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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 September 30, 2018
Commission file number 1-10312
 
______________________________
395660104_financialappendix930a65.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 D
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 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 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
¨
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
 
 
 
November 5, 2018

Common Stock, $1.00 Par Value
 
 
 
116,376,039




Table of Contents

Table of Contents
 
 
 
 
 
Page
Financial Information
 
 
 
Index of Defined Terms
 
Item 1.
Financial Statements (Unaudited)
 
 
 
Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017
 
 
Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2018 and 2017
 
 
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2018 and 2017
 
 
Consolidated Statements of Changes in Shareholders' Equity for the Nine Months Ended September 30, 2018 and 2017
 
 
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 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
AOCI - Accumulated other comprehensive income
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
Company – Synovus Financial Corp. and its wholly-owned subsidiaries, except where the context requires otherwise
Covered Litigation – Certain Visa litigation for which Visa is indemnified by Visa USA members
CRE – Commercial real estate
DIF – Deposit Insurance Fund
Dodd-Frank Act – The Dodd-Frank Wall Street Reform and Consumer Protection Act
EVE – Economic value of equity
Exchange Act – Securities Exchange Act of 1934, as amended
FASB – Financial Accounting Standards Board
FCB - FCB Financial Holdings, Inc.
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

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deductibility of FDIC insurance premiums, and limitation of the deductibility of certain performance-based compensation, among others
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
Merger Agreement – Agreement and Plan of Merger by and among Synovus, FCB and Azalea Merger Sub Corp. dated as of July 23, 2018
Merger – The proposed merger of Azalea Merger Sub Corp. with and into FCB pursuant to the terms and conditions of the Merger Agreement, with FCB continuing as the surviving entity. Immediately thereafter, FCB will merge with and into Synovus, with Synovus continuing as the surviving entity
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
Series D Preferred Stock – Synovus' Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D, $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

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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
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)
September 30, 2018
 
December 31, 2017
ASSETS
 
 
 
Cash and due from banks
$
436,540

 
$
397,848

Interest-bearing funds with Federal Reserve Bank
515,493

 
460,928

Interest earning deposits with banks
34,470

 
26,311

Federal funds sold and securities purchased under resale agreements
25,430

 
47,846

     Total cash, cash equivalents, restricted cash, and restricted cash equivalents(1)
1,011,933

 
932,933

Mortgage loans held for sale, at fair value
37,276

 
48,024

Investment securities available for sale, at fair value
3,883,574

 
3,987,069

Loans, net of deferred fees and costs
25,577,116

 
24,787,464

Allowance for loan losses
(251,450
)
 
(249,268
)
Loans, net
25,325,666

 
24,538,196

Cash surrender value of bank-owned life insurance
551,061

 
540,958

Premises and equipment, net
431,012

 
426,813

Goodwill
57,315

 
57,315

Other intangible assets
10,166

 
11,254

Deferred tax asset, net
185,116

 
165,788

Other assets
582,001

 
513,487

Total assets
$
32,075,120

 
$
31,221,837

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Liabilities
 
 
 
Deposits:
 
 
 
Non-interest-bearing deposits
$
7,628,736

 
$
7,686,339

Interest-bearing deposits
18,804,922

 
18,461,561

Total deposits
26,433,658

 
26,147,900

Federal funds purchased and securities sold under repurchase agreements
191,145

 
161,190

Other short-term borrowings
478,540

 
100,000

Long-term debt
1,656,909

 
1,606,138

Other liabilities
274,795

 
245,043

Total liabilities
29,035,047

 
28,260,271

Shareholders' Equity
 
 
 
Series D Preferred Stock – no par value. Authorized 100,000,000 shares; 8,000,000 shares issued and outstanding at September 30, 2018
195,138

 

Series C Preferred Stock - no par value. 5,200,000 shares outstanding at December 31, 2017

 
125,980

Common stock - $1.00 par value. Authorized 342,857,143 shares; 143,093,317 issued at September 30, 2018 and 142,677,449 issued at December 31, 2017; 116,714,463 outstanding at September 30, 2018 and 118,897,295 outstanding at December 31, 2017
143,093

