Fair Value Accounting (Tables)

3 Months Ended

Mar. 31, 2014

Financial Instruments Measured at Fair Value on Recurring Basis

The following table presents all financial instruments measured at fair value on a recurring basis as of March 31, 2014 and December 31, 2013, according to the valuation hierarchy included in ASC 820-10. For equity and debt securities, class was determined based on the nature and risks of the investments.



	March 31, 2014
(in thousands)	Level 1		Level 2	Level 3	Total Assets and Liabilities at Fair Value
Assets
Trading securities:
Mortgage-backed securities issued by U.S. Government agencies	$	—	9,582	—	9,582
Collateralized mortgage obligations issued by U.S. Government sponsored enterprises	—		2,551	—	2,551
State and municipal securities	—		40	—	40
All other mortgage-backed securities	—		5,131	—	5,131
Other investments	—		504	—	504
Total trading securities	$	—	17,808	—	17,808
Mortgage loans held for sale	—		50,390	—	50,390
Investment securities available for sale:
U.S. Treasury securities	17,792		—	—	17,792
U.S. Government agency securities	—		34,393	—	34,393
Securities issued by U.S. Government sponsored enterprises	—		113,320	—	113,320
Mortgage-backed securities issued by U.S. Government agencies	—		169,219	—	169,219
Mortgage-backed securities issued by U.S. Government sponsored enterprises	—		2,385,964	—	2,385,964
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	—		393,909	—	393,909
State and municipal securities	—		6,454	—	6,454
Equity securities	6,968		—	540	7,508
Other investments⁽¹⁾	1,984		—	1,859	3,843
Total investment securities available for sale	$	26,744	3,103,259	2,399	3,132,402
Private equity investments	—		1,499	27,495	28,994
Mutual funds held in Rabbi Trusts	11,168		—	—	11,168
Derivative assets:
Interest rate contracts	—		34,924	—	34,924
Mortgage derivatives⁽²⁾	—		1,256	—	1,256
Total derivative assets	$	—	36,180	—	36,180
Liabilities
Trading account liabilities	—		10,370	—	10,370
Salary stock units	154		—	—	154
Derivative liabilities:
Interest rate contracts	—		35,775	—	35,775
Mortgage derivatives⁽²⁾	—		54	—	54
Visa derivative	—		—	2,525	2,525
Total derivative liabilities	$	—	35,829	2,525	38,354



	December 31, 2013
(in thousands)	Level 1		Level 2	Level 3	Total Assets and Liabilities at Fair Value
Assets
Trading securities:
Collateralized mortgage obligations issued by U.S. Government sponsored enterprises	—		2,465	—	2,465
State and municipal securities	—		429	—	429
All other mortgage-backed securities	—		968	—	968
Other investments	—		2,251	—	2,251
Total trading securities	$	—	6,113	—	6,113
Mortgage loans held for sale	—		45,384	—	45,384
Investment securities available for sale:
U.S. Treasury securities	17,791		—	—	17,791
U.S. Government agency securities	—		34,641	—	34,641
Securities issued by U.S. Government sponsored enterprises	—		113,745	—	113,745
Mortgage-backed securities issued by U.S. Government agencies	—		195,117	—	195,117
Mortgage-backed securities issued by U.S. Government sponsored enterprises	—		2,421,360	—	2,421,360
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	—		398,540	—	398,540
State and municipal securities	—		6,889	—	6,889
Equity securities	6,956		—	628	7,584
Other investments⁽¹⁾	1,969		—	1,722	3,691
Total investment securities available for sale	$	26,716	3,170,292	2,350	3,199,358
Private equity investments	—		1,615	27,745	29,360
Mutual funds held in Rabbi Trusts	11,246		—	—	11,246
Derivative assets:
Interest rate contracts	—		38,482	—	38,482
Mortgage derivatives⁽²⁾	—		1,522	—	1,522
Total derivative assets	$	—	40,004	—	40,004
Liabilities
Trading account liabilities	—		1,763	—	1,763
Salary stock units	1,764		—	—	1,764
Derivative liabilities:
Interest rate contracts	—		39,436	—	39,436
Visa derivative	—		—	2,706	2,706
Total derivative liabilities	$	—	39,436	2,706	42,142

⁽¹⁾ Based on an analysis of the nature and risks of these investments, Synovus has determined that presenting these investments as a single asset class is appropriate.

