Note 6 - Loans and Allowance for Loan Losses

The following is a summary of current, accruing past due, and non-accrual loans by portfolio class as of March 31, 2014 and December 31, 2013.



Current, Accruing Past Due, and Non-accrual Loans
	March 31, 2014
(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	$	4,645,364	2,522	—	2,522	50,583	4,698,469
1-4 family properties	1,075,831		5,932	1,998	7,930	29,251	1,113,012
Land acquisition	519,669		3,619	58	3,677	151,332	674,678
Total commercial real estate	6,240,864		12,073	2,056	14,129	231,166	6,486,159
Commercial, financial and agricultural	5,433,948		14,896	1,795	16,691	54,938	5,505,577
Owner-occupied	3,732,210		7,303	905	8,208	33,238	3,773,656
Small business	770,158		6,648	12	6,660	6,325	783,143
Total commercial and industrial	9,936,316		28,847	2,712	31,559	94,501	10,062,376
Home equity lines	1,578,593		5,090	71	5,161	18,003	1,601,757
Consumer mortgages	1,448,207		17,720	59	17,779	38,227	1,504,213
Credit cards	249,546		1,997	1,606	3,603	—	253,149
Other retail	274,552		2,748	59	2,807	2,427	279,786
Total retail	3,550,898		27,555	1,795	29,350	58,657	3,638,905
Total loans	$	19,728,078	68,475	6,563	75,038	384,324	20,187,440	⁽¹	⁾

	December 31, 2013
(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	$	4,533,708	3,552	40	3,592	66,454	4,603,754
1-4 family properties	1,115,858		6,267	527	6,794	33,819	1,156,471
Land acquisition	549,838		1,100	300	1,400	154,095	705,333
Total commercial real estate	6,199,404		10,919	867	11,786	254,368	6,465,558
Commercial, financial and agricultural	5,413,614		16,251	721	16,972	59,628	5,490,214
Owner-occupied	3,749,052		9,341	66	9,407	36,980	3,795,439
Small business	676,947		4,506	155	4,661	5,608	687,216
Total commercial and industrial	9,839,613		30,098	942	31,040	102,216	9,972,869
Home equity lines	1,564,578		4,919	136	5,055	17,908	1,587,541
Consumer mortgages	1,460,219		18,068	1,011	19,079	39,770	1,519,068
Credit cards	253,422		1,917	1,507	3,424	—	256,846
Other retail	280,524		2,190	26	2,216	2,038	284,778
Total retail	3,558,743		27,094	2,680	29,774	59,716	3,648,233
Total loans	$	19,597,760	68,111	4,489	72,600	416,300	20,086,660	⁽²	⁾

⁽¹⁾Total before net deferred fees and costs of $28.4 million.

⁽²⁾Total before net deferred fees and costs of $28.9 million.

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 Criticized (Pass), Special Mention, and Classified or Adverse rating (Substandard, Doubtful, and Loss) and are defined as follows:

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

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

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

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

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

In the following tables, retail loans and small business 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
	March 31, 2014
(in thousands)	Pass		Special Mention	Substandard⁽¹⁾	Doubtful⁽²⁾	Loss		Total
Investment properties	$	4,328,462	227,404	140,891	1,712	—		4,698,469
1-4 family properties	872,167		120,235	112,603	8,007	—		1,113,012
Land acquisition	418,627		70,442	184,661	948	—		674,678
Total commercial real estate	5,619,256		418,081	438,155	10,667	—		6,486,159
Commercial, financial and agricultural	5,129,502		186,826	177,969	11,192	88	⁽³⁾	5,505,577
Owner-occupied	3,483,270		135,649	153,672	1,065	—		3,773,656
Small business	769,095		—	13,259	789	—		783,143
Total commercial and industrial	9,381,867		322,475	344,900	13,046	88		10,062,376
Home equity lines	1,575,012		—	22,627	1,771	2,347	⁽³⁾	1,601,757
Consumer mortgages	1,460,349		—	40,480	3,100	284	⁽³⁾	1,504,213
Credit cards	251,543		—	642	—	964	⁽⁴⁾	253,149
Other retail	275,807		—	3,812	50	117	⁽³⁾	279,786
Total retail	3,562,711		—	67,561	4,921	3,712		3,638,905
Total loans	$	18,563,834	740,556	850,616	28,634	3,800		20,187,440	⁽⁵	⁾