 
142,678

Additional paid-in capital
3,049,233

 
3,043,129

Treasury stock, at cost – 26,378,854 shares at September 30, 2018 and 23,780,154 shares at December 31, 2017
(974,478
)
 
(839,674
)
Accumulated other comprehensive loss
(143,720
)
 
(54,754
)
Retained earnings
770,807

 
544,207

Total shareholders’ equity
3,040,073

 
2,961,566

Total liabilities and shareholders' equity
$
32,075,120

 
$
31,221,837

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

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SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in thousands, except per share data)
2018
 
2017
 
2018
 
2017
Interest income:
 
 
 
 
 
 
 
      Loans, including fees
$
314,639

 
$
273,847

 
$
900,035

 
$
785,166

      Investment securities available for sale
24,164

 
20,014

 
71,976

 
60,112

      Mortgage loans held for sale
578

 
506

 
1,514

 
1,478

      Federal Reserve Bank balances
2,376

 
1,569

 
6,944

 
4,084

      Other earning assets
2,185

 
1,716

 
6,442

 
4,723

Total interest income
343,942

 
297,652

 
986,911

 
855,563

Interest expense:
 
 
 
 
 
 
 
Deposits
39,219

 
20,798

 
98,195

 
55,874

Federal funds purchased, securities sold under repurchase agreements, and other short-term borrowings
940

 
347

 
2,744

 
865

Long-term debt
12,164

 
13,935

 
35,492

 
45,227

Total interest expense
52,323

 
35,080

 
136,431

 
101,966

Net interest income
291,619

 
262,572

 
850,480

 
753,597

Provision for loan losses
14,982

 
39,686

 
39,548

 
58,620

Net interest income after provision for loan losses
276,637

 
222,886

 
810,932

 
694,977

Non-interest income:
 
 
 
 
 
 
 
Service charges on deposit accounts
20,582

 
20,678

 
60,521

 
61,048

Fiduciary and asset management fees
13,462

 
12,615

 
40,881

 
37,290

Card fees
10,608

 
9,729

 
31,640

 
29,614

Brokerage revenue
9,329

 
7,511

 
26,924

 
21,947

Mortgage banking income
5,290

 
5,603

 
15,177

 
17,151

Income from bank-owned life insurance
3,771

 
3,232

 
11,720

 
9,560

Cabela's Transaction Fee

 
75,000

 

 
75,000

Investment securities losses, net

 
(7,956
)
 
(1,296
)
 
(289
)
Other fee income
4,510

 
5,094

 
14,387

 
16,127

Other non-interest income
4,116

 
3,929

 
12,147

 
8,526

Total non-interest income
71,668

 
135,435

 
212,101

 
275,974

Non-interest expense:
 
 
 
 
 
 
 
Salaries and other personnel expense
114,341

 
109,675

 
339,924

 
322,079

Net occupancy and equipment expense
32,088

 
30,573

 
96,222

 
89,837

Third-party processing expense
14,810

 
13,659

 
43,822

 
39,882

FDIC insurance and other regulatory fees
6,430

 
7,078

 
19,765

 
20,723

Professional fees
6,298

 
7,141

 
18,087

 
20,048

Advertising expense
3,735

 
3,610

 
14,046

 
14,868

Foreclosed real estate expense, net
360

 
7,265

 
1,110

 
10,847

Earnout liability adjustments
11,652

 
2,059

 
11,652

 
3,766

Merger-related expense
6,684

 
23

 
6,684

 
110

Restructuring charges, net
21

 
519

 
(191
)
 
7,043

Other operating expenses
23,878

 
24,044

 
68,410

 
65,577

Total non-interest expense
220,297

 
205,646

 
619,531

 
594,780

Income before income taxes
128,008

 
152,675

 
403,502

 
376,171

Income tax expense
18,949

 
54,668

 
80,095

 
130,303

Net income
109,059

 
98,007

 
323,407

 
245,868

Less: Preferred stock dividends and redemption charge
9,729

 
2,559

 
14,848

 
7,678

Net income available to common shareholders
$
99,330

 
$
95,448

 
$
308,559

 
$
238,190

Net income per common share, basic
$
0.85

 
$
0.79

 
$
2.61

 
$
1.96

Net income per common share, diluted
0.84

 
0.78

 
2.60

 
1.94

Weighted average common shares outstanding, basic
117,241

 
120,900

 
118,096

 
121,796

Weighted average common shares outstanding, diluted
118,095

 
121,814

 
118,847

 
122,628

 
 