⁽²⁾Mortgage derivatives consist of customer interest rate lock commitments that relate to the potential origination of mortgage loans, which would be classified as held for sale and forward loan sales commitments with third party investors.

Changes in Fair Value Included in Consolidated Statements of Income

The following table summarizes the difference between the fair value and the unpaid principal balance of mortgage loans held for sale measured at fair value and the changes in fair value of these loans. Mortgage loans held for sale are initially measured at fair value with subsequent changes in fair value recognized in earnings. Changes in fair value were recorded as a component of mortgage banking income in the consolidated statements of income. An immaterial portion of these changes in fair value was attributable to changes in instrument-specific credit risk.



Changes in Fair Value Included in Net income
	For the Three Months Ended March 31,
(in thousands)	2014		2013
Mortgage loans held for sale	$	725	(2,759	)



Mortgage Loans Held for Sale
(in thousands)	As of March 31, 2014		As of December 31, 2013
Fair value	$	50,390	45,384
Unpaid principal balance	49,224		44,943
Fair value less aggregate unpaid principal balance	$	1,166	441

Changes in Level 3 Fair Value Measurements



	Three Months Ended March 31,
	2014							2013
(in thousands)	Investment Securities Available for Sale			Private Equity Investments		Other Derivative Contracts, Net		Investment Securities Available for Sale	Private Equity Investments		Other Derivative Contracts, Net
Beginning balance, January 1,	$	2,350		27,745		(2,706	)	3,178	30,708		(2,956	)
Total gains (losses) realized/unrealized:
Included in earnings^*	(88		)	(250	)	(396	)	—	(257	)	(37	)
Unrealized gains (losses) included in other comprehensive income	137			—		—		134	—		—
Purchases	—			—		—		—	—		—
Sales	—			—		—		—	—		—
Issuances	—			—		—		—	—		—
Settlements	—			—		577		—	—		383
Amortization of discount/premium	—			—		—		—	—		—
Transfers in and/or out of Level 3	—			—		—		—	—		—
Ending balance, March 31,	$	2,399		27,495		(2,525	)	3,312	30,451		(2,610	)
The amount of total net gains (losses) for the three months included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at March 31,	—			(250	)	(396	)	—	(257	)	(37	)

^* Included in earnings as a component of non-interest income (expense).

Assets and Liabilities Measured at Fair Value on Non-Recurring Basis



	March 31, 2014					December 31, 2013
(in thousands)	Level 1		Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Impaired loans^*	$	—	—	6,049	6,049	—	—	170,693	170,693
Other loans held for sale	—		—	1,396	1,396	—	—	9,670	9,670
Other real estate	—		—	21,106	21,106	—	—	50,070	50,070
Other assets held for sale	$	—	—	—	—	—	—	4,945	4,945

Assets Measured at Fair Value on a Nonrecurring Basis

The following table presents fair value adjustments recognized for the three months ended March 31, 2014 and 2013 for the assets measured at fair value on a non-recurring basis.



	Three Months Ended March 31,
(in thousands)	2014		2013
Impaired loans^*	$	2,655	23,594
Other loans held for sale	303		4,250
Other real estate	2,637		5,792
Other assets held for sale	—		170

^*Impaired loans that are collateral-dependent.

