0000018349 syn:CommercialAndIndustrialMember us-gaap:InterestRateBelowMarketReductionMember 2018-01-01 2018-06-300000018349us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel3Member2019-12-31

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
FORM 10-Q
 

Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 20192020
Commission file number 1-10312
 

syn-20200630_g1.jpg
SYNOVUS FINANCIAL CORP.CORP.
(Exact name of registrant as specified in its charter)

 
Georgia58-1134883
(State or other jurisdiction of incorporation or organization)
   (I.R.S. Employer Identification No.)

1111 Bay Avenue, Suite 500
Suite 500,

Columbus,Georgia31901
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (706649-2311
Securities registered pursuant to Section 12(b) of the Act:
(706) 641-6500
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $1.00 Par ValueSNVNew York Stock Exchange
Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series DSNV - PrDNew York Stock Exchange
Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series ESNV - PrENew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes   No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes��Yes     No 
Indicate the numberAs of August 4, 2020, 147,312,937 shares outstanding of each of the issuer’s class ofregistrant's common stock, as of the latest practicable date.$1.00 par value, were outstanding.



ClassJuly 31, 2019
Common Stock, $1.00 Par Value154,320,484




Table of Contents

Page
Financial Information
Index of Defined Terms
Item 1.Financial Statements (Unaudited)
Consolidated Balance Sheets as of June 30, 20192020 and December 31, 20182019
Consolidated Statements of Income for the Three and Six Months Ended June 30, 20192020 and 20182019
Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 20192020 and 20182019
Consolidated Statements of Changes in Shareholders' Equity for the Three and Six Months Ended June 30, 20192020 and 20182019
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 20192020 and 20182019
Notes to Unaudited Interim Consolidated Financial Statements
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Item 4.Controls and Procedures
Other Information
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits
Signatures








SYNOVUS FINANCIAL CORP.
INDEX OF DEFINED TERMS
AICPA
Throughout this discussion, references to "Synovus", "we", "our", "us", "the Company" and similar terms refer to the consolidated entity consisting of Synovus Financial Corp. and its subsidiaries unless the context indicates that we refer only to the Parent Company, Synovus Financial Corp. When we refer to the "Bank" or "Synovus Bank" we mean our only bank subsidiary, Synovus Bank.
ACL American Institute of Certified Public AccountantsAllowance for credit losses (ALL, reserve on unfunded loan commitments, and reserve, if required, on debt securities)
ALCO – Synovus' Asset Liability Management Committee
ALL – Allowance for loan losses
AOCI – Accumulated other comprehensive income
Acquisition Date – Effective January 1, 2019, Synovus completed its acquisition of FCB Financial Holdings, Inc.
ARRC – Alternative Reference Rates Committee
ASC – Accounting Standards Codification
ASC 310-30 loans – Loans accounted for in accordance with ASC 310 – 30, Loans and Debt Securities Acquired with Deteriorated Credit Quality
ASU – Accounting Standards Update
ATM – Automatic teller machine
Azalea Merger Sub – Azalea Merger Sub Corp., a wholly-owned subsidiary of Synovus which was formed for the express and limited purpose of the Merger
Basel III – The third Basel Accord developed by the Basel Committee on Banking Supervision to strengthen existing regulatory capital requirements
BOLI – Bank-owned life insurance
BOV – Broker’s opinion of value
bp(s) – Basis point(s)
C&I – Commercial and industrial
CARES Act – The Coronavirus Aid, Relief, and Economic Security Act
CECL Current expected credit losses
CET1 – Common Equity Tier 1 Capital defined by Basel III capital rules
CMO – Collateralized Mortgage Obligation
Cabela’s Transaction – The transaction completed on September 25, 2017 whereby Synovus Bank acquired certain assets and assumed certain liabilities of WFB and then immediately thereafter sold WFB’s credit card assets and certain related liabilities to Capital One Bank (USA), National Association.  As a part of this transaction, Synovus Bank retained WFB’s $1.10 billion brokered time deposit portfolio and received a $75.0 million fee from Cabela’s Incorporated and Capital One.  Throughout this Report, we refer to this transaction as the “Cabela’s Transaction” and the associated $75.0 million fee received from Cabela’s and Capital One as the “Cabela’s Transaction Feemortgage obligation
Code – Internal Revenue Code
Company – Synovus Financial Corp. and its wholly-owned subsidiaries, except where the context requires otherwise
Covered Litigation – Certain Visa litigation for which Visa is indemnified by Visa USA members
COVID-19 – Coronavirus disease 2019
CRA – Community Reinvestment Act
CRE – Commercial real estate
DIF DCFDeposit Insurance FundDiscounted cash flow
Dodd-Frank Act – The Dodd-Frank Wall Street Reform and Consumer Protection Act
EVE – Economic value of equity
Exchange Act – Securities Exchange Act of 1934, as amended
FASB – Financial Accounting Standards Board
FCA – Financial Conduct Authority
i


FCB – FCB Financial Holdings, Inc. and its wholly-owned subsidiaries, except where the context requires otherwise
FDIC – Federal Deposit Insurance Corporation
Federal Reserve Bank – The 12 banks that are the operating arms of the U.S. central bank. They implement the policies of the Federal Reserve Board and also conduct economic research

i


Federal Reserve Board – The 7-member Board of Governors that oversees the Federal Reserve System, establishes monetary policy (interest rates, credit, etc.), and monitors the economic health of the country. Its members are appointed by the President subject to Senate confirmation, and serve 14-year terms
Federal Reserve System – The 12 Federal Reserve Banks, with each one serving member banks in its own district. This system, supervised by the Federal Reserve Board, has broad regulatory powers over the money supply and the credit structure
Federal Tax Reform – Enactment of H.R. 1, formerly known as the Tax Cuts and Jobs Act, on December 22, 2017, legislation in which a number of changes were made under the Internal Revenue Code, including a reduction of the corporate income tax rate, significant limitations on the deductibility of interest, allowance of the expensing of capital expenditures, limitation on deductibility of FDIC insurance premiums, and limitation of the deductibility of certain performance-based compensation, among others
FFIEC – Federal Financial Institutions Examination Council
FFIEC Retail Credit Classification Policy – FFIEC Uniform Retail Credit Classification and Account Management Policy
FHLB – Federal Home Loan Bank
FICO – Fair Isaac Corporation
FMS – Financial Management Services, a division of Synovus Bank
FTE – Fully taxable-equivalent
FTP – Funds transfer pricing
GA DBF – Georgia Department of Banking and Finance
GAAP – Generally Accepted Accounting Principles in the United States of America
GDP – Gross domestic product
GGL – Government guaranteed loans
Global One – Entaire Global Companies, Inc., the parent company of Global One Financial, Inc., as acquired by Synovus on October 1, 2016. Throughout this Report, we refer to this acquisitionacquired entity as "Global One"
GSE – Government sponsored enterprise
HELOC – Home equity line of credit
Interagency Supervisory Guidance – 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
LGD – Loss given default
LIBOR – London Interbank Offered Rate
LIHTC – Low Income Housing Tax Credit
LTV – Loan-to-collateral value ratio
MBS – Mortgage-backed security
Merger Agreement – Agreement and Plan of Merger by and among Synovus, FCB and Azalea Merger Sub Corp. dated as of July 23, 2018
Merger – The January 1, 2019 merger of Azalea Merger Sub with and into FCB and immediately thereafter, the merger of FCB with and into Synovus, with Synovus continuing as the surviving entity pursuant to the terms and conditions of the Merger Agreement
MLO – Mortgage loan originator
MPS – Merchant processing servicer(s)
MRSU – Market Restricted Share Unit
NAICS – North American Industry Classification System
nm – not meaningful
NPA – Non-performing assets
NPL – Non-performing loans
ii


NSF – Non-sufficient funds
OCI – Other comprehensive income
ORE – Other real estate
OTC – Over-the-counter
OTTIPAAOther-than-temporary impairmentPurchase accounting adjustments
Parent Company – Synovus Financial Corp.

ii


PCD – Purchased Credit Deteriorated
ROUPCI – Purchased Credit Impaired
PD Right-of-useProbability of Default
PPPPaycheck Protection Program established as part of the CARES Act and launched on April 3, 2020 by the SBA and Treasury
PSU – Performance Share Unit
RSU – Restricted Share Unit
SBA – Small Business Administration
SBIC – Small Business Investment Company
SEC – U.S. Securities and Exchange Commission
Securities Act – Securities Act of 1933, as amended
Series C Preferred Stock – Synovus' Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series C, $25 liquidation preference
Series D Preferred Stock – Synovus' Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D, $25 liquidation preference
Series E Preferred Stock – Synovus' Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series E, $25 liquidation preference
SOFR – Secured Overnight Financing Rate
Synovus – Synovus Financial Corp.
Synovus Bank – A Georgia state-chartered bank and wholly-owned subsidiary of Synovus, through which Synovus conducts its banking operations
Synovus' 20182019 Form 10-K – Synovus' Annual Report on Form 10-K for the year ended December 31, 2018
Synovus Mortgage – Synovus Mortgage Corp., a wholly-owned subsidiary of Synovus Bank2019
Synovus Securities – Synovus Securities, Inc., a wholly-owned subsidiary of Synovus
Synovus Trust – Synovus Trust Company, N.A., a wholly-owned subsidiary of Synovus Bank
TDR – Troubled debt restructuring (as defined in ASC 310-40)
the Treasury TJCAUnited States DepartmentU.S. Tax Cuts and Jobs Act of the Treasury2017
TSR – Total shareholder return
UPB – Unpaid principal balance
VIE – Variable interest entity (as defined in ASC 810-10)
Visa – The Visa U.S.A., Inc. card association or its affiliates, collectively
Visa Class A shares – Class A shares of common stock issued by Visa are publicly traded shares which are not subject to restrictions on sale
Visa Class B shares – Class B shares of common stock issued by Visa which are subject to restrictions with respect to sale until all of the Covered Litigation has been settled. Class B shares will be convertible into Visa Class A shares using a then-current conversion ratio upon the lifting of restrictions with respect to sale of Visa Class B shares
Visa Derivative – A derivative contract with the purchaser of Visa Class B shares which provides for settlements between the purchaser and Synovus based upon a change in the ratio for conversion of Visa Class B shares into Visa Class A shares
Warrant – A warrant issued to the Treasury by Synovus to purchase up to 2,215,820 shares of Synovus common stock at a per share exercise price of $65.52 expiring on December 19, 2018, as was issued by Synovus to Treasury in 2008 in connection with the Capital Purchase Program, promulgated under the Emergency Stabilization Act of 2008
WFB – World's Foremost Bank, a wholly-owned subsidiary of Cabela's Incorporated

iii




PART I. FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
SYNOVUS FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except share and per share data)June 30, 2019 December 31, 2018
ASSETS   
Cash and due from banks$549,616
 $468,426
Interest-bearing funds with Federal Reserve Bank531,488
 641,476
Interest earning deposits with banks20,271
 19,841
Federal funds sold and securities purchased under resale agreements49,946
 13,821
     Total cash, cash equivalents, restricted cash, and restricted cash equivalents1,151,321
 1,143,564
Investment securities available for sale, at fair value7,007,012
 3,991,632
Mortgage loans held for sale, at fair value81,855
 37,129
Loans36,138,561
 25,946,573
Allowance for loan losses(257,376) (250,555)
Loans, net35,881,185
 25,696,018
Cash surrender value of bank-owned life insurance766,287
 554,134
Premises and equipment, net490,644
 434,307
Goodwill492,390
 57,315
Other intangible assets61,473
 9,875
Other assets1,386,036
 745,218
Total assets$47,318,203
 $32,669,192
LIABILITIES AND SHAREHOLDERS' EQUITY   
Liabilities   
Deposits:   
Non-interest-bearing deposits$9,205,066
 $7,650,967
Interest-bearing deposits28,761,656
 19,069,355
Total deposits37,966,722
 26,720,322
Federal funds purchased and securities sold under repurchase agreements273,481
 237,692
Other short-term borrowings1,330,000
 650,000
Long-term debt2,306,072
 1,657,157
Other liabilities688,112
 270,419
Total liabilities42,564,387
 29,535,590
Shareholders' Equity   
Series D Preferred Stock – no par value. Authorized 100,000,000 shares; 8,000,000 shares issued and outstanding at June 30, 2019 and December 31, 2018195,140
 195,140
Common stock - $1.00 par value. Authorized 342,857,143 shares; 166,079,543 issued at June 30, 2019 and 143,300,449 issued at December 31, 2018; 156,872,026 outstanding at June 30, 2019 and 115,865,510 outstanding at December 31, 2018166,080
 143,300
Additional paid-in capital3,801,748
 3,060,561
Treasury stock, at cost – 9,207,517 shares at June 30, 2019 and 27,434,939 shares at December 31, 2018(344,901) (1,014,746)
Accumulated other comprehensive income (loss), net49,289
 (94,420)
Retained earnings886,460
 843,767
Total shareholders’ equity4,753,816
 3,133,602
Total liabilities and shareholders' equity$47,318,203
 $32,669,192
    
See accompanying notes to unaudited interim consolidated financial statements.


SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
 Three Months Ended June 30, Six Months Ended June 30,
(in thousands, except per share data)2019 2018 2019 2018
Interest income:       
      Loans, including fees$457,564
 $300,056
 $905,333
 $585,396
      Investment securities available for sale52,794
 23,884
 102,732
 47,812
      Mortgage loans held for sale752
 557
 1,143
 936
      Federal Reserve Bank balances2,701
 2,818
 6,371
 4,568
      Other earning assets2,320
 2,519
 5,391
 4,256
Total interest income516,131
 329,834
 1,020,970
 642,968
Interest expense:       
Deposits92,700
 32,600
 180,383
 58,975
Federal funds purchased, securities sold under repurchase agreements, and other short-term borrowings7,294
 203
 10,757
 310
Long-term debt18,875
 12,454
 35,392
 24,822
Total interest expense118,869
 45,257
 226,532
 84,107
Net interest income397,262
 284,577
 794,438
 558,861
Provision for loan losses12,119
 11,790
 35,688
 24,566
Net interest income after provision for loan losses385,143
 272,787
 758,750
 534,295
Non-interest income:       
Service charges on deposit accounts21,994
 19,999
 42,853
 39,938
Fiduciary and asset management fees14,478
 13,983
 28,057
 27,419
Card fees11,161
 10,833
 22,037
 21,032
Brokerage revenue10,052
 8,709
 19,431
 17,085
Capital markets income8,385
 1,118
 13,291
 2,086
Mortgage banking income7,907
 4,839
 12,962
 9,887
Income from bank-owned life insurance5,176
 3,733
 10,466
 7,949
Investment securities losses, net(1,845) (1,296) (1,771) (1,296)
Other non-interest income12,499
 11,469
 21,859
 16,333
Total non-interest income89,807
 73,387
 169,185
 140,433
Non-interest expense:       
Salaries and other personnel expense143,009
 111,863
 282,436
 225,583
Net occupancy and equipment expense39,851
 32,654
 78,245
 64,134
Third-party processing expense19,118
 15,067
 36,875
 29,012
Professional fees9,312
 6,284
 15,660
 11,789
FDIC insurance and other regulatory fees7,867
 6,543
 14,629
 13,335
Advertising expense5,923
 5,220
 11,045
 10,312
Amortization of intangibles2,410
 292
 5,802
 583
Merger-related expense7,401
 
 57,140
 
Other operating expenses29,235
 26,134
 54,705
 44,486
Total non-interest expense264,126
 204,057
 556,537
 399,234
Income before income taxes210,824
 142,117
 371,398
 275,494
Income tax expense54,640
 30,936
 95,028
 61,146
Net income156,184
 111,181
 276,370
 214,348
Less: Preferred stock dividends3,150
 2,559
 6,300
 5,119
Net income available to common shareholders$153,034
 $108,622
 $270,070
 $209,229
Net income per common share, basic$0.97
 $0.92
 $1.70
 $1.77
Net income per common share, diluted0.96
 0.91
 1.68
 1.75
Weighted average common shares outstanding, basic157,389
 118,397
 159,148
 118,531
Weighted average common shares outstanding, diluted159,077
 119,139
 160,908
 119,229
        
(in thousands, except share and per share data)June 30, 2020December 31, 2019
ASSETS
Cash and due from banks$572,169  $535,846  
Interest-bearing funds with Federal Reserve Bank860,289  553,390  
Interest earning deposits with banks20,719  20,635  
Federal funds sold and securities purchased under resale agreements118,048  77,047  
     Total cash, cash equivalents, restricted cash, and restricted cash equivalents1,571,225  1,186,918  
Investment securities available for sale, at fair value7,197,493  6,778,670  
Loans held for sale (includes $266,306 and $115,173 measured at fair value, respectively)900,936  115,173  
Loans, net of deferred fees and costs39,914,297  37,162,450  
Allowance for loan losses(588,648) (281,402) 
Loans, net39,325,649  36,881,048  
Cash surrender value of bank-owned life insurance1,038,049  775,665  
Premises and equipment, net481,716  493,940  
Goodwill497,267  497,267  
Other intangible assets, net50,392  55,671  
Receivable on unsettled securities sales1,289,116  —  
Other assets1,770,146  1,418,930  
Total assets$54,121,989  $48,203,282  
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Non-interest-bearing deposits$12,555,714  $9,439,485  
Interest-bearing deposits31,638,866  28,966,019  
Total deposits44,194,580  38,405,504  
Federal funds purchased and securities sold under repurchase agreements225,576  165,690  
Other short-term borrowings300,000  1,753,560  
Long-term debt2,327,921  2,153,897  
Due on unsettled securities purchases922,952  —  
Other liabilities1,097,992  782,941  
Total liabilities49,069,021  43,261,592  
Shareholders' Equity
Preferred stock - no par value; authorized 100,000,000 shares; issued 22,000,000537,145  537,145  
Common stock - $1.00 par value; authorized 342,857,143 shares; issued 167,405,730 and 166,800,623; outstanding 147,312,703 and 147,157,596167,406  166,801  
Additional paid-in capital3,826,726  3,819,336  
Treasury stock, at cost; 20,093,027 and 19,643,027 shares(731,806) (715,560) 
Accumulated other comprehensive income, net202,970  65,641  
Retained earnings1,050,527  1,068,327  
Total shareholders’ equity5,052,968  4,941,690  
Total liabilities and shareholders' equity$54,121,989  $48,203,282  
See accompanying notes to unaudited interim consolidated financial statements.
1


SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended June 30,Six Months Ended June 30,
(in thousands, except per share data)2020201920202019
Interest income:
Loans, including fees$401,997  $457,564  $829,334  $905,333  
Investment securities available for sale44,935  52,794  96,588  102,732  
Loans held for sale1,914  752  2,706  1,165  
Federal Reserve Bank balances394  2,701  1,902  6,371  
Other earning assets2,329  2,320  4,936  5,369  
Total interest income451,569  516,131  935,466  1,020,970  
Interest expense:
Deposits56,474  92,700  142,476  180,383  
Federal funds purchased, securities sold under repurchase agreements, and other short-term borrowings1,778  7,294  7,710  10,757  
Long-term debt16,751  18,875  35,454  35,392  
Total interest expense75,003  118,869  185,640  226,532  
Net interest income376,566  397,262  749,826  794,438  
Provision for credit losses(1)
141,851  12,119  300,573  35,688  
Net interest income after provision for credit losses234,715  385,143  449,253  758,750  
Non-interest revenue:
Service charges on deposit accounts15,567  21,994  36,255  42,853  
Fiduciary and asset management fees14,950  14,478  30,124  28,057  
Card fees9,186  11,161  20,136  22,037  
Brokerage revenue9,984  10,052  22,383  19,431  
Mortgage banking income23,530  7,907  35,757  12,962  
Capital markets income6,050  8,916  17,294  14,161  
Income from bank-owned life insurance7,756  5,176  13,794  10,466  
Investment securities gains (losses), net69,409  (1,845) 78,144  (1,771) 
Other non-interest revenue17,052  11,968  23,454  20,989  
Total non-interest revenue173,484  89,807  277,341  169,185  
Non-interest expense:
Salaries and other personnel expense159,597  143,009  309,274  282,436  
Net occupancy, equipment, and software expense41,727  39,851  83,921  78,245  
Third-party processing and other services21,366  19,118  42,846  36,875  
Professional fees15,305  9,312  25,980  15,660  
FDIC insurance and other regulatory fees6,851  7,867  12,129  14,629  
Merger-related expense—  7,401  —  57,140  
Other operating expenses39,295  37,568  86,271  71,552  
Total non-interest expense284,141  264,126  560,421  556,537  
Income before income taxes124,058  210,824  166,173  371,398  
Income tax expense30,866  54,640  34,461  95,028  
Net income93,192  156,184  131,712  276,370  
Less: Preferred stock dividends8,291  3,150  16,581  6,300  
Net income available to common shareholders$84,901  $153,034  $115,131  $270,070  
Net income per common share, basic$0.58  $0.97  $0.78  $1.70  
Net income per common share, diluted0.57  0.96  0.78  1.68  
Weighted average common shares outstanding, basic147,288  157,389  147,300  159,148  
Weighted average common shares outstanding, diluted147,733  159,077  148,067  160,908  
(1) Beginning January 1, 2020, provision calculation is based on current expected credit loss methodology. Prior to January 1, 2020, calculation was based on incurred loss methodology.
See accompanying notes to unaudited interim consolidated financial statements.
2


SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)

Three Months Ended June 30,Three Months Ended June 30,
2019 201820202019
(in thousands)Before-tax Amount Tax Effect Net of Tax Amount Before-tax Amount Tax Effect Net of Tax Amount(in thousands)Before-tax AmountIncome TaxNet of Tax AmountBefore-tax AmountIncome TaxNet of Tax Amount
Net income$210,824
 $(54,640) $156,184
 $142,117
 $(30,936) $111,181
Net income$124,058  $(30,866) $93,192  $210,824  $(54,640) $156,184  
Net unrealized gains (losses) on investment securities available for sale:           
Reclassification adjustment for net losses realized in net income1,845
 (478) 1,367
 1,296
 (336) 960
Unrealized gains (losses) on investment securities available for sale:Unrealized gains (losses) on investment securities available for sale:
Net unrealized gains (losses) arising during the period89,459
 (23,169) 66,290
 (25,476) 6,598
 (18,878)Net unrealized gains (losses) arising during the period(11,939) 3,092  (8,847) 89,459  (23,169) 66,290  
Net unrealized gains (losses)91,304
 (23,647) 67,657
 (24,180) 6,262
 (17,918)
Reclassification adjustment for realized (gains) losses included in net incomeReclassification adjustment for realized (gains) losses included in net income(69,409) 17,977  (51,432) 1,845  (478) 1,367  
Net changeNet change(81,348) 21,069  (60,279) 91,304  (23,647) 67,657  
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Net unrealized gains (losses) arising during the periodNet unrealized gains (losses) arising during the period8,823  (2,285) 6,538  —  —  —  
Reclassification adjustment for realized (gains) losses included in net incomeReclassification adjustment for realized (gains) losses included in net income(270) 70  (200) —  —  —  
Net changeNet change8,553  (2,215) 6,338  —  —  —  
Post-retirement unfunded health benefit:           Post-retirement unfunded health benefit:
Reclassification adjustment for gains realized in net income(35) 9
 (26) (34) 9
 (25)
Other comprehensive income (loss)$91,269
 $(23,638) $67,631
 $(24,214) $6,271
 $(17,943)
Reclassification adjustment for realized (gains) losses included in net incomeReclassification adjustment for realized (gains) losses included in net income—  —  —  (35)  (26) 
Total other comprehensive income (loss)Total other comprehensive income (loss)$(72,795) $18,854  $(53,941) $91,269  $(23,638) $67,631  
Comprehensive income    $223,815
     $93,238
Comprehensive income$39,251  $223,815  
           
Six Months Ended June 30,Six Months Ended June 30,
2019 201820202019
(in thousands)Before-tax Amount Tax Effect Net of Tax Amount Before-tax Amount Tax Effect Net of Tax Amount(in thousands)Before-tax AmountTax EffectNet of Tax AmountBefore-tax AmountTax EffectNet of Tax Amount
Net income$371,398
 $(95,028) $276,370
 $275,494
 $(61,146) $214,348
Net income$166,173  $(34,461) $131,712  $371,398  $(95,028) $276,370  
Net unrealized gains (losses) on investment securities available for sale:           
Reclassification adjustment for net losses realized in net income1,771
 (459) 1,312
 1,296
 (336) 960
Unrealized gains (losses) on investment securities available for sale:Unrealized gains (losses) on investment securities available for sale:
Net unrealized gains (losses) arising during the period192,241
 (49,788) 142,453
 (86,921) 22,512
 (64,409)Net unrealized gains (losses) arising during the period146,403  (37,919) 108,484  192,241  (49,788) 142,453  
Net unrealized gains (losses)194,012
 (50,247) 143,765
 (85,625) 22,176
 (63,449)
Reclassification adjustment for realized (gains) losses included in net incomeReclassification adjustment for realized (gains) losses included in net income(78,144) 20,239  (57,905) 1,771  (459) 1,312  
Net changeNet change68,259  (17,680) 50,579  194,012  (50,247) 143,765  
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Net unrealized gains (losses) arising during the periodNet unrealized gains (losses) arising during the period117,462  (30,423) 87,039  —  —  —  
Reclassification adjustment for realized (gains) losses included in net incomeReclassification adjustment for realized (gains) losses included in net income(390) 101  (289) —  —  —  
Net changeNet change117,072  (30,322) 86,750  —  —  —  
Post-retirement unfunded health benefit:           Post-retirement unfunded health benefit:
Reclassification adjustment for gains realized in net income(70) 14
 (56) (68) 22
 (46)
Reclassification adjustment for net gains realized in net incomeReclassification adjustment for net gains realized in net income—  —  —  (70) 14  (56) 
Other comprehensive income (loss)$193,942
 $(50,233) $143,709
 $(85,693) $22,198
 $(63,495)Other comprehensive income (loss)$185,331  $(48,002) $137,329  $193,942  $(50,233) $143,709  
Comprehensive income    $420,079
     $150,853
Comprehensive income$269,041  $420,079  
           
See accompanying notes to unaudited interim consolidated financial statements.