 
 
 
 
 
 
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 September 30,
 
2018
 
2017
(in thousands)
Before-tax Amount
 
Tax (Expense) Benefit
 
Net of Tax Amount
 
Before-tax Amount
 
Tax (Expense) Benefit
 
Net of Tax Amount
Net income
$
128,008

 
$
(18,949
)
 
$
109,059

 
$
152,675

 
$
(54,668
)
 
$
98,007

Net unrealized (losses) gains on investment securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
Reclassification adjustment for net losses realized in net income

 

 

 
7,956

 
(3,063
)
 
4,893

Net unrealized (losses) gains arising during the period
(24,210
)
 
6,270

 
(17,940
)
 
5,465

 
(2,106
)
 
3,359

Net unrealized (losses) gains
(24,210
)
 
6,270

 
(17,940
)
 
13,421

 
(5,169
)
 
8,252

Post-retirement unfunded health benefit:
 
 
 
 
 
 
 
 
 
 
 
Reclassification adjustment for gains realized in net income
(35
)
 
9

 
(26
)
 
(34
)
 
13

 
(21
)
Actuarial (losses) gains arising during the period
(46
)
 
12

 
(34
)
 
61

 
(23
)
 
38

Net increase (decrease) in unrealized gains, net
(81
)
 
21

 
(60
)
 
27

 
(10
)
 
17

Other comprehensive (loss) income
$
(24,291
)
 
$
6,291

 
$
(18,000
)
 
$
13,448

 
$
(5,179
)
 
$
8,269

Comprehensive income
 
 
 
 
$
91,059

 
 
 
 
 
$
106,276

 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30,
 
2018
 
2017
(in thousands)
Before-tax Amount
 
Tax (Expense) Benefit
 
Net of Tax Amount
 
Before-tax Amount
 
Tax (Expense) Benefit
 
Net of Tax Amount
Net income
$
403,502

 
$
(80,095
)
 
$
323,407

 
$
376,171

 
$
(130,303
)
 
$
245,868

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

 

 

 
130

 
(50
)
 
80

Net unrealized (losses) gains on investment securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
Reclassification adjustment for net losses realized in net income
1,296

 
(336
)
 
960

 
289

 
(111
)
 
178

Net unrealized (losses) gains arising during the period
(111,131
)
 
28,782

 
(82,349
)
 
25,715

 
(9,903
)
 
15,812

Net unrealized (losses) gains
(109,835
)
 
28,446

 
(81,389
)
 
26,004

 
(10,014
)
 
15,990

Post-retirement unfunded health benefit:
 
 
 
 
 
 
 
 
 
 
 
Reclassification adjustment for gains realized in net income
(103
)
 
31

 
(72
)
 
(74
)
 
29

 
(45
)
Actuarial (losses) gains arising during the period
(46
)
 
12

 
(34
)
 
61

 
(23
)
 
38

Net increase (decrease) in unrealized gains, net
(149
)
 
43

 
(106
)
 
(13
)
 
6

 
(7
)
Other comprehensive (loss) income
$
(109,984
)
 
$
28,489

 
$
(81,495
)
 
$
26,121

 
$
(10,058
)
 
$
16,063

Comprehensive income
 
 
 
 
$
241,912

 
 
 
 
 
$
261,931

 
 
 
 
 
 
 
 
 
 
 
 
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 D Preferred Stock
 
Series C Preferred Stock
 
Common
Stock
 
Additional
Paid-in
Capital
 
Treasury
Stock
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained Earnings
 
Total
Balance at December 31, 2016
$

 
$
125,980

 
$
142,026

 
$
3,028,405

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

 
$
2,927,924

Net income

 

