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Loans and Allowance for Loan Losses

3 Months Ended

Mar. 31, 2020

Loans and Allowance for Loan Losses [Abstract]

Note 4 - Loans and Allowance for Loan Losses

The following tables provide a summary of current, accruing past due, and non-accrual loans by portfolio class as of March 31, 2020 and December 31, 2019.


Current, Accruing Past Due, and Non-accrual Loans
	March 31, 2020
(in thousands)	Current		Accruing 30-89 Days Past Due⁽¹⁾		Accruing 90 Days or Greater Past Due ⁽¹⁾		Total Accruing Past Due ⁽¹⁾		Non-accrual with an ALL ⁽¹⁾		Non-accrual without an ALL ⁽¹⁾		Total
Commercial, financial and agricultural	$	10,896,890	$	21,149	$	829	$	21,978	$	78,263	$	21,024	$	11,018,155
Owner-occupied	6,614,799		10,279		852		11,131		7,718		9,639		6,643,287
Total commercial and industrial	17,511,689		31,428		1,681		33,109		85,981		30,663		17,661,442
Investment properties	9,252,438		3,056		85		3,141		2,212		—		9,257,791
1-4 family properties	744,451		4,636		56		4,692		2,325		—		751,468
Land and development	658,624		976		142		1,118		1,935		265		661,942
Total commercial real estate	10,655,513		8,668		283		8,951		6,472		265		10,671,201
Consumer mortgages	5,583,714		10,836		—		10,836		13,017		554		5,608,121
Home equity lines	1,759,571		5,873		943		6,816		12,475		—		1,778,862
Credit cards	256,445		2,465		2,671		5,136		—		—		261,581
Other consumer loans	2,277,102		17,567		820		18,387		6,860		—		2,302,349
Total consumer	9,876,832		36,741		4,434		41,175		32,352		554		9,950,913
Total loans	$	38,044,034	$	76,837	$	6,398	$	83,235	$	124,805	$	31,482	$	38,283,556	(2)


	December 31, 2019
(in thousands)	Current		Accruing 30-89 Days Past Due		Accruing 90 Days or Greater Past Due		Total Accruing Past Due		Non-accrual		ASC 310-30 Loans⁽³⁾		Total
Commercial, financial and agricultural	$	9,137,585	$	38,916	$	1,206	$	40,122	$	56,017	$	1,019,135	$	10,252,859
Owner-occupied	5,691,095		5,164		576		5,740		9,780		823,196		6,529,811
Total commercial and industrial	14,828,680		44,080		1,782		45,862		65,797		1,842,331		16,782,670
Investment properties	7,303,146		1,344		—		1,344		1,581		1,736,608		9,042,679
1-4 family properties	733,984		2,073		304		2,377		2,253		41,401		780,015
Land and development	577,711		808		—		808		1,110		78,161		657,790
Total commercial real estate	8,614,841		4,225		304		4,529		4,944		1,856,170		10,480,484
Consumer mortgages	3,681,553		4,223		730		4,953		11,369		1,848,493		5,546,368
Home equity lines	1,691,759		7,038		171		7,209		12,034		2,155		1,713,157
Credit cards	263,065		3,076		2,700		5,776		—		—		268,841
Other consumer loans	2,363,101		18,688		616		19,304		5,704		8,185		2,396,294
Total consumer	7,999,478		33,025		4,217		37,242		29,107		1,858,833		9,924,660
Total loans	$	31,442,999	$	81,330	$	6,303	$	87,633	$	99,848	$	5,557,334	$	37,187,814	(4)

⁽¹⁾For purposes of this table, non-performing and past due loans exclude COVID-19 loan modifications.

⁽²⁾Total before net deferred fees and costs of $25.5 million.

⁽³⁾Represents loans (at fair value) acquired from FCB accounted for under ASC 310-30, net of discount of $90.3 million and payments since Acquisition Date and also include $1.8 million in non-accrual loans, $9.6 million in accruing 90 days or greater past due loans, and $26.5 million in 30-89 days past due loans.

⁽⁴⁾Total before net deferred fees and costs of $25.4 million.