3




SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)
(in thousands, except per share data)Preferred StockCommon
Stock
Additional
Paid-in
Capital
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Retained EarningsTotal
Balance, April 1, 2020$537,145  $167,360  $3,821,357  $(731,806) $256,911  $1,014,238  $5,065,205  
Net income—  —  —  —  —  93,192  93,192  
Other comprehensive loss, net of income taxes—  —  —  —  (53,941) —  (53,941) 
Cash dividends declared on common stock - $0.33 per share—  —  —  —  —  (48,612) (48,612) 
Cash dividends declared on preferred stock(2)
—  —  —  —  —  (8,291) (8,291) 
Restricted share unit vesting and taxes paid related to net share settlement—  34  (181) —  —  —  (147) 
Stock options exercised—  12  200  —  —  —  212  
Share-based compensation expense—  —  5,350  —  —  —  5,350  
Balance at June 30, 2020$537,145  $167,406  $3,826,726  $(731,806) $202,970  $1,050,527  $5,052,968  
Balance, April 1, 2019$195,140  $165,929  $3,794,262  $(319,898) $(18,342) $780,662  $4,597,753  
Net income—  —  —  —  —  156,184  156,184  
Other comprehensive income, net of income taxes—  —  —  —  67,631  —  67,631  
Cash dividends declared on common stock - $0.30 per share—  —  —  —  —  (47,236) (47,236) 
Cash dividends declared on preferred stock(2)
—  —  —  —  —  (3,150) (3,150) 
Repurchases of common stock including costs to repurchase—  —  —  (25,003) —  —  (25,003) 
Restricted share unit vesting and taxes paid related to net share settlement—  50  (281) —  —  —  (231) 
Stock options exercised—  101  1,786  —  —  —  1,887  
Share-based compensation expense—  —  5,981  —  —  —  5,981  
Balance at June 30, 2019$195,140  $166,080  $3,801,748  $(344,901) $49,289  $886,460  $4,753,816  
4


(in thousands, except per share data)Series C Preferred Stock Series D Preferred Stock Common
Stock
 Additional
Paid-in
Capital
 Treasury
Stock
 Accumulated
Other
Comprehensive
Income (Loss)
 Retained Earnings Total(in thousands, except per share data)Preferred StockCommon
Stock
Additional
Paid-in
Capital
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Retained EarningsTotal
Balance, April 1, 2019$
 $195,140
 $165,929
 $3,794,262
 $(319,898) $(18,342) $780,662
 $4,597,753
Balance, December 31, 2019Balance, December 31, 2019$537,145  $166,801  $3,819,336  $(715,560) $65,641  $1,068,327  $4,941,690  
Cumulative-effect of change in accounting principle for financial instruments - credit losses (ASU 2016-13), net of tax(1)
Cumulative-effect of change in accounting principle for financial instruments - credit losses (ASU 2016-13), net of tax(1)
—  —  —  —  —  (35,721) (35,721) 
Net income
 
 
 
 
 
 156,184
 156,184
Net income—  —  —  —  —  131,712  131,712  
Other comprehensive income (loss), net of income taxes
 
 
 
 
 67,631
 
 67,631
Cash dividends declared on common stock - $0.30 per share
 
 
 
 
 
 (47,236) (47,236)
Cash dividends paid on Series D Preferred Stock - $0.39 per share
 
 
 
 
 
 (3,150) (3,150)
Other comprehensive income, net of income taxesOther comprehensive income, net of income taxes—  —  —  —  137,329  —  137,329  
Cash dividends declared on common stock - $0.66 per shareCash dividends declared on common stock - $0.66 per share—  —  —  —  —  (97,210) (97,210) 
Cash dividends declared on preferred stock(3)
Cash dividends declared on preferred stock(3)
—  —  —  —  —  (16,581) (16,581) 
Repurchases of common stock including costs to repurchaseRepurchases of common stock including costs to repurchase—  —  —  (16,246) —  —  (16,246) 
Restricted share unit vesting and taxes paid related to net share settlementRestricted share unit vesting and taxes paid related to net share settlement—  379  (7,783) —  —  —  (7,404) 
Stock options exercisedStock options exercised—  226  6,253  —  —  —  6,479  
Share-based compensation expenseShare-based compensation expense—  —  8,920  —  —  —  8,920  
Balance at June 30, 2020Balance at June 30, 2020$537,145  $167,406  $3,826,726  $(731,806) $202,970  $1,050,527  $5,052,968  
Balance, December 31, 2018Balance, December 31, 2018$195,140  $143,300  $3,060,561  $(1,014,746) $(94,420) $843,767  $3,133,602  
Cumulative-effect of change in accounting principle for leases (ASU 2016-02), net of tax
Cumulative-effect of change in accounting principle for leases (ASU 2016-02), net of tax
—  —  —  —  —  4,270  4,270  
Net incomeNet income—  —  —  —  —  276,370  276,370  
Other comprehensive income, net of income taxesOther comprehensive income, net of income taxes—  —  —  —  143,709  —  143,709  
FCB Acquisition:FCB Acquisition:
Issuance of common stock, net of issuance costsIssuance of common stock, net of issuance costs—  22,043  682,103  —  —  —  704,146  
Common stock reissuedCommon stock reissued—  —  —  1,014,746  —  (137,176) 877,570  
Fair value of exchanged equity awards and warrants attributed to purchase priceFair value of exchanged equity awards and warrants attributed to purchase price—  —  43,972  —  —  —  43,972  
Cash dividends declared on common stock - $0.60 per shareCash dividends declared on common stock - $0.60 per share—  —  —  —  —  (94,471) (94,471) 
Cash dividends declared on preferred stock(3)
Cash dividends declared on preferred stock(3)
—  —  —  —  —  (6,300) (6,300) 
Repurchases of common stock including costs to repurchase
 
 
 
 (25,003) 
 
 (25,003)Repurchases of common stock including costs to repurchase—  —  —  (345,170) —  —  (345,170) 
Restricted share unit vesting and taxes paid related to net share settlement
 
 50
 (281) 
 
 
 (231)Restricted share unit vesting and taxes paid related to net share settlement—  285  (8,928) —  —  —  (8,643) 
Stock options/warrants exercised, net
 
 101
 1,786
 
 
 
 1,887
Stock options/warrants exercised, net—  452  7,815  269  —  —  8,536  
Share-based compensation expense
 
 
 5,981
 
 
 
 5,981
Share-based compensation expense—  —  16,225  —  —  —  16,225  
Balance, June 30, 2019$
 $195,140
 $166,080
 $3,801,748
 $(344,901) $49,289
 $886,460
 $4,753,816
Balance at June 30, 2019Balance at June 30, 2019$195,140  $166,080  $3,801,748  $(344,901) $49,289  $886,460  $4,753,816  
               
Balance, April 1, 2018$125,980
 $
 $143,017
 $3,039,757
 $(866,407) $(107,777) $621,925
 $2,956,495
Net income
 
 
 
 
 
 111,181
 111,181
Other comprehensive income (loss), net of income taxes
 
 
 
 
 (17,943) 
 (17,943)
Cash dividends declared on common stock - $0.25 per share
 
 
 
 
 
 (29,510) (29,510)
Cash dividends paid on Series C Preferred Stock - $0.49 per share
 
 
 
 
 
 (2,559) (2,559)
Issuance of Series D Preferred Stock, net of issuance costs
 195,138
 
 
 
 
 
 195,138
Repurchases of common stock including costs to repurchase
 
 
 
 (50,077) 
 
 (50,077)
Restricted share unit vesting and taxes paid related to net share settlement
 
 23
 274
 
 
 (349) (52)
Stock options exercised
 
 38
 618
 
 
 
 656
Share-based compensation expense
 
 
 4,365
 
 
 
 4,365
Balance, June 30, 2018$125,980
 $195,138
 $143,078
 $3,045,014
 $(916,484) $(125,720) $700,688
 $3,167,694
               

(1) For additional information, see "Part I - Item 1. Financial Statements and Supplementary Data - Note 1 - Basis of Presentation" in this Report.
(2) For the three months ended June 30, 2020, dividends per share were $0.39 and $0.37 for Series D and Series E Preferred Stock, respectively. For the three months ended June 30, 2019, dividends per share were $0.39 for Series D Preferred Stock.
SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited) (continued)
                
(in thousands, except per share data)Series C Preferred Stock Series D Preferred Stock Common
Stock
 Additional
Paid-in
Capital
 Treasury
Stock
 Accumulated
Other
Comprehensive
Income (Loss)
 Retained Earnings Total
Balance, December 31, 2018$
 $195,140
 $143,300
 $3,060,561
 $(1,014,746) $(94,420) $843,767
 $3,133,602
Cumulative-effect adjustment from adoption of ASU 2016-02
 
 
 
 
 
 4,270
 4,270
Net income
 
 
 
 
 
 276,370
 276,370
Other comprehensive income (loss), net of income taxes
 
 
 
 
 143,709
 
 143,709
FCB Acquisition:               
Issuance of common stock, net of issuance costs
 
 22,043
 682,103
 
 
 
 704,146
Common stock reissued
 
 
 
 1,014,746
 
 (137,176) 877,570
Fair value of exchanged equity awards and warrants attributed to purchase price
 
 
 43,972
 
 
 
 43,972
Cash dividends declared on common stock - $0.60 per share
 
 
 
 
 
 (94,471) (94,471)
Cash dividends paid on Series D Preferred Stock - $0.78 per share
 
 
 
 
 
 (6,300) (6,300)
Repurchases of common stock including costs to repurchase
 
 
 
 (345,170) 
 
 (345,170)
Restricted share unit vesting and taxes paid related to net share settlement
 
 285
 (8,928) 
 
 
 (8,643)
Stock options/warrants exercised, net
 
 452
 7,815
 269
 
 
 8,536
Share-based compensation expense
 
 
 16,225
 
 
 
 16,225
Balance, June 30, 2019$
 $195,140
 $166,080
 $3,801,748
 $(344,901) $49,289
 $886,460
 $4,753,816
                
Balance, December 31, 2017$125,980
 $
 $142,678
 $3,043,129
 $(839,674) $(54,754) $544,207
 $2,961,566
Cumulative-effect adjustment from adoption of ASU 2014-09
 
 
 
 
 
 (685) (685)
Reclassification from adoption of ASU 2018-02
 
 
 
 
 (7,588) 7,588
 
Cumulative-effect adjustment from adoption of ASU 2016-01
 
 
 
 
 117
 (117) 
Net income
 
 
 
 
 
 214,348
 214,348
Other comprehensive income (loss), net of income taxes
 
 
 
 
 (63,495) 
 (63,495)
Cash dividends declared on common stock - $0.50 per share
 
 
 
 
 
 (59,185) (59,185)
Cash dividends paid on Series C Preferred Stock - $0.98 per share
 
 
 
 
 
 (5,119) (5,119)
Issuance of Series D Preferred Stock, net of issuance costs
 195,138
 
 
 
 
 
 195,138
Repurchases of common stock including costs to repurchase
 
 
 
 (76,810) 
 
 (76,810)
Restricted share unit vesting and taxes paid related to net share settlement
 
 289
 (8,220) 
 
 (349) (8,280)
Stock options exercised
 
 111
 1,785
 
 
 
 1,896
Share-based compensation expense
 
 
 8,320
 
 
 
 8,320
Balance, June 30, 2018$125,980
 $195,138
 $143,078
 $3,045,014
 $(916,484) $(125,720) $700,688
 $3,167,694
                
(3) For the six months ended June 30, 2020, dividends per share were $0.78 and $0.74 for Series D and Series E Preferred Stock, respectively. For the six months ended June 30, 2019, dividends per share were $0.78 for Series D Preferred Stock.
See accompanying notes to unaudited interim consolidated financial statements.

5


SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 Six Months Ended June 30,
(in thousands)
2019(1)
 2018
Operating Activities   
Net income$276,370
 $214,348
Adjustments to reconcile net income to net cash provided by operating activities:   
Provision for loan losses35,688
 24,566
Depreciation, amortization, and accretion, net11,446
 28,661
Deferred income tax expense27,539
 5,222
Originations of mortgage loans held for sale(325,109) (286,070)
Proceeds from sales of mortgage loans held for sale287,648
 287,175
Gain on sales of mortgage loans held for sale, net(8,286) (6,198)
Increase in other assets(22,191) (54,639)
(Decrease) increase in other liabilities(45,265) 8,292
Investment securities losses, net1,771
 1,296
Share-based compensation expense16,225
 8,320
Net cash provided by operating activities255,836
 230,973
    
Investing Activities   
Net cash received in business combination, net of cash paid201,100
 
Proceeds from maturities and principal collections of investment securities available for sale444,865
 294,152
Proceeds from sales of investment securities available for sale1,292,673
 35,066
Purchases of investment securities available for sale(2,263,383) (367,458)
Proceeds from sales of loans44,229
 13,954
Proceeds from sales of other real estate and other assets8,255
 6,737
Net increase in loans excluding loans acquired in business combination(970,160) (382,086)
Net (purchases) redemptions of Federal Home Loan Bank stock(43,775) (6,155)
Net (purchases) redemptions of Federal Reserve Bank stock(24,239) 8,500
Proceeds from settlements of bank-owned life insurance policies656
 1,783
Net increase in premises and equipment(31,767) (26,780)
Net cash used in investing activities(1,341,546) (422,287)
    
Financing Activities   
Net increase in deposits337,552
 294,516
Net increase in federal funds purchased and securities sold under repurchase agreements6,650
 46,390
Net change in other short-term borrowings680,000
 
Repayments and redemption of long-term debt
 (2,330,052)
Proceeds from issuance of long-term debt, net497,045
 2,280,000
Dividends paid to common shareholders(76,203) (47,510)
Dividends paid to preferred shareholders(6,300) (5,119)
Proceeds from issuance of Series D Preferred Stock
 195,138
Stock options and warrants exercised8,536
 1,896
Repurchase of common stock(345,170) (76,810)
Taxes paid related to net share settlement of equity awards(8,643) (8,280)
Net cash provided by financing activities1,093,467
 350,169
Increase in cash and cash equivalents including restricted cash7,757
 158,855
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period1,143,564
 932,933
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period$1,151,321
 $1,091,788
    
Supplemental Disclosures:   
Income taxes paid (refunded)$62,913
 $38,619
Interest paid221,475
 80,884
Non-cash Activities   
Common stock issued, treasury stock reissued, equity awards/warrants exchanged to acquire FCB1,625,688
 
Premises and equipment transferred to other assets held for sale
 785
Loans foreclosed and transferred to other real estate7,586
 7,561
Loans transferred to/(from) other loans held for sale at fair value47,927
 5,233
Subtopic 825-10 equity investment securities available for sale transferred to other assets
 3,162
   Dividends declared on common stock during the period but paid after period-end47,236
 29,510
    

Six Months Ended June 30,
(in thousands)20202019
Operating Activities
Net income$131,712  $276,370  
Adjustments to reconcile net income to net cash (used) provided by operating activities:
Provision for credit losses300,573  35,688  
Depreciation, amortization, and accretion, net49,921  11,446  
Deferred income tax (benefit) expense(54,741) 27,539  
Originations of loans held for sale(1,806,895) (325,109) 
Proceeds from sales of loans held for sale1,045,342  287,648  
Gain on sales of loans held for sale, net(25,785) (8,286) 
Increase in other assets(1)
(1,631,678) (22,191) 
Increase (decrease) in other liabilities(1)
1,175,881  (45,265) 
Investment securities (gains) losses, net(78,144) 1,771  
Loss on early extinguishment of debt1,904  —  
Share-based compensation expense8,920  16,225  
Net cash (used in) provided by operating activities(882,990) 255,836  
Investing Activities
Net cash received in business combination, net of cash paid—  201,100  
Proceeds from maturities and principal collections of investment securities available for sale930,004  444,865  
Proceeds from sales of investment securities available for sale2,682,861  1,746,673  
Purchases of investment securities available for sale(3,890,074) (2,717,383) 
Proceeds from sales of equity securities23,141  —  
Proceeds from sales of loans17,969  44,229  
Proceeds from sales of other real estate and other assets10,373  8,255  
Net increase in loans(2,748,040) (970,160) 
Net redemptions (purchases) of Federal Home Loan Bank stock71,272  (43,775) 
Net purchases of Federal Reserve Bank stock(454) (24,239) 
Net (purchases) proceeds from settlement of bank-owned life insurance policies(249,273) 656  
Net increase in premises and equipment(20,186) (31,767) 
Net cash used in investing activities(3,172,407) (1,341,546) 
Financing Activities
Net increase in deposits5,788,189  337,552  
Net increase in federal funds purchased and securities sold under repurchase agreements59,886  6,650  
Net change in other short-term borrowings(1,453,560) 680,000  
Repayments and redemption of long-term debt(1,076,759) —  
Proceeds from issuance of long-term debt, net1,248,441  497,045  
Dividends paid to common shareholders(92,741) (76,203) 
Dividends paid to preferred shareholders(16,581) (6,300) 
Stock options and warrants exercised6,479  8,536  
Repurchase of common stock(16,246) (345,170) 
Taxes paid related to net share settlement of equity awards(7,404) (8,643) 
Net cash provided by financing activities4,439,704  1,093,467  
Increase in cash and cash equivalents including restricted cash384,307  7,757  
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period1,186,918  1,143,564  
Cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period$1,571,225  $1,151,321  
Supplemental Disclosures:
Income taxes paid$257  $62,913  
Interest paid194,687  221,475  
Non-cash Activities
Common stock issued, treasury stock reissued, equity awards/warrants exchanged to acquire FCB—  1,625,688  
Loans foreclosed and transferred to other real estate2,013  7,586  
Loans transferred to loans held for sale at fair value933,353  47,927  
Dividends declared on common stock during the period but paid after period-end48,612  47,236  
Dividends declared on preferred stock during the period but paid after period-end5,141  —  
(1) Where applicable, changesIncrease in other assets includes $1.29 billion for balances as of June 30, 2019, compared to December 31, 2018, exclude amounts acquiredreceivable on the Acquisition Date.unsettled securities sales, and increase in other liabilities includes $923.0 million for amount due on unsettled securities purchases.
See accompanying notes to unaudited interim consolidated financial statements.
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Notes to Unaudited Interim Consolidated Financial Statements
Note 1 - Basis of Presentation and Accounting Policies
General
The accompanying unaudited interim consolidated financial statements of Synovus Financial Corp. include the accounts of the Parent Company and its consolidated subsidiaries. Synovus Financial Corp. is a financial services company based in Columbus, Georgia. Through its wholly-owned subsidiary, Synovus Bank, a Georgia state-chartered bank that is a member of the Federal Reserve System, the companyCompany provides commercial and retail banking in addition to a full suite of specialized products and services including private banking, treasury management, wealth management, premium finance, asset-based lending, structured lending, and international banking. Synovus Bank is positioned in markets in the Southeast, with 297 293 branches and 385389 ATMs in Alabama, Florida, Georgia, South Carolina, and Tennessee.
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the instructions to the SEC Form 10-Q and Article 10 of Regulation S-X; therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, comprehensive income, and cash flows in conformity with GAAP. All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the periods covered by this Report have been included. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes appearing in Synovus' 20182019 Form 10-K.
Reclassifications
Prior periods' consolidated financial statements are reclassified whenever necessary to conform to the current periods' presentation.
Use of Estimates in the Preparation of Financial Statements
In preparing the consolidated financial statements in accordance with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the respective consolidated balance sheets and the reported amounts of revenues and expenses for the periods presented. Actual results could differ significantly from those estimates.
Material estimates that are particularly susceptible to change relate to the determination of the allowance for loan losses;ACL; estimates of fair value;value, including goodwill impairment assessment; income taxes; and contingent liabilities including legal matters, among others.liabilities.
PurchasedNon-TDR Modifications due to COVID-19
Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
The U.S. has been operating under a presidentially declared state of emergency since March 13, 2020 ("National Emergency"). On March 27, 2020, the CARES Act was signed into law. Among other emergency measures aimed to lessen the impact of COVID-19, the CARES Act creates a forbearance program for federally backed mortgage loans, protects borrowers from negative credit reporting due to loan accommodations related to the National Emergency, and provides financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time to account for the effects of COVID-19.
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Purchased loansRegulatory agencies have encouraged financial institutions to work prudently with borrowers who are recorded at fair valueor may be unable to meet their contractual payment obligations because of COVID-19. In the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (initially issued on March 22, 2020 and revised on April 7, 2020), for example, the regulatory agencies expressed their view of loan modification programs as positive actions that may mitigate adverse effects on borrowers due to COVID-19 and their unwillingness to criticize institutions for working with borrowers in a safe and sound manner. Moreover, the Interagency Statement provided that eligible loan modifications related to COVID-19 may be accounted for under section 4013 of the CARES Act or in accordance with ASC Topic 820, Fair Value Measurement310-40. Section 4013 of the CARES Act allows banks to elect to not consider loan modifications related to COVID-19 that are made between March 1, 2020 and the earlier of December 31, 2020, or 60 days after the National Emergency ends to borrowers that are current (i.e., consistent with the exit price concept on the dateless than 30 days past due as of acquisition. Credit risk assumptions and resulting credit discounts are included in the determination of fair value; therefore, no ALL is recorded at the acquisition date. 
PursuantDecember 31, 2019) as TDRs. The regulatory agencies further stated that performing loans granted payment deferrals due to an AICPA letter dated December 18, 2009, the AICPA summarized the SEC staff's view regarding the accounting in subsequent periods for discount accretion associated with loan receivables acquired in a business combination or asset purchase. Regarding the accounting for such loan receivables, in the absence of further standard setting, the AICPA understands the SEC staff would not object to an accounting policy based on contractual cash flows (ASC Topic 310-20, Nonrefundable Fees and Other Costs) or an accounting policy based on expected cash flows (ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality). Synovus analogizes to ASC Topic 310-30 to account for the fair value discount.
Purchased loans are evaluated upon acquisition as following the ASC 310-30 approach or ASC 310-20. Loans meeting the scope exception of ASC 310-30 (e.g. loans with revolving components)COVID-19 are not permittedconsidered past due or non-accrual. FASB confirmed the foregoing regulatory agencies' view, that such short-term modifications (e.g., six months) made on a good-faith basis in response to be analogizedCOVID-19 for borrowers who are current are not TDRs. As such, beginning in late March 2020, Synovus provided relief programs consisting primarily of 90-day payment deferral relief of principal and will beinterest to borrowers negatively impacted by COVID-19 and has accounted for these loan modifications in accordance with ASC 310-20.  For ASC 310-30 loans, expected cash flows at310-40. See "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" to the acquisitionconsolidated financial statements of Synovus' 2019 Form 10-K for information on Synovus' TDR policy. The deferred payments along with interest accrued during the deferral period are generally due and payable on the maturity date in excess of the fair valueexisting loan. Based on the terms of loans are recorded asthe deferral relief program which did not provide for forgiveness of interest, Synovus has recognized interest income overon loans during the lifedeferral period.
U.S. Small Business Administration Paycheck Protection Program (PPP)
Synovus is participating in the Paycheck Protection Program (PPP), which is a loan program that originated from the CARES Act and was subsequently expanded by the Paycheck Protection Program and Health Care Enhancement Act ("PPPHCEA Act"). The PPP is designed to provide U.S. small businesses with cash-flow assistance through loans guaranteed by the SBA. If the borrower meets certain criteria and uses the proceeds toward certain eligible expenses in accordance with the requirements of the loans using a level yield method ifPPP, the timing andborrower's obligation to repay the loan can be forgiven up to the full principal amount of the future cash flows is reasonably estimable. Subsequent toloan and any accrued interest. Upon borrower forgiveness, the acquisition date, increases in cash flows over those expected atSBA pays the acquisition date are recognized prospectively asCompany for the principal and accrued interest income. Decreases in expected cash flows due to credit deterioration are recognized by recording an ALL. Loan removals from pools due to pay-off or charge-off are removed at their carrying amount.  The difference betweenowed on the carrying amount andloan. If the amount received to satisfyfull principal of the loan is recordednot forgiven, the loan will operate according to the original loan terms with the SBA guaranty remaining. As of June 30, 2020, Synovus had provided nearly $2.9 billion in interest income.  For ASC 310-20funding to close to 19,000 customers through the PPP. The average PPP loan was approximately $150 thousand, and the customers that received those loans employ over 335 thousand individuals. As compensation for originating the loans, the difference between the fair value and UPB of the loan at the acquisition date is amortized or accreted to interest income over the contractual life of the loans using the effective interest method. In the event of prepayment, the remaining unamortized amount is recognized in interest income in the quarter of prepayment.
Due to the significant difference in accounting for ASC 310-30 loans, Synovus believes inclusion of these loans in certain asset quality ratios that reflect non-performing assets in the numerator or denominator (or both) results in significant distortion to these ratios. In addition, because loan level charge-offs related to ASC 310-30 loans are not recognized in the financial statements until the cumulative amounts exceed the original loss projections on a pool basis, the net charge-off ratio is inconsistent with the

net charge-off ratio for other loan portfolios. The inclusion of ASC 310-30 loans in certain asset quality ratios could result in a lack of comparability across quarters or years, and could impact comparability with other portfolios that were not impacted by ASC 310-30 accounting. Synovus believes that presenting certain loan and asset quality disclosures separately for ASC 310-20 and ASC 310-30 loans, and/or excluding ASC 310-30 loans, where appropriate and indicated within each table, provides better perspective into underlying trends related to the quality of its loan portfolio.
Non-interest Income - Revenue from Contracts with Customers within the scope of ASC Topic 606
Synovus' contracts with customers generally do not contain terms that require significant judgment to determine the amount of revenue to recognize. Synovus' policies for recognizing non-interest income within the scope of ASC Topic 606, including the nature and timing of such revenue streams, are included below.
Service Charges on Deposit Accounts: Revenue from service charges on deposit accounts is earned through cash management, wire transfer, and other deposit-related services, as well as overdraft, non-sufficient funds, account management and other deposit-related fees. Revenue is recognized for these services either over time, corresponding with deposit accounts' monthly cycle, or at a point in time for transaction-related services and fees. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers' accounts.
Fiduciary and Asset Management Fees: Fiduciary and asset managementCompany receives lender processing fees are primarily comprised of fees earned from the management and administration of trusts and other customer assets. Synovus' performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month-end through a direct chargeSBA ranging from 1% to customers' accounts. Synovus does not earn performance-based incentives.
Card Fees: Card fees consist primarily of interchange fees from consumer credit and debit cards processed by card association networks, as well as merchant discounts, and other card-related services. Interchange rates are generally set by the credit card associations and based on purchase volumes and other factors. Interchange fees and merchant discounts are recognized concurrently with the delivery of service on a daily basis as transactions occur. Payment is typically received immediately or in the following month. Card fees are reported net of certain associated expense items including loyalty program expenses and network expenses.
Brokerage Revenue: Brokerage revenue consists primarily of commissions. Additionally, brokerage revenue includes advisory fees earned from the management of customer assets. Advisory fees for brokerage services are recognized and collected monthly and are based upon the month-end market value of the assets under management at a rate predetermined in the contract. Transactional revenues are5%, based on the size of the loan, which are deferred and numberwill be amortized over the loans' contractual lives and recognized as interest income. Upon forgiveness of transactions executed ata loan by the client's direction and are generallySBA, any unrecognized net deferred fees related to the loan will be recognized on the trade date with payment received on the settlement date.as interest income in that period.
Insurance Revenue (included in other non-interest income on the consolidated statements of income): Insurance revenue primarily consists of commissions received on annuity and life product sales. The commissions are recognized as revenue when the customer executes an insurance policy with the insurance carrier. In some cases, Synovus receives payment of trailing commissions each year when the customer pays its annual premium.
Recently Adopted Accounting Standards
ASU 2016-02,2016-13, LeasesFinancial Instruments-Credit Losses (ASC 842)326).Synovus adopted ASC 842 prospectively as of January 1, 2019 for existing leasing arrangements. As such, financial information was not updated and the disclosures required under the new standard are not presented for dates and periods prior to January 1, 2019. ReferOn January 1, 2020, Synovus adopted ASU 2016-13 (and all subsequent ASUs on this topic), which replaces the existing incurred loss impairment guidance with an expected credit loss methodology (referred to as CECL). CECL requires management’s estimate of credit losses over the full remaining expected life of loans and other financial instruments and for Synovus, applies to loans, unfunded loan commitments, and available for sale debt securities. Upon adoption, Synovus applied the modified retrospective approach and recorded an after-tax cumulative-effect adjustment to beginning retained earnings for non-PCD assets (formerly non-PCI assets) and unfunded commitments of $35.7 million. Additionally, an initial estimate of expected credit losses on PCD assets (formerly PCI or ASC 310-30) was recognized with an offset to the 2018 10-Kcost basis of the related loans of $62.2 million. As permitted by transition guidance, Synovus did not reassess whether PCI assets met the criteria of PCD assets as of the adoption date. The remaining non-credit discount (based on the adjusted amortized cost basis) will be accreted into interest income. Results for lease disclosures surroundingreporting periods after adoption are presented under ASC 326 while prior period informationamounts continue to be reported underin accordance with previously applicable GAAP.