 

 

 

 

 
245,868

 
245,868

Other comprehensive income, net of income taxes

 

 

 

 

 
16,063

 

 
16,063

Cash dividends declared on common stock - $0.45 per share

 

 

 

 

 

 
(54,671
)
 
(54,671
)
Cash dividends paid on Series C Preferred Stock

 

 

 

 

 

 
(7,678
)
 
(7,678
)
Repurchases of common stock

 

 

 

 
(135,914
)
 

 

 
(135,914
)
Restricted share unit activity

 

 
335

 
(8,007
)
 

 

 
(290
)
 
(7,962
)
Stock options exercised

 

 
164

 
2,708

 

 

 

 
2,872

Share-based compensation expense

 

 

 
10,576

 

 

 

 
10,576

Balance at September 30, 2017
$

 
$
125,980

 
$
142,525

 
$
3,033,682

 
$
(800,509
)
 
$
(39,596
)
 
$
534,996

 
$
2,997,078

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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

 

 

 

 

 

 
323,407

 
323,407

Other comprehensive loss, net of income taxes

 

 

 

 

 
(81,495
)
 

 
(81,495
)
Cash dividends declared on common stock - $0.75 per share

 

 

 

 

 

 
(88,396
)
 
(88,396
)
Cash dividends paid on Series C Preferred Stock

 

 

 

 

 

 
(7,678
)
 
(7,678
)
Redemption of Series C Preferred Stock

 
(125,980
)
 

 

 

 

 
(4,020
)
 
(130,000
)
Issuance of Series D Preferred Stock, net of issuance costs
195,138

 

 

 

 

 

 

 
195,138

Cash dividends paid on Series D Preferred Stock

 

 

 

 

 

 
(3,150
)
 
(3,150
)
Repurchases of common stock

 

 

 

 
(134,804
)
 

 

 
(134,804
)
Restricted share unit vesting and taxes paid related to net share settlement

 

 
293

 
(8,355
)
 

 

 
(349
)
 
(8,411
)
Stock options exercised

 

 
122

 
1,955

 

 

 

 
2,077

Share-based compensation expense

 

 

 
12,504

 

 

 

 
12,504

Balance at September 30, 2018
$
195,138

 
$

 
$
143,093

 
$
3,049,233

 
$
(974,478
)
 
$
(143,720
)
 
$
770,807

 
$
3,040,073

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to unaudited interim consolidated financial statements.



4

Table of Contents

SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
Nine Months Ended September 30,
(in thousands)
2018
 
2017
Operating Activities
 
 
 
Net income
$
323,407

 
$
245,868

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Provision for loan losses
39,548

 
58,620

Depreciation, amortization, and accretion, net
41,716

 
44,786

Deferred income tax expense
9,360

 
114,205

Originations of mortgage loans held for sale
(429,531
)
 
(490,202
)
Proceeds from sales of mortgage loans held for sale
449,651

 
500,786

Gain on sales of mortgage loans held for sale, net
(9,886
)
 
(10,587
)
Increase in other assets
(82,608
)
 
(6,678
)
Increase in other liabilities
17,690

 
17,718

Investment securities losses, net
1,296

 
289

Share-based compensation expense
12,504

 
10,576

Net cash provided by operating activities
373,147

 
485,381

 
 
 
 
Investing Activities
 
 
 
Proceeds from maturities and principal collections of investment securities available for sale
457,151

 
483,307

Proceeds from sales of investment securities available for sale
35,066

 
812,293

Purchases of investment securities available for sale
(510,797
)
 
(1,195,302
)
Proceeds from sales of loans
15,454

 
26,386

Proceeds from sales of other real estate and other assets
8,676

 
11,517

Net increase in loans including purchases of loans
(842,383
)
 
(755,231
)
Purchases of bank-owned life insurance policies, net of settlements
1,783

 
(150,000
)
Net increase in premises and equipment
(39,034
)
 
(34,717
)
Net cash used in investing activities
(874,084
)
 
(801,747
)
 
 
 
 
Financing Activities
 
 
 
