Note 6 - Loans and Allowance for Loan Losses

Loans outstanding, by classification, at December 31, 2016 and 2015 are summarized below.



	December 31,
(in thousands)	2016			2015
Investment properties	$	5,932,619		5,751,631
1-4 family properties	1,023,821			1,129,156
Land acquisition	409,534			513,981
Total commercial real estate	7,365,974			7,394,768
Commercial, financial and agricultural	6,915,927			6,453,180
Owner-occupied	4,636,016			4,318,950
Total commercial and industrial	11,551,943			10,772,130
Home equity lines	1,617,265			1,689,914
Consumer mortgages	2,296,604			1,938,683
Credit cards	232,413			240,851
Other retail loans	818,183			423,318
Total retail	4,964,465			4,292,766
Total loans	23,882,382			22,459,664
Deferred fees and costs, net	(25,991		)	(30,099	)
Total loans, net of deferred fees and costs	$	23,856,391		22,429,565

A substantial portion of the loan portfolio is secured by real estate in markets located throughout Georgia, Alabama, Tennessee, South Carolina, and Florida. Accordingly, the ultimate collectability of a substantial portion of the loan portfolio is susceptible to changes in market conditions in these areas.

The following is a summary of current, accruing past due, and non-accrual loans by class as of December 31, 2016 and 2015.



Current, Accruing Past Due, and Non-accrual Loans
	December 31, 2016
( 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	$	5,924,225	2,958	—	2,958	5,436	5,932,619
1-4 family properties	1,000,590		4,962	161	5,123	18,108	1,023,821
Land acquisition	401,346		1,117	—	1,117	7,071	409,534
Total commercial real estate	7,326,161		9,037	161	9,198	30,615	7,365,974
Commercial, financial and agricultural	6,846,591		9,542	720	10,262	59,074	6,915,927
Owner-occupied	4,601,356		17,913	244	18,157	16,503	4,636,016
Total commercial and industrial	11,447,947		27,455	964	28,419	75,577	11,551,943
Home equity lines	1,585,228		10,013	473	10,486	21,551	1,617,265
Consumer mortgages	2,265,966		7,876	81	7,957	22,681	2,296,604
Credit cards	229,177		1,819	1,417	3,236	—	232,413
Other retail loans	809,419		5,771	39	5,810	2,954	818,183
Total retail	4,889,790		25,479	2,010	27,489	47,186	4,964,465
Total loans	$	23,663,898	61,971	3,135	65,106	153,378	23,882,382	⁽¹⁾

	December 31, 2015
( 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	$	5,726,307	2,284	—	2,284	23,040	5,751,631
1-4 family properties	1,105,914		6,300	103	6,403	16,839	1,129,156
Land acquisition	495,542		639	32	671	17,768	513,981
Total commercial real estate	7,327,763		9,223	135	9,358	57,647	7,394,768
Commercial, financial and agricultural	6,391,036		12,222	785	13,007	49,137	6,453,180
Owner-occupied	4,293,308		5,254	95	5,349	20,293	4,318,950
Total commercial and industrial	10,684,344		17,476	880	18,356	69,430	10,772,130
Home equity lines	1,667,552		5,882	0	5,882	16,480	1,689,914
Consumer mortgages	1,907,644		8,657	134	8,791	22,248	1,938,683
Credit cards	237,742		1,663	1,446	3,109	—	240,851
Other retail loans	418,337		2,390	26	2,416	2,565	423,318
Total retail	4,231,275		18,592	1,606	20,198	41,293	4,292,766
Total loans	$	22,243,382	45,291	2,621	47,912	168,370	22,459,664	⁽²⁾

⁽¹⁾Total before net deferred fees and costs of $26.0 million.

⁽²⁾Total before net deferred fees and costs of $30.1 million.

Non-accrual loans as of December 31, 2016 and 2015 were $153.4 million and $168.4 million, respectively. Interest income on non-accrual loans outstanding at December 31, 2016 and 2015 that would have been recorded if the loans had been current and performed in accordance with their original terms was $8.9 million and $10.5 million, respectively. Interest income recorded on these loans for the years ended December 31, 2016 and 2015 was $3.5 million and $4.3 million, respectively.

The credit quality of the loan portfolio is summarized 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 Classified (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, of any underlying collateral in a timely manner.

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 its 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, retail 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 retail 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 the associated senior lien with other financial institutions.



