
 
See accompanying notes to unaudited interim consolidated financial statements.
(1) See "Note 1 - Significant Accounting Policies" of this Report for information on Synovus' change in presentation of cash and cash equivalents.

5


Notes to Unaudited Interim Consolidated Financial Statements
Note 1 - Significant Accounting Policies
Business Operations
The accompanying unaudited interim consolidated financial statements of Synovus Financial Corp. include the accounts of the Parent Company and its consolidated subsidiaries. Synovus Financial Corp. is a financial services company based in Columbus, Georgia. Through its wholly-owned subsidiary, Synovus Bank, a Georgia state-chartered bank that is a member of the Federal Reserve System, the company provides commercial and retail banking in addition to a full suite of specialized products and services including private banking, treasury management, wealth management, premium finance and international banking.
Synovus Bank is positioned in some of the highest growth markets in the Southeast, with 250 branches and 328 ATMs in Georgia, Alabama, South Carolina, Florida, and Tennessee.
Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the instructions to the SEC Form 10-Q and Article 10 of Regulation S-X; therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, comprehensive income, and cash flows in conformity with GAAP. All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the periods covered by this Report have been included. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes appearing in Synovus' 2017 Form 10-K.
In connection with the adoption of ASU 2016-18, Statement of Cash Flows-Restricted Cash, Synovus changed its presentation of cash and cash equivalents, effective January 1, 2018, to include cash and due from banks as well as interest bearing funds with the Federal Reserve Bank, interest earning deposits with banks, and federal funds sold and securities purchased under resale agreements, which are inclusive of any restricted cash and restricted cash equivalents. Prior to 2018, cash and cash equivalents only included cash and due from banks. Prior periods have been revised to maintain comparability. Excluding the aforementioned presentation change, there have been no significant changes to the accounting policies as disclosed in Synovus' 2017 Form 10-K.
In preparing the unaudited interim 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 significant change relate to the determination of the allowance for loan losses, the fair value of investment securities, and the fair value of private equity investments.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and due from banks, interest bearing funds with the Federal Reserve Bank, interest earning deposits with banks, federal funds sold and securities purchased under resale agreements, and is inclusive of any restricted cash and restricted cash equivalents. Restricted cash and restricted cash equivalents primarily relate to cash held on deposit with the Federal Reserve to meet reserve requirements as well as cash posted as collateral for derivatives in a liability position. At March 31, 2018 and December 31, 2017, interest bearing funds with the Federal Reserve Bank included $14.1 million and $8.6 million, respectively, on deposit to meet Federal Reserve Bank requirements. Interest earning deposits with banks include $6.3 million and $5.9 million at March 31, 2018 and December 31, 2017, respectively, which are pledged as collateral in connection with certain letters of credit. Federal funds sold include $32.7 million and $43.8 million at March 31, 2018 and December 31, 2017, respectively, which are pledged to collateralize certain derivative financial instruments. Federal funds sold and securities purchased under resale agreements generally mature in one day.
Income Taxes
On December 22, 2017, Federal Tax Reform was enacted into law. The new legislation included a decrease in the corporate federal income tax rate from 35% to 21% effective January 1, 2018. Under ASC 740, the effects of the changes in tax rates and laws are recognized in the period in which the new legislation is enacted. Therefore, Synovus was required to remeasure its deferred tax assets and liabilities and record the adjustment to income tax expense effective December 22, 2017. In December 2017, the SEC issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allowed companies to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Since Federal Tax Reform was enacted late in 2017, management expects that certain deferred tax assets and liabilities will continue to be evaluated in the context of Federal Tax Reform through the date of the filing of our 2017 federal income tax return, and may change as a result of evolving management interpretations, elections, and assumptions, as well as new guidance that may be issued by the Internal Revenue Service.   Accordingly, the federal income tax expense of $47.2 million