Net (decrease) increase in demand and savings deposits
(152,313
)
 
335,438

Net increase in certificates of deposit
437,655

 
1,202,926

Net increase (decrease) in federal funds purchased and securities sold under repurchase agreements
29,955

 
(18,160
)
Net change in other short-term borrowings
378,540

 

Repayments and redemption of long-term debt
(2,230,052
)
 
(1,653,613
)
Proceeds from issuance of long-term debt
2,280,000

 
1,375,000

Dividends paid to common shareholders
(77,020
)
 
(36,681
)
Dividends paid to preferred shareholders
(10,828
)
 
(7,678
)
Proceeds from issuance of Series D Preferred Stock
195,138

 

Redemption of Series C Preferred Stock
(130,000
)
 

Stock options exercised
2,077

 
2,872

Repurchase of common stock
(134,804
)
 
(135,914
)
Taxes paid related to net share settlement of equity awards
(8,411
)
 
(7,962
)
Net cash provided by financing activities
579,937

 
1,056,228

Increase in cash and cash equivalents including restricted cash
79,000

 
739,862

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)
$
1,011,933

 
$
1,738,907

 
 
 
 
Supplemental Cash Flow Information
 
 
 
Cash paid during the period for:
 
 
 
Income tax payments, net
$
40,340

 
$
11,195

Interest paid
122,182

 
101,632

Non-cash Activities
 
 
 
Premises and equipment transferred to/(from) other assets
785

 
(3,387
)
Loans foreclosed and transferred to other real estate
11,280

 
6,571

Loans transferred to/(from) other loans held for sale at fair value
4,088

 
77,774

   Topic 606 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

 
193,286

   Dividends declared on common stock during the period but paid after period-end
29,211

 
17,990

 
 
 
 
See accompanying notes to unaudited interim consolidated financial statements.
(1) See "Note 1 - Basis of Presentation" 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 - Basis of Presentation
General
The accompanying unaudited interim consolidated financial statements of Synovus Financial Corp. include the accounts of the Parent Company and its consolidated subsidiaries. Synovus Financial Corp. is a financial services company based in Columbus, Georgia. Through its wholly-owned subsidiary, Synovus Bank, a Georgia state-chartered bank that is a member of the Federal Reserve System, the company provides commercial and retail banking in addition to a full suite of specialized products and services including private banking, treasury management, wealth management, premium finance and international banking. Synovus Bank is positioned in markets in the Southeast, with 249 branches and 334 ATMs in Georgia, Alabama, South Carolina, Florida, 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' 2017 Form 10-K.
Reclassifications
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 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 and the recently adopted accounting standards listed below, there have been no significant changes to the accounting policies as disclosed in Synovus' 2017 Form 10-K.
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 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 from those estimates.
Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses and the fair value of investment securities.
Recently Adopted Accounting Standards
ASU 2014-09, Revenue from Contracts with Customers (Topic 606) issued by the FASB in May 2014, and all subsequent ASUs that modified Topic 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.

6


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, or 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.
ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. In January 2016, the FASB issued ASU 2016-01, which 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 those that are 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 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. In August 2018, the FASB issued ASU 2018-13, which changes the fair value measurement disclosure requirements of ASC 820. The amendments in this ASU remove, modify, and add certain required disclosures on fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2019; early adoption is permitted. Synovus elected to early adopt ASU 2018-13 for eliminated and modified disclosures upon issuance of this ASU. Synovus will delay adoption of the additional disclosures until their effective date. The adoption of this guidance did not have a significant impact on Synovus' fair value disclosures.
ASU 2018-15, Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. In August 2018, the FASB issued ASU 2018-15, which amends ASC 350-40. The ASU aligns the requirements for capitalizing implementation costs for a hosting arrangement that is a service contract with those incurred for hosting arrangements that contain a software license as well as those incurred to develop or implement software for internal use. This guidance is effective for fiscal years beginning after December 15, 2019; early adoption is permitted. Synovus elected to early adopt ASU 2018-15, on a prospective basis, upon issuance of this ASU. As of September 30, 2018, no implementation costs have been capitalized under this ASU. Synovus expects to capitalize certain qualifying implementation, set-up, and other upfront costs related to hosting arrangements under a service contract during the fourth quarter of 2018.
Recently Issued Accounting Standards Not Yet Adopted
ASU 2016-13, Financial Instruments--Credit Losses (CECL). In June 2016, the FASB issued new guidance related to credit losses. The new guidance replaces the existing incurred loss impairment guidance with an expected credit loss methodology. The new guidance will require management’s estimate of credit losses over the full remaining expected life of loans and other financial instruments. For Synovus, the standard will apply to loans, unfunded loan commitments, and debt securities available for sale. The standard is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years with early adoption permitted on January 1, 2019.  Synovus will adopt the guidance on January 1, 2020. Upon adoption, Synovus will record a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption.  