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The following table illustrates the impact of ASC 840,326 adoption:
As of January 1, 2020
in thousandsPre-ASC 326 AdoptionImpact of ASC 326 AdoptionAs Reported under ASC 326
Assets
Allowance for loan losses:
Commercial and industrial$145,782  $(2,310) $143,472  
Commercial real estate67,430  (651) 66,779  
Consumer68,190  85,955  154,145  
Total allowance for loan losses$281,402  $82,994  $364,396  
Liabilities
Reserve for unfunded commitments$1,375  $27,440  $28,815  
Allowance for credit losses$282,777  $110,434  $393,211  
The following table illustrates the distribution of the ASC 326 adoption impact to loans and equity:
As of January 1, 2020
in thousandsPre-ASC 326 AdoptionImpact of ASC 326 AdoptionAs Reported under ASC 326
Loans, net$36,881,048  $(20,767) $36,860,281  
Retained earnings1,068,327  (35,721) 1,032,606  
On March 27, 2020, the federal banking regulators issued an interim final rule, updating CECL transition options, which allows electing banking organizations to delay an estimate of the effect of CECL on regulatory capital for up to two years, followed by a three-year phase-in transition period. June 30, 2020 regulatory capital ratios reflect Synovus' election of the five-year transition provision. Leases.
In conjunction with the adoption of ASC 326, the following are additional disclosures about our significant accounting policies related to CECL.
Investment Securities Available for Sale
Investment securities available for sale are carried at fair value with unrealized gains and losses, net of the related tax effect, excluded from earnings and reported as a separate component of shareholders' equity within accumulated other comprehensive income (loss) until realized.
For leasesinvestment securities available for sale in an unrealized loss position, if Synovus has an intention to sell the security, or it is more likely than not that commencedthe security will be required to be sold prior to recovery, the security is written down to its fair value. The write down is charged against the ACL with any additional impairment recorded in earnings. If the aforementioned criteria is not met, Synovus performs a quarterly assessment of its available for sale debt securities to determine if the decline in fair value of a security below its amortized cost is related to credit losses or other factors. Management considers the extent to which fair value is less than amortized cost, the issuer of the security, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. In assessing whether credit related impairment exists, the present value of cash flows expected to be collected from the security is compared to the security's amortized cost. If the present value of cash flows expected to be collected is less than the security's amortized cost basis, the difference is attributable to credit losses. For such differences, Synovus records an ACL with an offset to provision for credit losses expense. Synovus limits the ACL recorded to the amount the security's fair value is less than the amortized cost basis. Impairment losses related to other factors are recognized in other comprehensive income (loss).
Accrued interest on available for sale debt securities is excluded from the ACL determination and is recognized within other assets on the consolidated balance sheets. Available-for-sale debt securities are placed on non-accrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due. Accrued interest receivable is reversed against interest income when a security is placed on non-accrual status. Accordingly, we do not recognize an allowance for credit loss against accrued interest receivable.
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Loans Held for Investment and Interest Income
Loans the Company has the intent and ability to hold for the foreseeable future are reported at principal amounts outstanding less amounts charged off, net of deferred fees and costs, and purchase premiums/discounts. Interest income, net deferred fees, and purchase premium/discount amortization/accretion on loans, are recognized on a level yield basis.
Allowance for Credit Losses for Loans Held for Investment (ALL)
The allowance for credit losses on loans held for investment are included in the ALL and represent management's estimate of credit losses expected over the life of the loans included in Synovus' existing loans held for investment portfolio. Changes to the allowance are recorded through a provision for credit losses and reduced by loans charged-off, net of recoveries. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain.
Accrued but uncollected interest is recorded in other assets on the consolidated balance sheets. In general, the Company does not record an ACL for accrued interest receivables as allowable per ASC 326-20-30-5A as Synovus' non-accrual policies result in the timely write-off of accrued but uncollected interest.
Credit loss measurement
Synovus' loan loss estimation process includes procedures to appropriately consider the unique characteristics of its loan portfolio segments (C&I, CRE and consumer). These segments are further disaggregated into loan classes, the level at which credit quality is assessed and monitored (as described in the subsequent sections).
The ALL is measured on a collective (pool) basis when similar risk characteristics exist. Loans are grouped based upon the nature of the loan type and are further segregated based upon the individual loan risk ratings. Credit loss assumptions are primarily estimated using a DCF model applied to the aforementioned loan groupings. This model calculates an expected life-of-loan loss percentage for each loan category by considering the forecasted PD, which is the probability that a borrower will default, adjusted for relevant forecasted macroeconomic factors, and LGD, which is the estimate of the amount of net loss in the event of default.
Expected credit losses are estimated over the contractual term of the loan, adjusted for expected prepayments and curtailments when appropriate. Management's determination of the contract term excludes expected extensions, renewals, and modifications unless either of the following applies: there is a reasonable expectation at the reporting date that a TDR will be executed with an individual borrower, or an extension or renewal option is included in the contract at the reporting date that is not unconditionally cancellable by Synovus.
To the extent the lives of the loans in the portfolio extend beyond the period for which a reasonable and supportable forecast can be made (which is one year for Synovus), the Company reverts, on a straight-line basis back to the historical rates over a one year period.
Life-of-loan loss percentages may also be adjusted, as necessary, for certain quantitative and qualitative factors that in management's judgment are necessary to reflect losses expected in the portfolio. These adjustments address inherent limitations in the quantitative model including uncertainty and limitations, among others.
The above reflects the ALL estimation process for most commercial and consumer sub-pools. In some cases, Synovus may apply other acceptable loss rate models to smaller subpools.
Loans that do not share risk characteristics are individually evaluated on a loan by loan basis with specific reserves, if any, recorded as appropriate. Specific reserves are determined based on two methods: discounted cash flow based upon the loan's contractual effective dateinterest rate or at the fair value of ASC 842, Synovus elected the packagecollateral, less costs to sell if the loan is collateral-dependent.
For individually evaluated loans, under the DCF method, resulting expected credit losses are recorded as a specific reserve with a charge-off for any portion of practical expedientsthe expected credit loss that is determined not to reassess (a) whether existing contracts contain leases, (b) lease classificationbe recoverable. The reserve is reassessed each quarter and adjusted as appropriate based on changes in estimated cash flows. Additionally, where guarantors are determined to be a source of repayment, an assessment of the guarantee is required. This guarantee assessment would include, but not be limited to, factors such as type and feature of the guarantee, consideration for existing leases,the guarantor's financial strength and (c) initial direct cost for any existing leasescapacity to service the loan in combination with the guarantor's other financial obligations as well as the short-term lease recognition exemption for all leases that qualify. Additionally, Synovus did not electguarantor's willingness to assist in servicing the practical expedient to combine lease and non-lease components for all of our leases.loan.
Adoption ofFor individually evaluated loans, if the new standard resulted inloan is collateral-dependent, then the recording of ROU assets and lease liabilities of $381.1 million and $391.0 million, respectively, as of January 1, 2019. These amounts were based on the presentfair value of the remaining rental paymentsloan's collateral, less estimated selling costs, is compared to the loan's carrying amount to determine impairment. Fair value is estimated using appraisals performed by a certified or licensed appraiser. Management also considers other factors or recent developments, such as changes in absorption rates or market conditions at the time of valuation, selling costs and anticipated sales values, taking into account management's plans for existing leases and include consideration for renewal and termination options available that we were reasonably certain of exercising.disposition, which could result in adjustments to the fair value estimates indicated in the appraisals. The difference betweenassumptions used in determining the asset and liability balance is primarily the result of lease liabilities that existed prior to adoptionamount of the new guidance. The adoptionimpairment are subject to significant judgment. Use of
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different assumptions, for example, changes in the fair value of the standard also resultedcollateral or management's plans for disposition could have a significant impact on the amount of impairment.
Troubled debt restructurings
The ALL on a TDR is measured using the same method as all other loans held for investment, except that the original interest rate, and not the rate specified with the restructuring, is used to discount the expected cash flows.
Purchased Loans with Credit Deterioration
Purchased loans are evaluated upon acquisition in a cumulative-effect adjustment, netorder to determine if the loan, or pool of income taxes,loans, has experienced more-than-insignificant deterioration in credit quality since origination or issuance. In the performance of this evaluation, Synovus considers migration of the credit quality of the loans at origination in comparison to the beginning balancecredit quality at acquisition.
Purchased loans classified as PCD are recognized in accordance with ASC 326-20-30, whereby the amortized cost basis of retained earningsthe PCD asset is ‘grossed-up’ by the initial estimate of $4.3 million ($3.9 millioncredit losses with an offset to the ALL. This acquisition date allowance has no income statement effect. Post-acquisition, any changes in estimates of which consisted of deferred gains associatedexpected credit losses are recorded through the provision for credit losses. Non-credit discounts or premiums are accreted or amortized, respectively into interest income using the interest method.

Loans formerly accounted for as purchased credit-impaired in accordance with sale-leaseback transactions that previouslyASC 310-30 were automatically transitioned to PCD classification. The Company did not qualifymaintain ASC 310-30 pools. PCD loans were integrated into existing pool structures based upon the nature of the loan type and are further segregated based upon the individual loan risk ratings as noted above.
The accounting treatment for recognition). The ROU assets arepurchased loans classified as non-PCD is the same as loans held for investment as detailed in the above section.
Allowance for Credit Losses on Off-balance-sheet Credit Exposures
Synovus maintains a separate ACL for off-balance-sheet credit exposures, including unfunded loan commitments, unless the associated obligation is unconditionally cancellable by the Company. This allowance is included in other assets (other than $4.0 million of finance leases included in premises and equipment)liabilities on the consolidated balance sheet and the lease liabilities are included in other liabilities. Adoptionsheets with offsetting expense recognized as a component of the standard did not materially impact ourprovision for credit losses on the consolidated statements of incomeincome. The reserve for off-balance-sheet credit exposures considers the likelihood that funding will occur and had no impactestimates the expected credit losses on cash flows.
Synovus determines if an arrangement is a lease at inception in accordance with ASC 842-10-15-3 and classifies leases as either operating or financing from a lessee perspective and operating or direct financing and sales-type from a lessor perspective based on criteria that are largely similarresulting commitments expected to those applied under ASC 840, Leases, but without explicit bright lines.

ROU assets and lease liabilities are recognized based on the present value of the future minimum lease paymentsbe funded over the lease term at the commencement date. The determination of future minimum lease payments includes consideration for extension or termination options when it is reasonably certain Synovus will exercise that option as well as rent escalation clauses (including market or index-based escalations) and abatements, capital improvement funding or other lease concessions. As most leases in Synovus' portfolio do not provide an implicit rate, Synovus utilizes a collateralized incremental borrowing rate, referenced to the Federal Home Loan Bank rates for borrowings of similar terms, based on the information available at lease commencement date in determining the present value of future payments. Additionally, for all real estate leases, Synovus applies a portfolio approach (based on lease term) in the application of the discount rate. Determination of the ROU asset also includes prepaid lease payments and amounts recognized relating to favorable or unfavorable lease terms from leases acquired through business combinations.
For operating leases, minimum rental expense is recognized on a straight-line basis based on the fixed components of leasing arrangements. Variable lease components represent amounts that are not fixed in nature and are not tied to an index or rate, and are recognized as expense when incurred. For financing leases, rent expense is recognized as amortization expense on a straight-line basis and interest expenseits estimated life using the effective interest method.Additionally, leases with an initial term of 12 months or less are not recordedestimated loss rates on the balance sheet; lease expenseloans held for these leases is recognized on a straight-line basis over the lease term. Net lease cost is recorded net of sublease income. For leases beginning in 2019 and later, lease components (e.g., base rent) are accounted for separately from non-lease components (e.g., common-area maintenance costs, real estate taxes and insurance costs).investment.
ASU 2017-04, Intangibles-Goodwill and Other, Simplifying the Test for Goodwill Impairment: In January 2017, the FASB issued ASU 2017- 04, which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Therefore, any carrying amount which exceeds the reporting unit’s fair value (up to the amount of goodwill recorded) will be recognized as an impairment loss. The ASU is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those periods. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Synovus elected to early adopt the guidance, effective January 1, 2019. Synovus performed a qualitative assessment as allowed under ASC 350-20-35 during its annual impairment test as of June 30, 2019 and based on the assessment performed, management concluded goodwill was not impaired. As such, the adoption of this ASU had no impact.
Recently Issued Accounting Standards Not Yet Adopted
ASU 2016-13,2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Instruments--Credit Losses (CECL)Reporting (ASC 848). Facilitation of the Effects of Reference Rate Reform on Financial Reporting, provides temporary, optional guidance to ease the potential burden in accounting for, or recognizing the effects of, the transition away from the LIBOR or other interbank offered rate on financial reporting. To help with the transition to new reference rates, the ASU provides optional expedients and exceptions for applying GAAP to affected contract modifications and hedge accounting relationships. The main provisions include:
In June 2016,A change in a contract’s reference interest rate would be accounted for as a continuation of that contract rather than as the FASB issuedcreation of a new one for contracts, including loans, debt, leases, and other arrangements, that meet specific criteria.
When updating its hedging strategies in response to reference rate reform, an entity would be allowed to preserve its hedge accounting.
The guidance is applicable only to contracts or hedge accounting relationships that reference LIBOR or another reference rate expected to be discontinued. Because the guidance is meant to help entities through the transition period, it will be in effect for a limited time and will not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, for which an entity has elected certain optional expedients that are retained through the end of the hedging relationship. The amendments in this ASU are effective March 12, 2020 through December 31, 2022. We are evaluating the impact of adopting the new guidance related to credit losses. The new guidance (and all subsequent ASUs) replaces the existing incurred loss impairment guidance with an expected credit loss methodology. The new guidance will require management’s estimate of credit losses over the full remaining expected life of loans and other financial instruments. For Synovus, the standard will apply to loans, unfunded loan commitments, and debt securities available for sale. The standard is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years with early adoption permitted on January 1, 2019. Synovus will adopt the guidance on January 1, 2020. Upon adoption, Synovus will record a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption. In addition, the amendments provide for a simplified accounting model for purchased financial assets with a more-than-insignificant amount of credit deterioration since their acquisition ("PCD assets"). The initial estimate of expected credit losses on PCD assets will be recognized through the ALL with an offset to the cost basis of the related financial asset at acquisition.  
Synovus is continuing its implementation efforts which are led by a cross-functional steering committee. The team meets periodically to discuss the latest developments and ensure progress compared to the planned timeline. We continued our limited parallel testing during the second quarter of 2019.  The results are being utilized to refine our models and estimation techniques.  Documentation of new processes and internal controls that will be implemented as part of standard adoption is also in process. Implementation status updates are provided quarterly to executive management and the Audit Committee of the Board.
Management expects that the allowance for loan losses will be higher under the new standard primarily for longer duration consumer loans, due to the difference between loss emergence periods currently used versus the remaining life of the asset required under CECL. However, management is still in the process of refining estimates to ultimately determine the impact on the consolidated financial statements and regulatory capital ratios. Additionally, the extent of theon an ongoing basis with no material expected increase on the ALL will depend upon the composition of the loan portfolio upon adoption of the standard, as well as economic conditions and forecastsimpact at thatthis time.
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Note 2 - Acquisitions
Acquisition of FCB Financial Holdings, Inc.
Effective January 1, 2019 (the "Acquisition Date"), Synovus completed its acquisition of all of the outstanding stock of FCB, a bank holding company based in Weston, Florida, for total consideration of $1.63 billion. Effective January 1, 2019, FCB's wholly-owned banking subsidiary, Florida Community Bank, National Association, merged into Synovus Bank. On the Acquisition Date, the preliminary estimated fair valuesThe acquisition of FCB included approximately $12.4 billion of identifiable assets, $9.3expanded Synovus' presence in Florida and the Southeast adding $9.29 billion in loans and $10.9$10.93 billion in deposits. With the addition of FCB and its 51 full service banking centers, Synovus expanded its deposit base in the Southeast. The addition of FCB elevated Synovus' growth profile through a deepened presence in high-growth Florida markets. Conversion of FCB systems occurred during the second quarter of 2019. The results of FCB's operations are included in Synovus' consolidated financial statements since the Acquisition Date.
Under the terms of the Merger Agreement, each outstanding share of FCB common stock was converted into the right to receive 1.055 Synovus common shares and cash in lieu of fractional shares. Additionally, under the terms of the Merger Agreement, certain outstanding FCB non-vested equity awards with a fair value of $7.5 milliondeposits, on the Acquisition Date accelerated vesting and converted automatically into the right to receive merger consideration at the merger exchange ratio of 1.055, or an equivalent amount in cash, of which $3.5 million was allocated to purchase price and the remaining to merger-related compensation expense. In the aggregate, on the Acquisition Date, FCB stockholders received 49.5 million shares of Synovus common stock valued at $1.58 billion and $601 thousand in cash. Also, under the terms of the Merger Agreement, FCB employee and non-employee director outstanding stock options and non-vested restricted share units as well as outstanding FCB warrants were converted into options, restricted share units, and warrants, respectively, to purchase and receive Synovus common stock. The converted options and restricted share units had a fair value of $41.5 million on the Acquisition Date, of which $37.3 million was allocated to purchase price and the remaining to compensation expense and the converted warrants had a fair value of $6.7 million attributed to purchase price. The estimated fair value of the converted restricted share units was based on Synovus' closing stock price on December 31, 2018 of $31.99, and the estimated fair value of the converted stock options was determined using a Hull-White model in a binomial lattice option pricing framework. The estimated fair value of the converted warrants was determined using the Black-Scholes-Merton model.
Date. The acquisition of FCB constituted a business combination and was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations,. Accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at their estimated fair value onwith the Acquisition Date. The determination of estimated fair values requires management to make certain estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and may require adjustments. Upon receipt of final fair value estimates during the measurement period, which must be within one year of the acquisition date, Synovus will record any adjustments to the preliminary fair value estimates in the reporting period in which the adjustments are determined. Fair value adjustments based on updated estimates could materially affect the goodwill recorded on the acquisition. Synovus may incur losses on the acquired loans that are materially different from losses Synovus originally projected.
Preliminary goodwill of $435.1 million was recorded as a result of the transaction and is not-deductible for tax purposes. FCB's $19.6 million of merger-based success fees payable to third-party advisors and investment bankers were accounted for as part of the business combination and an assumed liability. Since the success fees payable by FCB were contingent upon the consummation of the merger, the expense was recognized as an "on the line" expense with no expense recognition in either the pre- or post-acquisition financials of FCB or Synovus. The following table reflects the consideration transferred for FCB's net assets and the identifiable assets purchased and liabilities assumed at their estimated fair valuesvaluation finalized as of January 1, 2019. These fair value measurement estimates are based on third-party and internal valuations and reflect measurement period adjustments to the amounts reported as of March 31, 2019, the most significant of which consists of a decrease in core deposit intangibles of $10.8 million, with offsetting increases in goodwill and net deferred tax assets (the income statement impact of such adjustments was immaterial).


(in thousands)  
Consideration transferred:  
     Synovus common stock issued and reissued from treasury attributed to purchase price(1)
$1,582,133
     Cash payments to FCB stockholders attributed to purchase price(2)
 173
     Fair value of exchanged employee and director equity awards and FCB warrants attributed to purchase price(1)
 43,972
       Total purchase price $1,626,278
   
Statement of Net Assets Acquired at Fair Value (Preliminary): 
Assets 
  Cash and cash equivalents$201,689
 
  Investment securities available for sale2,301,001
 
  Loans9,289,208
 
  Cash surrender value of bank-owned life insurance216,848
 
  Premises and equipment44,875
 
  Core deposit intangible57,400
 
  Other assets268,804
 
     Total Assets$12,379,825
 
   
Liabilities

  Deposits$10,930,724
 
  Federal funds purchased and securities sold under repurchase agreements29,139
 
  Long-term debt153,236
 
  Other liabilities75,523
 
     Total Liabilities$11,188,622
 
   
Fair value of net identifiable assets acquired 1,191,203
Preliminary goodwill $435,075
   
(1) Based on Synovus' closing stock price of $31.99 on December 31, 2018.2019
(2). $173 thousandThe results of cash payment of $601 thousand attributed to purchase price with remaining allocated to compensation expense.

The following is a description of the methods used to determine the fair values of significant assets acquired and liabilities assumed presented above.

Investment Securities Available for Sale: Fair values of securities were based on quoted market prices from multiple third-party pricing services as well as realized proceeds upon sale of certain corporate bonds.

Loans: The Income Approach was utilizedFCB's operations are included in accordance with ASC Topic 820 to estimate the fair value of the loans as of the Acquisition Date. The Income Approach utilizes a discounted cash flow method, to present value the expected cash flows using a market-based discount rate. The acquired loans were grouped together based on the terms of the loans, variable or fixed interest rate, variable index rate, interest or principal only loans, payment plans and amortizing or non-amortizing loans.

The discounted cash flow model utilized the contractual loan data and market-based assumptions for prepayment rates, loss rates, and servicing fee, at the loan group level, to project expected loan cash flows as of the Acquisition Date.

Core Deposit Intangible (CDI): This intangible asset represents the value of the relationships with deposit customers. The fair value of the core deposit intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, net maintenance cost of the deposit base, alternative costs of funds, and the interest costs associated with the customer deposits. The CDI is being amortized over its estimated useful life of approximately ten years utilizing an accelerated method. The decrease in the CDI of $10.8 million during the quarter was based on further review of the alternative cost of funds assumptions atSynovus' consolidated financial statements since the Acquisition Date.

Deposits: Certificates of deposit were valued by projecting out the expected cash flows based on the contractual terms of the certificates of deposit. These cash flows were discounted based on a market rate for a certificate of deposit with a corresponding

maturity. The fair values for demand and savings deposits were assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand.

Long-term Debt: Fair values for FHLB borrowings were based on market values and market rates provided by the FHLB.

The following table presents consolidated financial information includedDuring 2019, in Synovus' unaudited consolidated statements of income from the Acquisition Date (January 1, 2019) through June 30, 2019 under the column "Actual from Acquisition Date." Synovus does not provide separate summary financial information of FCB from the Acquisition Date since it would be impracticable to do so as certain systems and processes were integrated during the six months ended June 30, 2019. The following table also presents unaudited pro forma information as if the acquisition occurred on January 1, 2018 under the "Pro Forma" column. The unaudited pro forma results include the estimated impact of amortizing and accreting certain estimated purchase accounting adjustments such as intangible assets as well as fair value adjustments to loans and deposits. Merger-related expenses that occurred at the effective time of the merger or subsequent to the merger are not reflected in the unaudited pro forma amounts. Cost savings are also not reflected in the unaudited pro forma amounts for the six months ended June 30, 2018. The pro forma information does not necessarily reflect the results of operations that would have occurred had Synovus merged with FCB at the beginning of 2018.
(in thousands) 
Actual from Acquisition Date (January 1, 2019) through June 30, 2019(1)
 Pro Forma for Six Months Ended June 30, 2018
Net interest income $794,438
 $760,304
Non-interest income 169,185
 155,610
Net income available to common shareholders 270,070
 309,786
     
(1) Actual results for the six months ended June 30, 2019 include pre-tax merger-related expense of $57.1 million.
In connection with the FCB acquisition, Synovus incurred merger-related expense totaling $7.4 million and $57.1 million for the three and six months ended June 30, 2019, primarily related to employment compensation agreements, severance, professional services, and contract termination charges, including the payment of $21.8 million related to employment agreements of certain FCB executives. Merger-related expense for the threecharges.
See "Part II - Item 8. Financial Statements and six months ended June 30, 2019 is presented in the table below:
(in thousands)Three Months Ended June 30, 2019 Six Months Ended June 30, 2019
Employment compensation agreements, severance, and other employee benefit costs$1,774
 $34,762
Professional fees1,791
 16,991
All other expense(1)
3,836
 5,387
  Total merger-related expense$7,401
 $57,140
    

(1) Primarily relates to fees associated with lease exit accruals, asset impairments relatedSupplementary Data - Note 2 - Acquisitions" to the integration, and contract termination charges.consolidated financial statements of Synovus' 2019 Form 10-K for additional information on Synovus' acquisition of FCB.
Acquisition of Global One
On October 1, 2016, Synovus completed its acquisition of all of the outstanding stock of Global One. Under the terms of the merger agreement, the purchase price included additional annual payments ("Earnout Payments") to Global One's former shareholders over a threeperiod not to five years period,extend beyond June 30, 2021, with amounts based on a percentage of "Global One Earnings," as defined in the merger agreement. The Earnout Payments consist of shares of Synovus common stock as well as a smaller cash consideration component. During 2018,the three months ended June 30, 2020, Synovus recorded an $11.7a $4.9 million increase to the earnout liability driven by increased earnings and earnings projections of Global One and issued the second annual Earnout Payment of 199 thousand shares of Synovus common stock valued at $7.4 million and $1.2 million in cash.One. The total fair value of the earnout liability at June 30, 20192020 was $14.4 million based on the estimated fair value of the remaining Earnout Payments.$15.9 million.
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Note 3 - Investment Securities Available for Sale
The amortized cost, gross unrealized gains and losses, and estimated fair values of investment securities available for sale at June 30, 20192020 and December 31, 20182019 are summarized below.
  June 30, 2019
(in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
U.S. Treasury securities $19,689
 $
 $
 $19,689
U.S. Government agency securities 64,070
 1,617
 
 65,687
Mortgage-backed securities issued by U.S. Government agencies 88,677
 367
 (767) 88,277
Mortgage-backed securities issued by U.S. Government sponsored enterprises 4,873,285
 84,794
 (9,408) 4,948,671
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises 859,235
 6,391
 (3,093) 862,533
Commercial mortgage-backed securities issued by U.S. Government sponsored enterprises 354,104
 14,339
 
 368,443
State and municipal securities 2,107
 
 (7) 2,100
Asset-backed securities 501,713
 4,044
 (640) 505,117
Corporate debt securities 144,401
 2,124
 (30) 146,495
Total investment securities available for sale $6,907,281
 $113,676
 $(13,945) $7,007,012
         
  December 31, 2018
(in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
U.S. Treasury securities $123,436
 $
 $(1,359) $122,077
U.S. Government agency securities 38,021
 361
 
 38,382
Mortgage-backed securities issued by U.S. Government agencies 100,060
 172
 (3,027) 97,205
Mortgage-backed securities issued by U.S. Government sponsored enterprises 2,460,498
 1,981
 (63,829) 2,398,650
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises 1,215,406
 2,997
 (29,885) 1,188,518
Commercial mortgage-backed securities issued by U.S. Government sponsored enterprises 131,492
 613
 (2,240) 129,865
Corporate debt securities 17,000
 150
 (215) 16,935
Total investment securities available for sale $4,085,913
 $6,274
 $(100,555) $3,991,632
         

June 30, 2020
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
U.S. Treasury securities$19,921  $—  $—  $19,921  
U.S. Government agency securities168,918  2,504  (56) 171,366  
Mortgage-backed securities issued by U.S. Government agencies860,773  3,721  (66) 864,428  
Mortgage-backed securities issued by U.S. Government sponsored enterprises4,293,563  150,689  —  4,444,252  
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises1,191,630  21,597  (146) 1,213,081  
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises342,974  22,335  (56) 365,253  
State and municipal securities1,003   —  1,007  
Corporate debt securities and other debt securities119,573  40  (1,428) 118,185  
Total investment securities available for sale$6,998,355  $200,890  $(1,752) $7,197,493  
December 31, 2019
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
U.S. Treasury securities$19,855  $—  $—  $19,855  
U.S. Government agency securities35,499  1,042  —  36,541  
Mortgage-backed securities issued by U.S. Government agencies56,328  560  (72) 56,816  
Mortgage-backed securities issued by U.S. Government sponsored enterprises5,079,396  103,495  (2,076) 5,180,815  
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises629,706  7,349  (204) 636,851  
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises357,291  14,301  —  371,592  
State and municipal securities2,069   —  2,075  
Asset-backed securities323,237  4,315  (152) 327,400  
Corporate debt securities and other debt securities144,410  2,317  (2) 146,725  
Total investment securities available for sale$6,647,791  $133,385  $(2,506) $6,778,670  
At June 30, 20192020 and December 31, 2018,2019, investment securities with a carrying value of $1.59$2.49 billion and $1.56$1.71 billion, respectively, were pledged to secure certain deposits and securities sold under repurchase agreementsother liabilities, as required by law andor contractual agreements.