6


recorded in 2017 relating to the effects from Federal Tax Reform is considered provisional. Management expects to complete its analysis within the measurement period in accordance with SAB 118.  
Recently Adopted Accounting Standards Updates
ASU 2014-09, Revenue from Contracts with Customers (Topic 606) issued by the FASB in May 2014, and all subsequent ASUs that modified 606. ASU 2014-09 implements a common revenue standard that establishes principles for reporting information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts to provide goods or services to customers. The core principle of the revenue model is that a company will recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. The scope of the guidance explicitly excludes net interest income as well as many other revenues from financial assets. Management reviewed its revenue streams and contracts with customers and did not identify material changes to the timing or amount of revenue recognition. Synovus adopted these ASUs on the required effective date of January 1, 2018 utilizing the modified retrospective method of adoption.  The adoption resulted in a cumulative effect adjustment of ($685) thousand to the opening balance of retained earnings.  Beginning January 1, 2018, in connection with the adoption of this standard, Synovus began including merchant discounts and other card-related fees in card fees. For periods prior to January 1, 2018, these amounts were previously presented in other non-interest income and have been reclassified for comparability. See "Part I - Item 1. Financial Statements and Supplementary Data - Note 12 - Non-interest Income" for the required disclosures in accordance with this ASU.
ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. In February 2018, the FASB issued final guidance on reclassification of tax effects stranded in other comprehensive income due to Federal Tax Reform. The guidance provides entities the option to reclassify the tax effects that are stranded in accumulated other comprehensive income (AOCI) as a result of Federal Tax Reform to retained earnings. The guidance is effective for fiscal years beginning after December 15, 2018; early adoption is permitted. Synovus elected to early adopt ASU 2018-02 as of January 1, 2018 and elected to reclassify the income tax effects of Federal Tax Reform from AOCI to retained earnings. For Synovus, tax effects stranded in AOCI due to Federal Tax Reform totaled $7.6 million at December 31, 2017 and primarily related to unrealized losses on the available-for-sale investment securities portfolio. The reclassification adjustment resulted in an increase to retained earnings as of January 1, 2018 of $7.6 million and a corresponding decrease to AOCI for the same amount. Synovus utilizes the portfolio approach when releasing income tax effects from AOCI for its investment securities. The reclassification adjustment increased regulatory capital by $7.6 million, resulting in an approximate 3 b.p.s increase to Tier 1 capital, common equity Tier 1 capital, and total risk based capital ratios, and an approximate 2 b.p.s increase to the leverage ratio.
ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. In January 2016, the FASB issued ASU 2016-01 that included targeted amendments to accounting guidance for recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 requires equity investments (except those accounted for under the equity method of accounting or consolidated) to be measured at fair value with changes in fair value recognized in net income. This ASU requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption to reclassify the cumulative change in fair value of equity securities previously recognized in AOCI. ASU 2016-01 became effective for Synovus on January 1, 2018. The adoption of the guidance resulted in a transfer of investments in mutual funds of $3.2 million, at fair value, from investment securities available for sale to other assets and a $117 thousand cumulative-effect adjustment that decreased retained earnings, with offsetting related adjustments to deferred taxes and AOCI. ASU 2016-01 also emphasizes the existing requirement to use an exit price concept to measure fair value for disclosure purposes in determining the fair value of loans. Determination of the fair value under the exit price method requires judgment because substantially all of the loans within the loan portfolio do not have observable market prices. The adoption of this guidance did not have a significant impact on Synovus' fair value disclosures.
ASU 2016-18, Statement of Cash Flows-Restricted Cash. In November 2016, the FASB issued new accounting guidance which addressed classification and presentation of changes in restricted cash on the statement of cash flows. The standard requires a reconciliation of the beginning-of-period and end-of-period total amounts shown on the statement of cash flows to include in cash and cash equivalents amounts generally described as restricted cash and restricted cash equivalents. The ASU does not define restricted cash or restricted cash equivalents; however, the nature of the restrictions should be disclosed. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. This ASU is to be applied using a retrospective transition method for each period presented. Synovus adopted ASU 2016-18 on January 1, 2018 and concurrently revised its presentation of cash and cash equivalents. For periods prior to January 1, 2018, the presentation of cash and cash equivalents has been revised to conform to the current presentation.