Loan Portfolio Credit Exposure by Risk Grade
	December 31, 2016
(in thousands)	Pass		Special Mention	Substandard⁽¹⁾	Doubtful⁽²⁾	Loss		Total
Investment properties	$	5,843,433	54,486	34,700	—	—		5,932,619
1-4 family properties	932,340		51,623	32,853	7,005	—		1,023,821
Land acquisition	360,017		31,360	17,897	260	—		409,534
Total commercial real estate	7,135,790		137,469	85,450	7,265	—		7,365,974
Commercial, financial and agricultural	6,642,648		126,268	140,425	6,445	141	⁽³⁾	6,915,927
Owner-occupied	4,462,420		60,856	111,330	1,410	—		4,636,016
Total commercial and industrial	11,105,068		187,124	251,755	7,855	141		11,551,943
Home equity lines	1,589,199		—	22,774	2,892	2,400	⁽³⁾	1,617,265
Consumer mortgages	2,271,916		—	23,268	1,283	137	⁽³⁾	2,296,604
Credit cards	230,997		—	637	—	779	⁽⁴⁾	232,413
Other retail loans	814,844		—	3,233	42	64	⁽³⁾	818,183
Total retail	4,906,956		—	49,912	4,217	3,380		4,964,465
Total loans	$	23,147,814	324,593	387,117	19,337	3,521		23,882,382	⁽⁵⁾

	December 31, 2015
(in thousands)	Pass		Special Mention	Substandard⁽¹⁾	Doubtful⁽²⁾	Loss		Total
Investment properties	$	5,560,595	114,705	76,331	—	—		5,751,631
1-4 family properties	995,903		64,325	61,726	7,202	—		1,129,156
Land acquisition	436,835		46,208	30,574	364	—		513,981
Total commercial real estate	6,993,333		225,238	168,631	7,566	—		7,394,768
Commercial, financial and agricultural	6,184,179		152,189	100,658	13,330	2,824	⁽³⁾	6,453,180
Owner-occupied	4,118,631		78,490	121,272	98	459	⁽³⁾	4,318,950
Total commercial and industrial	10,302,810		230,679	221,930	13,428	3,283		10,772,130
Home equity lines	1,666,586		—	20,456	1,206	1,666	⁽³⁾	1,689,914
Consumer mortgages	1,910,649		—	26,041	1,700	293	⁽³⁾	1,938,683
Credit cards	239,405		—	480	—	966	⁽⁴⁾	240,851
Other retail loans	418,929		—	4,315	—	74	⁽³⁾	423,318
Total retail	4,235,569		—	51,292	2,906	2,999		4,292,766
Total loans	$	21,531,712	455,917	441,853	23,900	6,282		22,459,664	⁽⁶⁾

⁽¹⁾Includes $256.6 million and $303.7 million of Substandard accruing loans at December 31, 2016 and December 31, 2015, respectively.

⁽²⁾The loans within this risk grade are on non-accrual status. Commercial loans generally have an allowance for loan losses in accordance with ASC 310 and retail loans generally have an allowance for loan losses equal to 50% of the loan amount.

⁽³⁾The loans within this risk grade are on non-accrual status and have an allowance for loan losses equal to the full loan amount.

⁽⁴⁾Represent amounts that were 120 days past due. These credits are downgraded to the Loss category with an allowance for loan losses equal to the full loan amount and are generally charged off upon reaching 181 days past due in accordance with the FFIEC Uniform Retail Credit Classification and Account Management Policy.

⁽⁵⁾Total before net deferred fees and costs of $26.0 million.

⁽⁶⁾Total before net deferred fees and costs of $30.1 million.

The following table details the change in the allowance for loan losses by loan segment for the years ended December 31, 2016, 2015 and 2014.



Allowance for Loan Losses and Recorded Investment in Loans
	As Of and For The Year Ended December 31, 2016
(in thousands)	Commercial Real Estate			Commercial & Industrial		Retail			Unallocated			Total
Allowance for loan losses
Beginning balance	$	87,133		122,989		42,374			—			252,496
Charge-offs	(18,216		)	(25,039	)	(14,705		)	—			(57,960	)
Recoveries	15,226			9,071		4,925			—			29,222
Provision for loan losses	(2,327		)	18,757		11,570			—			28,000
Ending balance	$	81,816		125,778		44,164			—			251,758
Ending balance: individually evaluated for impairment	7,916			8,384		1,811			—			18,111
Ending balance: collectively evaluated for impairment	$	73,900		117,394		42,353			—			233,647
Loans
Ending balance: total loans⁽¹⁾	$	7,365,974		11,551,943		4,964,465			—			23,882,382
Ending balance: individually evaluated for impairment	91,410			120,560		37,526			—			249,496
Ending balance: collectively evaluated for impairment	$	7,274,564		11,431,383		4,926,939			—			23,632,886

