Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 16 - Income Taxes

The components of income tax expense (benefit) included on the consolidated statements of income for the years ended December 31, 2023, 2022, and 2021 are presented below:

(in thousands)	2023		2022		2021
Current
Federal	$	107,445	$	167,255	$	153,911
State	29,739		28,152		29,982
Total current income tax expense	137,184		195,407		183,893
Deferred
Federal	13,124		11,570		28,873
State	3,713		(702)		16,127
Total deferred income tax expense (benefit)	16,837		10,868		45,000
Total income tax expense	$	154,021	$	206,275	$	228,893

Income tax expense as shown on the consolidated statements of income differed from the federal statutory rate for the years ended December 31, 2023, 2022, and 2021. A reconciliation of the differences is presented below:

	Years Ended December 31,
(dollars in thousands)	2023			2022			2021
Income tax expense at statutory federal income tax rate	$	146,194		$	202,477		$	207,765
Increase (decrease) resulting from:
State income tax expense, net of federal income tax benefit	28,415			21,981			38,452
Tax credits and related benefits, net of amortization (as applicable)	(21,037)			(9,629)			(8,717)
Income not subject to tax	(10,477)			(9,346)			(10,455)
FDIC premiums	8,589			5,517			4,111
Executive compensation	3,575			2,152			1,096
Excess tax benefit from share-based compensation	(1,416)			(3,153)			(3,084)
Other, net	178			(3,724)			(275)
Total income tax expense	$	154,021		$	206,275		$	228,893
Effective tax rate	22.1		%	21.4		%	23.1		%

The components of the Company's deferred tax assets and liabilities at December 31, 2023 and 2022 are presented below:

(in thousands)	2023		2022
Deferred tax assets
Net unrealized losses on investment securities available for sale and cash flow hedges	$	348,712	$	455,744
Allowance for credit losses	130,205		121,941
Lease liability	120,534		107,818
Employee benefits and deferred compensation	40,601		42,746
Net operating loss carryforwards	32,126		23,590
Tax credit carryforwards	15,532		14,553
FDIC Special Assessment	12,058		—
Unrealized losses on fair value hedges	7,480		11,101
Non-performing loan interest	5,877		2,695
Miscellaneous accrued expenses	5,659		5,125
Fair value of investment securities and loans	1,422		2,019
Other	7,423		6,585
Total gross deferred tax assets	727,629		793,917
Less valuation allowance	(26,184)		(19,114)
Total deferred tax assets	701,445		774,803
Deferred tax liabilities
Right-of-use asset	(114,529)		(102,945)
Purchase accounting intangibles	(23,276)		(15,224)
Excess tax over financial statement depreciation	(20,457)		(23,762)
Deferred loan costs	(16,810)		(15,901)
Unrealized gain on hedged liabilities	(7,480)		(11,101)
Prepaid expense	(6,917)		(4,947)
Other properties held for sale	(1,434)		(2,828)
Other	(3,640)		(2,778)
Total gross deferred tax liabilities	(194,543)		(179,486)
Net deferred tax asset	$	506,902	$	595,317

Synovus believes the realization of net deferred tax assets (after valuation allowance) at December 31, 2023 is more likely than not based on its history of cumulative profitability as well as expectations of future taxable income, including reversals of taxable temporary differences, in the jurisdictions in which it operates.

Synovus expects that a portion of its $32.1 million of federal and state NOLs as well as a portion of the $15.5 million of federal and state tax credit carryforwards, which have carryforward periods ending in tax years 2024 through 2043, will not be realized before their carryforward period lapses and the Company has accordingly established a valuation allowance in the amount of $26.2 million at December 31, 2023.

Federal and state NOLs and tax credit carryforwards as of December 31, 2023 are summarized in the following table on a tax effected basis.

Tax Carryforwards	As of December 31, 2023
(in thousands)	Expiration Dates	Deferred Tax Asset, Before Valuation Allowance		Valuation Allowance		Net Deferred Tax Asset Balance
Net operating losses - federal(1)	2027-2037	$	25,240	$	(19,703)	$	5,537
Net operating losses - states(1)	2027-2043	6,886		(5,316)		1,570
Tax credits - federal	2034-2041	460		(460)		—
Tax credits - states(1)	2024-2038	15,072		(705)		14,367

(1) Included in this balance are tax attributes that can be carried forward indefinitely and have no expiration date.

Synovus is subject to income taxation in the U. S. and various state and local taxing jurisdictions. Generally, Synovus is no longer subject to income tax examinations by the IRS for years before 2020 and by state and local income tax authorities for years before 2015. Although Synovus is unable to determine the ultimate outcome of current and future examinations, Synovus believes that the resolution of these examinations will not have a material effect on the consolidated financial statements.

A reconciliation of the beginning and ending amount of unrecognized income tax benefits is as follows (unrecognized state income tax benefits are not adjusted for the federal income tax impact).

	Years Ended December 31,
(in thousands)	2023		2022		2021
Balance at January 1,	$	22,400	$	25,104	$	20,250
Additions based on income tax positions related to current year	719		649		3,754
Additions for income tax positions of prior years(1)	186		247		1,379
Reductions for income tax positions of prior years	(122)		(1,215)		(200)
Statute of limitation expirations	(871)		(2,002)		(79)
Settlements	—		(383)		—
Balance at December 31,	$	22,312	$	22,400	$	25,104

(1)    Includes deferred tax benefits that could reduce future tax liabilities.

Accrued interest and penalties related to unrecognized income tax benefits are recognized as a component of income tax expense, and totaled $4.8 million, $3.2 million, and $3.3 million as of December 31, 2023, 2022, and 2021, respectively. Unrecognized income tax benefits as of December 31, 2023, 2022, and 2021 that, if recognized, would affect the effective income tax rate totaled $22.5 million, $20.9 million and $23.5 million (net of the federal benefit on state income tax issues), respectively. It is reasonably possible that significant changes in the balance of unrecognized tax benefits may occur within the next 12 months. At this time, Synovus expects that $1.7 million of uncertain income tax positions will be either settled or resolved during the next twelve months.