Synovus has evaluated
13


Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that areindividual securities have been in ana continuous unrealized loss position, asat June 30, 2020 and December 31, 2019 are presented below.
June 30, 2020
Less than 12 Months12 Months of LongerTotal
(in thousands)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
U.S. Government agency securities$47,091  $(56) $—  $—  $47,091  $(56) 
Mortgage-backed securities issued by U.S. Government agencies25,126  (66) —  —  25,126  (66) 
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises142,634  (146) —  —  142,634  (146) 
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises33,285  (56) —  —  33,285  (56) 
Corporate debt securities and other debt securities42,782  (1,428) —  —  42,782  (1,428) 
Total$290,918  $(1,752) $—  $—  $290,918  $(1,752) 
December 31, 2019
Less than 12 Months12 Months of LongerTotal
(in thousands)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Mortgage-backed securities issued by U.S. Government agencies$19,543  $(70) $355  $(2) 19,898  $(72) 
Mortgage-backed securities issued by U.S. Government sponsored enterprises768,040  (2,076) —  —  768,040  (2,076) 
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises57,670  (204) —  —  57,670  (204) 
Asset-backed securities37,156  (116) 4,954  (36) 42,110  (152) 
Corporate debt securities and other debt securities9,505  (2) —  —  9,505  (2) 
Total$891,914  $(2,468) $5,309  $(38) $897,223  $(2,506) 
As of June 30, 20192020, Synovus had 12 investment securities in a loss position for less than twelve months and 0 investment securities in a loss position for twelve months or longer. At December 31, 2018 for OTTI and does not consider any2019, Synovus had 26 investment securities in an unrealizeda loss position to be other-than-temporarily impaired. If Synovus intended to sellfor less than twelve months and 5 investment securities in a security in an unrealized loss position the entire unrealized loss would be reflected in earnings.for twelve months or longer. Synovus does not intend to sell investment securities in an unrealized loss position prior to the recovery of the unrealized loss, which may not be until maturity, and has the ability and intent to hold those securities for that period of time. Additionally, Synovus is not currently aware of any circumstances which will require it to sell any of the securities that are in an unrealized loss position prior to the respective securities' recovery of all such unrealized losses. As such, no write-downs to the amortized cost basis of the portfolio were recorded in the current period. During the latter part of the second quarter of 2020, as part of an overall strategic repositioning of the investment securities portfolio, Synovus realized net gains of $69.4 million from sales of investment securities, including losses of $5.7 millionrelated to the sale of Synovus' remaining portfolio of asset-backed securities.
ForSynovus has evaluated investment securities that Synovus does not expect to sell, or it is not more likely than not it will be required to sell prior to recovery of its amortized cost basis, the credit component ofare in an OTTI would be recognized in earnings and the non-credit component would be recognized in OCI. Currently, unrealized losses on debt securities are attributable to increases in interest rates on comparable securities from the date of purchase. Synovus regularly evaluates its investment securities portfolio to ensure that there are no conditions that would indicate that unrealized losses represent OTTI. These factors include the length of time the security has been in a loss position the extent that the fair value is below amortized cost, and the credit standing of the issuer.

Asas of June 30, 2019,2020 and determined the following:
Corporate debt securities - Synovus had 21considers the credit quality of each issuer and whether payments of principal and interest are current. None of the investment securities in a loss position for less than twelve months and 69 investment described above are past due as of June 30, 2020. At June 30, 2020, these
14


securities in a loss position for twelve months or longer.
Asset-backed securities and corporate bonds and other debt securities acquired as part of the FCB acquisition were generally underwritten in accordance with Synovus' credit extension standards, without relying on a bond issuer's guarantee in making the investment decision. These investments are rated investment grade and will continue to be monitored as part of Synovus' ongoing impairment analysis, but are expected to performthe decline in accordance with their terms.
Grossfair value was largely driven by liquidity and wider market spreads. As such, no ACL was recorded during the period and unrealized losses on investment securities and the fair valuewere recognized in other comprehensive income, net of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2019 and December 31, 2018 are presented below.
 June 30, 2019
 Less than 12 Months 12 Months or Longer Total
(in thousands)Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses
Mortgage-backed securities issued by U.S. Government agencies$626
 $(4) $61,656
 $(763) $62,282
 $(767)
Mortgage-backed securities issued by U.S. Government sponsored enterprises10,523
 (15) 1,213,574
 (9,393) 1,224,097
 (9,408)
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises44,539
 (21) 345,169
 (3,072) 389,708
 (3,093)
State and municipal securities1,599
 (7) 
 
 1,599
 (7)
Asset-backed securities124,312
 (640) 
 
 124,312
 (640)
Corporate debt securities9,478
 (30) 
 
 9,478
 (30)
Total$191,077
 $(717) $1,620,399
 $(13,228) $1,811,476
 $(13,945)
            
 December 31, 2018
 Less than 12 Months 12 Months or Longer Total
(in thousands)Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses
U.S. Treasury securities$39,031
 $(118) $63,570
 $(1,241) $102,601
 $(1,359)
Mortgage-backed securities issued by U.S. Government agencies2,059
 (2) 79,736
 (3,025) 81,795
 (3,027)
Mortgage-backed securities issued by U.S. Government sponsored enterprises130,432
 (700) 2,105,358
 (63,129) 2,235,790
 (63,829)
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises
 
 964,732
 (29,885) 964,732
 (29,885)
Commercial mortgage-backed securities issued by U.S. Government sponsored enterprises58,998
 (1,298) 44,220
 (942) 103,218
 (2,240)
Corporate debt securities
 
 1,785
 (215) 1,785
 (215)
Total$230,520
 $(2,118) $3,259,401
 $(98,437) $3,489,921
 $(100,555)
            


tax.
The amortized cost and fair value by contractual maturity of investment securities available for sale at June 30, 20192020 are shown below. The expected life of mortgage-backed securitiesMBSs or CMOs may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. For purposes of the maturity table, mortgage-backed securitiesMBSs and CMOs, which are not due at a single maturity date, have been classified based on the final contractual maturity date.
Distribution of Maturities at June 30, 2020
(in thousands)Within One
Year
1 to 5
Years
5 to 10
Years
More Than
10 Years
Total
Amortized Cost
U.S. Treasury securities$19,921  $—  $—  $—  $19,921  
U.S. Government agency securities568  27,714  140,636  —  168,918  
Mortgage-backed securities issued by U.S. Government agencies—  1,398  715  858,660  860,773  
Mortgage-backed securities issued by U.S. Government sponsored enterprises—  410  83,168  4,209,985  4,293,563  
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises—  —  273  1,191,357  1,191,630  
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises—  109,753  116,092  117,129  342,974  
State and municipal securities—  —  500  503  1,003  
Corporate debt securities and other debt securities24,049  84,869  8,655  2,000  119,573  
Total amortized cost$44,538  $224,144  $350,039  $6,379,634  $6,998,355  
Fair Value
U.S. Treasury securities$19,921  $—  $—  $—  $19,921  
U.S. Government agency securities571  27,770  143,025  —  171,366  
Mortgage-backed securities issued by U.S. Government agencies—  1,442  743  862,243  864,428  
Mortgage-backed securities issued by U.S. Government sponsored enterprises—  423  89,415  4,354,414  4,444,252  
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises—  —  285  1,212,796  1,213,081  
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises—  116,639  125,274  123,340  365,253  
State and municipal securities—  —  501  506  1,007  
Corporate debt securities and other debt securities23,967  83,922  8,634  1,662  118,185  
Total fair value$44,459  $230,196  $367,877  $6,554,961  $7,197,493  
 Distribution of Maturities at June 30, 2019
(in thousands)Within One
Year
 1 to 5
Years
 5 to 10
Years
 More Than
10 Years
 Total
Amortized Cost         
U.S. Treasury securities$19,689
 $
 $
 $
 $19,689
U.S. Government agency securities791
 2,100
 61,179
 
 64,070
Mortgage-backed securities issued by U.S. Government agencies
 809
 16,111
 71,757
 88,677
Mortgage-backed securities issued by U.S. Government sponsored enterprises
 43,477
 467,320
 4,362,488
 4,873,285
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises
 
 370
 858,865
 859,235
Commercial mortgage-backed securities issued by U.S. Government sponsored enterprises
 22,699
 236,738
 94,667
 354,104
State and municipal securities
 
 1,084
 1,023
 2,107
Asset-backed securities
 4,496
 324,224
 172,993
 501,713
Corporate debt securities
 109,216
 33,185
 2,000
 144,401
Total amortized cost$20,480
 $182,797
 $1,140,211
 $5,563,793
 $6,907,281
          
Fair Value         
U.S. Treasury securities$19,689
 $
 $
 $
 $19,689
U.S. Government agency securities793
 2,107
 62,787
 
 65,687
Mortgage-backed securities issued by U.S. Government agencies
 810
 16,022
 71,445
 88,277
Mortgage-backed securities issued by U.S. Government sponsored enterprises
 43,479
 469,441
 4,435,751
 4,948,671
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises
 
 377
 862,156
 862,533
Commercial mortgage-backed securities issued by U.S. Government sponsored enterprises
 23,158
 246,337
 98,948
 368,443
State and municipal securities
 
 1,078
 1,022
 2,100
Asset-backed securities
 4,607
 327,521
 172,989
 505,117
Corporate debt securities
 110,354
 34,124
 2,017
 146,495
Total fair value$20,482
 $184,515
 $1,157,687
 $5,644,328
 $7,007,012
          

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Proceeds from sales, gross gains, and gross losses on sales of securities available for sale for the three and six months ended June 30, 20192020 and 20182019 are presented below. The specific identification method is used to reclassify gains and losses out of other comprehensive income at the time of sale.
Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2020201920202019
Proceeds from sales of investment securities available for sale$2,269,682  $104,434  $2,682,861  $1,746,673  
Gross realized gains on sales75,105  —  83,839  9,129  
Gross realized losses on sales(1)
(5,696) (1,845) (5,695) (10,900) 
Investment securities gains, net$69,409  $(1,845) $78,144  $(1,771) 
 Three Months Ended June 30, Six Months Ended June 30,
(in thousands)2019 2018 2019 2018
Proceeds from sales of investment securities available for sale$104,434
 $35,066
 $1,292,673
 $35,066
Gross realized gains on sales
 
 9,129
 
Gross realized losses on sales(1,845) (1,296) (10,900) (1,296)
Investment securities losses, net$(1,845) $(1,296) $(1,771) $(1,296)
        
(1) Losses recognized during 2020 related to the sale of Synovus' remaining portfolio of asset-backed securities during the second quarter of 2020.
16



Note 4 - Loans and Allowance for Loan Losses
The following tables provide a summary of current, accruing past due, and non-accrual loans separately reported by originated (loans originated, renewed, refinanced, modified, or otherwise underwritten by Synovus) and acquired loans from business combinations by portfolio class as of June 30, 20192020 and December 31, 2018. See "Part I - Item 1. Financial Statements and Supplementary Data - Note 1 - Basis of Presentation" in this Report for more information on Synovus' accounting for purchased loans.2019.
Current, Accruing Past Due, and Non-accrual Loans
June 30, 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$13,041,583  $9,515  $2,598  $12,113  $67,535  $15,465  $13,136,696  
Owner-occupied6,779,043  1,894  1,038  2,932  9,206  10,399  6,801,580  
Total commercial and industrial19,820,626  11,409  3,636  15,045  76,741  25,864  19,938,276  
Investment properties9,444,615  829  118  947  1,638  —  9,447,200  
1-4 family properties689,660  1,507  1,204  2,711  4,437  —  696,808  
Land and development680,445  469  46  515  2,302  265  683,527  
Total commercial real estate10,814,720  2,805  1,368  4,173  8,377  265  10,827,535  
Consumer mortgages5,786,762  7,176  —  7,176  17,086  352  5,811,376  
Home equity lines1,692,542  3,495  27  3,522  14,200  —  1,710,264  
Credit cards243,333  4,395  2,720  7,115  —  —  250,448  
Other consumer loans1,460,672  8,719  640  9,359  4,552  —  1,474,583  
Total consumer9,183,309  23,785  3,387  27,172  35,838  352  9,246,671  
Total loans$39,818,655  $37,999  $8,391  $46,390  $120,956  $26,481  $40,012,482  (2)
Current, Accruing Past Due, and Non-accrual Originated Loans 
 June 30, 2019 
(in thousands)Current Accruing 30-89 Days Past Due Accruing 90 Days or Greater Past Due Total Accruing Past Due Non-accrual Total 
Commercial, financial and agricultural$7,712,371
 $19,804
 $462
 $20,266
 $68,573
 $7,801,210
 
Owner-occupied5,348,232
 6,331
 284
 6,615
 11,557
 5,366,404
 
Total commercial and industrial13,060,603
 26,135
 746
 26,881
 80,130
 13,167,614
 
Investment properties5,924,501
 1,525
 881
 2,406
 799
 5,927,706
 
1-4 family properties639,534
 2,296
 
 2,296
 1,618
 643,448
 
Land and development359,921
 1,874
 158
 2,032
 2,735
 364,688
 
Total commercial real estate6,923,956
 5,695
 1,039
 6,734
 5,152
 6,935,842
 
Consumer mortgages3,175,355
 4,494
 550
 5,044
 13,628
 3,194,027
 
Home equity lines1,569,312
 4,783
 265
 5,048
 13,494
 1,587,854
 
Credit cards253,331
 2,503
 2,449
 4,952
 
 258,283
 
Other consumer loans2,213,665
 18,272
 802
 19,074
 4,667
 2,237,406
 
Total consumer7,211,663
 30,052
 4,066
 34,118
 31,789
 7,277,570
 
Total loans$27,196,222
 $61,882
 $5,851
 $67,733
 $117,071
 $27,381,026
(1) 
             
             


December 31, 2019
(in thousands)CurrentAccruing 30-89 Days Past DueAccruing 90 Days or Greater Past DueTotal Accruing Past DueNon-accrual
ASC 310-30 Loans(3)
Total
Commercial, financial and agricultural$9,124,285  $38,916  $1,206  $40,122  $56,017  $1,019,135  $10,239,559  
Owner-occupied5,691,095  5,164  576  5,740  9,780  823,196  6,529,811  
Total commercial and industrial14,815,380  44,080  1,782  45,862  65,797  1,842,331  16,769,370  
Investment properties7,264,794  1,344  —  1,344  1,581  1,736,608  9,004,327  
1-4 family properties733,984  2,073  304  2,377  2,253  41,401  780,015  
Land and development629,363  808  —  808  1,110  78,161  709,442  
Total commercial real estate8,628,141  4,225  304  4,529  4,944  1,856,170  10,493,784  
Consumer mortgages3,681,553  4,223  730  4,953  11,369  1,848,493  5,546,368  
Home equity lines1,691,759  7,038  171  7,209  12,034  2,155  1,713,157  
Credit cards263,065  3,076  2,700  5,776  —  —  268,841  
Other consumer loans2,363,101  18,688  616  19,304  5,704  8,185  2,396,294  
Total consumer7,999,478  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 $98.2 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 that would have been recorded if the loans had been current and performing in accordance with their original terms was $2.8 million and $3.4 million for the three months ended June 30, 2020 and 2019, respectively, and $4.9 million and $5.5 million for the six months ended June 30, 2020 and 2019, respectively. Of the interest income recognized during the three months ended June 30, 2020 and 2019, cash-basis interest income was
Current, Accruing Past Due, and Non-accrual Acquired Loans 
 June 30, 2019 
(in thousands)Current 
Accruing 30-89 Days Past Due(2)
 
Accruing 90 Days or Greater Past Due(2)
 
Total Accruing Past Due(2)
 
Non-accrual(2)
 ASC 310-30 Loans Discount/Premium Total 
Commercial, financial and agricultural$754,672
 $317
 $
 $317
 $
 $1,177,713
 $(16,166) $1,916,536
 
Owner-occupied69,569
 
 
 
 
 1,098,670
 (4,846) 1,163,393
 
Total commercial and industrial824,241
 317
 
 317
 
 2,276,383
 (21,012) 3,079,929
 
Investment properties991,090
 
 
 
 
 2,105,867
 (19,563) 3,077,394
 
1-4 family properties49,695
 
 
 
 174
 55,192
 (1,119) 103,942
 
Land and development125,101
 
 
 
 
 109,342
 (3,174) 231,269
 
Total commercial real estate1,165,886
 
 
 
 174
 2,270,401
 (23,856) 3,412,605
 
Consumer mortgages132,011
 
 
 
 
 2,165,966
 (84,242) 2,213,735
 
Home equity lines65,112
 155
 
 155
 55
 5,088
 (7,519) 62,891
 
Other consumer loans308
 
 
 
 
 12,902
 (1,279) 11,931
 
Total consumer197,431
 155
 
 155
 55
 2,183,956
 (93,040) 2,288,557
 
Total loans$2,187,558
 $472
 $
 $472
 $229
 $6,730,740
 $(137,908) $8,781,091
(3) 
                 
17





Current, Accruing Past Due, and Non-accrual Loans 
 December 31, 2018 
(in thousands)Current Accruing 30-89 Days Past Due Accruing 90 Days or Greater Past Due Total Accruing Past Due Non-accrual Total 
Commercial, financial and agricultural$7,372,301
 $7,988
 $114
 $8,102
 $69,295
 $7,449,698
 
Owner-occupied5,317,023
 5,433
 81
 5,514
 8,971
 5,331,508
 
Total commercial and industrial12,689,324
 13,421
 195
 13,616
 78,266
 12,781,206
 
Investment properties5,557,224
 1,312
 34
 1,346
 2,381
 5,560,951
 
1-4 family properties674,648
 2,745
 96
 2,841
 2,381
 679,870
 
Land and development319,978
 739
 
 739
 2,953
 323,670
 
Total commercial real estate6,551,850
 4,796
 130
 4,926
 7,715
 6,564,491
 
Consumer mortgages2,922,136
 7,150
 
 7,150
 4,949
 2,934,235
 
Home equity lines1,496,562
 7,092
 28
 7,120
 12,114
 1,515,796
 
Credit cards252,832
 3,066
 2,347
 5,413
 
 258,245
 
Other consumer loans1,894,352
 17,604
 1,098
 18,702
 3,689
 1,916,743
 
Total consumer6,565,882
 34,912
 3,473
 38,385
 20,752
 6,625,019
 
Total loans$25,807,056
 $53,129
 $3,798
 $56,927
 $106,733
 $25,970,716
(4) 
             
(1)
Total before net deferred fees and costs of $23.6 million.
(2)
For purposes of this table, non-performing and past due loans exclude acquired loans accounted for under ASC 310-30.
(3)
Represents $9.29 billion (at fair value) of loans acquired from FCB, net of paydowns and payoffs since acquisition date.
(4)
Total before net deferred fees and costs of $24.1 million.

$484 thousand and $996 thousand, respectively. Cash-basis interest income was $1.4 million and $1.6 million for the six months ended June 30, 2020 and 2019, respectively.
Loans with carrying values of $12.16$15.42 billion and $8.40$12.11 billion, respectively, were pledged as collateral for borrowings and capacity at June 30, 20192020 and December 31, 2018,2019, 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 home equity lines)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


Originated Loan Portfolio Credit Exposure by Risk Grade 
 June 30, 2019 
(in thousands)Pass Special Mention 
Substandard(1)
 
Doubtful(2)
 
Loss(3)
 Total 
Commercial, financial and agricultural$7,534,124
 $117,878
 $144,660
 $4,548
 $
 $7,801,210
 
Owner-occupied5,268,926
 17,844
 79,561
 73
 
 5,366,404
 
Total commercial and industrial12,803,050
 135,722
 224,221
 4,621
 
 13,167,614
 
Investment properties5,860,735
 22,206
 44,765
 
 
 5,927,706
 
1-4 family properties631,648
 3,610
 8,190
 
 
 643,448
 
Land and development342,427
 9,880
 12,381
 
 
 364,688
 
Total commercial real estate6,834,810
 35,696
 65,336
 
 
 6,935,842
 
Consumer mortgages3,179,300
 
 13,708
 943
 76

3,194,027
 
Home equity lines1,572,002
 
 14,362
 21
 1,469

1,587,854
 
Credit cards255,836
 
 934
 
 1,513
(4) 
258,283
 
Other consumer loans2,232,459
 
 4,947
 
 

2,237,406
 
Total consumer7,239,597
 
 33,951
 964
 3,058
 7,277,570
 
Total loans$26,877,457
 $171,418
 $323,508
 $5,585
 $3,058
 $27,381,026
(5) 
             
             
Acquired Loan Portfolio Credit Exposure by Risk Grade 
 June 30, 2019 
(in thousands)Pass Special Mention 
Substandard(1)
 Doubtful Loss Total 
Commercial, financial and agricultural$1,881,798
 $19,981
 $14,757
 $
 $
 $1,916,536
 
Owner-occupied1,153,900
 5,686
 3,807
 
 
 1,163,393
 
Total commercial and industrial3,035,698
 25,667
 18,564
 
 
 3,079,929
 
Investment properties3,035,213
 6,439
 35,742
 
 
 3,077,394
 
1-4 family properties101,480
 
 2,462
 
 
 103,942
 
Land and development231,141
 128
 
 
 
 231,269
 
Total commercial real estate3,367,834
 6,567
 38,204
 
 
 3,412,605
 
Consumer mortgages2,213,735
 
 
 
 
 2,213,735
 
Home equity lines62,746
 
 145
 
 
 62,891
 
Other consumer loans11,931
 
 
 
 
 11,931
 
Total consumer2,288,412
 
 145
 
 
 2,288,557
 
Total loans$8,691,944
 $32,234
 $56,913
 $
 $
 $8,781,091
(6) 
             
             

Loan Portfolio Credit Exposure by Risk Grade 
 December 31, 2018 
(in thousands)Pass Special Mention 
Substandard(1)
 
Doubtful(2)
 
Loss(3)
 Total 
Commercial, financial and agricultural$7,190,517
 $118,188
 $140,218
 $775
 $
 $7,449,698
 
Owner-occupied5,212,473
 55,038
 63,572
 425
 
 5,331,508
 
Total commercial and industrial12,402,990
 173,226
 203,790
 1,200
 
 12,781,206
 
Investment properties5,497,344
 40,516
 23,091
 
 
 5,560,951
 
1-4 family properties663,692
 6,424
 9,754
 
 
 679,870
 
Land and development297,855
 12,786
 13,029
 
 
 323,670
 
Total commercial real estate6,458,891
 59,726
 45,874
 
 

6,564,491
 
Consumer mortgages2,926,712
 
 7,425
 98
 

2,934,235
 
Home equity lines1,501,316
 
 13,130
 174
 1,176

1,515,796
 
Credit cards255,904
 
 858
 
 1,483
(4) 
258,245
 
Other consumer loans1,912,902
 
 3,841
 
 

1,916,743
 
Total consumer6,596,834
 
 25,254
 272
 2,659
 6,625,019
 
Total loans$25,458,715
 $232,952
 $274,918
 $1,472
 $2,659
 $25,970,716
(7) 
             
(1)
Includes $265.0 million and $172.3 million of Substandard accruing loans at June 30, 2019 and December 31, 2018, respectively.
(2)
The loans within this risk grade are on non-accrual status and generally 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.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 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 Retail Credit Classification Policy.
(5)
Total before net deferred fees and costs of $23.6 million.
(6)
Represents $9.29 billion (at fair value) of loans acquired from FCB, net of paydowns and payoffs since acquisition date.
(7)
Total before net deferred fees and costs of $24.1 million.