	As Of and For The Year Ended December 31, 2015
(in thousands)	Commercial Real Estate			Commercial & Industrial		Retail			Unallocated			Total
Allowance for loan losses
Beginning balance	$	101,471		118,110		41,736			—			261,317
Charge-offs	(13,998		)	(22,583	)	(20,758		)	—			(57,339	)
Recoveries	13,644			8,611		7,253			—			29,508
Provision for loan losses	(13,984		)	18,851		14,143			—			19,010
Ending balance	$	87,133		122,989		42,374			—			252,496
Ending balance: individually evaluated for impairment	18,969			10,477		989			—			30,435
Ending balance: collectively evaluated for impairment	$	68,164		112,512		$	41,385		$	—		222,061
Loans
Ending balance: total loans⁽²⁾	$	7,394,768		10,772,130		4,292,766			—			22,459,664
Ending balance: individually evaluated for impairment	157,958			105,599		38,243			—			301,800
Ending balance: collectively evaluated for impairment	$	7,236,810		10,666,531		4,254,523			—			22,157,864

	As Of and For The Year Ended December 31, 2014
(in thousands)	Commercial Real Estate			Commercial & Industrial		Retail			Unallocated			Total
Allowance for loan losses
Beginning balance	$127,646			115,435		41,479			23,000			307,560
Allowance for loan losses of sold Memphis loans	(281		)	(398	)	(340		)	—			(1,019	)
Charge-offs	(49,716		)	(38,941	)	(24,881		)	—			(113,538	)
Recoveries	11,787			14,628		8,068			—			34,483
Provision for loan losses	12,035			27,386		17,410			(23,000		)	33,831
Ending balance	$	101,471		118,110		41,736			—			261,317
Ending balance: individually evaluated for impairment	21,755			10,451		1,270			—			33,476
Ending balance: collectively evaluated for impairment	$	79,716		107,659		40,466			—			227,841
Loans
Ending balance: total loans⁽³⁾	$	6,926,602		10,267,719		3,934,168			—			21,128,489
Ending balance: individually evaluated for impairment	251,536			146,026		44,586			—			442,148
Ending balance: collectively evaluated for impairment	$	6,675,066		10,121,693		3,889,582			—			20,686,341

⁽¹⁾Total before net deferred fees and costs of $26.0 million.

⁽²⁾Total before net deferred fees and costs of $30.1 million.

⁽³⁾Total before net deferred fees and costs of $30.8 million.

Below is a detailed summary of impaired loans (including accruing TDRs) by class as of December 31, 2016 and 2015.



Impaired Loans (including accruing TDRs)	December 31, 2016
(in thousands)	Recorded Investment		Unpaid Principal Balance	Related Allowance	Average Recorded Investment	Interest Income Recognized
With no related allowance recorded
Investment properties	$	748	793	—	5,384	—
1-4 family properties	1,850		5,847	—	1,461	—
Land acquisition	892		4,335	—	2,958	—
Total commercial real estate	3,490		10,975	—	9,803	—
Commercial, financial and agricultural	17,958		20,577	—	6,321	—
Owner-occupied	5,508		7,377	—	8,394	—
Total commercial and industrial	23,466		27,954	—	14,715	—
Home equity lines	1,051		1,051	—	1,045	—
Consumer mortgages	744		814	—	870	—
Credit cards	—		—	—	—	—
Other retail loans	—		—	—	—	—
Total retail	1,795		1,865	—	1,915	—
Total	28,751		40,794	—	26,433	—
With allowance recorded
Investment properties	32,729		32,729	2,267	42,836	1,699
1-4 family properties	38,972		38,978	4,754	47,806	1,098
Land acquisition	16,219		16,219	895	17,449	486
Total commercial real estate	87,920		87,926	7,916	108,091	3,283
Commercial, financial and agricultural	43,386		45,913	5,687	51,968	1,218
Owner-occupied	53,708		53,942	2,697	52,300	1,946
Total commercial and industrial	97,094		99,855	8,384	104,268	3,164
Home equity lines	9,638		9,638	971	9,668	432
Consumer mortgages	20,953		19,834	673	20,993	1,014
Credit cards	—		—	—	—	—
Other retail loans	5,140		5,140	167	5,062	303
Total retail	35,731		34,612	1,811	35,723	1,749
Total	220,745		222,393	18,111	248,082	8,196
Total
Investment properties	33,477		33,522	2,267	48,220	1,699
1-4 family properties	40,822		44,825	4,754	49,267	1,098
Land acquisition	17,111		20,554	895	20,407	486
Total commercial real estate	91,410		98,901	7,916	117,894	3,283
Commercial, financial and agricultural	61,344		66,490	5,687	58,289	1,218
Owner-occupied	59,216		61,319	2,697	60,694	1,946
Total commercial and industrial	120,560		127,809	8,384	118,983	3,164
Home equity lines	10,689		10,689	971	10,713	432
Consumer mortgages	21,697		20,648	673	21,863	1,014
Credit cards	—		—	—	—	—
Other retail loans	5,140		5,140	167	5,062	303
Total retail	37,526		36,477	1,811	37,638	1,749
Total impaired loans	$	249,496	263,187	18,111	274,515	8,196