Interest income on non-accrual loans outstanding at March 31, 2020 and 2019 that would have been recorded if the loans had been current and performing in accordance with their original terms was $2.1 million for each of the three months ended

March 31, 2020 and 2019. Of the interest income recognized during the three months ended March 31, 2020 and 2019, cash-basis interest income was $961 thousand and $648 thousand, respectively.

Loans with carrying values of $15.24 billion and $12.11 billion, respectively, were pledged as collateral for borrowings and capacity at March 31, 2020 and December 31, 2019, respectively, to the FHLB and Federal Reserve Bank.

The credit quality of the loan portfolio is reviewed and updated no less frequently than quarterly using the standard asset classification system utilized by the federal banking agencies. These classifications are divided into three groups – Not Criticized (Pass), Special Mention, and Classified or Adverse rating (Substandard, Doubtful, and Loss) and are defined as follows:

Pass - loans which are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell in a timely manner, of any underlying collateral.

Special Mention - loans which have potential weaknesses that deserve management's close attention. These loans are not adversely classified and do not expose an institution to sufficient risk to warrant an adverse classification.

Substandard - loans which are inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Loans with this classification are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful - loans which have all the weaknesses inherent in loans classified as Substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently known facts, conditions, and values.

Loss - loans which are considered by management to be uncollectible and of such little value that their continuance on the institution's books as an asset, without establishment of a specific valuation allowance or charge-off, is not warranted. Synovus fully reserves for any loans rated as Loss.

In the following tables, consumer loans are generally assigned a risk grade similar to the classifications described above; however, upon reaching 90 days and 120 days past due, they are generally downgraded to Substandard and Loss, respectively, in accordance with the FFIEC Retail Credit Classification Policy. Additionally, in accordance with Interagency Supervisory Guidance, the risk grade classifications of consumer loans (consumer mortgages and HELOCs) secured by junior liens on 1-4 family residential properties also consider available information on the payment status of any associated senior liens with other financial institutions.

The risk characteristics and collateral information of each portfolio segment are as follows:

Commercial and Industrial Loans

The C&I loan portfolio is comprised of general middle market and commercial banking clients across a diverse set of industries. In accordance with Synovus' lending policy, each loan undergoes a detailed underwriting process which incorporates uniform underwriting standards and oversight in proportion to the size and complexity of the lending relationship. These loans are secured by collateral such as business equipment, inventory, and real estate. Whether for real estate or non-real estate purpose, credit decisions on loans in the C&I portfolio are based on cash flow from the operations of the business as the primary source of repayment of the debt, with underlying real estate or other collateral being the secondary source of repayment.

Commercial Real Estate Loans

CRE loans primarily consist of income-producing investment properties loans. Additionally, CRE loans include 1-4 family properties loans as well as land and development loans. Investment properties loans consist of construction and mortgage loans for income-producing properties and are primarily made to finance multi-family properties, hotels, office buildings, shopping centers, warehouses and other commercial development properties. 1-4 family properties loans include construction loans to homebuilders and commercial mortgage loans related to 1-4 family rental properties and are almost always secured by the underlying property being financed by such loans. These properties are primarily located in the markets served by Synovus. Land and development loans include commercial and residential development as well as land acquisition loans and are secured by land held for future development, typically in excess of one year. Properties securing these loans are substantially within markets served by Synovus, and loan terms generally include personal guarantees from the principals. Loans in this portfolio are underwritten based on the LTV of the collateral and the capacity of the guarantor(s).

Consumer Loans

The consumer loan portfolio consists of a wide variety of loan products offered through Synovus' banking network including first and second residential mortgages, HELOCs, and credit card loans, as well as home improvement loans and student loans from third-party lending partnerships. The majority of Synovus' consumer loans are consumer mortgages and

HELOCs secured by first and second liens on residential real estate primarily located in the markets served by Synovus. The primary source of repayment for all consumer loans is generally the personal income of the borrower(s), which can be impacted by economic conditions in their market areas.

The following table summarizes each loan portfolio class by risk grade and origination as of March 31, 2020.