	December 31, 2013
(in thousands)	Pass		Special Mention	Substandard⁽¹⁾	Doubtful⁽²⁾	Loss		Total
Investment properties	$	4,184,748	249,890	167,392	1,724	—		4,603,754
1-4 family properties	892,512		126,715	128,890	8,062	292	⁽³⁾	1,156,471
Land acquisition	421,956		94,316	186,514	2,547	—		705,333
Total commercial real estate	5,499,216		470,921	482,796	12,333	292		6,465,558
Commercial, financial and agricultural	5,053,808		224,620	201,410	10,286	90	⁽³⁾	5,490,214
Owner-occupied	3,478,359		155,097	160,173	1,810	—		3,795,439
Small business	674,200		—	12,219	797	—		687,216
Total commercial and industrial	9,206,367		379,717	373,802	12,893	90		9,972,869
Home equity lines	1,559,272		—	24,931	1,448	1,890	⁽³⁾	1,587,541
Consumer mortgages	1,475,928		—	40,935	1,918	287	⁽³⁾	1,519,068
Credit cards	255,339		—	541	—	966	⁽⁴⁾	256,846
Other retail	281,179		—	3,400	75	124	⁽³⁾	284,778
Total retail	3,571,718		—	69,807	3,441	3,267		3,648,233
Total loans	$	18,277,301	850,638	926,405	28,667	3,649		20,086,660	₍₆	₎

⁽¹⁾ Includes $351.9 million and $384.0 million of non-accrual Substandard loans at March 31, 2014 and December 31, 2013, respectively.

⁽²⁾ The loans within this risk grade are on non-accrual status and 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 $28.4 million.

⁽⁶⁾Total before net deferred fees and costs of $28.9 million.

The following table details the changes in the allowance for loan losses by loan segment for the three months ended March 31, 2014 and 2013.



Allowance for Loan Losses and Recorded Investment in Loans
	As Of and For The Three Months Ended March 31, 2014
(in thousands)	Commercial Real Estate			Commercial & Industrial		Retail		Unallocated		Total
Allowance for loan losses:
Beginning balance	$	127,012		116,069		41,479		23,000		307,560
Allowance for loan losses of sold branches	(281		)	(398	)	(340	)	—		(1,019	)
Charge-offs	(7,946		)	(8,036	)	(6,293	)	—		(22,275	)
Recoveries	2,227			1,953		2,914		—		7,094
Provision (credit) for loan losses	5,943			18,758		7,810		(23,000	)	9,511
Ending balance	$	126,955		128,346		45,570		—		300,871
Ending balance: individually evaluated for impairment	42,894			20,678		1,595		—		65,167
Ending balance: collectively evaluated for impairment	$	84,061		107,668		43,975		—		235,704
Loans:
Ending balance: total loans⁽¹⁾	$	6,486,159		10,062,376		3,638,905		—		20,187,440
Ending balance: individually evaluated for impairment	481,684			220,376		52,243		—		754,303
Ending balance: collectively evaluated for impairment	$	6,004,475		9,842,000		3,586,662		—		19,433,137

	As Of and For The Three Months Ended March 31, 2013
(in thousands)	Commercial Real Estate			Commercial & Industrial		Retail		Unallocated		Total
Allowance for loan losses:
Beginning balance	$	167,926		138,495		38,984		28,000		373,405
Charge-offs	(36,276		)	(19,218	)	(11,625	)	—		(67,119	)
Recoveries	3,602			4,418		1,770		—		9,790
Provision for loan losses	10,739			10,962		13,995		—		35,696
Ending balance	$	145,991		134,657		43,124		28,000		351,772
Ending balance: individually evaluated for impairment	44,252			22,563		2,199		—		69,014
Ending balance: collectively evaluated for impairment	$	101,739		112,094		40,925		28,000		282,758
Loans:
Ending balance: total loans⁽²⁾	$	6,422,635		9,540,141		3,426,663		—		19,389,439
Ending balance: individually evaluated for impairment	644,627			272,756		67,133		—		984,516
Ending balance: collectively evaluated for impairment	$	5,778,008		9,267,385		3,359,530		—		18,404,923

⁽¹⁾Total before net deferred fees and costs of $28.4 million.