Acquired loans
As discussed 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 "Part I - Item 1. Financial Statements and Supplementary Data - Note 2 - Acquisitions",the C&I portfolio are based on January 1, 2019, Synovus acquiredcash 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. PPP loans, from FCB with fair values of $9.29which are categorized as C&I loans, were $2.71 billion net of total discountunearned fees at June 30, 2020 and are guaranteed by the SBA.
Commercial Real Estate Loans
CRE loans primarily consist of $168.0 million.
Atincome-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 Acquisition Date,underlying property being financed by such loans. These properties are primarily located in the contractual required payments receivablemarkets 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 purchased loans accounted for under ASC 310-20 totaled $2.45 billion, with a corresponding fair valueLTV of $2.15 billion. the collateral and the capacity of the guarantor(s).
Consumer Loans
The estimated cash flows not expected to be collected at the Acquisition Date were $39.5 million.
Information about the acquired FCBconsumer loan portfolio accountedconsists 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, student, and personal loans from third-party lending partnerships. The majority of Synovus' consumer loans are consumer mortgages
18


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 under ASC 310-30 asall consumer loans is generally the personal income of the Acquisition Date is in the following table.borrower(s).
(in thousands)ASC 310-30 Loans
Contractually required principal and interest at acquisition$8,377,942
Non-accretable difference (expected losses and foregone interest)(163,147)
    Cash flows expected to be collected at acquisition8,214,795
Accretable yield(1,066,689)
    Basis in ASC 310-30 loans at acquisition$7,148,106
  




19





The following table summarizes each loan portfolio class by risk grade and origination as of June 30, 2020.
Loan Portfolio by Risk Grade and Origination
June 30, 2020
Term Loans Amortized Cost Basis by Origination YearRevolving Loans
(in thousands)20202019201820172016PriorAmortized Cost BasisConverted to Term LoansTotal
Commercial, financial and agricultural
Pass$3,740,787  $1,597,917  $1,036,299  $708,156  $612,390  $892,294  $4,122,798  $77,917  $12,788,558  
Special Mention7,352  7,740  19,208  31,223  3,910  14,110  61,580  2,820  147,943  
Substandard(1)
4,674  11,579  15,952  20,561  11,095  37,335  65,753  1,016  167,965  
Doubtful(2)
—  3,721  19,778  186  915  91  6,810  729  32,230  
Total commercial, financial and agricultural3,752,813  1,620,957  1,091,237  760,126  628,310  943,830  4,256,941  82,482  13,136,696  
Owner-occupied
Pass688,033  1,216,238  1,250,906  1,082,002  669,572  1,419,946  308,851  —  6,635,548  
Special Mention2,700  6,233  13,990  6,776  3,219  7,362  —  —  40,280  
Substandard(1)
1,101  11,466  35,225  30,457  6,749  31,093  23  —  116,114  
Doubtful(2)
—  —  9,638  —  —  —  —  —  9,638  
Total owner-occupied691,834  1,233,937  1,309,759  1,119,235  679,540  1,458,401  308,874  —  6,801,580  
Total commercial and industrial4,444,647  2,854,894  2,400,996  1,879,361  1,307,850  2,402,231  4,565,815  82,482  19,938,276  
Investment properties
Pass584,995  2,148,882  2,367,168  1,568,115  794,784  1,645,276  225,887  —  9,335,107  
Special Mention828  717  —  22,446  21,406  4,499  —  —  49,896  
Substandard(1)
154  1,982  4,691  2,328  976  52,026  40  —  62,197  
Total investment properties585,977  2,151,581  2,371,859  1,592,889  817,166  1,701,801  225,927  —  9,447,200  
1-4 family properties
Pass94,373  150,134  90,084  102,285  51,637  124,109  67,053  —  679,675  
Special Mention430  1,996  160  —  807  410  —  —  3,803  
Substandard(1)
1,518  922  4,399  1,092  382  2,640  2,377  —  13,330  
Total 1-4 family properties96,321  153,052  94,643  103,377  52,826  127,159  69,430  —  696,808  
Land and development
Pass41,600  222,580  103,868  115,763  21,025  103,966  48,039  —  656,841  
Special Mention—  1,533  2,390  636  —  7,186  5,642  —  17,387  
Substandard(1)
1,101  1,274  2,864  630  1,190  2,240  —  —  9,299  
Total land and development42,701  225,387  109,122  117,029  22,215  113,392  53,681  —  683,527  
Total commercial real estate724,999  2,530,020  2,575,624  1,813,295  892,207  1,942,352  349,038  —  10,827,535  
20


Loan Portfolio by Risk Grade and Origination (continued)
June 30, 2020
Term Loans Amortized Cost Basis by Origination YearRevolving Loans
(in thousands)20202019201820172016PriorAmortized Cost BasisConverted to Term LoansTotal
Consumer mortgages
Pass$1,087,169  $1,042,318  $560,207  $841,101  $826,726  $1,433,288  $991  $—  $5,791,800  
Substandard(1)
29  1,116  895  4,741  2,500  10,221  —  —  19,502  
Loss(3)
—  —  —  —  —  74  —  —  74  
Total consumer mortgages1,087,198  1,043,434  561,102  845,842  829,226  1,443,583  991  —  5,811,376  
Home equity lines
Pass—  —  —  —  —  —  1,600,837  89,969  1,690,806  
Substandard(1)
—  —  —  —  —  —  11,234  6,047  17,281  
Doubtful(2)
—  —  —  —  —  —  17  20  37  
Loss(3)
—  —  —  —  —  —  1,898  242  2,140  
Total home equity lines—  —  —  —  —  —  1,613,986  96,278  1,710,264  
Credit cards
Pass—  —  —  —  —  —  247,884  —  247,884  
Substandard(1)
—  —  —  —  —  —  898  —  898  
Loss(4)
—  —  —  —  —  —  1,666  —  1,666  
Total credit cards—  —  —  —  —  —  250,448  —  250,448  
Other consumer loans
Pass259,282  326,999  221,013  196,955  126,927  88,033  249,397  —  1,468,606  
Substandard(1)
—  1,246  536  2,517  715  677  286  —  5,977  
Total other consumer loans259,282  328,245  221,549  199,472  127,642  88,710  249,683  —  1,474,583  
Total consumer1,346,480  1,371,679  782,651  1,045,314  956,868  1,532,293  2,115,108  96,278  9,246,671  
Total loans(5)
$6,516,126  $6,756,593  $5,759,271  $4,737,970  $3,156,925  $5,876,876  $7,029,961  $178,760  $40,012,482  
(1) The majority of loans within Substandard risk grade are accruing loans at June 30, 2020.
(2) Loans within Doubtful risk grade are on non-accrual status and generally have an ALL equal to 50% of the loan amount.
(3) Loans within Loss 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 $98.2 million.


21


Loan Portfolio by Risk Grade
December 31, 2019
(in thousands)PassSpecial Mention
Substandard(1)
Doubtful(2)
Loss(3)
Total
Commercial, financial and agricultural$9,927,059  $128,506  $182,831  $1,163  $—  $10,239,559  
Owner-occupied6,386,055  58,330  85,426  —  —  6,529,811  
Total commercial and industrial16,313,114  186,836  268,257  1,163  —  16,769,370  
Investment properties8,930,360  16,490  57,477  —  —  9,004,327  
1-4 family properties766,529  3,249  10,237  —  —  780,015  
Land and development681,003  18,643  9,796  —  —  709,442  
Total commercial real estate10,377,892  38,382  77,510  —  —  

10,493,784  
Consumer mortgages5,527,746  —  18,376  97  149  

5,546,368  
Home equity lines1,697,086  —  14,806  21  1,244  

1,713,157  
Credit cards266,146  —  818  —  1,877  
(4)
268,841  
Other consumer loans2,390,199  —  6,095  —  —  

2,396,294  
Total consumer9,881,177  —  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) The majority of loans within Substandard risk grade are accruing loans at December 31, 2019.
(2) Loans within Doubtful risk grade are on non-accrual status and generally have an ALL equal to 50% of the loan amount.
(3) Loans within Loss 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 $25.4 million.
Collateral-Dependent Loans
We classify a loan as collateral-dependent when our borrower is a summaryexperiencing 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 accretable difference for allextent to which collateral secures our collateral-dependent loans accounted for under ASC 310-30 forduring the three and six months ended June 30, 2019.2020.
22

(in thousands)Six Months Ended June 30, 2019
Beginning balance$
Additions1,066,689
Transfers from non-accretable difference to accretable yield(1)
13,516
Accretion(182,944)
Changes in expected cash flows not affecting non-accretable differences(2)
24,929
Ending balance$922,190
  
(1) Represents improvement in the credit component of expected cash flows.
(2) Includes changes in cash flows expected to be collected due to the impact of changes in actual or expected timing of liquidation events, modifications, changes in interest rates and changes in prepayment assumptions.

The following tables detail the changes in the allowance for loan lossesALL by loan segment for the three and six months ended June 30, 20192020 and 2018.
Allowance for Loan Losses and Recorded Investment in Loans

 As Of and For The Three Months Ended June 30, 2019
(in thousands)Commercial & Industrial Commercial Real Estate Consumer Total
Allowance for loan losses:       
Beginning balance$135,639
 $69,009
 $52,388
 $257,036
Charge-offs(11,095) (861) (4,909) (16,865)
Recoveries1,821
 1,954
 1,311
 5,086
Provision for (reversal of) loan losses11,639
 (6,639) 7,119
 12,119
Ending balance(1)
$138,004
 $63,463
 $55,909
 $257,376
Ending balance: individually evaluated for impairment$16,126
 $1,229
 $811
 $18,166
Ending balance: collectively evaluated for impairment$121,878
 $62,234
 $55,098
 $239,210
Loans:       
Ending balance: total loans(2)
$16,247,543
 $10,348,447
 $9,566,127
 $36,162,117
Ending balance: individually evaluated for impairment    $135,548
 $28,231
 $31,713
 $195,492
Ending balance: collectively evaluated for impairment(3)
$13,857,183
 $8,070,437
 $7,433,959
 $29,361,579
Ending balance: acquired loans accounted for under ASC 310-30(4)    
$2,254,812
 $2,249,779
 $2,100,455
 $6,605,046
        
 As Of and For The Three Months Ended June 30, 2018
(in thousands)Commercial & Industrial Commercial Real Estate Consumer Total
Allowance for loan losses:       
Beginning balance$134,745
 $73,991
 $49,028
 $257,764
Charge-offs(15,770) (523) (5,211) (21,504)
Recoveries1,635
 480
 1,560
 3,675
Provision for loan losses9,725
 1,257
 808
 11,790
Ending balance$130,335
 $75,205
 $46,185
 $251,725
Ending balance: individually evaluated for impairment$9,474
 $4,687
 $771
 $14,932
Ending balance: collectively evaluated for impairment$120,861
 $70,518
 $45,414
 $236,793
Loans:       
Ending balance: total loans(5)(6)
$12,275,472
 $6,644,171
 $6,237,130
 $25,156,773
Ending balance: individually evaluated for impairment$107,544
 $53,805
 $27,676
 $189,025
Ending balance: collectively evaluated for impairment$12,167,928
 $6,590,366
 $6,209,454
 $24,967,748
        
(1) As of and for2019. Additionally, during the three months ended June 30, 2019, there was no allowance2020, Synovus reversed $13.3 million in previously established reserves for loancredit losses associated with the transfer of $801.0 million in certain third-party lending partnership consumer loans to held for acquired loans accounted for under ASC 310-30.
(2)
Total before net deferred fees and costs of $23.6 million.
(3)
These loans are presented net of the remaining fair value discount of $12.2 million at June 30, 2019.
(4)
These loans are presented net of the remaining fair value discount of $125.7 million at June 30, 2019.
(5)
Total before net deferred fees and costs of $22.7 million.
(6)
As of and for the three months ended June 30, 2018, there were no purchased credit-impaired loans and no allowance for loan losses for purchased credit-impairedsale loans.


Allowance for Loan Losses and Recorded Investment in Loans

 As Of and For The Six Months Ended June 30, 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(24,133) (2,093) (11,337) (37,563)
Recoveries3,810
 2,298
 2,588
 8,696
Provision for (reversal of) loan losses25,204
 (5,538) 16,022
 35,688
Ending balance(1)
$138,004
 $63,463
 $55,909
 $257,376
Ending balance: individually evaluated for impairment$16,126
 $1,229
 $811
 $18,166
Ending balance: collectively evaluated for impairment$121,878
 $62,234
 $55,098
 $239,210
Loans:       
Ending balance: total loans(2)
$16,247,543
 $10,348,447
 $9,566,127
 $36,162,117
Ending balance: individually evaluated for impairment    $135,548
 $28,231
 $31,713
 $195,492
Ending balance: collectively evaluated for impairment(3)
$13,857,183
 $8,070,437
 $7,433,959
 $29,361,579
Ending balance: acquired loans accounted for under ASC 310-30(4)    
$2,254,812
 $2,249,779
 $2,100,455
 $6,605,046
        
 As Of and For The Six Months Ended June 30, 2018
(in thousands)Commercial & Industrial Commercial Real Estate Consumer Total
Allowance for loan losses:       
Beginning balance$126,803
 $74,998
 $47,467
 $249,268
Charge-offs(23,786) (2,446) (9,894) (36,126)
Recoveries3,995
 6,964
 3,058
 14,017
Provision for (reversal of) loan losses23,323
 (4,311) 5,554
 24,566
Ending balance$130,335
 $75,205
 $46,185
 $251,725
Ending balance: individually evaluated for impairment$9,474
 $4,687
 $771
 $14,932
Ending balance: collectively evaluated for impairment$120,861
 $70,518
 $45,414
 $236,793
Loans:       
Ending balance: total loans(5)(6)
$12,275,472
 $6,644,171
 $6,237,130
 $25,156,773
Ending balance: individually evaluated for impairment$107,544
 $53,805
 $27,676
 $189,025
Ending balance: collectively evaluated for impairment$12,167,928
 $6,590,366
 $6,209,454
 $24,967,748
        
(1)
As of and for the six months ended June 30, 2019, there was no allowance for loan losses for acquired loans accounted for under ASC 310-30.
(2)
Total before net deferred fees and costs of $23.6 million.
(3)
These loans are presented net of the remaining fair value discount of $12.2 million at June 30, 2019.
(4)
These loans are presented net of the remaining fair value discount of $125.7 million at June 30, 2019.
(5)
Total before net deferred fees and costs of $22.7 million.
(6)
As of and for the six months ended June 30, 2018 , there were no purchased credit-impaired loans and no allowance for loan losses for purchased credit-impaired loans.

Allowance for Loan Losses Roll Forward
As Of and For the Three Months Ended June 30, 2020
(in thousands)Commercial & IndustrialCommercial Real EstateConsumerTotal
Allowance for loan losses:
Beginning balance$216,950  $107,117  $169,385  $493,452  
Charge-offs(23,245) (689) (6,844) (30,778) 
Recoveries3,261  536  2,935  6,732  
Provision for loan losses32,949  64,562  21,731  119,242  
Ending balance$229,915  $171,526  $187,207  $588,648  
As Of and For the Three Months Ended June 30, 2019
(in thousands)Commercial & IndustrialCommercial Real EstateConsumerTotal
Allowance for loan losses:
Beginning balance$135,639  $69,009  $52,388  $257,036  
Charge-offs(11,095) (861) (4,909) (16,865) 
Recoveries1,821  1,954  1,311  5,086  
Provision for (reversal of) loan losses11,639  (6,639) 7,119  12,119  
Ending balance$138,004  $63,463  $55,909  $257,376  
As Of and For the Six Months Ended June 30, 2020
(in thousands)Commercial & IndustrialCommercial Real EstateConsumerTotal
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(38,130) (1,706) (14,816) (54,652) 
Recoveries5,002  935  4,608  10,545  
Provision for loan losses119,571  105,518  43,270  268,359  
Ending balance$229,915  $171,526  $187,207  $588,648  
As Of and For the Six Months Ended June 30, 2019
(in thousands)Commercial & IndustrialCommercial Real EstateConsumerTotal
Allowance for loan losses:
Beginning balance$133,123  $68,796  $48,636  $250,555  
Charge-offs(24,133) (2,093) (11,337) (37,563) 
Recoveries3,810  2,298  2,588  8,696  
Provision for (reversal of) loan losses25,204  (5,538) 16,022  35,688  
Ending balance$138,004  $63,463  $55,909  $257,376  
BelowThe ALL of $588.6 million and the reserve for unfunded commitments of $61.0 million, which is a detailed summaryrecorded in other liabilities, comprise the total ACL of impaired loans (including TDRs)$649.7 million at June 30, 2020. The ACL increased during the second quarter of 2020 by class$117.8 million to $649.7 million as of June 30, 2019 and December 31, 2018 and2020.Since the adoption of CECL on January 1, 2020, the ACL has increased $256.5 million.The increase for the three and six months ended June 30, 2019 and 2018.2020 continues to be primarily driven by the deteriorated economic environment caused by the COVID-19 pandemic. At Provision for credit losses (which includes the provision for loan losses and unfunded commitments) of $141.9 million and $300.6 million for the three and six months ended
23


June 30, 20192020, respectively, resulted in the building of the ACL required under CECL primarily as a result of deterioration in the economic environment due to the impact of COVID-19.
Our modeling process incorporates quantitative and Decemberqualitative considerations that are used to inform CECL estimates. The internally developed economic forecast used to determine the ACL as of June 30, 2020 was approved late in the second quarter of 2020 pursuant to Synovus' economic forecasting governance processes. The economic assumptions for the second quarter of 2020 included the estimated impact of currently enacted government stimulus plans and an unemployment rate ending the 2020 year around 10%. Our model forecast includes moderate economic expansion following significant declines in real GDP in the second quarter of 2020. This represented further deterioration of the economic environment since March 31, 2018, impaired2020 and resulted in an increase of the ACL to loans coverage ratio during the quarter of $69.1 million and $51.3 million, respectively, were on non-accrual status.24 bps to 1.63% at June 30, 2020, or 1.74% excluding PPP loans.

Significant economic uncertainty remains as a result of the continuing COVID-19 crisis, and the trajectory of the economic recovery including any additional government stimulus plans will impact subsequent period CECL reserves.
Impaired Loans (including accruing TDRs)
 June 30, 2019 December 31, 2018
  Recorded Investment   Recorded Investment 
(in thousands)Unpaid Principal BalanceWithout an ALLWith an ALLRelated Allowance Unpaid Principal BalanceWithout an ALLWith an ALLRelated Allowance
Commercial, financial and agricultural$94,581
$24,420
$59,760
$13,248
 $65,150
$22,298
$34,222
$7,133
Owner-occupied53,576
116
51,252
2,878
 49,588

48,902
3,074
Total commercial and industrial148,157
24,536
111,012
16,126
 114,738
22,298
83,124
10,207
Investment properties12,493

12,494
585
 13,916

13,916
1,523
1-4 family properties5,369

5,369
181
 5,586

5,586
131
Land and development11,636
1,055
9,313
463
 16,283
265
13,431
944
Total commercial real estate29,498
1,055
27,176
1,229
 35,785
265
32,933
2,598
Consumer mortgages19,988
883
18,814
268
 19,506

19,506
343
Home equity lines5,666

5,604
335
 3,264

3,235
224
Other consumer loans6,412

6,412
208
 5,565

5,565
177
Total consumer32,066
883
30,830
811
 28,335

28,306
744
Total loans$209,721
$26,474
$169,018
$18,166
 $178,858
$22,563
$144,363
$13,549
          

 Three Months Ended June 30, 2019 Three Months Ended June 30, 2018
(in thousands)Average Recorded Investment
Interest Income Recognized(1)
 Average Recorded Investment
Interest Income Recognized(1)
Commercial, financial and agricultural$86,393
$384
 $71,505
$452
Owner-occupied51,549
614
 38,432
444
Total commercial and industrial137,942
998
 109,937
896
Investment properties12,929
157
 24,439
220
1-4 family properties5,096
134
 11,217
226
Land and development11,061
34
 18,428
74
Total commercial real estate29,086
325
 54,084
520
Consumer mortgages19,565
217
 3,986
200
Home equity lines4,849
37
 21,239
56
Other consumer loans5,940
81
 4,985
71
Total consumer30,354
335
 30,210
327
 Total loans$197,382
$1,658
 $194,231
$1,743
      
(1)
Of the interest income recognized during the three months ended June 30, 2019 and 2018, cash-basis interest income was $290 thousand and $394 thousand, respectively.


 Six Months Ended June 30, 2019 Six Months Ended June 30, 2018
(in thousands)Average Recorded Investment
Interest Income Recognized(1)
 Average Recorded Investment
Interest Income Recognized(1)
Commercial, financial and agricultural$81,373
$938
 $73,693
$851
Owner-occupied50,794
1,140
 38,073
814
Total commercial and industrial132,167
2,078
 111,766
1,665
Investment properties12,984
298
 23,604
418
1-4 family properties5,302
265
 11,466
442
Land and development11,062
69
 18,299
150
Total commercial real estate29,348
632
 53,369
1,010
Consumer mortgages19,801
429
 5,245
395
Home equity lines4,076
73
 20,613
102
Other consumer loans5,701
159
 5,188
143
Total consumer29,578
661
 31,046
640
 Total loans$191,093
$3,371
 $196,181
$3,315
      
(1)
Of the interest income recognized during the six months ended June 30, 2019 and 2018, cash-basis interest income was $690 thousand and $535 thousand, respectively.
Information about Synovus' TDRs is presented in the following tables. Modifications of loans thatSynovus began entering into loan modifications with borrowers in response to the COVID-19 pandemic, which have not been classified as TDRs, and therefore are accounted for within a pool under ASC Topic 310-30 are excluded as TDRs. Accordingly, such modifications do not resultincluded in the removaldiscussion below. See "Part I-Item 1. Financial Statements and Supplementary Data - Note 1 - Basis of those loans from the pool, even if the modification of those loans would otherwise be considered a TDR. As a result, all such acquired loans that would otherwise meet the criteriaPresentation" in this Report for classification as a TDR are excluded from the tables below.more information on Synovus' loan modifications due to COVID-19. The following tables represent, by concession type, the post-modification balance for loans modified or renewed during the three and six months ended June 30, 20192020 and 20182019 that were reported as accruing or non-accruing TDRs.

TDRs by Concession Type
Three Months Ended June 30, 2020
(in thousands, except contract data)Number of ContractsBelow Market Interest Rate
Other Concessions(1)
Total
Commercial, financial and agricultural40  $1,503  $2,000  $3,503  
Owner-occupied 453  1,434  1,887  
Total commercial and industrial47  1,956  3,434  5,390  
Investment properties 5,599  —  5,599  
1-4 family properties 69  549  618  
Land and development 91  —  91  
Total commercial real estate 5,759  549  6,308  
Consumer mortgages10  556  1,482  2,038  
Home equity lines14  181  918  1,099  
Other consumer loans18  19  798  817  
Total consumer42  756  3,198  3,954  
Total TDRs96  $8,471  $7,181  $15,652  
(2)
Three Months Ended June 30, 2019
(in thousands, except contract data)Number of ContractsBelow Market Interest Rate
Other Concessions(1)
Total
Commercial, financial and agricultural21  $1,343  $1,589  $2,932  
Owner-occupied 1,082  —  1,082  
Total commercial and industrial25  2,425  1,589  4,014  
Investment properties 180  —  180  
1-4 family properties 514  —  514  
Land and development 169  —  169  
Total commercial real estate 863  —  863  
Consumer mortgages 109  —  109  
Home equity lines24  2,321  —  2,321  
Other consumer loans34  586  1,332  1,918  
Total consumer59  3,016  1,332  4,348  
Total TDRs91  $6,304  $2,921  $9,225  
(3)
TDRs by Concession Type  
 Three Months Ended June 30, 2019 
(in thousands, except contract data)Number of Contracts Below Market Interest Rate 
Other Concessions(1)
 Total 
Commercial, financial and agricultural21
 $1,343
 $1,589
 $2,932
 
Owner-occupied4
 1,082
 
 1,082
 
Total commercial and industrial25
 2,425
 1,589
 4,014
 
Investment properties1
 180
 
 180
 
1-4 family properties4
 514
 
 514
 
Land and development2
 169
 
 169
 
Total commercial real estate7
 863
 
 863
 
Consumer mortgages1
 109
 
 109
 
Home equity lines24
 2,321
 
 2,321
 
Other consumer loans34
 586
 1,332
 1,918
 
Total consumer59
 3,016
 1,332
 4,348
 
Total TDRs91
 $6,304
 $2,921
 $9,225
(2) 
   
 Three Months Ended June 30, 2018 
(in thousands, except contract data)Number of Contracts Below Market Interest Rate 
Other Concessions(1)
 Total 
Commercial, financial and agricultural5
 $
 $576
 $576
 
Owner-occupied4
 2,094
 592
 2,686
 
Total commercial and industrial9
 2,094
 1,168
 3,262
 
Investment properties2
 6,011
 256
 6,267
 
1-4 family properties1
 
 492
 492
 
Land and development3
 
 1,786
 1,786
 
Total commercial real estate6
 6,011
 2,534
 8,545
 
Consumer mortgages7
 2,963
 87
 3,050
 
Home equity lines3
 172
 148
 320
 
Other consumer loans17
 388
 313
 701
 
Total consumer27
 3,523
 548
 4,071
 
Total TDRs42
 $11,628
 $4,250
 $15,878
(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 each of the three months ended ending June 30, 20192020 and 2018.2019.
(2) NoNaN net charge-offs were recorded during the three months ended June 30, 2019 upon restructuring of these loans.2020.
(3) NoNaN net charge-offs were recorded during the three months ended June 30, 2018 upon restructuring of these loans.2019.
24



TDRs by Concession TypeSix Months Ended June 30, 2019 
(in thousands, except contract data)Number of Contracts Below Market Interest Rate 
Other Concessions(1)
 Total 
Commercial, financial and agricultural34
 $3,126
 $2,488
 $5,614
 
Owner-occupied6
 2,031
 
 2,031
 
Total commercial and industrial40
 5,157
 2,488
 7,645
 
Investment properties2
 663
 
 663
 
1-4 family properties10
 1,307
 
 1,307
 
Land and development2
 169
 
 169
 
Total commercial real estate14
 2,139
 
 2,139
 
Consumer mortgages5
 237
 1,214
 1,451
 
Home equity lines25
 2,321
 105
 2,426
 
Other consumer loans52
 694
 2,377
 3,071
 
Total consumer82
 3,252
 3,696
 6,948
 
Total TDRs136
 $10,548
 $6,184
 $16,732
(2 
) 
   
 Six Months Ended June 30, 2018 
(in thousands, except contract data)Number of Contracts Below Market Interest Rate 
Other Concessions(1)
 Total 
Commercial, financial and agricultural14
 $
 $1,565
 $1,565
 
Owner-occupied6
 4,799
 684
 5,483
 
Total commercial and industrial20
 4,799
 2,249
 7,048
 
Investment properties3
 6,011
 2,215
 8,226
 
1-4 family properties7
 965
 492
 1,457
 
Land and development3
 
 1,786
 1,786
 
Total commercial real estate13
 6,976
 4,493
 11,469
 
Consumer mortgages14
 4,695
 87
 4,782
 
Home equity lines3
 172
 148
 320
 
Other consumer loans31
 925
 821
 1,746
 
Total consumer48
 5,792
 1,056
 6,848
 
Total TDRs81
 $17,567
 $7,798
 $25,365
(3) 
         


Six Months Ended June 30, 2020
(in thousands, except contract data)Number of ContractsBelow Market Interest Rate
Other Concessions(1)
Total
Commercial, financial and agricultural76  $5,226  $4,011  $9,237  
Owner-occupied12  1,821  1,530  3,351  
Total commercial and industrial88  7,047  5,541  12,588  
Investment properties 28,669  —  28,669  
1-4 family properties10  793  991  1,784  
Land and development 541  —  541  
Total commercial real estate16  30,003  991  30,994  
Consumer mortgages16  1,072  2,566  3,638  
Home equity lines33  455  1,882  2,337  
Other consumer loans47  97  2,694  2,791  
Total consumer96  1,624  7,142  8,766  
Total TDRs200  $38,674  $13,674  $52,348  
(2)
Six Months Ended June 30, 2019
(in thousands, except contract data)Number of ContractsBelow Market Interest Rate
Other Concessions(1)
Total
Commercial, financial and agricultural34  $3,126  $2,488  $5,614  
Owner-occupied 2,031  —  2,031  
Total commercial and industrial40  5,157  2,488  7,645  
Investment properties 663  —  663  
1-4 family properties10  1,307  —  1,307  
Land and development 169  —  169  
Total commercial real estate14  2,139  —  2,139  
Consumer mortgages 237  1,214  1,451  
Home equity lines25  2,321  105  2,426  
Other consumer loans52  694  2,377  3,071  
Total consumer82  3,252  3,696  6,948  
Total TDRs136  $10,548  $6,184  $16,732  
(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 each of the six months ended ending June 30, 20192020 and 2018.2019.
(2) NoNaN net charge-offs were recorded during the six months ended June 30, 2019 upon restructuring of these loans.2020.
(3) NoNaN net charge-offs were recorded during the six months ended June 30, 2018 upon restructuring of these loans.2019.
For both the three and six months ended June 30, 20192020 there was one1 default with a recorded investment of $5$27 thousand and 4 defaults with a recorded investment of $645 thousand, respectively, 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 eight defaults1 default with a recorded investment of $10.5 million$5 thousand for both the three and six months ended June 30, 2018.
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 closely approximates the reserve derived through 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 June 30, 2019, the allowance for loan losses allocated to accruing TDRs totaling $126.4 million was $5.7 million compared to accruing TDRs of $115.6 million with an allocated allowance for loan losses of $6.1 million at December 31, 2018. 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.2019. As of June 30, 2019 2020and December 31, 2018,2019, there were no0 commitments to lend a material amount of additional funds to any customer whose loan was classified as a TDR.
25


Note 5 - Goodwill and Other Intangible Assets
ChangesGoodwill allocated to the carrying amount of goodwill byeach reporting unit for the six months endedat June 30, 2019 are provided in the following table. There were no changes to the carrying amount of goodwill during the year ended2020 and December 31, 2018.2019 is presented as follows (the FMS reportable segment includes 2 reporting units of Consumer Mortgages and Wealth Management):
(in thousands) Synovus Bank Reporting Unit Trust Services Reporting Unit Total
Balance as of December 31, 2018 $32,884
 $24,431
 $57,315
Goodwill acquired during the year (preliminary allocation) and adjustments 435,075
 