Synovus has begun its implementation efforts which are led by a cross-functional steering committee.  Management expects that the allowance for loan losses will be higher under the new standard; however, management is still in the process of determining the magnitude of the impact on its financial statements and regulatory capital ratios.  Additionally, the extent of the expected increase on the allowance for loan losses will depend upon the composition of the loan portfolio upon adoption of the standard, as well as economic conditions and forecasts at that time.

ASU 2016-02, Leases (ASC 842).  In February 2016, the FASB issued ASU 2016-02, its new standard on lease accounting.  ASU 2016-02 introduces a lessee model that brings most leases on the balance sheet.  Under the new standard, all lessees will

7


recognize a right-of-use asset and a lease liability, including operating leases, with a lease term greater than 12 months.  From a lessor perspective, the accounting model is largely unchanged from existing GAAP.  Additional amendments include, but are not limited to, the elimination of leveraged leases; modification to the definition of a lease; amendments on sale and leaseback transactions; and disclosure of additional qualitative and quantitative information.

In July 2018, the FASB issued ASU 2018-11, Leases (ASC 842), Targeted Improvements. The ASU 2018-11 amendments include an optional transition method to apply ASU 2016-02 on a prospective basis as of the effective date, with a cumulative- effect adjustment to retained earnings in the period of adoption, instead of applying the guidance using the modified retrospective approach as originally required under ASU 2016-02. ASU 2018-11 also provides lessors with a practical expedient, by class of underlying asset, to not separate lease and non-lease components under certain circumstances, and clarifies which guidance (ASC 842 or ASC 606) to apply to the combined lease and non-lease components.

Synovus will elect the optional transition method provided through ASU 2018-11 and will adopt ASU 2016-02 prospectively on January 1, 2019. Synovus will elect the package of practical expedients to not reassess (a) whether existing contracts contain leases, (b) lease classification for existing leases, and (c) initial direct cost for any existing leases. Synovus currently expects to recognize lease liabilities and corresponding right-of-use assets (at their present value) related to substantially all of the $230 million of future minimum lease commitments as disclosed in Note 7 of Synovus' 2017 Form 10-K.  Additionally, Synovus expects to recognize a cumulative-effect adjustment upon adoption to increase the beginning balance of retained earnings as of January 1, 2019 for any remaining deferred gains on sale-leaseback transactions that occurred prior to the date of initial application. Synovus had approximately $5.2 million of such deferred gains recorded as of September 30, 2018. Synovus does not expect this ASU to have a material impact on the timing of expense recognition in its consolidated statements of income.

 




8



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 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. During the quarter ended September 30, 2018, Synovus recorded an $11.7 million increase to the earnout liability driven by increased earnings projections of Global One. The total fair value of the earnout liability at September 30, 2018 was $23.0 million based on the estimated fair value of the remaining Earnout Payments.

9

Table of Contents

Note 3 - Investment Securities Available for Sale
The amortized cost, gross unrealized gains and losses, and estimated fair values of investment securities available for sale at September 30, 2018 and December 31, 2017 are summarized below.
 