Loan Portfolio by Risk Grade and Origination
	March 31, 2020
	Term Loans Amortized Cost Basis by Origination Year																		Revolving Loans
(in thousands)	2020		2019		2018		2017		2016		Prior		Amortized Cost Basis		Converted to Term Loans		Total
Commercial, financial and agricultural
Pass	$	550,653	$	1,657,933	$	1,115,403	$	769,493	$	642,584	$	954,718	$	4,922,661	$	78,912	$	10,692,357
Special Mention	1,884		6,304		18,293		30,775		2,090		13,352		57,251		2,223		132,172
Substandard⁽¹⁾	2,935		13,677		46,404		6,442		10,500		40,659		63,437		721		184,775
Doubtful⁽²⁾	—		—		—		198		915		91		6,919		728		8,851
Total commercial, financial and agricultural	555,472		1,677,914		1,180,100		806,908		656,089		1,008,820		5,050,268		82,584		11,018,155
Owner-occupied
Pass	386,363		1,213,917		1,271,307		1,116,905		714,764		1,503,199		284,048		—		6,490,503
Special Mention	—		5,742		5,000		12,431		5,058		15,252		—		—		43,483
Substandard⁽¹⁾	338		7,352		38,459		29,820		3,912		29,397		23		—		109,301
Total owner-occupied	386,701		1,227,011		1,314,766		1,159,156		723,734		1,547,848		284,071		—		6,643,287
Total commercial and industrial	942,173		2,904,925		2,494,866		1,966,064		1,379,823		2,556,668		5,334,339		82,584		17,661,442
Investment properties
Pass	387,787		1,961,810		2,339,056		1,690,528		855,438		1,765,377		184,095		—		9,184,091
Special Mention	836		92		2,117		4,754		5		10,146		—		—		17,950
Substandard⁽¹⁾	160		1,668		1,718		2,124		1,278		48,802		—		—		55,750
Total investment properties	388,783		1,963,570		2,342,891		1,697,406		856,721		1,824,325		184,095		—		9,257,791
1-4 family properties
Pass	47,219		203,421		103,044		118,126		54,752		138,793		70,505		—		735,860
Special Mention	5		2,006		—		—		815		410		2,273		—		5,509
Substandard⁽¹⁾	69		2,920		3,726		988		387		1,923		86		—		10,099
Total 1-4 family properties	47,293		208,347		106,770		119,114		55,954		141,126		72,864		—		751,468
Land and development
Pass	21,204		205,099		104,987		87,990		26,427		96,809		90,201		—		632,717
Special Mention	—		1,544		2,394		639		—		8,608		5,738		—		18,923
Substandard⁽¹⁾	115		1,327		2,905		635		964		4,356		—		—		10,302
Total land and development	21,319		207,970		110,286		89,264		27,391		109,773		95,939		—		661,942
Total commercial real estate	457,395		2,379,887		2,559,947		1,905,784		940,066		2,075,224		352,898		—		10,671,201


Loan Portfolio by Risk Grade and Origination (continued)
	March 31, 2020
	Term Loans Amortized Cost Basis by Origination Year																		Revolving Loans
(in thousands)	2020		2019		2018		2017		2016		Prior		Amortized Cost Basis		Converted to Term Loans		Total
Consumer mortgages
Pass	$	279,510	$	1,149,232	$	701,190	$	942,965	$	898,374	$	1,622,114	$	880	$	—	$	5,594,265
Substandard⁽¹⁾	—		784		281		1,488		1,811		9,418		—		—		13,782
Loss⁽³⁾	—		—		—		—		—		74		—		—		74
Total consumer mortgages	279,510		1,150,016		701,471		944,453		900,185		1,631,606		880		—		5,608,121
Home equity lines
Pass	—		—		—		—		—		—		1,666,627		93,499		1,760,126
Substandard⁽¹⁾	—		—		—		—		—		—		11,824		5,949		17,773
Doubtful⁽²⁾	—		—		—		—		—		—		17		20		37
Loss⁽³⁾	—		—		—		—		—		—		736		190		926
Total home equity lines	—		—		—		—		—		—		1,679,204		99,658		1,778,862
Credit cards
Pass	—		—		—		—		—		—		258,904		—		258,904
Substandard⁽¹⁾	—		—		—		—		—		—		736		—		736
Loss⁽⁴⁾	—		—		—		—		—		—		1,941		—		1,941
Total credit cards	—		—		—		—		—		—		261,581		—		261,581
Other consumer loans
Pass	121,380		788,397		438,760		413,899		185,671		100,619		245,304		—		2,294,030
Substandard⁽¹⁾	—		1,117		588		3,849		1,439		1,111		215		—		8,319
Total other consumer loans	121,380		789,514		439,348		417,748		187,110		101,730		245,519		—		2,302,349
Total consumer	400,890		1,939,530		1,140,819		1,362,201		1,087,295		1,733,336		2,187,184		99,658		9,950,913
Total loans⁽⁵⁾	$	1,800,458	$	7,224,342	$	6,195,632	$	5,234,049	$	3,407,184	$	6,365,228	$	7,874,421	$	182,242	$	38,283,556