 435,075
Balance as of June 30, 2019 $467,959
 $24,431
 $492,390
       

(in thousands)Community Banking Reporting UnitWholesale Banking Reporting UnitConsumer Mortgages Reporting UnitWealth Management Reporting UnitTotal
Balance as of December 31, 2019$256,323  $171,636  $44,877  $24,431  $497,267  
Goodwill acquired and adjustments during the year—  —  —  —  —  
Balance as of June 30, 2020$256,323  $171,636  $44,877  $24,431  $497,267  
Effective January 1,Goodwill is evaluated for impairment on an annual basis or whenever an event occurs or circumstances change to indicate that it is more likely than not that an impairment loss has been incurred (i.e., a triggering event). Synovus conducted a goodwill impairment assessment as of December 31, 2019, Synovus acquired FCB. In connection with the acquisition, Synovus recorded $435.1 million offollowing Synovus' reorganization, applying ASC 350-20-35-3A Goodwill Subsequent Measurement - Qualitative Assessment Approach and concluded that goodwill based on Acquisition Date preliminary fair value estimates of the assets acquired and liabilities assumed in the business combination, including measurement period adjustments recorded during the three months ended June 30, 2019, the most significant of which consisted of a decrease in core deposit intangible assets of $10.8 million, with offsetting increases in goodwill and net deferred tax assets. Additionally, Synovus recorded a $57.4 million core deposit intangible asset on the Acquisition Date, including the aforementioned measurement period adjustment recorded during the three months ended June 30, 2019.was not impaired. See "Part III - Item 1.8. Financial Statements and Supplementary Data - Note 2 - Acquisitions" in this Report19 -Segment Reporting" to the consolidated financial statements of Synovus' 2019 Form 10-K for additional information on the FCB acquisition.Synovus' reorganization during 2019.
During the second quarter of 2020, Synovus assessed the indicators of goodwill impairment for each reporting unit and noted certain events related to COVID-19 that indicated it was more likely than not that goodwill was impaired, necessitatingan interim test. Triggering events included Synovus' stock price trading below book value for the entire quarter, an extremely low interest rate environment, as well as general economic uncertainty surrounding the pandemic, which has led to an economic recession.As such, Synovus performed a quantitative assessment of goodwill impairment as of June 30, 2019, Synovus completed2020, which included determining the estimated fair value of each reporting unit, utilizing a combination of discounted cash flow and market-based approaches, and comparing that fair value to each reporting unit's carrying amount. The discounted cash flow method included updated internal forecasts, long-term profitability targets, growth rates and discount rates.The market approach was based on a comparison of certain financial metrics of Synovus' reporting units to guideline public company peers. The income-based discounted cash flow approach was more heavily weighted (60%) than the market-based approach (40%) due to significant volatility in the market since the pandemic was declared a National Emergency.
Based on assessments performed at June 30, 2020 and March 31, 2020, the fair value of each of our reporting units exceeded its annualcarrying amount at June 30, 2020 and March 31, 2020; therefore, goodwill is 0t impaired. However, the excess of fair value over the carrying amount for the Community Banking and Wholesale Banking reporting units was significantly less than the excess at December 31, 2019.
Due to the high degree of subjectivity involved in estimating the fair value of Synovus' reporting units, a significant decline in Synovus' expected future cash flows or estimated growth rates due to further deterioration in the economic environment, or a prolonged decline in the price of Synovus' common stock, may necessitate additional future interim assessments that could result in a goodwill impairment evaluation applying ASC 350-20-35-3A, Goodwill Subsequent Measurement - Qualitative Assessment Approach based on the preliminary allocation of goodwillcharge that is material to the reporting units shown above and concluded that goodwill wasSynovus' results from operations, but would not impaired.materially impact our financial condition.
The following table shows the gross carrying amount and accumulated amortization of other intangible assets as of June 30, 20192020 and December 31, 2018,2019, which primarily consist of core deposit intangible assets acquired in the FCB acquisition. Core deposit intangible assets were $52.2 million at June 30, 2019. The CDI is being amortized over its estimated useful life of approximately ten years utilizing an accelerated method. AmortizationAggregate other intangible assets amortization expense recognized onfor the three and six months ended June 30, 2020 was $2.6 million and $5.3 million, respectively. Aggregate other intangible assets amortization for the three and six months ended June 30, 2019 was $2.4 million and $5.8 million, respectively. Amortization expense recognized on intangible assets for the three and six months ended June 30, 2018 was $292 thousand and $583 thousand, respectively.
(in thousands)Gross Carrying AmountAccumulated AmortizationNet Carrying Value
June 30, 2020
CDI$57,400  $(15,132) $42,268  
Other12,500  (4,376) 8,124  
Total other intangible assets$69,900  $(19,508) $50,392  
December 31, 2019
CDI$57,400  $(10,436) $46,964  
Other12,500  (3,793) 8,707  
Total other intangible assets$69,900  $(14,229) $55,671  
(in thousands) June 30, 2019 December 31, 2018
Other intangible assets, gross carrying amount $70,328
 $12,928
Other intangible assets, accumulated amortization (8,855) (3,053)
Other intangible assets, net carrying amount $61,473
 $9,875
     

26


Note 6 - Shareholders' Equity and Other Comprehensive Income (Loss)

Stock issued for acquisition of FCB
On January 1, 2019, as part of the FCB acquisition, Synovus issued 22.0 million shares of common stock and reissued 27.4 million shares of treasury stock and incurred $417 thousand in costs related to the issuance. FCB stockholders received 1.055 shares of Synovus common stock for each outstanding share of FCB common stock. Also, under the terms of the Merger Agreement, outstanding stock options, non-vested restricted share units, and warrants were converted into options, restricted share units, and warrants, respectively, to purchase and receive Synovus common stock. The total value of the acquisition consideration transferred by Synovus was $1.63 billion. See "Part I - Item 1. Financial Statements and Supplementary Data - Note 2 - Acquisitions" in this Report for more information on the FCB acquisition.
Repurchases of Common Stock
On June 17, 2019, Synovus announced thatDuring the Board of Directors increased its prior $400 million share repurchase authorization to $725 million for the year 2019. As ofthree months ended June 30, 2019,2020, Synovus haddid not repurchase any shares of its common stock. During the six months ended June 30, 2020, Synovus repurchased under this program a total of $345.0$16.2 million, or 9.2 million450 thousand shares of its common stock, at an average price of $37.43$36.08 per share.share, under the share repurchase program announced on January 24, 2020.
Dividends
The following table presents dividends declared related to common stock. For information related to preferred stock dividends, see "Part II - Item 8. Financial Statements and Supplementary Data - Note 10 - Shareholders' Equity and Other Comprehensive Income" to the consolidated financial statements of Synovus' 2019 Form 10-K.
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Cash dividends declared per share$0.33  $0.30  $0.66  $0.60  

Equity-Based Compensation Plans
The following tables summarize the status of Synovus' stock options, restricted share units, market restricted share units, and performance share units as of June 30, 2020 and activity for the six months ended June 30, 2020.
Stock Options
(in thousands, except per share amounts)QuantityWeighted-Average Exercise Price Per Share
Outstanding at January 1, 20203,037  $22.74  
Exercised(232) 28.59  
Expired/canceled(16) 25.00  
Outstanding at June 30, 20202,789  $22.24  

RSUs, MRSUs, and PSUs
(in thousands, except per share amounts)QuantityWeighted-Average Grant Date Fair Value Per Share
Non-vested at January 1, 20201,312  $39.28  
Granted743  35.11  
Quantity change based on TSR and performance factors44  35.11  
Dividend equivalents granted41  35.11  
Vested(582) 38.40  
Forfeited(48) 36.22  
Non-vested at June 30, 20201,510  $37.43  
Changes in Accumulated Other Comprehensive Income (Loss) by Component (Net of Income Taxes)

The following tables illustrate activity within the balances in accumulated other comprehensive income (loss) by component

for the three and six months ended June 30, 20192020 and 2018.2019.
Changes in Accumulated Other Comprehensive Income (Loss) by Component (Net of Income Taxes)
(in thousands)
Net unrealized losses on cash flow hedges(1)
 
Net unrealized gains (losses) on investment securities available for sale(1)
 Post-retirement unfunded health benefit Total
Balance, April 1, 2019$(12,137) $(7,071) $866
 $(18,342)
Other comprehensive income (loss) before reclassifications
 66,290
 
 66,290
Amounts reclassified from AOCI
 1,367
 (26) 1,341
Net current period other comprehensive income (loss)
 67,657
 (26) 67,631
Balance, June 30, 2019$(12,137) $60,586
 $840
 $49,289
        
Balance, April 1, 2018$(12,137) $(96,647) $1,007
 $(107,777)
Other comprehensive income (loss) before reclassifications
 (18,878) 
 (18,878)
Amounts reclassified from AOCI
 960
 (25) 935
Net current period other comprehensive income (loss)
 (17,918) (25) (17,943)
Balance, June 30, 2018$(12,137) $(114,565) $982
 $(125,720)
        
Balance, January 1, 2019$(12,137) $(83,179) $896
 $(94,420)
Other comprehensive income (loss) before reclassifications
 142,453
 
 142,453
Amounts reclassified from AOCI
 1,312
 (56) 1,256
Net current period other comprehensive income (loss)
 143,765
 (56) 143,709
Balance, June 30, 2019$(12,137) $60,586
 $840
 $49,289
        
Balance, December 31, 2017$(12,137) $(43,470) $853
 $(54,754)
Reclassification from adoption of ASU 2018-02
 (7,763) 175
 (7,588)
Cumulative-effect adjustment from adoption of ASU 2016-01
 117
 
 117
Other comprehensive income (loss) before reclassifications
 (64,409) 
 (64,409)
Amounts reclassified from AOCI
 960
 (46) 914
Net current period other comprehensive income (loss)
 (63,449) (46) (63,495)
Balance, June 30, 2018$(12,137) $(114,565) $982
 $(125,720)
        
27


Changes in Accumulated Other Comprehensive Income (Loss) by Component (Net of Income Taxes)
(in thousands)
Net unrealized gains (losses) on investment securities available for sale(1)
Net unrealized gains (losses) on cash flow hedges(1)
Post-retirement unfunded health benefitTotal
Balance, April 1, 2020$194,524  $61,925  $462  $256,911  
Other comprehensive income (loss) before reclassifications(8,847) 6,538  —  (2,309) 
Amounts reclassified from AOCI(51,432) (200) —  (51,632) 
Net current period other comprehensive income (loss)(60,279) 6,338  —  (53,941) 
Balance at June 30, 2020$134,245  $68,263  $462  $202,970  
Balance, April 1, 2019$(7,071) $(12,137) $866  $(18,342) 
Other comprehensive income (loss) before reclassifications66,290  —  —  66,290  
Amounts reclassified from AOCI1,367  —  (26) 1,341  
Net current period other comprehensive income (loss)67,657  —  (26) 67,631  
Balance at June 30, 2019$60,586  $(12,137) $840  $49,289  
Balance, December 31, 2019$83,666  $(18,487) $462  $65,641  
Other comprehensive income (loss) before reclassifications108,484  87,039  —  195,523  
Amounts reclassified from AOCI(57,905) (289) —  (58,194) 
Net current period other comprehensive income (loss)50,579  86,750  —  137,329  
Balance at June 30, 2020$134,245  $68,263  $462  $202,970  
Balance, December 31, 2018$(83,179) $(12,137) $896  $(94,420) 
Other comprehensive income (loss) before reclassifications142,453  —  —  142,453  
Amounts reclassified from AOCI1,312  —  (56) 1,256  
Net current period other comprehensive income (loss)143,765  —  (56) 143,709  
Balance at June 30, 2019$60,586  $(12,137) $840  $49,289  
(1) In accordance with ASC 740-20-45-11(b), in 2010 and 2011, Synovus recorded a deferred tax asset valuation allowance associated with net unrealized losses not recognized in income directly to other comprehensive income (loss) by applying the portfolio approach which treats derivative instruments and available for sale securities as a single portfolio. For all periods presented, the ending balance in net unrealized gains (losses) on cash flow hedges and investment securities available for sale includes unrealized losses of $12.1 million and $13.3 million, respectively, related to the residual tax effects remaining in OCI due to the previously established deferred tax asset valuation allowance. Underallowances in 2010 and 2011. In accordance with ASC 740-20-45-11(b), under the portfolio approach, these unrealized losses are realized at the time the entire portfolio is sold or disposed.

28



Note 7 - Fair Value Accounting
Fair value accounting guidance defines fair value as the exchange price that would be received to sell an asset or paid to transfer a liability (an "exit price") in the principal or most advantageous market available to the entity in an orderly transaction between market participants, on the measurement date. See "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" to the consolidated financial statements of Synovus' 20182019 Form 10-K for a description of thehow fair value hierarchy and valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis.measurements are determined.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables present all financial instruments measured at fair value on a recurring basis as of June 30, 20192020 and December 31, 2018.2019.
June 30, 2020
(in thousands)Level 1Level 2Level 3Total Assets and Liabilities at Fair Value
Assets
Trading securities:
Mortgage-backed securities issued by U.S. Government agencies$—  $18  $—  $18  
Commercial mortgage-backed securities issued by U.S. Government sponsored enterprises—  288  —  288  
Other mortgage-backed securities—  1,620  —  1,620  
State and municipal securities—  165  —  165  
Asset-backed securities—  2,535  —  2,535  
Total trading securities$—  $4,626  $—  $4,626  
Investment securities available for sale:
U.S. Treasury securities$19,921  $—  $—  $19,921  
U.S. Government agency securities—  171,366  —  171,366  
Mortgage-backed securities issued by U.S. Government agencies—  864,428  —  864,428  
Mortgage-backed securities issued by U.S. Government sponsored enterprises—  4,444,252  —  4,444,252  
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises—  1,213,081  —  1,213,081  
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises—  365,253  —  365,253  
State and municipal securities—  1,007  —  1,007  
Corporate debt securities and other debt securities—  116,523  1,662  118,185  
Total investment securities available for sale$19,921  $7,175,910  $1,662  $7,197,493  
Mortgage loans held for sale—  266,306  —  266,306  
Private equity investments—  —  698  698  
Mutual funds and mutual funds held in rabbi trusts34,219  —  —  34,219  
GGL/SBA loans servicing asset—  —  3,019  3,019  
Derivative assets—  496,978  —  496,978  
Liabilities
Earnout liability$—  $—  $15,924  $15,924  
Derivative liabilities—  194,376  1,755  196,131  
 June 30, 2019
(in thousands)Level 1 Level 2 Level 3 Total Assets and Liabilities at Fair Value
Assets       
Trading securities:       
U.S. Government agency securities$
 $31
 $
 $31
Mortgage-backed securities issued by U.S. Government agencies
 3,504
 
 3,504
Collateralized mortgage obligations issued by
U.S. Government sponsored enterprises    

 999
 
 999
Other mortgage-backed securities
 1,464
 
 1,464
State and municipal securities
 382
 
 382
Corporate debt securities
 77
 
 77
Total trading securities$
 $6,457
 $
 $6,457
Investment securities available for sale:       
U.S. Treasury securities$19,689
 $
 $
 $19,689
U.S. Government agency securities
 65,687
 
 65,687
Mortgage-backed securities issued by U.S. Government agencies
 88,277
 
 88,277
Mortgage-backed securities issued by U.S. Government sponsored enterprises
 4,948,671
 
 4,948,671
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises
 862,533
 
 862,533
Commercial mortgage-backed securities issued by U.S. Government sponsored enterprises
 368,443
 
 368,443
State and municipal securities
 2,100
 
 2,100
Asset-backed securities
 505,117
 
 505,117
 Corporate debt securities    
 144,478
 2,017
 146,495
Total investment securities available for sale$19,689
 $6,985,306
 $2,017
 $7,007,012
Mortgage loans held for sale
 81,855
 
 81,855
Private equity investments
 
 13,341
 13,341
Mutual funds16,390
 
 
 16,390
Mutual funds held in rabbi trusts14,816
 
 
 14,816
GGL/SBA loans servicing asset
 
 3,326
 3,326
Derivative assets:       
Interest rate contracts$
 $134,504
 $
 $134,504
Mortgage derivatives(1)

 1,892
 
 1,892
Total derivative assets$
 $136,396
 $
 $136,396
Liabilities       
Earnout liability(2)

 
 14,353
 14,353
Derivative liabilities:       
Interest rate contracts$
 $32,193
 $
 $32,193
Mortgage derivatives(1)

 1,049
 
 1,049
Visa derivative
 
 1,049
 1,049
Total derivative liabilities$
 $33,242
 $1,049
 $34,291
        
29



December 31, 2018December 31, 2019
(in thousands)Level 1 Level 2 Level 3 Total Assets and Liabilities at Fair Value(in thousands)Level 1Level 2Level 3Total Assets and Liabilities at Fair Value
Assets       Assets
Trading securities:       Trading securities:
U.S. Government agency securities$
 $44
 $
 $44
Commercial mortgage-backed securities issued by U.S. Government sponsored enterprisesCommercial mortgage-backed securities issued by U.S. Government sponsored enterprises$—  $2,486  $—  $2,486  
Other mortgage-backed securitiesOther mortgage-backed securities—  1,284  —  1,284  
State and municipal securities
 1,064
 
 1,064
State and municipal securities—  65  —  65  
Asset-backed securitiesAsset-backed securities—  3,227  —  3,227  
Other investments1,128
 894
 
 2,022
Other investments—  150  —  150  
Total trading securities$1,128
 $2,002
 $
 $3,130
Total trading securities$—  $7,212  $—  $7,212  
Investment securities available for sale:       Investment securities available for sale:
U.S. Treasury securities$122,077
 $
 $
 $122,077
U.S. Treasury securities$19,855  $—  $—  $19,855  
U.S. Government agency securities
 38,382
 
 38,382
U.S. Government agency securities—  36,541  —  36,541  
Mortgage-backed securities issued by U.S. Government agencies
 97,205
 
 97,205
Mortgage-backed securities issued by U.S. Government agencies—  56,816  —  56,816  
Mortgage-backed securities issued by U.S. Government sponsored enterprises
 2,398,650
 
 2,398,650
Mortgage-backed securities issued by U.S. Government sponsored enterprises—  5,180,815  —  5,180,815  
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises
 1,188,518
 
 1,188,518
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises—  636,851  —  636,851  
Commercial mortgage-backed securities issued by U.S. Government sponsored enterprises
 129,865
 
 129,865
Corporate debt securities
 15,150
 1,785
 16,935
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprisesCommercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises—  371,592  —  371,592  
State and municipal securitiesState and municipal securities—  2,075  —  2,075  
Asset-backed securitiesAsset-backed securities—  327,400  —  327,400  
Corporate debt securities and other debt securitiesCorporate debt securities and other debt securities—  144,620  2,105  146,725  
Total investment securities available for sale$122,077
 $3,867,770
 $1,785
 $3,991,632
Total investment securities available for sale$19,855  $6,756,710  $2,105  $6,778,670  
Mortgage loans held for sale
 37,129
 
 37,129
Mortgage loans held for sale—  115,173  —  115,173  
Private equity investments
 
 11,028
 11,028
Private equity investments15,502  —  3,887  19,389  
Mutual funds3,168
 
 
 3,168
Mutual funds held in rabbi trusts12,844
 
 
 12,844
Mutual funds and mutual funds held in rabbi trustsMutual funds and mutual funds held in rabbi trusts32,348  —  —  32,348  
GGL/SBA loans servicing asset
 
 3,729
 3,729
GGL/SBA loans servicing asset—  —  3,040  3,040  
Derivative assets:       
Interest rate contracts$
 $18,388
 $
 $18,388
Mortgage derivatives(1)

 944
 
 944
Total derivative assets$
 $19,332
 $
 $19,332
Derivative assetsDerivative assets—  140,016  —  140,016  
Liabilities       Liabilities
Earnout liability(2)

 
 14,353
 14,353
Derivative liabilities:       
Interest rate contracts$
 $15,716
 $
 $15,716
Mortgage derivatives(1)

 819
 
 819
Visa derivative
 
 1,673
 1,673
Total derivative liabilities$
 $16,535
 $1,673
 $18,208
Trading liability for short positionsTrading liability for short positions$1,560  $—  $—  $1,560  
Earnout liabilityEarnout liability—  —  11,016  11,016  
Derivative liabilitiesDerivative liabilities—  34,732  2,339  37,071  
       

(1) 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.
(2) Earnout liability consists of contingent consideration obligation related to the Global One acquisition.

Fair Value Option
Synovus has elected the fair value option for mortgage loans held for sale primarily to ease the operational burden required to maintain hedge accounting for these loans. Synovus is still able to achieve effective economic hedges on mortgage loans held for sale without the time and expense needed to manage a hedge accounting program.
The following table summarizes the difference between the fair value and the unpaid principal balanceUPB of mortgage loans held for sale measured at fair value and the changes in fair value of these loans. An immaterial portion of these changes in fair value was attributable to changes in instrument-specific credit risk.
Mortgage Loans Held for Sale
(in thousands)As of June 30, 2020As of December 31, 2019
Fair value$266,306  $115,173  
Unpaid principal balance257,365  112,218  
Fair value less aggregate unpaid principal balance$8,941  $2,955  
Mortgage Loans Held for Sale 
(in thousands)As of June 30, 2019 As of December 31, 2018
Fair value$81,855
 $37,129
Unpaid principal balance79,873
 35,848
Fair value less aggregate unpaid principal balance$1,982
 $1,281
    

Changes in Fair Value Included in Net Income       
 Three Months Ended June 30, Six Months Ended June 30,
(in thousands)2019 2018 2019 2018
Mortgage loans held for sale$345
 $40
 $701
 $155
        
30



Changes in Fair Value Included in Net Income
Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2020201920202019
Mortgage loans held for sale$5,365  $345  $5,984  $701  
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

During the three and six months ended June 30, 2019 and 2018,2020, Synovus did not have any transfers in or out of Level 3 in the fair value hierarchy. For the three andDuring the six months ended June 30, 2019, total net gains/(losses) includedSynovus had transfers out of Level 3 into Level 1 in earnings attributablethe fair value hierarchy as certain funds within private equity investments became public with traded securities.
Three Months Ended June 30, 2020
(in thousands)Investment Securities Available for SalePrivate Equity InvestmentsGGL / SBA
Loans Servicing Asset
Earnout
Liability
Visa Derivative
Beginning balance, April 1, 2020$1,562  $3,255  $3,149  $(11,016) $(2,050) 
Total gains (losses) realized/unrealized:
Included in earnings—  (2,557) (291) (4,908) —  
Unrealized gains (losses) included in OCI100  —  —  —  —  
Additions—  —  161  —  —  
Settlements—  —  —  —  295  
Ending balance, June 30, 2020$1,662  $698  $3,019  $(15,924) $(1,755) 
Total net gains (losses) for the period included in earnings attributable to the change in unrealized gains/(losses) relating to assets/liabilities still held at June 30, 2020 $—  $(2,557) $—  $(4,908) $—  
Three Months Ended June 30, 2019
(in thousands)Investment Securities Available for SalePrivate Equity InvestmentsGGL / SBA
Loans Servicing Asset
Earnout
Liability
Visa Derivative
Beginning balance, April 1, 2019$1,981  $9,481  $3,447  $(14,353) $(1,366) 
Total gains (losses) realized/unrealized:
Included in earnings—  82  (305) —  —  
Unrealized gains (losses) included in OCI36  —  —  —  —  
Additions—  —  184  —  —  
Settlements—  —  —  —  317  
Ending balance, June 30, 2019$2,017  $9,563  $3,326  $(14,353) $(1,049) 
Total net gains (losses) for the period included in earnings attributable to the change in unrealized gains/(losses) relating to assets/liabilities still held at June 30, 2019$—  $82  $—  $—  $—  
31


Six Months Ended June 30, 2020
(in thousands)Investment Securities Available for SalePrivate Equity InvestmentsGGL / SBA
Loans Servicing Asset
Earnout
Liability
Visa Derivative
Beginning balance, December 31, 2019$2,105  $3,887  $3,040  $(11,016) $(2,339) 
Total gains (losses) realized/unrealized:
Included in earnings—  (3,189) (555) (4,908) —  
Unrealized gains (losses) included in OCI(443) —  —  —  —  
Additions—  —  534  —  —  
Settlements—  —  —  —  584  
Ending balance, June 30, 2020$1,662  $698  $3,019  $(15,924) $(1,755) 
Total net gains (losses) for the period included in earnings attributable to the change in unrealized gains/(losses) relating to assets/liabilities still held at June 30, 2020 $—  $(3,189) $—  $(4,908) $—  
Six Months Ended June 30, 2019
(in thousands)Investment Securities Available for SalePrivate Equity InvestmentsGGL / SBA
Loans Servicing Asset
Earnout
Liability
Visa Derivative
Beginning balance, December 31, 2018$1,785  $11,028  $3,729  $(14,353) $(1,673) 
Total (losses) gains realized/unrealized:
Included in earnings—  110  (793) —  —  
Unrealized gains (losses) included in OCI232  —  —  —  —  
Additions—  —  390  —  —  
Settlements—  —  —  —  624  
Transfers out of Level 3—  (1,575) —  —  —  
Ending balance, June 30, 2019$2,017  $9,563  $3,326  $(14,353) $(1,049) 
Total net gains (losses) for the period included in earnings attributable to the change in unrealized losses relating to assets/liabilities still held at June 30, 2019$—  $110  $—  $—  $—  

32


The table below provides an overview of the valuation techniques and significant unobservable inputs used in those techniques to measure financial instruments that are classified within Level 3 of the valuation hierarchy and are measured at fair value on a recurring basis. The range of sensitivities that management utilized in its fair value calculations is deemed acceptable in the industry with respect to the change in unrealized gains/(losses) relating to assets/liabilities still held at June 30, 2019 were a $1.5 million gain and a $2.3 million gain, respectively. For the three and six months ended June 30, 2018, total net gains/(losses) included in earnings attributable to the change in unrealized gains/(losses) relating to assets/liabilities still held at June 30, 2018 were a $2.4 million loss and a $5.4 million loss, respectively.identified financial instruments.
 Three Months Ended June 30, 2019
(in thousands)Investment Securities Available for Sale Private Equity Investments 
GGL / SBA
Loans Servicing Asset
 Earnout
Liability
 Visa Derivative
Beginning balance, April 1, 2019$1,981
 $11,886
 $3,447
 $(14,353) $(1,366)
Total gains (losses) realized/unrealized:         
Included in earnings
 1,455
 (305) 
 
Unrealized gains (losses) included in OCI36
 
 
 
 
Additions
 
 184
 
 
Settlements
 
 
 
 317
Ending balance, June 30, 2019$2,017
 $13,341
 $3,326
 $(14,353) $(1,049)
Total net gains for the period included in earnings attributable to the change in unrealized gains/(losses) relating to assets/liabilities still held at June 30, 2019    $
 $1,455
 $
 $
 $
  
 Three Months Ended June 30, 2018
(in thousands)Investment Securities Available for Sale Private Equity Investments GGL / SBA
Loans Servicing Asset
 Earnout
Liability
 Visa Derivative
Beginning balance, April 1, 2018$1,852
 $12,715
 $3,971
 $(11,348) $(3,974)
Total (losses) gains realized/unrealized:         
Included in earnings
 (37) (312) 
 (2,328)
Unrealized gains (losses) included in OCI5
 
 
 
 
Additions
 
 527
 
 
Settlements
 
 
 
 359
Ending balance, June 30, 2018$1,857
 $12,678
 $4,186
 $(11,348) $(5,943)
Total net losses for the period included in earnings attributable to the change in unrealized losses relating to assets/liabilities still held at June 30, 2018$
 $(37) $
 $
 $(2,328)
          