	December 31, 2015
(in thousands)	Recorded Investment		Unpaid Principal Balance	Related Allowance	Average Recorded Investment	Interest Income Recognized
With no related allowance recorded
Investment properties	$	10,051	12,946	—	11,625	—
1-4 family properties	1,507		5,526	—	2,546	—
Land acquisition	8,551		39,053	—	13,897	—
Total commercial real estate	20,109		57,525	—	28,068	—
Commercial, financial and agricultural	4,393		7,606	—	5,737	—
Owner-occupied	8,762		11,210	—	14,657	—
Total commercial and industrial	13,155		18,816	—	20,394	—
Home equity lines	1,030		1,030	—	573	—
Consumer mortgages	814		941	—	995	—
Credit cards	—		—	—	—	—
Other retail loans	—		—	—	—	—
Total retail	1,844		1,971	—	1,568	—
Total	35,108		78,312	—	50,030	—
With allowance recorded
Investment properties	62,305		62,305	10,070	73,211	2,131
1-4 family properties	51,376		51,376	6,184	61,690	1,618
Land acquisition	24,168		24,738	2,715	34,793	936
Total commercial real estate	137,849		138,419	18,969	169,694	4,685
Commercial, financial and agricultural	42,914		44,374	8,339	43,740	1,125
Owner-occupied	49,530		49,688	2,138	55,323	1,814
Total commercial and industrial	92,444		94,062	10,477	99,063	2,939
Home equity lines	9,575		9,575	206	8,318	346
Consumer mortgages	22,173		23,297	651	26,044	1,229
Credit cards	—		—	—	—	—
Other retail loans	4,651		4,651	132	5,105	323
Total retail	36,399		37,523	989	39,467	1,898
Total	266,692		270,004	30,435	308,224	9,522
Total
Investment properties	72,356		75,251	10,070	84,836	2,131
1-4 family properties	52,883		56,902	6,184	64,236	1,618
Land acquisition	32,719		63,791	2,715	48,690	936
Total commercial real estate	157,958		195,944	18,969	197,762	4,685
Commercial, financial and agricultural	47,307		51,980	8,339	49,477	1,125
Owner-occupied	58,292		60,898	2,138	69,980	1,814
Total commercial and industrial	105,599		112,878	10,477	119,457	2,939
Home equity lines	10,605		10,605	206	8,891	346
Consumer mortgages	22,987		24,238	651	27,039	1,229
Credit cards	—		—	—	—	—
Other retail loans	4,651		4,651	132	5,105	323
Total retail	38,243		39,494	989	41,035	1,898
Total impaired loans	$	301,800	348,316	30,435	358,254	9,522

The average recorded investment in impaired loans was $622.0 million for the year ended December 31, 2014. Excluding accruing TDRs, there was no interest income recognized for the investment in impaired loans for the years ended December 31, 2016 , 2015, and 2014. Interest income recognized for accruing TDRs was $14.9 million for the year ended December 31, 2014. At December 31, 2016, 2015, and 2014, impaired loans of $53.7 million, $77.9 million, and $93.7 million, respectively, were on non-accrual status.

Concessions provided in a TDR are primarily in the form of providing a below market interest rate given the borrower's credit risk, a period of time generally less than one year with a reduction of required principal and/or interest payments (e.g., interest only for a period of time), or extension of the maturity of the loan generally for less than one year. Insignificant periods of reduction of principal and/or interest payments, or one time deferrals of three months or less, are generally not considered to be financial concessions.

The following tables represent, by concession type, the post-modification balance for loans modified or renewed during the years ended December 31, 2016, 2015, and 2014 that were reported as accruing or non-accruing TDRs.



