Fair Value Accounting (Tables)

6 Months Ended

Jun. 30, 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 June 30, 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.



	June 30, 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	$	—	6,305	—	6,305
Collateralized mortgage obligations issued by U.S. Government sponsored enterprises	—		1,900	—	1,900
State and municipal securities	—		744	—	744
All other mortgage-backed securities	—		3,755	—	3,755
Other investments	—		7,614	—	7,614
Total trading securities	$	—	20,318	—	20,318
Mortgage loans held for sale	—		75,957	—	75,957
Investment securities available for sale:
U.S. Treasury securities	17,793		—	—	17,793
U.S. Government agency securities	—		34,292	—	34,292
Securities issued by U.S. Government sponsored enterprises	—		112,809	—	112,809
Mortgage-backed securities issued by U.S. Government agencies	—		174,378	—	174,378
Mortgage-backed securities issued by U.S. Government sponsored enterprises	—		2,338,295	—	2,338,295
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	—		386,473	—	386,473
State and municipal securities	—		5,429	—	5,429
Equity securities	6,953		—	—	6,953
Other investments⁽¹⁾	1,897		—	1,866	3,763
Total investment securities available for sale	$	26,643	3,051,676	1,866	3,080,185
Private equity investments	—		1,258	27,376	28,634
Mutual funds held in Rabbi Trusts	11,349		—	—	11,349
Derivative assets:
Interest rate contracts	—		34,476	—	34,476
Mortgage derivatives⁽²⁾	—		1,889	—	1,889
Total derivative assets	$	—	36,365	—	36,365
Liabilities
Trading account liabilities	—		7,309	—	7,309
Salary stock units	465		—	—	465
Derivative liabilities:
Interest rate contracts	—		35,046	—	35,046
Mortgage derivatives⁽²⁾	—		1,122	—	1,122
Visa derivative	—		—	2,438	2,438
Total derivative liabilities	$	—	36,168	2,438	38,606



	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 Six Months Ended June 30,				For the Three Months Ended June 30,
(in thousands)	2014		2013		2014	2013
Mortgage loans held for sale	$	1,781	(7,930	)	1,057	(5,171	)



Mortgage Loans Held for Sale
(in thousands)	As of June 30, 2014		As of December 31, 2013
Fair value	$	75,957	45,384
Unpaid principal balance	73,735		44,943
Fair value less aggregate unpaid principal balance	$	2,222	441

Changes in Level 3 Fair Value Measurements



	Six Months Ended June 30,
	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		)	(369	)	(752	)	—	(1,140	)	(801	)
Unrealized gains (losses) included in other comprehensive income	144			—		—		276	—		—
Purchases	—					—		—	—		—
Sales	—			—		—		—	—		—
Issuances	—			—		—		—	—		—
Settlements	(540		)	—		1,020		—	—		780
Amortization of discount/premium	—			—		—		—	—
Transfers in and/or out of Level 3	—			—		—		—	—		—
Ending balance, June 30,	$	1,866		27,376		(2,438	)	3,454	29,568		(2,977	)
Total net gains (losses) for the six months included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at June 30,	$	(88	)	(369	)	(752	)	—	(1,140	)	(801	)

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



	Three Months Ended June 30,
	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, April 1,	$	2,399		27,495		(2,525	)	3,312	30,451		(2,610	)
Total gains (losses) realized/unrealized:
Included in earnings^*	—			(119	)	(356	)	—	(883	)	(764	)
Unrealized gains (losses) included in other comprehensive income	7			—		—		142	—		—
Purchases	—			—		—		—	—		—
Sales	—			—		—		—	—		—
Issuances	—			—		—		—	—		—
Settlements	(540		)	—		443		—	—		397
Amortization of discount/premium	—			—		—		—	—		—
Transfers in and/or out of Level 3	—			—		—		—	—		—
Ending balance, June 30,	$	1,866		27,376		(2,438	)	3,454	29,568		(2,977	)
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 June 30,	$	—		(119	)	(356	)	—	(883	)	(764	)

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

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



	June 30, 2014					December 31, 2013
(in thousands)	Level 1		Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Impaired loans^*	$	—	—	11,190	11,190	—	—	170,693	170,693
Other loans held for sale	—		—	2,045	2,045	—	—	9,670	9,670
Other real estate	—		—	18,746	18,746	—	—	50,070	50,070
Other assets held for sale	$	—	—	5,394	5,394	—	—	4,945	4,945

Assets Measured at Fair Value on a Nonrecurring Basis

The following table presents fair value adjustments recognized for the six and three months ended June 30, 2014 and 2013 for the assets measured at fair value on a non-recurring basis.