⁽¹⁾ Includes $266.4 million of Substandard accruing loans at March 31, 2020.

⁽²⁾ The loans within this risk grade are on non-accrual status and generally have an ALL equal to 50% of the loan amount.

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

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

⁽⁵⁾ Total before net deferred fees and costs of $25.5 million.


Loan Portfolio by Risk Grade
	December 31, 2019
(in thousands)	Pass		Special Mention		Substandard⁽¹⁾		Doubtful⁽²⁾		Loss⁽³⁾			Total
Commercial, financial and agricultural	$	9,940,359	$	128,506	$	182,831	$	1,163	$	—		$	10,252,859
Owner-occupied	6,386,055		58,330		85,426		—		—			6,529,811
Total commercial and industrial	16,326,414		186,836		268,257		1,163		—			16,782,670
Investment properties	8,968,712		16,490		57,477		—		—			9,042,679
1-4 family properties	766,529		3,249		10,237		—		—			780,015
Land and development	629,351		18,643		9,796		—		—			657,790
Total commercial real estate	10,364,592		38,382		77,510		—		—			10,480,484
Consumer mortgages	5,527,746		—		18,376		97		149			5,546,368
Home equity lines	1,697,086		—		14,806		21		1,244			1,713,157
Credit cards	266,146		—		818		—		1,877		⁽⁴⁾	268,841
Other consumer loans	2,390,199		—		6,095		—		—			2,396,294
Total consumer	9,881,177		—		40,095		118		3,270			9,924,660
Total loans⁽⁵⁾	$	36,572,183	$	225,218	$	385,862	$	1,281	$	3,270		$	37,187,814

⁽¹⁾ Includes $288.8 million of substandard accruing loans at December 31, 2019.

⁽²⁾ The loans within this risk grade are on non-accrual status and generally have an ALL equal to 50% of the loan amount.

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

⁽⁵⁾Total before net deferred fees and costs of $25.4 million.

Collateral-Dependent Loans

We classify a loan as collateral-dependent when our borrower is experiencing financial difficulty, and we expect repayment to be provided substantially through the operation or sale of collateral. Our commercial loans have collateral that is comprised of real estate and business assets. Our consumer loans have collateral that is substantially comprised of residential real estate.

There were no significant changes in the extent to which collateral secures our collateral-dependent loans during the three months ended March 31, 2020.

The following tables detail the changes in the ALL by loan segment for the three months ended March 31, 2020 and 2019.


Allowance for Loan Losses Roll Forward
	As Of and For the Three Months Ended March 31, 2020
(in thousands)	Commercial & Industrial		Commercial Real Estate		Consumer		Total
Allowance for loan losses:
Beginning balance, prior to adoption of ASU 2016-13	$	145,782	$	67,430	$	68,190	$	281,402
Impact from adoption of ASU 2016-13	(2,310)		(651)		85,955		82,994
Charge-offs	(14,885)		(1,017)		(7,972)		(23,874)
Recoveries	1,741		399		1,673		3,813
Provision for loan losses	86,622		40,956		21,539		149,117
Ending balance	$	216,950	$	107,117	$	169,385	$	493,452

	As Of and For the Three Months Ended March 31, 2019
(in thousands)	Commercial & Industrial		Commercial Real Estate		Consumer		Total
Allowance for loan losses:
Beginning balance	$	133,123	$	68,796	$	48,636	$	250,555
Charge-offs	(13,039)		(1,233)		(6,427)		(20,699)
Recoveries	1,990		344		1,277		3,611
Provision for loan losses	13,565		1,102		8,902		23,569
Ending balance	$	135,639	$	69,009	$	52,388	$	257,036

Provision for credit losses and allowance for the quarter, which includes both the ALL and the reserve for unfunded commitments, were impacted by the adoption of CECL on January 1, 2020. The impact on provision for credit losses for the three months ending March 31, 2020 and the allowance at March 31, 2020, compared to prior year, was amplified by the heightened economic distress resulting from the COVID-19 pandemic.