 
September 30, 2018
(in thousands)
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
U.S. Treasury securities
 
$
123,265

 
$

 
$
(2,626
)
 
$
120,639

U.S. Government agency securities
 
38,020

 
102

 
(258
)
 
37,864

Mortgage-backed securities issued by U.S. Government agencies
 
104,933

 
75

 
(4,125
)
 
100,883

Mortgage-backed securities issued by U.S. Government sponsored enterprises
 
2,592,827

 
70

 
(103,532
)
 
2,489,365

Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises
 
1,168,378

 

 
(50,675
)
 
1,117,703

Corporate debt and other debt securities
 
17,000

 
155

 
(35
)
 
17,120

Total investment securities available for sale
 
$
4,044,423

 
$
402

 
$
(161,251
)
 
$
3,883,574

 
 
 
 
 
 
 
 
 
 
 
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 September 30, 2018 and December 31, 2017, investment securities with a carrying value of $1.29 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 September 30, 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.
For investment securities that Synovus does not expect to sell, or it is not more likely than not it will be required to sell prior to recovery of its amortized cost basis, the credit component of an OTTI would be recognized in earnings and the non-credit component would be recognized in OCI. Currently, unrealized losses on debt securities are attributable to increases in interest rates on comparable securities from the date of purchase. Synovus regularly evaluates its investment securities portfolio to ensure that there are no conditions that would indicate that unrealized losses represent OTTI. These factors include the length of time the security has been in a loss position, the extent that the fair value is below amortized cost, and the credit standing of the issuer. As of September 30, 2018, Synovus had 43 investment securities in a loss position for less than twelve months and 100 investment securities in a loss position for twelve months or longer.

10

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 September 30, 2018 and December 31, 2017 are presented below.
 
September 30, 2018
 
Less than 12 Months
 
12 Months or Longer
 
Total
(in thousands)
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
U.S. Treasury securities
$
38,352

 
$
739

 
$
62,905

 
$
1,887

 
$
101,257

 
$
2,626

U.S. Government agency securities
29,727

 
258

 

 

 
29,727

 
258

Mortgage-backed securities issued by U.S. Government agencies
15,655

 
364

 
73,555

 
3,761

 
89,210

 
4,125

Mortgage-backed securities issued by U.S. Government sponsored enterprises
830,455

 
24,765

 
1,618,843

 
78,767

 
2,449,298

 
103,532

Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises
214,420

 
3,406

 
903,283

 
47,269

 
1,117,703

 
50,675

Corporate debt and other debt securities

 

 
1,965

 
35

 
1,965

 
35

Total
$
1,128,609

 
$
29,532

 
$
2,660,551

 
$
131,719

 
$
3,789,160

 
$
161,251

 
 
 
 
 
 
 
 
 
 
 
 
 
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

 
 
 
 
 
 
 
 
 
 
 
 

11

Table of Contents

The amortized cost and fair value by contractual maturity of investment securities available for sale at September 30, 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 September 30, 2018
(in thousands)
Within One
Year
 
1 to 5
Years
 
5 to 10
Years
 
More Than
10 Years
 
Total
Amortized Cost
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
19,382

 
$
103,883

 
$

 
$

 
$
123,265

U.S. Government agency securities
1,917

 
6,118

 
29,985

 

 
38,020

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

 

 
25,659

 
79,274

 
104,933

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

 
43,496

 
556,115

 
1,993,216

 
2,592,827

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

 

 
28,367

 
1,140,011

 
1,168,378

Corporate debt and other debt securities

 

 
15,000

 
2,000

 
17,000

Total amortized cost
$
21,299

 
$
153,497

 
$
655,126

 
$
3,214,501

 
$
4,044,423

 
 
 
 
 
 
 
 
 
 
Fair Value
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
$
19,382

 
$
101,257

 
$

 
$

 
$
120,639

U.S. Government agency securities
1,937

 
6,200

 
29,727

 

 
37,864

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

 

 
25,154

 
75,729

 
100,883

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

 
42,630

 
534,881

 
1,911,854

 
2,489,365

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

 

 
27,198

 
1,090,505

 
1,117,703

Corporate debt and other debt securities

 

 
15,155

 
1,965

 
17,120

Total fair value
$
21,319

 
$
150,087

 
$
632,115

 
$
3,080,053

 
$
3,883,574

 
 