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

7



Note 2 - Acquisitions
Cabela's Transaction
On September 25, 2017, Synovus' wholly owned subsidiary, Synovus Bank, completed the acquisition of certain assets and assumption of certain liabilities of World's Foremost Bank, or WFB. Immediately following the closing of this transaction, Synovus Bank sold WFB’s credit card assets and related liabilities to Capital One Bank (USA), National Association, a bank subsidiary of Capital One Financial Corporation.
Synovus retained WFB’s $1.10 billion brokered time deposits portfolio, which had a weighted average remaining maturity of approximately 2.53 years and a weighted average rate of 1.83% as of September 25, 2017. The transaction was accounted for as an assumption of a liability (accounted for under the asset acquisition model). In accordance with ASC 820, Fair Value Measurements and Disclosures, the brokered time deposit portfolio was recorded at $1.10 billion, which was the amount of cash received for the deposits and represented the estimated fair value of the deposits at the transaction date. Additionally, Synovus received a $75.0 million transaction fee from Cabela’s Incorporated and Capital One, which was recognized into earnings on September 25, 2017 upon closing of the transaction, based on having achieved the recognition criteria outlined in SEC SAB Topic 13.A, Revenue Recognition.
Acquisition of Global One
On October 1, 2016, Synovus completed its acquisition of all of the outstanding stock of Global One. Prior to its acquisition, Global One was an Atlanta-based private specialty financial services company that provided financing primarily to commercial entities, with all loans fully collateralized by cash value life insurance policies and/or annuities issued by investment grade life insurance companies. Under the terms of the merger agreement, Synovus acquired Global One for an up-front payment of $30 million, consisting of the issuance of 821 thousand shares of Synovus common stock valued at $26.6 million and $3.4 million in cash, with additional payments to Global One's former shareholders over a three to five year period based on earnings from the Global One business, as further discussed below.
The acquisition of Global One constituted a business combination. Accordingly, the assets acquired and liabilities assumed were recorded at their estimated fair values on October 1, 2016. The determination of fair value required management to make estimates about discount rates, future expected earnings and cash flows, market conditions, future loan growth, and other future events that are highly subjective in nature and subject to change. During the three months ended September 30, 2017, Synovus completed the determination of the final allocation of the purchase price with respect to the assets acquired and liabilities assumed.
Under the terms of the merger agreement, the purchase price includes additional annual payments ("Earnout Payments") to Global One's former shareholders over a three to five year period, with amounts based on a percentage of "Global One Earnings," as defined in the merger agreement. The Earnout Payments consist of shares of Synovus common stock as well as a smaller cash consideration component. The first annual Earnout Payment of stock and cash valued at $6.4 million was made during November 2017. The balance of the earnout liability at March 31, 2018 was $11.3 million based on the estimated fair value of the remaining Earnout Payments.
Note 3 - Share Repurchase Program
On January 23, 2018, Synovus announced a $150 million share repurchase program to be completed during 2018. As of March 31, 2018, Synovus had repurchased under this program a total of $26.7 million, or 535 thousand shares of its common stock, at an average price of $49.98 per share.
Note 4 - 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, 2018 and December 31, 2017 are summarized below.
 
 
March 31, 2018
(in thousands)
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
 Fair Value
U.S. Treasury securities
 
$
122,655

 
$

 
$
(1,724
)
 
$
120,931

U.S. Government agency securities
 
10,769

 
128

 

 
10,897

Mortgage-backed securities issued by U.S. Government agencies
 
115,888

 
237

 
(3,257
)
 
112,868

Mortgage-backed securities issued by U.S. Government sponsored enterprises
 
2,734,650

 
483

 
(71,133
)
 
2,664,000

Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises
 
1,102,361

 

 
(37,320
)
 
1,065,041

State and municipal securities
 
115

 

 

 
115

Corporate debt and other debt securities
 
17,000

 
274

 
(148
)
 
17,126

Total investment securities available for sale
 
$
4,103,438

 
$
1,122

 
$
(113,582
)
 
$
3,990,978

 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
(in thousands)
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
U.S. Treasury securities
 