Fair Value Inputs, Assets, Quantitative Information



March 31, 2014
(dollars in thousands)	Level 3 Fair Value		Valuation Technique	Significant Unobservable Input	Range (Weighted Average)⁽¹⁾
Assets measured at fair value on a recurring basis

Investment Securities Available for Sale
Equity securities	$	540	Individual analysis of each investment	Multiple data points, including, but not limited to evaluation of past and projected business performance	N/A⁽⁴⁾

Other investments:

Trust preferred securities	1,859		Discounted cash flow analysis	Credit spread embedded in discount rate	400-450 bps (425 bps)
				Discount for lack of marketability⁽²⁾	0%-10% (0%)

Private equity investments	27,495		Individual analysis of each investee company	Multiple factors, including but not limited to, current operations, financial conditions, cash flows, evaluation of business management and financial plans, and recently executed financing transactions related to the investee companies ⁽²⁾	N/A

Visa derivative liability	2,525		Internal valuation	Estimated future cumulative deposits to the litigation escrow for settlement of the Covered Litigation, and estimated future monthly fees payable to the derivative counterparty.	$1.5 million to $2.5 million ($2.5 million)



March 31, 2014
(dollars in thousands)	Level 3 Fair Value		Valuation Technique	Significant Unobservable Input	Range (Weighted Average)⁽¹⁾
Assets measured at fair value on a non-recurring basis
Collateral dependent impaired loans	$	6,049	Third party appraised value of collateral less estimated selling costs	Discount to appraised value ⁽³⁾ Estimated selling costs	4% - 84% (44%) 0% - 10% (7%)

Other loans held for sale	1,396		Third party appraised value of collateral less estimated selling costs	Discount to appraised value ⁽³⁾ Estimated selling costs	(22%) 0% - 10% (7%)

Other real estate	21,106		Third party appraised value of collateral less estimated selling costs	Discount to appraised value ⁽³⁾ Estimated selling costs	0% - 70% (21%) 0% - 10% (7%)

⁽¹⁾ The range represents management's best estimate of the high and low of the value that would be assigned to a particular input. The weighted average is the measure of central tendencies; it is the value that management is using for the asset or liability.

⁽²⁾ Represents management's estimate of discount that market participants would require based on the instrument's lack of liquidity.

⁽³⁾ Synovus also makes adjustments to the values of the assets listed above for various reasons, including age of the appraisal, information known by management about the property, such as occupancy rates, changes to the physical conditions of the property, and other factors.

⁽⁴⁾ The range has not been disclosed due to the wide range of possible values given the methodology used.



December 31, 2013
(dollars in thousands)	Level 3 Fair Value		Valuation Technique	Significant Unobservable Input	Range (Weighted Average)⁽¹⁾
Assets measured at fair value on a recurring basis

Investment Securities Available for Sale:
Equity securities	$	628	Individual analysis of each investment	Multiple data points, including, but not limited to evaluation of past and projected business performance	N/A⁽⁴⁾

Other investments:

Trust preferred securities	1,722		Discounted cash flow analysis	Credit spread embedded in discount rate	400-480 bps (441 bps)
				Discount for lack of marketability⁽²⁾	0%-10% (0%)

Private equity investments	27,745		Individual analysis of each investee company	Multiple factors, including but not limited to, current operations, financial conditions, cash flows, evaluation of business management and financial plans, and recently executed company transactions related to the investee companies ⁽²⁾	N/A

Visa derivative liability	2,706		Internal valuation	Estimated future cumulative deposits to the litigation escrow for settlement of the Covered Litigation, and estimated future monthly fees payable to the derivative counterparty	$400 thousand to $2.7 million ($2.7 million)



December 31, 2013
(dollars in thousands)	Level 3 Fair Value		Valuation Technique	Significant Unobservable Input	Range (Weighted Average)⁽¹⁾
Assets measured at fair value on a non-recurring basis
Collateral dependent impaired loans	$	170,693	Third party appraised value of collateral less estimated selling costs	Discount to appraised value⁽³⁾ Estimated selling costs	0%-65% (25%) 0%-10% (7%)

Other loans held for sale	9,670		Third party appraised value of collateral less estimated selling costs	Discount to appraised value ⁽³⁾ Estimated selling costs	18%-93% (70%) 0%-10% (7%)

Other real estate	50,070		Third party appraised value of collateral less estimated selling costs	Discount to appraised value ⁽³⁾ Estimated selling costs	0%-85% (25%) 0%-10% (7%)

Other assets held for sale	4,945		Third party appraised value of collateral less estimated selling costs or BOV	Discount to appraised value ⁽³⁾ Estimated selling costs	5%-36% (20%) 0%-10% (7%)

⁽²⁾ Represents management's estimate of discount that market participants would require based on the instrument's lack of liquidity.