 Six Months Ended June 30, 2019
(in thousands)Investment Securities Available for Sale Private Equity Investments GGL / SBA
Loans Servicing Asset
 Earnout
Liability
 Visa Derivative
Beginning balance, January 1, 2019$1,785
 $11,028
 $3,729
 $(14,353) $(1,673)
Total gains (losses) realized/unrealized:         
Included in earnings
 2,313
 (793) 
 
Unrealized gains (losses) included in OCI232
 
 
 
 
Additions
 
 390
 
 
Settlements
 
 
 
 624
Ending balance, June 30, 2019$2,017
 $13,341
 $3,326
 $(14,353) $(1,049)
Total net losses for the period included in earnings attributable to the change in unrealized losses relating to assets/liabilities still held at June 30, 2019    $
 $2,313
 $
 $
 $
          


 Six Months Ended June 30, 2018
(in thousands)Investment Securities Available for Sale Private Equity Investments GGL / SBA
Loans Servicing Asset
 Earnout
Liability
 Visa Derivative
Beginning balance, January 1, 2018$1,935
 $15,771
 $4,101
 $(11,348) $(4,330)
Total (losses) gains realized/unrealized:         
Included in earnings
 (3,093) (734) 
 (2,328)
Unrealized gains (losses) included in OCI(78) 
 
 
 
Additions
 
 819
 
 
Sales and settlements
 
 
 
 715
Ending balance, June 30, 2018$1,857
 $12,678
 $4,186
 $(11,348) $(5,943)
Total net losses for the period included in earnings attributable to the change in unrealized losses relating to assets/liabilities still held at June 30, 2018$
 $(3,093) $
 $
 $(2,328)
          

June 30, 2020
(dollars in thousands)Valuation TechniqueSignificant Unobservable InputLevel 3 Fair ValueRate/Range
Assets measured at fair value on a recurring basis
Investment Securities Available for Sale -
Corporate debt and other debt securities - trust preferred security
Discounted cash flow analysisDiscount rate
Forecasted average Prime reset rate
$1,662   6.51% 3.68%
Private equity investmentsIndividual analysis of each investee companyMultiple 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$698N/A
GGL/SBA loans servicing assetDiscounted cash flow analysisDiscount rate
Prepayment speeds
$3,019 12.16% 16.10%
Earnout liabilityOption pricing methods and Monte Carlo simulationFinancial projections of Global One$15,924N/A
Visa derivative liabilityDiscounted cash flow analysisEstimated timing of resolution of Covered Litigation and future cumulative deposits to the litigation escrow for settlement of the Covered Litigation$1,755
0-1.5 years
(4Q 2021)
Assets Measured at Fair Value on a Non-recurring Basis

Certain assets are recordedrequired to be measured at fair value on a non-recurring basis. Non-recurringnonrecurring basis subsequent to their initial recognition. These assets and liabilities are not measured at fair value on an ongoing basis; however, they are subject to fair value adjustments typically are a resultin certain circumstances, such as when there is evidence of the application of lower of cost or fair value accounting occurring during the period recorded as a charge-off with associated provision expense or a write-down in non-interest expense. For example, if the fair value of an asset in these categories falls below its cost basis, it is considered to be at fair value at the end of the period of the adjustment.impairment. The following table presents assets measured at fair value on a non-recurring basis as of the dates indicated for which there was a fair value adjustment during the period.adjustment.
33




June 30, 2019 December 31, 2018
June 30, 2020December 31, 2019
(in thousands)Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total(in thousands)Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Impaired loans(1)
$
 $
 $1,540
 $1,540
 $
 $
 $21,742
 $21,742
Other loans held for sale
 
 
 
 
 
 1,494
 1,494
Loans(1)
Loans(1)
$—  $—  $21,138  $21,138  $—  $—  $1,461  $1,461  
Other real estate
 
 2,332
 2,332
 
 
 3,827
 3,827
Other real estate—  —  5,902  5,902  —  —  8,023  8,023  
MPS receivableMPS receivable—  —  18,202  18,202  —  —  21,437  21,437  
Other assets held for sale
 
 350
 350
 
 
 1,104
 1,104
Other assets held for sale—  —  1,634  1,634  —  —  1,238  1,238  
               
(1) Collateral-dependent impaired loans that were written down to fair value during the period.
    Other real estate (ORE)ORE properties are included in other assets on the consolidated balance sheets. The carrying value of ORE at June 30, 20192020 and December 31, 20182019 was $14.8$12.0 million and $6.2$14.4 million, respectively.
The following table presents fair value adjustments recognized in earnings for the three and six months ended June 30, 20192020 and 20182019 for assets measured at fair value on a non-recurring basis still held at period-end.
 Three Months Ended June 30, Six Months Ended June 30,
(in thousands)2019 2018 2019 2018
Impaired loans(1)
$
 $6,828
 $2,625
 $7,548
Other real estate612
 
 624
 
Other assets held for sale
 499
 91
 499
        

Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2020201920202019
Loans(1)
$14,950  $—  $14,950  $2,625  
Other real estate1,228  612  1,228  624  
MPS receivable—  —  2,663  —  
Other assets held for sale729  —  2,120  91  
(1)Collateral-dependent impaired loans that were written down to fair value duringof collateral.
The table below provides an overview of the period.valuation techniques and significant unobservable inputs used in those techniques to measure financial instruments that are classified within Level 3 of the valuation hierarchy and are measured at fair value on a non-recurring basis.


June 30, 2020
Valuation TechniqueSignificant Unobservable Input
Range
(Weighted Average)(1)
Assets measured at fair value on a non-recurring basis
LoansThird-party appraised value of collateral less estimated selling costsDiscount to appraised value
Estimated selling costs
0%-43% (24%) 0%-10% (7%)
Other real estateThird-party appraised value of real estate less estimated selling costsDiscount to appraised value
Estimated selling costs
0%-33% (23%) 0%-10% (7%)
MPS receivable(2)
Third-party appraised value of business less estimated selling costsDiscount to appraised value
Estimated selling costs
N/A
Other assets held for saleThird-party appraised value less estimated selling costs or BOVDiscount to appraised value
Estimated selling costs
0%-66% (63%) 0%-10% (7%)
(1) The weighted average is the measure of central tendencies; it is not the value that management is using for the asset or liability.
(2) See "Part I - Item 1. Notes to Unaudited Interim Financial Statements - Note 10 - Commitments and Contingencies" of this Report for more information on this receivable which was classified as a NPA at June 30, 2020 and December 31, 2019.
Fair Value of Financial Instruments
The following tables present the carrying and estimated fair values of financial instruments at June 30, 20192020 and December 31, 2018.2019. The fair values represent management’s best estimates based on variousa range of methodologies and assumptions. See "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" to the consolidated financial statements of Synovus' 20182019 Form 10-K for a description of how fair value measurements are determined.
34


June 30, 2019June 30, 2020
(in thousands)Carrying Value Fair Value Level 1 Level 2 Level 3(in thousands)Carrying ValueFair ValueLevel 1Level 2Level 3
Financial assets         Financial assets
Total cash, cash equivalents, restricted cash, and restricted cash equivalents$1,151,321
 $1,151,321
 $1,151,321
 $
 $
Total cash, cash equivalents, restricted cash, and restricted cash equivalents$1,571,225  $1,571,225  $1,571,225  $—  $—  
Trading securities6,457
 6,457
 
 6,457
 
Trading securities4,626  4,626  —  4,626  —  
Investment securities available for sale7,007,012
 7,007,012
 19,689
 6,985,306
 2,017
Investment securities available for sale7,197,493  7,197,493  19,921  7,175,910  1,662  
Mortgage loans held for sale81,855
 81,855
 
 81,855
 
Other loans held for sale4,861
 4,861
 
 
 4,861
Loans held for saleLoans held for sale900,936  900,936  —  266,306  634,630  
Private equity investments13,341
 13,341
 
 
 13,341
Private equity investments698  698  —  —  698  
Mutual funds16,390
 16,390
 16,390
 
 
Mutual funds held in rabbi trusts14,816
 14,816
 14,816
 
 
Mutual funds and mutual funds held in rabbi trustsMutual funds and mutual funds held in rabbi trusts34,219  34,219  34,219  —  —  
Loans, net35,881,185
 35,674,964
 
 
 35,674,964
Loans, net39,325,649  39,386,584  —  —  39,386,584  
GGL/SBA loans servicing asset3,326
 3,326
 
 
 3,326
GGL/SBA loans servicing asset3,019  3,019  —  —  3,019  
Derivative assets136,396
 136,396
 
 136,396
 
Derivative assets496,978  496,978  —  496,978  —  
         
Financial liabilities
 
 
 
  Financial liabilities
Non-interest-bearing deposits$9,205,066
 $9,205,066
 $
 $9,205,066
 $
Non-interest-bearing deposits$12,555,714  $12,555,714  $—  $12,555,714  $—  
Non-time interest-bearing deposits18,264,053
 18,264,053
 
 18,264,053
 
Non-time interest-bearing deposits23,236,436  23,236,436  —  23,236,436  —  
Time deposits10,497,603
 10,542,659
 
 10,542,659
 
Time deposits8,402,430  8,458,264  —  8,458,264  —  
Total deposits$37,966,722
 $38,011,778
 $
 $38,011,778
 $
Total deposits$44,194,580  $44,250,414  $—  $44,250,414  $—  
Federal funds purchased and securities sold under repurchase agreements273,481
 273,481
 273,481
 
 
Federal funds purchased and securities sold under repurchase agreements225,576  225,576  225,576  —  —  
Other short-term borrowings1,330,000
 1,330,000
 
 1,330,000
 
Other short-term borrowings300,000  300,000  —  300,000  —  
Long-term debt2,306,072
 2,334,573
 
 2,334,573
 
Long-term debt2,327,921  2,351,494  —  2,351,494  —  
Earnout liability14,353
 14,353
 
 
 14,353
Earnout liability15,924  15,924  —  —  15,924  
Derivative liabilities34,291
 34,291
 
 33,242
 1,049
Derivative liabilities196,131  196,131  —  194,376  1,755  
 December 31, 2018
(in thousands)Carrying Value Fair Value Level 1 Level 2 Level 3
Financial assets         
Total cash, cash equivalents, restricted cash, and restricted cash equivalents$1,143,564
 $1,143,564
 $1,143,564
 $
 $
Trading securities3,130
 3,130
 1,128
 2,002
 
Investment securities available for sale3,991,632
 3,991,632
 122,077
 3,867,770
 1,785
Mortgage loans held for sale37,129
 37,129
 
 37,129
 
Other loans for sale1,506
 1,506
 
 
 1,506
Private equity investments11,028
 11,028
 
 
 11,028
Mutual funds3,168
 3,168
 3,168
 
 
Mutual funds held in rabbi trusts12,844
 12,844
 12,844
 
 
Loans, net25,696,018
 25,438,890
 
 
 25,438,890
GGL/SBA loans servicing asset3,729
 3,729
 
 
 3,729
Derivative assets19,332
 19,332
 
 19,332
 
          
Financial liabilities         
Non-interest-bearing deposits$7,650,967
 $7,650,967
 $
 $7,650,967
 $
Non-time interest-bearing deposits14,065,959
 14,065,959
 
 14,065,959
 
Time deposits5,003,396
 4,989,570
 
 4,989,570
 
     Total deposits$26,720,322
 $26,706,496
 $
 $26,706,496
 $
Federal funds purchased and securities sold under repurchase agreements237,692
 237,692
 237,692
 
 
Other short-term borrowings650,000
 650,000
 
 650,000
 
Long-term debt1,657,157
 1,649,642
 
 1,649,642
 
Earnout liability14,353
 14,353
 
 
 14,353
Derivative liabilities18,208
 18,208
 
 16,535
 1,673
          
35



December 31, 2019
(in thousands)Carrying ValueFair ValueLevel 1Level 2Level 3
Financial assets
Total cash, cash equivalents, restricted cash, and restricted cash equivalents$1,186,918  $1,186,918  $1,186,918  $—  $—  
Trading securities7,212  7,212  —  7,212  —  
Investment securities available for sale6,778,670  6,778,670  19,855  6,756,710  2,105  
Mortgage loans held for sale115,173  115,173  —  115,173  —  
Private equity investments19,389  19,389  15,502  —  3,887  
Mutual funds and mutual funds held in rabbi trusts32,348  32,348  32,348  —  —  
Loans, net36,881,048  36,931,256  —  —  36,931,256  
GGL/SBA loans servicing asset3,040  3,040  —  —  3,040  
Derivative assets140,016  140,016  —  140,016  —  
Financial liabilities
Non-interest-bearing deposits$9,439,485  $9,439,485  $—  $9,439,485  $—  
Non-time interest-bearing deposits19,891,711  19,891,711  —  19,891,711  —  
Time deposits9,074,308  9,112,459  —  9,112,459  —  
Total deposits$38,405,504  $38,443,655  $—  $38,443,655  $—  
Federal funds purchased and securities sold under repurchase agreements165,690  165,690  165,690  —  —  
Trading liability for short positions1,560  1,560  1,560  —  —  
Other short-term borrowings1,752,000  1,752,000  —  1,752,000  —  
Long-term debt2,153,897  2,185,717  —  2,185,717  —  
Earnout liability11,016  11,016  —  —  11,016  
Derivative liabilities37,071  37,071  —  34,732  2,339  

Note 8 - Derivative Instruments and Hedging Activities
Synovus utilizes derivative instruments to manage its exposure to various types of interest rate risk, exposures related to liquidity and credit risk, and to facilitate customer transactions. The primary types of derivative instruments utilized by Synovus consist of interest rate swaps, interest rate lock commitments made to prospective mortgage loan customers, and commitments to sell fixed-rate mortgage loans.loans, and foreign currency exchange forwards. Interest rate lock commitments represent derivative instruments since it is intended that such loans will be sold. Synovus may also utilize interest rate swaps to manage interest rate risks primarily arising from its core banking activities. As of June 30, 2019 and December 31, 2018, Synovus had no outstanding interest rate swap contracts utilized to manage interest rate risk related to core banking activities. Synovus is party to master netting arrangements with its dealer counterparties; however, Synovus does not offset assets and liabilities under these arrangements for financial statement presentation purposes. See "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" to the consolidated financial statements of Synovus' 2019 Form 10-K for additional information regarding accounting policies for derivatives.
Hedging Derivatives
Cash flow hedge relationships mitigate exposure to the variability of future cash flows or other forecasted transactions. Synovus has entered into interest rate swap contracts to manage overall cash flow changes related to interest rate risk exposure on index-based variable rate commercial loans. The contracts effectively modify Synovus' exposure to interest rate risk by utilizing receive fixed/pay index-based variable rate interest rate swaps.
For cash flow hedges, the effective portion of the gain or loss related to the derivative instrument is initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings or when the hedge is terminated and included in the same income statement line item as the earnings effect of the hedged item.
Synovus recorded an unrealized gain of $9.8 million, or $7.3 million, after-tax, in OCI, during the first quarter of 2020, related to terminated cash flow hedges, which is being recognized into earnings in conjunction with the effective terms of the original swaps through the third quarter of 2025. Synovus recognized pre-tax income of $270 thousand and $390 thousand, respectively, during the three and six months ended June 30, 2020 related to the amortization of terminated cash flow hedges.
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As of June 30, 2020, Synovus expects to reclassify approximately $39 million of pre-tax gains from AOCI into interest income on cash flow hedges over the next twelve months. Included in this amount is approximately $5 million in pre-tax gains related to the terminated cash flow hedges.As of June 30, 2020, the maximum length of time over which Synovus is hedging its exposure to the variability in future cash flows is through the first quarter of 2024.
For derivative instruments that are not designated as hedging instruments, changes in the fair value of the derivatives are recognized in earnings immediately.
Counterparty Credit Risk and Collateral
Entering into derivative contracts potentially exposes Synovus to the risk of counterparties’ failure to fulfill their legal obligations, including, but not limited to, potential amounts due or payable under each derivative contract. Notional principal amounts are often used to express the volume of these transactions, but the amounts potentially subject to credit risk are much smaller. Synovus assesses the credit risk of its dealer counterparties by regularly monitoring publicly available credit rating information, evaluating other market indicators, and periodically reviewing detailed financials. Dealer collateral requirements are determined via risk-based policies and procedures and in accordance with existing agreements. Synovus seeksseeks to minimize dealer credit risk by dealing with highly rated counterparties and by obtaining collateral for exposures above certain predetermined limits. Management closely monitors credit conditions within the customer swap portfolio, which management deems to be of higher risk than dealer counterparties. Collateral is secured at origination and credit-relatedcredit related fair value adjustments are recorded against the asset value of the derivative as deemed necessary based upon an analysis, which includes consideration of the current asset value of the swap, customer creditrisk rating, collateral value, and customer standing with regards to its swap contractual obligations and other related matters. Such asset values fluctuate based upon changes in interest rates regardless of changes in notional amounts and changes in customer specific risk.

Collateral Requirements
Pursuant to the Dodd-Frank Act, certain derivative transactions have collateral requirements, both at the inception of the trade and as the value of each derivative position changes. As of June 30, 2020 and December 31, 2019, collateral totaling $77.4$159.3 million and $84.6 million, respectively, was pledged to the derivative counterparties to comply with collateral requirements. For derivatives cleared through central clearing houses, the variation margin payments made are legally characterized as settlements of the derivatives. As a result, these variation margin payments are netted against the fair value of the respective derivative contracts in the consolidated balance sheetsheets and related disclosures. At June 30, 20192020 and December 31, 2018,2019, Synovus had a variation margin of $103.0$198.5 million and $3.1$113.7 million respectively, each reducing the derivative liability.

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The following table reflects the notional amount and fair value of derivative instruments included on the consolidated balance sheets.
 June 30, 2019 December 31, 2018
   Fair Value   Fair Value
(in thousands)Notional Amount 
Derivative Assets (1)
 
Derivative Liabilities (2)
 Notional Amount 
Derivative Assets (1)
 
Derivative Liabilities (2)
Derivatives not designated
as hedging instruments:
           
Interest rate contracts(3)
$5,799,682
 $134,504
 $32,193
 $1,840,288
 18,388
 $15,716
Mortgage derivatives - interest rate lock commitments119,590
 1,892
 
 52,420
 944
 
Mortgage derivatives - forward commitments to sell fixed-rate mortgage loans127,519
 
 1,049
 65,500
 
 819
Visa derivative
 
 1,049
 
 
 1,673
Total derivatives not designated as hedging instruments      $136,396
 $34,291
   $19,332
 $18,208
            

June 30, 2020December 31, 2019
Fair ValueFair Value
(in thousands)Notional Amount
Derivative Assets (1)
Derivative Liabilities (2)
Notional Amount
Derivative Assets (1)
Derivative Liabilities (2)
Derivatives in cash flow hedging relationships:
Interest rate contracts$2,750,000  $99,070  $—  $2,000,000  $54  $8,624  
Total derivatives designated as hedging instruments $99,070  $—  $54  $8,624  
Derivatives not designated
as hedging instruments:
Interest rate contracts(3)
$8,647,036  $390,228  $192,556  $7,258,159  $138,672  $25,849  
Mortgage derivatives - interest rate lock commitments348,408  7,680  —  70,481  1,290  —  
Mortgage derivatives - forward commitments to sell fixed-rate mortgage loans325,000  —  1,396  107,000  —  168  
Other contracts(4)
164,430  —  424  145,764  —  91  
Visa derivative—  —  1,755  —  —  2,339  
Total derivatives not designated as hedging instruments $397,908  $196,131  $139,962  $28,447  
(1)Derivative assets are recorded in other assets on the consolidated balance sheets.
(2) Derivative liabilities are recorded in other liabilities on the consolidated balance sheets.
(3) Includes interest rate contracts for customer swaps and offsetting positions, net of variation margin payments.
Synovus has entered into(4) Includes risk participation agreements with counterparties to transfer or assume credit exposures related to interest rate derivatives. Thesold. Additionally, the notional amountsamount of risk participation agreements sold were $102.2purchased was $2.8 million and $69.9$3.0 million at June 30, 20192020 and December 31, 2018,2019, respectively. Assuming all underlying third-party
Synovus also provides foreign currency exchange services, primarily forward contracts, with counterparties to allow commercial customers referenced in the swap contracts defaultedto mitigate exchange rate risk. Synovus covers its risk by entering into an offsetting foreign currency exchange forward contract. The notional amount of foreign currency exchange forwards was $35.1 million and $32.9 million at June 30, 20192020 and December 31, 2018, the exposure from these agreements would not be material based on the2019, respectively. The fair value of foreign currency exchange forwards was negligible at June 30, 2020 and December 31, 2019 due to the underlying swaps.very short duration of these contracts.
The following table presents the effect of hedging derivative instruments on the consolidated statements of income and the total amounts for the respective line item affected for the three and six months ended June 30, 2020 and 2019.
Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2020201920202019
Total amounts presented in the consolidated statements of income in interest income on loans$5,261  $—  $5,086  $—  
Gain/loss on cash flow hedging relationships:(1)
Interest rate swaps:
Realized gains (losses) reclassified from AOCI, pre-tax, to interest income on loans270  —  390  —  
Pre-tax income recognized on cash flow hedges$270  $—  $390  $—  
(1) See "Part I - Item 1. Financial Statements and Supplementary Data - Note 6 - Shareholders' Equity and Other Comprehensive Income (Loss) in this Report for additional information.

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The pre-tax effect of changes in fair value from derivative instruments not designated as hedging instruments on the consolidated statements of income for the three and six months ended June 30, 20192020 and 20182019 is presented below.
Gain (Loss) Recognized in Consolidated Statements of Income
Three Months Ended June 30,Six Months Ended June 30,
(in thousands)Location in Consolidated Statements of Income2020201920202019
Derivatives not designated as hedging instruments:
Interest rate contracts(1) 
Capital markets income$653  $221  $49  $91  
Other contracts(2)
Capital markets income —  (333) —  
Mortgage derivatives - interest rate lock commitmentsMortgage banking income(634) 255  6,390  948  
Mortgage derivatives - forward commitments to sell fixed-rate mortgage loansMortgage banking income3,701  (243) (1,228) (229) 
Total derivatives not designated as hedging instruments$3,724  $233  $4,878  $810  
    Gain (Loss) Recognized in Consolidated Statements of Income
    Three Months Ended June 30, Six Months Ended June 30,
(in thousands) Location in Consolidated Statements of Income 2019 2018 2019 2018
Derivatives not designated as hedging instruments:          
Interest rate contracts(1)    
 Capital markets income $221
 $(16) $91
 $(9)
Mortgage derivatives - interest rate lock commitments Mortgage banking income 255
 (369) 948
 366
Mortgage derivatives - forward commitments to sell fixed-rate mortgage loans Mortgage banking income (243) (311) (229) (119)
Total derivatives not designated as hedging instruments   $233
 $(696) $810
 $238
           
(1) Additionally, losses related to termination of customer swaps of $2.5 million were recorded in other non-interest expense during the first quarter of 2020.
(1)
(2) Includes risk participation agreements sold.
Gain (loss) represents net fair value adjustments (including credit-related adjustments and interest settlements on variation margin payments) for customer swaps and offsetting positions.

Note 9 - Net Income Per Common Share
The following table displays a reconciliation of the information used in calculating basic and diluted earnings per common share for the three and six months ended June 30, 20192020 and 2018.2019.

Three Months Ended June 30, Six Months Ended June 30,
(in thousands, except per share data)2019 2018 2019 2018
Basic Net Income Per Common Share:       
Net income available to common shareholders$153,034
 $108,622
 $270,070
 $209,229
Weighted average common shares outstanding157,389
 118,397
 159,148
 118,531
Net income per common share, basic$0.97
 $0.92
 $1.70
 $1.77
Diluted Net Income Per Common Share:       
Net income available to common shareholders$153,034
 $108,622
 $270,070
 $209,229
Weighted average common shares outstanding157,389
 118,397
 159,148
 118,531
Effect of dilutive outstanding equity-based awards, warrants, and earnout payments1,688
 742
 1,760
 698
Weighted average diluted common shares159,077
 119,139
 160,908
 119,229
Net income per common share, diluted$0.96
 $0.91
 $1.68
 $1.75
        

Three Months Ended June 30,Six Months Ended June 30,
(in thousands, except per share data)2020201920202019
Basic Net Income Per Common Share:
Net income available to common shareholders$84,901  $153,034  $115,131  $270,070  
Weighted average common shares outstanding147,288  157,389  147,300  159,148  
Net income per common share, basic$0.58  $0.97  $0.78  $1.70  
Diluted Net Income Per Common Share:
Net income available to common shareholders$84,901  $153,034  $115,131  $270,070  
Weighted average common shares outstanding147,288  157,389  147,300  159,148  
Effect of dilutive outstanding equity-based awards, warrants, and earnout payments445  1,688  767  1,760  
Weighted average diluted common shares147,733  159,077  148,067  160,908  
Net income per common share, diluted$0.57  $0.96  $0.78  $1.68  
Basic net income per common share is computed by dividing net income available to common shareholders by the average common shares outstanding for the period. Diluted net income per common share reflects the dilution that could occur if securities or other contracts to issue common stock were exercised or converted. The dilutive effect of outstanding stock options, restricted share units, and warrants is reflected in diluted net income per common share, unless the impact is anti-dilutive, by application of the treasury stock method.
As of June 30, 2020 and 2019, there were 1.3 million and 40 thousand, respectively, potentially dilutive shares related to stock options to purchase shares of common stock that were outstanding during 2019, and as of June 30, 2018, there were 2.2 million potentiallythese quarters. Potentially dilutive shares related to the Warrant to purchase shares of common stock that were outstanding during 2018 but wereare not included in the computation of diluted net income per common share because the effect would have beenbe anti-dilutive.