$
83,608

 
$

 
$
(934
)
 
$
82,674

U.S. Government agency securities
 
10,771

 
91

 

 
10,862

Mortgage-backed securities issued by U.S. Government agencies
 
121,283

 
519

 
(1,362
)
 
120,440

Mortgage-backed securities issued by U.S. Government sponsored enterprises
 
2,666,818

 
5,059

 
(31,354
)
 
2,640,523

Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises
 
1,135,259

 
144

 
(23,404
)
 
1,111,999

State and municipal securities
 
180

 

 

 
180

Corporate debt and other securities
 
20,320

 
294

 
(223
)
 
20,391

Total investment securities available for sale
 
$
4,038,239

 
$
6,107

 
$
(57,277
)
 
$
3,987,069

 
 
 
 
 
 
 
 
 
At March 31, 2018 and December 31, 2017, investment securities with a carrying value of $1.01 billion and $2.00 billion, respectively, were pledged to secure certain deposits and securities sold under repurchase agreements as required by law and contractual agreements.
Synovus has reviewed investment securities that are in an unrealized loss position as of March 31, 2018 and December 31, 2017 for OTTI and does not consider any securities in an unrealized loss position to be other-than-temporarily impaired. If Synovus intended to sell a security in an unrealized loss position, the entire unrealized loss would be reflected in earnings. Synovus does not intend to sell investment securities in an unrealized loss position prior to the recovery of the unrealized loss, which may not be until maturity, and has the ability and intent to hold those securities for that period of time. Additionally, Synovus is not currently aware of any circumstances which will require it to sell any of the securities that are in an unrealized loss position prior to the respective securities' recovery of all such unrealized losses.
Declines in the fair value of available for sale securities below their cost that are deemed to have OTTI are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income. Currently, unrealized losses on debt securities are attributable to increases in interest rates on comparable securities from the date of purchase. Synovus regularly evaluates its investment securities portfolio to ensure that there are no conditions that would indicate that unrealized losses represent OTTI. These factors include the length of time the security has been in a loss position, the extent that the fair value is below amortized cost, and the credit standing of the issuer. As of March 31, 2018, Synovus had 75 investment securities in a loss position for less than twelve months and 54 investment securities in a loss position for twelve months or longer.

8

Table of Contents

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, 2018 and December 31, 2017 are presented below.
 
March 31, 2018
 
Less than 12 Months
 
12 Months or Longer
 
Total
(in thousands)
Fair
Value
 
Gross Unrealized
Losses
 
Fair
Value
 
Gross Unrealized
Losses
 
Fair
Value
 
Gross Unrealized
Losses
U.S. Treasury securities
$
72,694

 
$
989

 
$
29,313

 
$
735

 
$
102,007

 
$
1,724

Mortgage-backed securities issued by U.S. Government agencies
39,763

 
1,045

 
52,763

 
2,212

 
92,526

 
3,257

Mortgage-backed securities issued by U.S. Government sponsored enterprises
1,656,562

 
38,195

 
882,984

 
32,938

 
2,539,546

 
71,133

Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises
629,793

 
17,650

 
435,247

 
19,670

 
1,065,040

 
37,320

Corporate debt and other debt securities

 

 
1,852

 
148

 
1,852

 
148

    Total
$
2,398,812

 
$
57,879

 
$
1,402,159

 
$
55,703

 
$
3,800,971

 
$
113,582

 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
Less than 12 Months
 
12 Months or Longer
 
Total
(in thousands)
Fair
Value
 
Gross Unrealized
Losses
 
Fair
Value
 
Gross Unrealized
Losses
 
Fair
Value
 
Gross Unrealized
Losses
U.S. Treasury securities
$
34,243

 
$
443

 
$
29,562

 
$
491

 
$
63,805

 
$
934

Mortgage-backed securities issued by U.S. Government agencies
36,810

 
357

 
55,740

 
1,005

 
92,550

 
1,362

Mortgage-backed securities issued by U.S. Government sponsored enterprises
1,271,012