⁽²⁾Total before net deferred fees and costs of $21.6 million.

During the first quarter of 2014, Synovus designated $23.0 million of allowance for loan losses that was included in the unallocated component of the allowance for loan losses at December 31, 2013 to the allowance for loan losses allocated to the respective loan segments. The allocation of the allowance for loan losses to the loan segments related to the qualitative factors evaluated at December 31, 2013 on a total loan portfolio basis and included in the unallocated component of the allowance for loan losses at December 31, 2013. These qualitative factors consider the inherent risk of loss relating to the following:

•Experience, ability, and depth of lending management, loan review personnel, and other relevant staff

•National and local economic trends and conditions


•	Underlying value of collateral dependent loans, which impacts trends in charge-offs and recoveries that are not included in the expected loss factors

•Trends in volume and terms of loans

•Effects of changes in credit concentrations

•Model uncertainty

Management determined that prospectively the assessment of these qualitative factors for each loan segment would improve the overall level of precision of the allowance for loan loss estimation process. The designation of this component of the unallocated allowance to the allocated allowance did not result in a change to the total allowance for loan losses or provision expense during the first quarter of 2014. The allowance for loan losses continues to consist of an allocated component (which includes the qualitative factors noted above as well as the qualitative factors disclosed in the 2013 Form 10-K) and an unallocated component. Effective March 31, 2014, the unallocated component relates to risk elements, if any, which are not already included in the allocated allowance.

The tables below summarize impaired loans (including accruing TDRs) as of March 31, 2014 and December 31, 2013.



Impaired Loans (including accruing TDRs)
	March 31, 2014				Three Months Ended March 31, 2014
(in thousands)	Recorded Investment		Unpaid Principal Balance	Related Allowance	Average Recorded Investment	Interest Income Recognized
With no related allowance recorded
Investment properties	$	14,297	16,927	—	14,189	—
1-4 family properties	6,494		25,664	—	8,582	—
Land acquisition	29,280		72,395	—	29,380	—
Total commercial real estate	50,071		114,986	—	52,151	—
Commercial, financial and agricultural	11,173		19,235	—	12,920	—
Owner-occupied	21,557		29,098	—	23,660	—
Small business	—		—	—	—	—
Total commercial and industrial	32,730		48,333	—	36,580	—
Home equity lines	—		—	—	—	—
Consumer mortgages	1,678		3,173	—	654	—
Credit cards	—		—	—	—	—
Other retail	—		—	—	—	—
Total retail	1,678		3,173	—	654	—
Total impaired loans with no related allowance recorded	$	84,479	166,492	—	89,385	—
With allowance recorded
Investment properties	$	160,764	167,390	10,569	168,365	1,078
1-4 family properties	104,007		104,858	7,496	110,373	814
Land acquisition	166,842		185,982	24,829	173,779	472
Total commercial real estate	431,613		458,230	42,894	452,517	2,364
Commercial, financial and agricultural	98,064		98,247	15,176	105,791	758
Owner-occupied	81,499		83,219	5,086	85,960	730
Small business	8,083		8,083	416	7,041	15
Total commercial and industrial	187,646		189,549	20,678	198,792	1,503
Home equity lines	2,955		2,955	117	2,606	70
Consumer mortgages	42,416		42,416	1,385	42,590	—
Credit cards	—		—	—	—	—
Other retail	5,194		5,194	93	4,230	56
Total retail	50,565		50,565	1,595	49,426	126
Total impaired loans with allowance recorded	$	669,824	698,344	65,167	700,735	3,993
Total impaired loans
Investment properties	$	175,061	184,317	10,569	182,554	1,078
1-4 family properties	110,501		130,522	7,496	118,955	814
Land acquisition	196,122		258,377	24,829	203,159	472
Total commercial real estate	481,684		573,216	42,894	504,668	2,364
Commercial, financial and agricultural	109,237		117,482	15,176	118,711	758
Owner-occupied	103,056		112,317	5,086	109,620	730
Small business	8,083		8,083	416	7,041	15
Total commercial and industrial	220,376		237,882	20,678	235,372	1,503
Home equity lines	2,955		2,955	117	2,606	70
Consumer mortgages	44,094		45,589	1,385	43,244	—
Credit cards	—		—	—	—	—
Other retail	5,194		5,194	93	4,230	56
Total retail	52,243		53,738	1,595	50,080	126
Total impaired loans	$	754,303	864,836	65,167	790,120	3,993