	Six Months Ended June 30,			Three Months Ended June 30,
(in thousands)	2014		2013	2014		2013
Impaired loans^*	$	8,144	30,152	$	5,542	10,184
Other loans held for sale	1,631		3,546	1,631		3,315
Other real estate	3,229		4,513	654		363
Other assets held for sale	$	7,508	170	$	7,508	—

^*Impaired loans that are collateral-dependent.

Fair Value Inputs, Assets, Quantitative Information



June 30, 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:
Other Investments:

Trust preferred securities	1,866	Discounted cash flow analysis	Credit spread embedded in discount rate	400-490 bps (445 bps)
			Discount for lack of marketability⁽²⁾	0%-10% (0%)

Private equity investments	27,376	Individual analysis of each investee company	Multiple factors, including but not limited to, current operations, financial condition, 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	2,438	Internal valuation	Management's estimate of the timing and amount of the Covered Litigation settlement, and the resulting payments due to the counterparty under the terms of the contract.	$400 thousand to $2.4 million ($2.4 million)



June 30, 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	$	11,190	Third party appraised value of collateral less estimated selling costs	Discount to appraised value ⁽³⁾ Estimated selling costs	0% - 79% (42%) 0% - 10% (7%)

Other loans held for sale	2,045		Third party appraised value of collateral less estimated selling costs	Discount to appraised value ⁽³⁾ Estimated selling costs	0% - 19% (19%) 0% - 10% (7%)

Other real estate	18,746		Third party appraised value of collateral less estimated selling costs	Discount to appraised value ⁽³⁾ Estimated selling costs	0% - 4% (2%) 0% - 10% (7%)

Other assets held for sale	5,394		Third party appraised value of collateral less estimated selling costs or BOV	Discount to appraised value ⁽³⁾ Estimated selling costs	9%-80% (55%) 0%-10% (10%)

⁽¹⁾ The range represents management's best estimate of the high and low of the value that would be assigned to a particular input. For assets measured at fair value on a non-recurring basis, the weighted average is the measure of central tendencies; it is not 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.



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 condition, 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	Management's estimate of the timing and amount of the Covered Litigation settlement, and the resulting payments due to the counterparty under the terms of the contract.	$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	0%-12% (4%) 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%-7% (2%) 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 June 30, 2014 and December 31, 2013 are as follows:



	June 30, 2014
(in thousands)	Carrying Value		Estimated Fair Value	Level 1	Level 2	Level 3
Financial assets
Cash and cash equivalents	$	596,425	596,425	596,425	—	—
Interest bearing funds with Federal Reserve Bank	689,284		689,284	689,284	—	—
Interest earning deposits with banks	7,661		7,661	7,661	—	—
Federal funds sold and securities purchased under resale agreements	79,553		79,553	79,553	—	—
Trading account assets	20,318		20,318	—	20,318	—
Mortgage loans held for sale	75,957		75,957	—	75,957	—
Other loans held for sale	2,764		2,764	—	—	2,764
Investment securities available for sale	3,080,185		3,080,185	26,643	3,051,676	1,866
Private equity investments	28,634		28,634	—	1,258	27,376
Mutual funds held in Rabbi Trusts	11,349		11,349	11,349	—	—
Loans, net of deferred fees and costs	20,455,763		20,188,381	—	—	20,188,381
Derivative assets	36,365		36,365	—	36,365	—
Financial liabilities
Trading account liabilities	7,309		7,309	—	7,309	—
Non-interest bearing deposits	5,875,301		5,875,301	—	5,875,301	—
Interest bearing deposits	15,118,166		15,123,417	—	15,123,417	—
Federal funds purchased and securities sold under repurchase agreements	127,840		127,840	127,840	—	—
Salary stock units	465		465	465	—	—
Long-term debt	2,256,418		2,329,660	—	2,329,660	—
Derivative liabilities	$	38,606	38,606	—	36,168	2,438



	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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