 
 
 
 
 
 
 
 
Proceeds from sales, gross gains, and gross losses on sales of securities available for sale for the three and nine months ended September 30, 2018 and 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 September 30,
 
Nine Months Ended September 30,
(in thousands)
 
2018
 
2017
 
2018
 
2017
Proceeds from sales of investment securities available for sale
 
$

 
$
473,912

 
$
35,066

 
$
812,293

Gross realized gains on sales
 

 

 

 
7,942

Gross realized losses on sales
 

 
(7,956
)
 
(1,296
)
 
(8,231
)
Investment securities losses, net
 
$

 
$
(7,956
)
 
$
(1,296
)
 
$
(289
)
 
 
 
 
 
 
 
 
 

12

Table of Contents

Note 4 - 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 September 30, 2018 and December 31, 2017.
Current, Accruing Past Due, and Non-accrual Loans
 
 
September 30, 2018
 
(in thousands)
Current
 
Accruing 30-89 Days Past Due
 
Accruing 90 Days or Greater Past Due
 
Total Accruing Past Due
 
Non-accrual
 
Total
 
Commercial, financial and agricultural
$
7,185,447

 
$
25,850

 
$
1,159

 
$
27,009

 
$
69,010

 
$
7,281,466

 
Owner-occupied
5,206,192

 
8,879

 
1,049

 
9,928

 
5,708

 
5,221,828

 
Total commercial and industrial
12,391,639

 
34,729

 
2,208

 
36,937

 
74,718

 
12,503,294

 
Investment properties
5,661,605

 
1,930

 

 
1,930

 
2,155

 
5,665,690

 
1-4 family properties
701,406

 
2,651

 

 
2,651

 
3,139

 
707,196

 
Land and development
333,709

 
765

 
217

 
982

 
4,829

 
339,520

 
Total commercial real estate
6,696,720

 
5,346

 
217

 
5,563

 
10,123

 
6,712,406

 
Home equity lines
1,442,451

 
7,819

 
651

 
8,470

 
14,498

 
1,465,419

 
Consumer mortgages
2,832,971

 
4,960

 

 
4,960

 
5,313

 
2,843,244

 
Credit cards
241,334

 
2,170

 
1,645

 
3,815

 

 
245,149

 
Other consumer loans
1,809,033

 
18,444

 
135

 
18,579

 
3,773

 
1,831,385

 
Total consumer
6,325,789

 
33,393

 
2,431

 
35,824

 
23,584

 
6,385,197

 
Total loans
$
25,414,148

 
$
73,468

 
$
4,856

 
$
78,324

 
$
108,425

 
$
25,600,897

(1 
) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
(in thousands)
Current
 
Accruing 30-89 Days Past Due
 
Accruing 90 Days or Greater Past Due
 
Total Accruing Past Due
 
Non-accrual
 
Total
 
Commercial, financial and agricultural
$
7,097,127

 
$
11,214

 
$
1,016

 
$
12,230

 
$
70,130

 
$
7,179,487

 
Owner-occupied
4,830,150

 
6,880

 
479

 
7,359

 
6,654

 
4,844,163

 
Total commercial and industrial
11,927,277

 
18,094

 
1,495

 
19,589

 
76,784

 
12,023,650

 
Investment properties
5,663,665

 
2,506

 
90

 
2,596

 
3,804

 
5,670,065

 
1-4 family properties
775,023

 
3,545

 
202

 
3,747

 
2,849

 
781,619

 
Land and development
476,131

 
1,609

 
67

 
1,676

 
5,797

 
483,604

 
Total commercial real estate
6,914,819

 
7,660

 
359

 
8,019

 
12,450

 
6,935,288

 
Home equity lines
1,490,808

 
5,629

 
335

 
5,964

 
17,455

 
1,514,227

 
Consumer mortgages
2,622,061

 
3,971

 
268

 
4,239

 
7,203

 
2,633,503

 
Credit cards
229,015

 
1,930

 
1,731

 
3,661

 

 
232,676

 
Other consumer loans