Impaired Loans (including accruing TDRs)
	December 31, 2013				Year Ended December 31, 2013
(in thousands)	Recorded Investment		Unpaid Principal Balance	Related Allowance	Average Recorded Investment	Interest Income Recognized
With no related allowance recorded
Investment properties	$	14,218	15,820	—	18,046	—
1-4 family properties	9,679		29,741	—	23,879	—
Land acquisition	30,595		78,470	—	41,007	—
Total commercial real estate	54,492		124,031	—	82,932	—
Commercial, financial and agricultural	13,490		22,312	—	15,355	—
Owner-occupied	24,839		32,626	—	22,556	—
Small business	—		—	—	—	—
Total commercial and industrial	38,329		54,938	—	37,911	—
Home equity lines	—		—	—	33	—
Consumer mortgages	1,180		2,840	—	1,487	—
Credit cards	—		—	—	—	—
Other retail	—		—	—	4	—
Total retail	1,180		2,840	—	1,524	—
Total	$	94,001	181,809	—	122,367	—
With allowance recorded
Investment properties	$	186,058	193,765	8,863	226,987	5,062
1-4 family properties	115,063		117,410	11,126	115,614	3,464
Land acquisition	183,029		202,048	26,789	191,807	2,931
Total commercial real estate	484,150		513,223	46,778	534,408	11,457
Commercial, financial and agricultural	112,291		117,049	15,364	126,242	3,534
Owner-occupied	86,661		92,529	4,327	106,186	3,590
Small business	5,669		5,669	336	4,132	162
Total commercial and industrial	204,621		215,247	20,027	236,560	7,286
Home equity lines	2,750		2,750	116	4,668	176
Consumer mortgages	44,019		44,019	967	48,674	1,910
Credit cards	—		—	—	—	—
Other retail	7,013		7,013	109	5,555	285
Total retail	53,782		53,782	1,192	58,897	2,371
Total	$	742,553	782,252	67,997	829,865	21,114
Total
Investment properties	$	200,276	209,585	8,863	245,033	5,062
1-4 family properties	124,742		147,151	11,126	139,493	3,464
Land acquisition	213,624		280,518	26,789	232,814	2,931
Total commercial real estate	538,642		637,254	46,778	617,340	11,457
Commercial, financial and agricultural	125,781		139,361	15,364	141,597	3,534
Owner-occupied	111,500		125,155	4,327	128,742	3,590
Small business	5,669		5,669	336	4,132	162
Total commercial and industrial	242,950		270,185	20,027	274,471	7,286
Home equity lines	2,750		2,750	116	4,701	176
Consumer mortgages	45,199		46,859	967	50,161	1,910
Credit cards	—		—	—	—	—
Other retail	7,013		7,013	109	5,559	285
Total retail	54,962		56,622	1,192	60,421	2,371
Total impaired loans	$	836,554	964,061	67,997	952,232	21,114

The average recorded investment in impaired loans was $984.5 million for the three months ended March 31, 2013. Excluding accruing TDRs, there was no interest income recognized for the investment in impaired loans for the three months ended March 31, 2013. Interest income recognized for accruing TDRs was $5.5 million for the three months ended March 31, 2013. At March 31, 2014, and 2013, all impaired loans other than $495.4 million and $623.9 million, respectively, of accruing TDRs, 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 3 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 three months ended March 31, 2014 and 2013, respectively, that were reported as accruing or non-accruing TDRs.