⁽⁴⁾ The range has not been disclosed due to the wide range of possible values given the methodology used.

Carrying and Estimated Fair Values of Financial Instruments Carried on Balance Sheet

The carrying and estimated fair values of financial instruments, as well as the level within the fair value hierarchy, as of March 31, 2014 and December 31, 2013 are as follows:



	March 31, 2014
(in thousands)	Carrying Value		Estimated Fair Value	Level 1	Level 2	Level 3
Financial assets
Cash and cash equivalents	$	460,618	460,618	460,618	—	—
Interest bearing funds with Federal Reserve Bank	884,743		884,743	884,743	—	—
Interest earning deposits with banks	9,139		9,139	9,139	—	—
Federal funds sold and securities purchased under resale agreements	76,097		76,097	76,097	—	—
Trading account assets	17,808		17,808	—	17,808	—
Mortgage loans held for sale	50,390		50,390	—	50,390	—
Other loans held for sale	3,120		3,120	—	—	3,120
Investment securities available for sale	3,132,402		3,132,402	26,744	3,103,259	2,399
Private equity investments	28,994		28,994	—	1,499	27,495
Mutual funds held in Rabbi Trusts	11,168		11,168	11,168	—	—
Loans, net of deferred fees and costs	20,159,004		19,903,681	—	—	19,903,681
Derivative assets	36,180		36,180	—	36,180	—
Financial liabilities
Trading account liabilities	10,370		10,370	—	10,370	—
Non-interest bearing deposits	5,870,570		5,870,570	—	5,870,570	—
Interest bearing deposits	15,080,322		15,087,630	—	15,087,630	—
Federal funds purchased and securities sold under repurchase agreements	164,946		164,946	164,946	—	—
Salary stock units	154		154	154	—	—
Long-term debt	2,106,980		2,182,002	—	2,182,002	—
Derivative liabilities	$	38,354	38,354	—	35,829	2,525



	December 31, 2013
(in thousands)	Carrying Value		Estimated Fair Value	Level 1	Level 2	Level 3
Financial assets
Cash and cash equivalents	$	469,630	469,630	469,630	—	—
Interest bearing funds with Federal Reserve Bank	644,528		644,528	644,528	—	—
Interest earning deposits with banks	24,325		24,325	24,325	—	—
Federal funds sold and securities purchased under resale agreements	80,975		80,975	80,975	—	—
Trading account assets	6,113		6,113	—	6,113	—
Mortgage loans held for sale	45,384		45,384	—	45,384	—
Other loans held for sale	10,685		10,685	—	—	10,685
Investment securities available for sale	3,199,358		3,199,358	26,716	3,170,292	2,350
Private equity investments	29,360		29,360	—	1,615	27,745
Mutual funds held in Rabbi Trusts	11,246		11,246	11,246	—	—
Loans, net of deferred fees and costs	20,057,798		19,763,708	—	—	19,763,708
Derivative assets	40,004		40,004	—	40,004	—
Financial liabilities
Trading account liabilities	1,763		1,763	—	1,763	—
Non-interest bearing deposits	5,642,751		5,642,751	—	5,642,751	—
Interest bearing deposits	15,234,039		15,244,020	—	15,244,020	—
Federal funds purchased and securities sold under repurchase agreements	148,132		148,132	148,132	—	—
Salary stock units	1,764		1,764	1,764	—	—
Long-term debt	2,033,141		2,095,720	—	2,095,720	—
Derivative liabilities	$	42,142	42,142	—	39,436	2,706

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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