Our 2019 disclosures included in "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" of Synovus' 2019 Form 10-K referenced a two-year reasonable and supportable forecast period used in CECL estimates, but it was deemed more appropriate to reduce that to a one-year horizon during this period of heightened economic uncertainty. A one-year reversion to historical losses follows the reasonable and supportable forecast period.

Our modeling process incorporates quantitative and qualitative considerations that are used to inform CECL estimates. The internally developed economic forecast used to determine the allowance for credit losses as of March 31, 2020 was approved late in the first quarter pursuant to Synovus' economic forecasting governance processes. Between that approval date and March 31, 2020, further deterioration in the economic outlook occurred which resulted in the need for a qualitative overlay to our allowance for credit losses. The qualitative overlay of $37.3 million adds 10 bps to the allowance for credit losses and better aligns the total allowance with the economic indicators and forecasts at March 31, 2020.

The deterioration of the economic environment since January 1, 2020 due to the effects of COVID-19 resulted in an ACL to loans ratio of 1.39% at March 31, 2020.

Economic projections are an important consideration in CECL estimates. Significant economic uncertainty remains as a result of the continuing healthcare crisis and the ultimate impact of government stimulation efforts. If our economic outlook on June 30, 2020 evidences further deterioration, then we would expect to see a further increase in the allowance for credit losses.

Information about Synovus' TDRs is presented in the following tables. The following tables represent, by concession type, the post-modification balance for loans modified or renewed during the three months ended March 31, 2020 and 2019 that were reported as accruing or non-accruing TDRs.


TDRs by Concession Type
	Three Months Ended March 31, 2020
(in thousands, except contract data)	Number of Contracts	Below Market Interest Rate		Other Concessions⁽¹⁾		Total
Commercial, financial and agricultural	36	$	3,724	$	2,011	$	5,735
Owner-occupied	5	1,367		96		1,463
Total commercial and industrial	41	5,091		2,107		7,198
Investment properties	2	23,070		—		23,070
1-4 family properties	6	724		442		1,166
Land and development	1	449		—		449
Total commercial real estate	9	24,243		442		24,685
Consumer mortgages	6	515		1,083		1,598
Home equity lines	19	275		964		1,239
Other consumer loans	29	78		1,897		1,975
Total consumer	54	868		3,944		4,812
Total TDRs	104	$	30,202	$	6,493	$	36,695	⁽²⁾

	Three Months Ended March 31, 2019
(in thousands, except contract data)	Number of Contracts	Below Market Interest Rate		Other Concessions(1)		Total
Commercial, financial and agricultural	13	$	1,783	$	899	$	2,682
Owner-occupied	2	949		—		949
Total commercial and industrial	15	2,732		899		3,631
Investment properties	1	482		—		482
1-4 family properties	6	793		—		793
Total commercial real estate	7	1,275		—		1,275
Consumer mortgages	4	128		1,214		1,342
Home equity lines	1	—		105		105
Other consumer loans	18	108		1,046		1,154
Total consumer	23	236		2,365		2,601
Total TDRs	45	$	4,243	$	3,264	$	7,507	⁽³⁾

⁽¹⁾Other concessions generally include term extensions, interest only payments for a period of time, or principal forgiveness, but there was no principal forgiveness for the three months ending March 31, 2020 and 2019.

⁽²⁾No net charge-offs were recorded during the three months ended March 31, 2020.

⁽³⁾No net charge-offs were recorded during the three months ended March 31, 2019.

For the three months ended March 31, 2020 there were 3 defaults with a recorded investment of $618 thousand on accruing TDRs restructured during the previous twelve months (defaults are defined as the earlier of the TDR being placed on non-accrual status or reaching 90 days past due with respect to principal and/or interest payments) compared to no defaults for the three months ended March 31, 2019. As of March 31, 2020 and December 31, 2019, there were no commitments to lend a material amount of additional funds to any customer whose loan was classified as a TDR.