TDRs by Concession Type
	Three Months Ended March 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	3	$	—	7,143	320	7,463
1-4 family properties	4	—		133	1,086	1,219
Land acquisition	1	—		—	534	534
Total commercial real estate	8	—		7,276	1,940	9,216
Commercial, financial and agricultural	7	—		1,791	2,205	3,996
Owner-occupied	7	—		2,488	2,818	5,306
Small business	23	—		296	3,316	3,612
Total commercial and industrial	37	—		4,575	8,339	12,914
Home equity lines	2	—		241	46	287
Consumer mortgages	1	—		101	—	101
Credit cards	—	—		—	—	—
Other retail	4	—		—	117	117
Total retail	7	—		342	163	505
Total TDRs	52	$	—	12,193	10,442	22,635	⁽¹	⁾

	Three Months Ended March 31, 2013
(in thousands, except contract data)	Number of Contracts	Principal Forgiveness		Below Market Interest Rate	Term Extensions and/or Other Concessions	Total
Investment properties	14	$	—	15,777	2,114	17,891
1-4 family properties	37	424		6,964	4,184	11,572
Land acquisition	10	74		3,979	329	4,382
Total commercial real estate	61	498		26,720	6,627	33,845
Commercial, financial and agricultural	27	183		8,477	1,737	10,397
Owner-occupied	17	—		5,283	2,454	7,737
Small business	13	—		887	674	1,561
Total commercial and industrial	57	183		14,647	4,865	19,695
Home equity lines	1	—		—	80	80
Consumer mortgages	46	—		4,920	2,603	7,523
Credit cards	—	—		—	—	—
Other retail	24	—		372	666	1,038
Total retail	71	—		5,292	3,349	8,641
Total TDRs	189	$	681	46,659	14,841	62,181	⁽²	⁾

⁽¹⁾No net charge-offs were recorded during the three months ended March 31, 2014 upon restructuring of these loans.

⁽²⁾Net charge-offs of $53 thousand were recorded during the three months ended March 31, 2013 upon restructuring of these loans.

The following table presents TDRs that defaulted in the periods indicated and which were modified or renewed in a TDR within 12 months of the default date.



Troubled Debt Restructurings Entered Into That Subsequently Defaulted⁽¹⁾ During
	Three Months Ended March 31, 2014			Three Months Ended March 31, 2013⁽²⁾
(in thousands, except contract data)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Investment properties	1	$	186	2	$	4,519
1-4 family properties	—	—		2	8,945
Land acquisition	—	—		—	—
Total commercial real estate	1	186		4	13,464
Commercial, financial and agricultural	1	522		1	271
Owner-occupied	—	—		1	856
Small business	—	—		—	—
Total commercial and industrial	1	522		2	1,127
Home equity lines	—	—		—	—
Consumer mortgages	—	—		10	558
Credit cards	—	—		—	—
Other retail	—	—		1	195
Total retail	—	—		11	753
Total TDRs	2	$	708	17	$	15,344

⁽¹⁾Default is defined as the earlier of the troubled debt restructuring being placed on non-accrual status or reaching 90 days past due with respect to principal and/or interest payments.

(2) Amounts related to loans modified or renewed into TDRs within 12 months of the default date that subsequently defaulted during the three months ended March 31, 2013 were previously disclosed as 29 contracts with a recorded investment totaling $19.4 million. These amounts were revised in the table above due to a re-evaluation of the defaulted status of certain loans during this period.

If, at the time a loan was designated as a TDR, the loan was not already impaired, the measurement of impairment that resulted 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 TDR designation is not significant. At March 31, 2014, the allowance for loan losses allocated to accruing TDRs totaling $495.4 million was $24.9 million compared to accruing TDRs of $623.9 million with an allocated allowance for loan losses of $38.9 million at March 31, 2013. Non-accrual, non-homogeneous loans (commercial-type impaired loans 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.