 
10,263

 
929,223

 
21,091

 
2,200,235

 
31,354

Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises
653,781

 
9,497

 
426,237

 
13,907

 
1,080,018

 
23,404

Corporate debt and other securities

 

 
5,097

 
223

 
5,097

 
223

Total
$
1,995,846

 
$
20,560

 
$
1,445,859

 
$
36,717

 
$
3,441,705

 
$
57,277

 
 
 
 
 
 
 
 
 
 
 
 

9

Table of Contents

The amortized cost and fair value by contractual maturity of investment securities available for sale at March 31, 2018 are shown below. The expected life of mortgage-backed securities or CMOs may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. For purposes of the maturity table, mortgage-backed securities and CMOs, which are not due at a single maturity date, have been classified based on the final contractual maturity date.
 
Distribution of Maturities at March 31, 2018
(in thousands)
Within One
Year
 
1 to 5
Years
 
5 to 10
Years
 
More Than
10 Years
 
 
Total
Amortized Cost
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
18,924

 
$
103,731

 
$

 
$

 
 
$
122,655

U.S. Government agency securities
2,330

 
6,437

 
2,002

 

 
 
10,769

Mortgage-backed securities issued by U.S. Government agencies

 

 
29,355

 
86,533

 
 
115,888

Mortgage-backed securities issued by U.S. Government sponsored enterprises
7

 
1,657

 
578,774

 
2,154,212

 
 
2,734,650

Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises

 

 
18,652

 
1,083,709

 
 
1,102,361

State and municipal securities
115

 

 

 

 
 
115

Corporate debt and other debt securities

 

 
15,000

 
2,000

 
 
17,000

Total amortized cost
$
21,376

 
$
111,825

 
$
643,783

 
$
3,326,454

 
 
$
4,103,438

 
 
 
 
 
 
 
 
 
 
 
Fair Value
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
18,924

 
$
102,007

 
$

 
$

 
 
$
120,931

U.S. Government agency securities
2,355

 
6,514

 
2,028

 

 
 
10,897

Mortgage-backed securities issued by U.S. Government agencies

 

 
28,993

 
83,875

 
 
112,868

Mortgage-backed securities issued by U.S. Government sponsored enterprises
7

 
1,723

 
565,331

 
2,096,939

 
 
2,664,000

Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises

 

 
18,218

 
1,046,823

 
 
1,065,041

State and municipal securities
115

 

 

 

 
 
115

Corporate debt and other debt securities

 

 
15,274

 
1,852

 
 
17,126

Total fair value
$
21,401

 
$
110,244

 
$
629,844

 
$
3,229,489

 
 
$
3,990,978

 
 
 
 
 
 
 
 
 
 
 
Synovus did not sell any securities available for sale during the three months ended March 31, 2018. Proceeds from sales, gross gains, and gross losses on sales of securities available for sale for the three months ended March 31, 2017 are presented below. The specific identification method is used to reclassify gains and losses out of other comprehensive income at the time of sale. On January 1, 2018, Synovus transferred $3.2 million, at fair value, from investment securities available for sale to other assets upon adoption of ASU 2016-01.
 
 
Three Months Ended March 31,
(in thousands)
 
2018
 
2017
Proceeds from sales of investment securities available for sale
 
$

 
$
282,629

Gross realized gains on sales
 

 
7,702

Gross realized losses on sales
 

 
(34
)
Investment securities gains, net
 
$

 
$
7,668

 
 
 
 
 

10

Table of Contents

Note 5 - Restructuring Charges
For the three months ended March 31, 2018 and 2017, total restructuring charges consist of the following components:
 
Three Months Ended March 31,
(in thousands)
2018
 
2017
Severance charges
$

 
$
6,453

Other charges, net
(315
)
 
58

Total restructuring charges, net
$
(315
)
 
$
6,511

 
 
 
 
For the three months ended March 31, 2018, Synovus recorded net lease termination accrual reversals of $377 thousand related to branches closed in prior years. During the three months ended March 31, 2017, Synovus recorded severance charges of $6.5 million including $6.2 million for termination benefits incurred in conjunction with a voluntary early retirement program offered to Synovus employees during the first quarter of 2017.
The following tables present aggregate activity within the accrual for restructuring charges for the three months ended March 31, 2018 and 2017:
(in thousands)
Severance Charges
 