TDRs by Concession Type
	Year Ended December 31, 2016
(in thousands, except contract data)	Number of Contracts	Principal Forgiveness		Below Market Interest Rate	Term Extensions and/or Other Concessions	Total
Investment properties	4	$	—	1,825	3,518	5,343
1-4 family properties	39	—		5,499	1,488	6,987
Land acquisition	14	—		—	4,099	4,099
Total commercial real estate	57	—		7,324	9,105	16,429
Commercial, financial and agricultural	63	—		17,509	7,160	24,669
Owner-occupied	9	—		7,884	550	8,434
Total commercial and industrial	72	—		25,393	7,710	33,103
Home equity lines	5	—		225	123	348
Consumer mortgages	7	—		413	51	464
Credit cards	—	—		—	—	—
Other retail loans	28	—		394	2,256	2,650
Total retail	40	—		1,032	2,430	3,462
Total loans	169	$	—	33,749	19,245	52,994	⁽¹⁾

⁽¹⁾As a result of these loans being reported as TDRs, there were no net charge-offs recorded during 2016.



TDRs by Concession Type
	Year Ended December 31, 2015
(in thousands, except contract data)	Number of Contracts	Principal Forgiveness		Below Market Interest Rate	Term Extensions and/or Other Concessions	Total
Investment properties	11	$	—	25,052	6,973	32,025
1-4 family properties	43	14,823		4,667	2,763	22,253
Land acquisition	12	—		614	1,532	2,146
Total commercial real estate	66	14,823		30,333	11,268	56,424
Commercial, financial and agricultural	91	29		3,191	6,477	9,697
Owner-occupied	10	—		3,417	2,064	5,481
Total commercial and industrial	101	29		6,608	8,541	15,178
Home equity lines	53	—		2,826	2,905	5,731
Consumer mortgages	15	—		1,011	895	1,906
Credit cards	—	—		—	—	—
Other retail loans	27	—		444	703	1,147
Total retail	95	—		4,281	4,503	8,784
Total loans	262	$	14,852	41,222	24,312	80,386	⁽¹⁾

⁽¹⁾As a result of these loans being reported as TDRs, there were net charge-offs of $4.0 million recorded during 2015.



TDRs by Concession Type
	Year Ended December 31, 2014
(in thousands, except contract data)	Number of Contracts	Principal Forgiveness		Below Market Interest Rate	Term Extensions and/or Other Concessions	Total
Investment properties	15	$	—	8,423	5,813	14,236
1-4 family properties	68	—		6,611	6,492	13,103
Land acquisition	16	2,338		4,783	2,688	9,809
Total commercial real estate	99	2,338		19,817	14,993	37,148
Commercial, financial and agricultural	89	60		10,066	21,141	31,267
Owner-occupied	18	—		23,404	14,862	38,266
Total commercial and industrial	107	60		33,470	36,003	69,533
Home equity lines	20	—		2,335	451	2,786
Consumer mortgages	19	—		2,735	867	3,602
Credit cards	—	—		—	—	—
Other retail loans	27	—		663	566	1,229
Total retail	66	—		5,733	1,884	7,617
Total loans	272	$	2,398	59,020	52,880	114,298	⁽¹⁾

⁽¹⁾As a result of these loans being reported as TDRs, there were net charge-offs of approximately $163 thousand recorded during 2014.

For the years ended December 31, 2016, 2015, and 2014, there were two defaults with a recorded investment of $181 thousand, seven defaults with a recorded investment of $12.5 million, and fifteen defaults with a recorded investment of $3.6 million, respectively, on accruing TDRs restructured during the previous twelve months (defaults are defined as the earlier of the TDR being place on non-accrual status or reaching 90 days past due with respect to principal and/or interest payments).

If at the time that a loan was designated as a TDR the loan was not already impaired, the measurement of impairment resulting from the TDR designation changes from a general pool-level reserve to a specific loan measurement of impairment in accordance with ASC 310-10-35. Generally, the change in the allowance for loan losses resulting from such a TDR is not significant. At December 31, 2016, the allowance for loan losses allocated to accruing TDRs totaling $195.8 million was $9.8 million compared to accruing TDR's of $223.9 million with a related allowance for loan losses of $12.6 million at December 31, 2015. Non-accrual non-homogeneous loans (commercial-type impaired loan relationships greater than $1 million) that are designated as TDRs are individually measured for the amount of impairment, if any, both before and after the TDR designation.

In the ordinary course of business, Synovus Bank has made loans to certain Synovus and Synovus Bank executive officers and directors (including their related interests). Management believes that such loans are made on the same terms, including interest rate and collateral, as those prevailing at the time for comparable transactions with unaffiliated customers.

The following is a summary of such loans and the activity in these loans for the year ended December 31, 2016.



(in thousands)
Balance at December 31, 2015	$	41,441
New loans	193,477
Repayments	(179,345		)
Loans charged-off	—
Balance at December 31, 2016	$	55,573

At December 31, 2016, there were no loans to executive officers and directors that were classified as nonaccrual, greater than 90 days past due and still accruing, or potential problem loans.