Lease Termination Charges
 
Total
Balance at December 31, 2017
$
336

 
$
3,276

 
$
3,612

Accruals for lease terminations

 
(377
)
 
(377
)
Payments
(336
)
 
(393
)
 
(729
)
Balance at March 31, 2018
$

 
$
2,506

 
$
2,506

 
 
 
 
 
 
(in thousands)
Severance Charges
 
Lease Termination Charges
 
Total
Balance at December 31, 2016
$
81

 
$
3,968

 
$
4,049

Accrual for voluntary and involuntary termination benefits
6,453

 

 
6,453

Payments
(219
)
 
(279
)
 
(498
)
Balance at March 31, 2017
$
6,315

 
$
3,689

 
$
10,004

 
 
 
 
 
 
All other charges were paid in the quarters in which they were incurred. No other restructuring charges resulted in payment accruals.

11

Table of Contents

Note 6 - Loans and Allowance for Loan Losses
The following is a summary of current, accruing past due, and non-accrual loans by portfolio class as of March 31, 2018 and December 31, 2017.
Current, Accruing Past Due, and Non-accrual Loans
 
 
March 31, 2018
 
(in thousands)
Current
 
Accruing 30-89 Days Past Due
 
Accruing 90 Days or Greater Past Due
 
Total Accruing Past Due
 
Non-accrual
 
 Total
 
Investment properties
$
5,613,811

 
$
1,986

 
$
323

 
$
2,309

 
$
2,930

 
$
5,619,050

 
1-4 family properties
753,255

 
2,232

 
783

 
3,015

 
2,634

 
758,904

 
Land and development
449,700

 
3,450

 
49

 
3,499

 
4,574

 
457,773

 
Total commercial real estate
6,816,766

 
7,668

 
1,155

 
8,823

 
10,138

 
6,835,727

 
Commercial, financial and agricultural
7,093,270

 
15,872

 
783

 
16,655

 
81,606

 
7,191,531

 
Owner-occupied
4,901,542

 
3,841

 
936

 
4,777

 
4,067

 
4,910,386

 
Total commercial and industrial
11,994,812

 
19,713

 
1,719

 
21,432

 
85,673

 
12,101,917

 
Home equity lines
1,450,454

 
6,718

 
431

 
7,149

 
14,868

 
1,472,471

 
Consumer mortgages
2,651,758

 
3,905

 

 
3,905

 
7,708

 
2,663,371

 
Credit cards
223,232

 
1,599

 
1,882

 
3,481

 

 
226,713

 
Other consumer loans
1,595,745

 
9,131

 
229

 
9,360

 
1,694

 
1,606,799

 
Total consumer
5,921,189

 
21,353

 
2,542

 
23,895

 
24,270

 
5,969,354

 
Total loans
$
24,732,767

 
$
48,734

 
$
5,416

 
$
54,150

 
$
120,081

 
$
24,906,998

(1 
) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
(in thousands)
Current
 
Accruing 30-89 Days Past Due
 
Accruing 90 Days or Greater Past Due
 
Total Accruing Past Due
 
Non-accrual
 
 Total
 
Investment properties
$
5,663,665

 
$
2,506

 
$
90

 
$
2,596

 
$
3,804

 
$
5,670,065

 
1-4 family properties
775,023

 
3,545

 
202

 
3,747

 
2,849

 
781,619

 
Land and development
476,131

 
1,609

 
67

 
1,676

 
5,797

 
483,604

 
Total commercial real estate
6,914,819

 
7,660

 
359

 
8,019

 
12,450

 
6,935,288

 
Commercial, financial and agricultural
7,097,127

 
11,214

 
1,016

 
12,230

 
70,130

 
7,179,487

 
Owner-occupied
4,830,150

 
6,880

 
479

 
7,359

 
6,654

 
4,844,163

 
Total commercial and industrial
11,927,277

 
18,094

 
1,495

 
19,589

 
76,784

 
12,023,650

 
Home equity lines
1,490,808

 
5,629

 
335

 
5,964

 
17,455

 
1,514,227

 
Consumer mortgages
2,622,061

 
3,971

 
268

 
4,239

 
7,203

 
2,633,503

 
Credit cards
229,015

 
1,930

 
1,731

 
3,661

 

 
232,676

 
Other consumer loans
1,461,223

 
10,333

 
226

 
10,559

 
1,669

 
1,473,451

 
Total consumer
5,803,107

 
21,863

 
2,560

 
24,423

 
26,327

 
5,853,857

 
Total loans
$
24,645,203

 
$
47,617

 
$
4,414

 
$
52,031

 
$
115,561

 
$
24,812,795

(2 
) 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Total before net deferred fees and costs of $24.0 million.
(2) Total before net deferred fees and costs of $25.3 million.






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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.
In the following tables, consumer loans are generally assigned a risk grade similar to the classifications described above; however, upon reaching 90 days and 120 days past due, they are generally downgraded to Substandard and Loss, respectively, in accordance with the FFIEC Uniform Retail Credit Classification and Account Management Policy. Additionally, in accordance with the Interagency Supervisory Guidance on Allowance for Loan and Lease Losses Estimation Practices for Loans and Lines of Credit Secured by Junior Liens on 1-4 Family Residential Properties, the risk grade classifications of consumer loans (home equity lines and consumer mortgages) secured by junior liens on 1-4 family residential properties also consider available information on the payment status of any associated senior liens with other financial institutions.

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Loan Portfolio Credit Exposure by Risk Grade
 
 
March 31, 2018
 
(in thousands)
Pass
 
Special
Mention
 
Substandard(1)
 
Doubtful(2)
 
Loss
 
Total
 
Investment properties
$
5,545,689

 
$
53,193

 
$
20,168

 
$

 
$

 
$
5,619,050

 
1-4 family properties
729,023

 
14,331

 
15,550

 

 

 
758,904

 
Land and development
408,128

 
33,858

 
12,654

 
3,133

 

 
457,773

 
Total commercial real estate
6,682,840

 
101,382

 
48,372

 
3,133

 

 
6,835,727

 
Commercial, financial and agricultural
6,895,133

 
132,582

 
154,863

 
8,953

 

 
7,191,531

 
Owner-occupied
4,778,913

 
55,627

 
75,773

 
73

 

 
4,910,386

 
Total commercial and industrial
11,674,046

 
188,209

 
230,636

 
9,026

 

 
12,101,917

 
Home equity lines
1,452,171

 

 
18,421

 
271

 
1,608

(3) 
1,472,471

 
Consumer mortgages
2,654,285

 

 
8,951

 
103

 
32

(3) 
2,663,371

 
Credit cards
224,831

 

 
564

 

 
1,318

(4) 
226,713

 
Other consumer loans
1,604,979

 

 
1,556

 
257

 
7

(3) 
1,606,799

 
Total consumer
5,936,266

 

 
29,492

 
631

 
2,965

 
5,969,354

 
Total loans
$
24,293,152

 
$
289,591

 
$
308,500

 
$
12,790

 
$
2,965

 
$
24,906,998

(5 
) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
(in thousands)
Pass
 
Special
Mention
 
Substandard(1)
 
Doubtful(2)
 
Loss
 
Total
 
Investment properties
$
5,586,792

 
$
64,628

 
$
18,645

 
$

 
$

 
$
5,670,065

 
1-4 family properties
745,299

 
19,419

 
16,901

 

 

 
781,619

 
Land and development
431,759

 
33,766

 
14,950

 
3,129

 

 
483,604

 
Total commercial real estate
6,763,850

 
117,813

 
50,496

 
3,129

 


6,935,288

 
Commercial, financial and agricultural
6,929,506

 
115,912

 
132,818

 
1,251

 

 
7,179,487

 
Owner-occupied
4,713,877

 
50,140

 
80,073

 
73

 


4,844,163

 
Total commercial and indus