Note 10 - Share-based Compensation
As a result of the FCB acquisition on January 1, 2019, Synovus assumed 3.2 million outstanding FCB stock option awards and 136 thousand outstanding FCB restricted stock unit awards. Pursuant to the Merger Agreement, each stock option and restricted share unit outstanding on the Acquisition Date was assumed and converted into a stock option or restricted stock unit award relating to shares of Synovus common stock, with the same terms and conditions as were applicable under such award prior to the acquisition. The converted options and restricted share units had a fair value of $41.5 million on the Acquisition Date, of which $4.2 million was allocated to compensation expense and the remaining to purchase price. The estimated fair value of the converted restricted share units was based on Synovus' closing stock price on December 31, 2018, and the estimated fair value of the converted stock options was determined using a Hull-White model in a binomial lattice option pricing framework. Additionally, under the terms of the Merger Agreement, certain outstanding FCB non-vested equity awards with a fair value of $7.5 million on the Acquisition Date, accelerated vesting and converted automatically into the right to receive merger consideration at the merger exchange ratio of 1.055, or an equivalent amount in cash, of which $3.9 million was allocated to merger-related compensation expense consisting of $3.5 million settled in equity and $400 thousand settled in cash with the remaining $3.5 million allocated to purchase price.
The following tables summarize the status of Synovus' stock options, restricted share units, market restricted share units, and performance share units as of June 30, 2019, and activity for the six months ended June 30, 2019.
  Stock Options
(in thousands, except per share amounts) Quantity Weighted-Average Exercise Price Per Share
Outstanding at January 1, 2019 640
 $16.93
Assumed 3,230
 23.22
Exercised (461) 19.23
Outstanding at June 30, 2019 3,409
 $22.58
     

  
Restricted Share
 Units
 Market Restricted Share Units 
Performance Share
 Units
(in thousands, except per share amounts) Quantity Weighted-Average Grant Date Fair Value Per Share Quantity Weighted-Average Grant Date Fair Value Per Share Quantity Weighted-Average Grant Date Fair Value Per Share
Non-vested at January 1, 2019 526
 $41.18
 144
 $41.91
 248
 $38.29
Granted 537
 36.26
 151
 36.96
 140
 37.34
Assumed 136
 31.99
 
 
 
 
Quantity change by TSR factor 
 
 (18) 38.06
 
 
Dividend equivalents granted 10
 36.26
 2
 36.96
 10
 37.34
Vested (292) 36.78
 (55) 38.06
 (93) 26.35
Forfeited (82) 36.14
 (19) 40.94
 (31) 40.65
Non-vested at June 30, 2019 835
 $38.49
 205
 $39.68
 274
 $41.56
             

Total share-based compensation expense recognized for the three and six months ended June 30, 2019 and 2018 is presented in the following table by its classification within total non-interest expense.
 Three Months Ended June 30, Six Months Ended June 30,
(in thousands)2019 2018 2019 2018
Salaries and other personnel expense$5,405
 $3,976
 $11,713
 $7,749
Merger-related expense413
 
 4,219
 
Other operating expenses163
 389
 293
 571
  Total share-based compensation expense included in non-interest expense$5,981
 $4,365
 $16,225
 $8,320
        



Note 11 - Leases

Synovus’ leasing activities are primarily comprised of real estate leases used for retail branch locations and office space for core administrative and operating activities of Synovus’ banking and financial services business, and to a significantly lesser extent, certain equipment. The majority of these leases provide for fixed lease payments, including periodic escalators which are fixed at lease inception, however, a number of leases provide for variable lease payments where periodic increases in payment amounts are indexed to a consumer price index. Many leases include one or more options to renew which generally range from one to five years. Optional extension periods which are reasonably certain to be exercised in the future were included in the measurement of ROU assets and lease liabilities. Synovus’ leasing arrangements do not contain any material residual value guarantees, material restrictive covenants, or material end of lease purchase options.
The following table presents the lease balances within the consolidated balance sheet as of June 30, 2019. The difference between the asset and liability balance is primarily the result of lease liabilities that existed prior to the January 1, 2019 adoption of the new accounting guidance for leases.
Leases   
(in thousands)Classification June 30, 2019
Assets   
OperatingOther Assets $373,675
Finance
Premises and Equipment, net(1)
 3,233
Total leased assets  $376,908
Liabilities   
OperatingOther Liabilities 381,345
FinanceOther Liabilities 3,050
Total lease liabilities  $384,395
    
(1) Finance lease assets are recorded net of accumulated amortization of $448 thousand as of June 30, 2019.

For the three and six months ended June 30, 2019, the components of lease expense were as follows:
Lease Cost     
(in thousands)Classification Three Months Ended June 30, 2019 Six Months Ended June 30, 2019
Operating lease cost, net(1)
Net occupancy and equipment expense $8,137
 $16,309
Finance lease cost     
Amortization of leased assetsNet occupancy and equipment expense 224
 448
Interest on lease liabilitiesNet occupancy and equipment expense 19
 39
Sublease income(2)
Net occupancy and equipment expense (157) (323)
Net lease cost  $8,223
 $16,473
      
(1)Excludes variable and short-term lease costs, which are not material.
(2) Sublease income excludes rental income from owned properties of $639 thousand and $1.2 million, respectively, for the three and six months ended June 30, 2019, which is also included in net occupancy and equipment expenses.

The following table presents the weighted average remaining lease term and weighted average discount rates related to Synovus' leases as of June 30, 2019:
Lease Term and Discount Rate   
 Weighted-average remaining lease term (years) Weighted-average discount rate (percentage)
Operating leases21.5 3.55%
Finance leases4.2 2.44
    




Supplemental cash flow information related to the Company's leasing activities for the six months ended June 30, 2019 are as follows:
Other Information 
(in thousands)Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$(14,893)
Operating cash flows from finance leases(39)
Financing cash flows from finance leases(357)
  


The following table presents the maturity of the Company’s lease liabilities as of June 30, 2019:
Maturity of Lease Liabilities     
(in thousands)Operating Leases Finance Leases Total
2019$14,732
 $494
 $15,226
202029,437
 871
 30,308
202128,104
 839
 28,943
202227,369
 465
 27,834
202325,711
 180
 25,891
After 2023434,340
 343
 434,683
Total lease payments$559,693
 $3,192
 $562,885
Less: Imputed interest178,348
 142
 178,490
Present value of lease liabilities$381,345
 $3,050
 $384,395
      


As of June 30, 2019, minimum lease payments related to operating leases that had not yet commenced were $20.8 million.
Note 12 - Commitments and Contingencies
In the normal course of business, Synovus enters into commitments to extend credit such as loan commitments and letters of credit to meet the financing needs of its customers. Synovus uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Synovus also has commitments to fund certain low incomelow-income housing investments, solar energy, and CRA investments.
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The contractual amount of these financial instruments represents Synovus' maximum credit risk should the counterparty draw upon the commitment, and should the counterparty subsequently fail to perform according to the terms of the contract. Since many of the commitments are expected to expire without being drawn upon, total commitment amounts do not necessarily represent future cash requirements. Additionally, certain commitments (primarily consumer) can generally be canceled by providing notice to the borrower.
The allowance for credit lossesACL associated with unfunded commitments and letters of credit is a component of the unfunded commitments reserve recorded within other liabilities on the consolidated balance sheets. Upon adoption of CECL on January 1, 2020, Synovus recorded $27.4 million in unfunded commitment reserves due to the consideration under CECL of expected utilization over the life of such commitments. At June 30, 2020, the ACL for unfunded commitments was $61.0 million, including the impact of CECL and COVID-19, compared to a reserve of $1.4 million at December 31, 2019. Additionally, an immaterial amount of unearned fees relating to letters of credit are recorded within other liabilities on the consolidated balance sheets. These amounts are not material toSee "Part I-Item 1. Financial Statements and Supplementary Data - Note 1 - Basis of Presentation" in this Report for more information on Synovus' consolidated balance sheets.adoption of CECL.
Synovus invests in certain low income housing tax creditLIHTC partnerships which are engaged in the development and operation of affordable multi-family housing utilizing the LIHTC pursuant to Section 42 of the Code. Additionally, Synovus invests in certain solar energy tax credit partnerships pursuant to Section 48 of the Code. Synovus typically acts as a limited partner in these investments and does not exert control over the operating or financial policies of the partnerships and as such, is not considered the primary beneficiary of the partnership. For certain of its LIHTC investments, Synovus typically provides financing during the construction and development of the properties and is at risk for the funded amount of its equity investment plus the outstanding amount of any construction loans in excess of the fair value of the collateral for the loan, but has no obligation to fund the operations or working capital of the

partnerships and is not exposed to losses beyond Synovus’ investment. Synovus receives tax credits related to these investments which are subject to recapture by taxing authorities based on compliance featuresprovisions required to be met at the project level.
Synovus also invests in certain other CRA partnerships including SBIC programs. The SBIC is a program initiated by the SBA in 1958 to assist in the funding of small business loans.
(in thousands)June 30, 2019 December 31, 2018(in thousands)June 30, 2020December 31, 2019
Letters of credit*$216,304
 $157,675
Letters of credit*$175,465  $202,614  
Commitments to fund commercial and industrial loans6,065,365
 5,527,017
Commitments to fund commercial and industrial loans7,887,720  7,018,152  
Commitments to fund commercial real estate, construction, and land development loans3,020,509
 2,034,223
Commitments to fund commercial real estate, construction, and land development loans2,823,515  3,032,252  
Commitments under home equity lines of credit1,419,312
 1,258,657
Commitments under home equity lines of credit1,584,619  1,501,452  
Unused credit card lines857,536
 775,003
Unused credit card lines971,419  877,929  
Other loan commitments473,824
 400,983
Other loan commitments435,907  485,371  
Total unfunded lending commitments and letters of credit$12,052,850
 $10,153,558
Total letters of credit and unfunded lending commitmentsTotal letters of credit and unfunded lending commitments$13,878,645  $13,117,770  

Investments in low income housing tax credit partnerships:   
Carrying amount included in other assets$79,541
 $83,736
Amount of future funding commitments included in carrying amount28,382
 47,123
Short-term construction loans and letter of credit commitments259
 1,585
Funded portion of short-term loans and letters of credit2,822
 5,595
    
Investments in low income housing, solar energy tax credit and other CRA partnerships:
Carrying amount included in other assets$168,058  $146,612  
Amount of future funding commitments included in carrying amount92,025  78,266  
Permanent and short-term construction loans and letter of credit commitments12,488  2,124  
Funded portion of permanent and short-term loans and letters of credit5,146  3,196  
* Represent the contractual amount net of risk participations purchased of approximately $34$31 million and $46$33 million at June 30, 20192020 and December 31, 2018,2019, respectively.
Merchant Services
In accordance with credit and debit card association rules, Synovus provides merchant processing services for customers. Prior to the second quarter of 2020, these services were provided through a referral relationship which was replaced during the quarter with a new contractual arrangement under which certain sales and processing support are provided through an outside merchant services provider with Synovus owning the merchant contract relationship. In addition, Synovus sponsors various third-party MPS businesses that process credit and debit card transactions on behalf of merchants. In connection with these services, a liability may arise in the event of a billing dispute between the merchant and a cardholder that is ultimately resolved in the cardholder's favor. If the merchant defaults on its obligations, the cardholder, through its issuing bank, generally has until six months after the date of the transaction to present a chargeback to the MPS, which is primarily liable for any losses on covered transactions. However, if thea sponsored MPS fails to meet its obligations, then Synovus, as the sponsor, could be held liable for the disputed amount. Synovus seeks to mitigate this risk through its contractual arrangements with the MPS and the merchants by withholding future settlements, retaining cash reserve accounts and/or obtaining other security. For the three and six months ended June 30, 2020, Synovus and the sponsored entities processed and settled $16.40 billion and $34.75 billion of
40


transactions, respectively. For the three and six months ended June 30, 2019, the sponsored entities processed and settled $18.88 billion and $36.59 billion of transactions, respectively. For the three and six months ended June 30, 2018, the sponsored entities processed and settled $17.63 billion and $34.35 billion of transactions, respectively.
Synovus began covering and has continued to covercovered chargebacks related to a particular sponsored MPS during 2019 and 2018 where the MPS’s cash reserve account was unavailable to support the chargebacks. As of June 30, 2019,2020, the remaining amount due to Synovus had advanced approximately $22.6 million tofrom the MPS is $20.9 million, compared to cover these chargebacks.$21.4 million at December 31, 2019. During the first quarter of 2020, Synovus recorded a $2.7 million reserve in other operating expenses associated with the chargebacks, reflecting the amount that Synovus does not expect to collect. The net balance of $18.2 million at June 30, 2020 is included in other assets and classified in NPAs. While Synovus has contractual protections to mitigate against loss, repayment of suchthe amounts owed to Synovus will depend in large part upon the continued financial viability and/or valuation of the MPS and the availability of any cash reserve accounts.
Legal Proceedings
Synovus and its subsidiaries are subject to various legal proceedings, claims and claimsdisputes that arise in the ordinary course of its business. Additionally, in the ordinary course of business, Synovus and its subsidiaries are subject to regulatory examinations, information gathering requests, tax matters, inquiries and investigations. Synovus, like many other financial institutions, has been the target of numerous legal actions and other proceedings asserting claims for damages and related relief for losses. These actions include mortgage loan and other loan put-back claims, claims and counterclaims asserted by individualsindividual borrowers related to their loans, and allegations of violations of state and federal laws and regulations relating to banking practices, and allegations related to Synovus' participation in government stimulus programs, including putative class action matters and also claims asserted by shareholders or purported shareholders against Synovus, members of Synovus' Board of Directors, and members of Synovus' management team.matters. In addition to actual damages, if Synovus does not prevail in such asserted legal actions, credit-related litigation could result in additional write-downs or charge-offs of loans,assets, which could adversely affect Synovus' results of operations during the period in which the write-down or charge-off were to occur.
Synovus carefully examines and considers each legal matter, and, in those situations where Synovus determines that a particular legal matter presents loss contingencies that are both probable and reasonably estimable, Synovus establishes an appropriate reserve. An event is considered to be probable if the future event is likely to occur. While the final outcome of any legal proceeding is inherently uncertain, based on the information currently available, advice of counsel and available insurance coverage, management believes that the amounts accrued with respect to legal matters as of June 30, 20192020 are adequate. The actual costs of resolving legal claims may be higher or lower than the amounts accrued.

In addition, where Synovus determines that there is a reasonable possibility of a loss in respect of legal matters, Synovus considers whether it is able to estimate the total reasonably possible loss or range of loss. An event is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely.” An event is “remote” if “the chance of the future event or events occurring is more than slight but less than reasonably possible." In many situations, Synovus may be unable to estimate reasonably possible losses due to the preliminary nature of the legal matters, as well as a variety of other factors and uncertainties. For those legal matters where Synovus is able to estimate a range of reasonably possible losses, management currently estimates the aggregate range from our outstanding litigation is from zero0 to $5 million in excess of the amounts accrued, if any, related to those matters. This estimated aggregate range is based upon information currently available to Synovus, and the actual losses could prove to be lower or higher. As there are further developments in these legal matters, Synovus will reassess these matters, and the estimated range of reasonably possible losses may change as a result of this assessment. Based on Synovus' current knowledge and advice of counsel, management presently does not believe that the liabilities arising from these legal matters will have a material adverse effect on Synovus' consolidated financial condition, results of operations or cash flows. However, it is possible that the ultimate resolution of these legal matters could have a material adverse effect on Synovus' results of operations or financial condition for any particular period.
Synovus intends to vigorously pursue all available defenses to these legal matters, but will also consider other alternatives, including settlement, in situations where there is an opportunity to resolve such legal matters on terms that Synovus considers to be favorable, including in light of the continued expense and distraction of defending such legal matters. Synovus maintains insurance coverage, which may be available to cover legal fees, or potential losses that might be incurred in connection with such legal matters. The above-noted estimated range of reasonably possible losses does not take into consideration insurance coverage which may or may not be available for the respective legal matters.

Note 11 - Segment Reporting

Note 13 - Subsequent Event

IssuanceSynovus' business segments are based on the products and services provided or the customers served, and as of Series E Preferred Stock
On July 1,the fourth quarter of 2019, reflect the manner in which financial information is evaluated by the chief operating decision makers. Prior to the fourth quarter of 2019, Synovus completedidentified its overall banking operations as its only reportable segment. Synovus has 3 major reportable business segments: Community Banking, Wholesale Banking, and Financial Management Services (FMS), with functional activities such as treasury, technology, operations, marketing, finance, enterprise risk, legal, human resources, corporate communications, executive management, among others, included in Treasury and Corporate Other.
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Business segment results are determined based upon Synovus' management reporting system, which assigns balance sheet and income statement items to each of the business segments. Certain assets, liabilities, revenues, and expenses not allocated or attributable to a $350 million public offeringparticular business segment are included in Treasury and Corporate Other.Synovus's third-party lending partnership consumer loans as well as PPP C&I loans are included in Treasury and Corporate Other. The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to GAAP. As a result, reported segment results are not necessarily comparable with similar information reported by other financial institutions.
The Community Banking business segment serves customers using a relationship-based approach through its branch, ATM, commercial, and private wealth network in addition to mobile, Internet, and telephone banking. This segment primarily provides individual, small business, and corporate customers with an array of Series E Preferred Stock. comprehensive banking products and services including commercial, home equity, and other consumer loans, credit and debit cards, and deposit accounts.
The offering generatedWholesale Banking business segment serves primarily larger corporate customers by providing commercial lending and deposit services through specialty teams including middle market, CRE, senior housing, national accounts, premium finance, structured lending, healthcare, and asset-based lending.
The FMS business segment serves its customers by providing mortgage and trust services and also specializing in professional portfolio management for fixed-income securities, investment banking, the execution of securities transactions as a broker/dealer, asset management, and financial planning services, as well as the provision of individual investment advice on equity and other securities.
Synovus uses a centralized FTP methodology to attribute appropriate net proceedsinterest income to the business segments. The intent of $341.5 million. Dividendsthe FTP methodology is to transfer interest rate risk from the business segments by providing matched duration funding of assets and liabilities. The result is to centralize the financial impact, management, and reporting of interest rate risk in the Treasury and Corporate Other function where it can be centrally monitored and managed. Treasury and Corporate Other charges (credits) an internal cost of funds for assets held in (or pays for funding provided by) each business segment. The FTP rate is based on the shares are non-cumulative and, if declared, will accrue and be payable, in arrears, quarterly at a rate per annum equal to 5.875%prevailing market interest rates for comparable duration assets (or liabilities).
The following tables present certain financial information for each dividend period fromreportable business segment for the original issue datethree and six months ended June 30, 2020. To provide comparable information, Synovus has included proforma business segment financial information for the three and six months ended June 30, 2019 utilizing various allocation methodologies based on balance sheet and income statement items assigned to but excluding, July 1, 2024. Fromeach business segment. The application and including July 1, 2024, the dividend rate will changedevelopment of management reporting methodologies is a dynamic process and reset every five years on July 1 at a rate equalis subject to the five-year U.S. Treasury Rate plus 4.127% per annum. The Series E Preferred Stock is redeemable at Synovus' option in whole or in part, from time to time, on July 1, 2024 or any subsequent reset date, or in whole but not in part, at any time within 90 days following a regulatory capital treatment event, inperiodic enhancements. As these enhancements are made, financial results presented by each case at a redemption price equal to $25.00 per share, plus any declared and unpaid dividends, without accumulation of any undeclared dividends. The Series E Preferred Stock has no preemptive or conversion rights. Except in limited circumstances, the Series E Preferred Stock does not have any voting rights.reportable business segment may be periodically revised.

Three Months Ended June 30, 2020
(in thousands)Community BankingWholesale BankingFinancial Management ServicesTreasury and Corporate OtherSynovus Consolidated
Net interest income$220,638  $145,016  $18,832  $(7,920) $376,566  
Non-interest revenue25,982  5,654  52,972  88,876  173,484  
Non-interest expense75,984  22,934  48,281  136,942  284,141  
Pre-provision net revenue$170,636  $127,736  $23,523  $(55,986) $265,909  

Three Months Ended June 30, 2019 Proforma
(in thousands)Community BankingWholesale BankingFinancial Management ServicesTreasury and Corporate OtherSynovus Consolidated
Net interest income$207,493  $128,857  $30,978  $29,934  $397,262  
Non-interest revenue34,050  7,937  38,628  9,192  89,807  
Non-interest expense73,910  14,709  37,508  137,999  264,126  
Pre-provision net revenue$167,633  $122,085  $32,098  $(98,873) $222,943  

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Six Months Ended June 30, 2020
(in thousands)Community BankingWholesale BankingFinancial Management ServicesTreasury and Corporate OtherSynovus Consolidated
Net interest income$417,885  $268,185  $35,614  $28,142  $749,826  
Non-interest revenue59,431  14,910  100,247  102,753  277,341  
Non-interest expense151,288  41,136  91,570  276,427  560,421  
Pre-provision net revenue$326,028  $241,959  $44,291  $(145,532) $466,746  

Six Months Ended June 30, 2019 Proforma
(in thousands)Community BankingWholesale BankingFinancial Management ServicesTreasury and Corporate OtherSynovus Consolidated
Net interest income$422,253  $254,468  $59,843  $57,874  $794,438  
Non-interest revenue66,826  14,695  70,907  16,757  169,185  
Non-interest expense148,727  29,728  70,726  307,356  556,537  
Pre-provision net revenue$340,352  $239,435  $60,024  $(232,725) $407,086  

June 30, 2020
(dollars in thousands)Community BankingWholesale BankingFinancial Management ServicesTreasury and Corporate OtherSynovus Consolidated
Total loans net of deferred fees and costs$11,837,955  $18,718,503  $5,544,768  $3,813,071  $39,914,297  
Total deposits$28,777,901  $9,737,901  $313,296  $5,365,482  $44,194,580  
Total full-time equivalent employees2,273  269  831  1,935  5,308  
December 31, 2019
(dollars in thousands)Community BankingWholesale BankingFinancial Management ServicesTreasury and Corporate OtherSynovus Consolidated
Total loans net of deferred fees and costs$12,170,914  $17,643,509  $5,285,455  $2,062,572  $37,162,450  
Total deposits$25,610,777  $8,314,184  $284,716  $4,195,827  $38,405,504  
Total full-time equivalent employees2,301  213  839  1,911  5,264  

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ITEM 2. – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In this Report, the words “Synovus,” “the Company,” “we,” “us,” and “our” refer to Synovus Financial Corp. together with Synovus Bank and Synovus' other wholly-owned subsidiaries, except where the context requires otherwise.
FORWARD-LOOKING STATEMENTS
Certain statements made or incorporated by reference in this Report which are not statements of historical fact, including those under “Management's Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Report, constitute forward-looking statements within the meaning of, and subject to the protections of, Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements include statements with respect to Synovus' beliefs, plans, objectives, goals, targets, expectations, anticipations, assumptions, estimates, intentions and future performance and involve known and unknown risks, many of which are beyond Synovus' control and which may cause Synovus' actual results, performance or achievements or the financial services industry or economy generally, to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

All statements other than statements of historical fact are forward-looking statements. You can identify these forward-looking statements through Synovus' use of words such as “believes,” “anticipates,” “expects,” “may,” “will,” “assumes,” “predicts,” “could,” “should,” “would,” “intends,” “targets,” “estimates,” “projects,” “plans,” “potential” and other similar words and expressions of the future or otherwise regarding the outlook for Synovus' future business and financial performance and/or the performance of the financial services industry and economy in general. Forward-looking statements are based on the current beliefs and expectations of Synovus' management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statements in this document. Many of these factors are beyond Synovus' ability to control or predict. These factors include, but are not limited to:
(1)the risk that competition inrisks and uncertainties related to the impact of the COVID-19 pandemic on our assets, business, capital and liquidity, financial services industry may adversely affect our future earningscondition, prospects and growth;results of operations;

(2)the risk that we may not realize the expected benefits fromcurrent and any further economic downturn and contraction could have a material adverse effect on our efficiencycapital, liquidity, financial condition, credit quality, results of operations and future growth, initiatives, whichincluding the risk that the current economic contraction could negatively impact our future profitability;last much longer and be much more severe if efforts to contain the pandemic are unsuccessful and restrictions on movement last longer than currently anticipated;

(3)that we may fail to realize all of the anticipated benefits of the Merger, or those benefits may take longer to realize than expected, and that we may encounter significant difficulties in integrating and managing FCB and its businesses;
(4)the risk that our current and future information technology system enhancements and operational initiatives may not be successfully implemented, which could negatively impact our operations;
(5)the risk that our enterprise risk management framework, our compliance program, or our corporate governance and supervisory oversight functions may not identify or address risks adequately, which may result in unexpected losses;
(6)the risk that our asset quality may deteriorate, our allowance for loancredit losses may prove to be inadequate or may be negatively affected by credit risk exposures, and the risk that we may be unable to obtain full payment in respect of any tradeloan or other receivables;


(7)(4)changes in the risk that any future economic downturn could have a material adverse effect on our capital, financial condition, resultscost and availability of operationsfunding due to changes in the deposit market and future growth;credit market;

(8)(5)the risks that if economic conditions worsen further or regulatory capital rules are modified, we may be required to undertake initiatives to improve our ability to attract and retain key employees;capital position;

(9)(6)the risk that we may be required to make substantial expenditures to keep pace with regulatory initiatives and the rapid technological changes in the financial services market;

(10)(7)risks relatedrestrictions or limitations on access to funds from historical and alternative sources of liquidity could adversely affect our business relationships with,overall liquidity, which could restrict our ability to make payments on our obligations and reliance upon, third parties that have strategic partnerships with us or that provide key componentsour ability to support asset growth and sustain our operations and the operations of our business infrastructure, including the costs of services and products provided to us by third parties, and risks related to disruptions in service or financial difficulties with a third-party vendor or business relationship;Synovus Bank;

(11)(8)risks relatedchanges in the interest rate environment, including changes to the ability offederal funds rate to include a possible negative interest rate environment, and competition in our operational framework to identifyprimary market area may result in increased funding costs or reduced earning assets yields, thus further reducing margins and manage risks associated with our business such as credit risk, compliance risk, reputational risk, and operational risk, including third-party vendors and other service providers;net interest income;

(12)(9)the risk that competition in the financial services industry may adversely affect our future earnings and growth;

(10)the risk that we may not realize the expected benefits from our efficiency and growth initiatives or that we may not be able to realize those cost savings or revenue initiatives in the time period expected, which could negatively impact our future profitability;

44


(11)our ability to identify and address cyber-security risks such as data security breaches, malware, "denial of service" attacks, "hacking" and identity theft, a failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage of our systems, increased costs, significant losses, or adverse effects to our reputation;

(13)(12)the risk that our current and future information technology system enhancements and operational initiatives may not be successfully implemented, which could negatively impact our operations;

(13)our ability to attract and retain employees that are key to our strategic and growth initiatives;

(14)the risk related to our implementation of new lines of business, or new products and services;services or new technologies;

(14)(15)changes in interest rate environment, including changes to the federal funds rate, and competition in our primary market area may result in increased funding costs or reduced earning assets yields, thus reducing margins and net interest income;
(15)the impact of recent and proposed changes in governmental policy, laws and regulations, including recently enacted laws, regulations and guidance related to government stimulus programs related to the COVID-19 pandemic, proposed and recently enacted changes in the regulation and taxation of banks and financial institutions, or the interpretation or application thereof and the uncertainty of future implementation and enforcement of these regulations;

(16)our ability to receive dividends from our subsidiaries could affect our liquidity, including our ability to pay dividends or take other capital actions;

(17)the risk that our enterprise risk management framework, our compliance program, or our corporate governance and supervisory oversight functions may not identify or address risks adequately, which may result in unexpected losses;

(18)risks related to our business relationships with, and reliance upon, third parties that have strategic partnerships with us or that provide key components of our business infrastructure, including the costs of services and products provided to us by third parties, and risks related to disruptions in service or financial difficulties with a third-party vendor or business relationship;

(19)risks related to the ability of our operational framework to identify and manage risks associated with our business such as credit risk, compliance risk, reputational risk, and operational risk, including third-party business partners, as well as our relationship with third-party vendors and other service providers;

(20)the risk that we may be exposed to potential losses in the event of fraud and/or theft, or in the event that a third-party vendor, obligor, or business partner fails to pay amounts due to us under that relationship or under any arrangement that we enter into with them;

(17)(21)the risk that we may not be able to identify suitable bank and non-bank acquisition opportunities as part of our growth strategy and evencould realize losses if we sell non-performing assets and the proceeds we receive are able to identify attractive acquisition opportunities, we may not be able to completelower than the carrying value of such transactions on favorable terms or realize anticipated benefits from such transactions;assets;

(18)(22)risks related to the fluctuation in our stock price and general volatility in the stock market;

(23)the impact on our financial results, reputation, and business if we are unable to comply with all applicable federal and state regulations or other supervisory actions or directives and any necessary capital initiatives;

(19)(24)changes in the cost and availability of funding due to changes in the deposit market and credit market;
(20)the risks that if economic conditions worsen or regulatory capital rules are modified, we may be required to undertake initiatives to improve our capital position;
(21)restrictions or limitations on access to funds from historical and alternative sources of liquidity could adversely affect our overall liquidity, which could restrict our ability to make payments on our obligations and our ability to support asset growth and sustain our operations and the operations of Synovus Bank;
(22)the risk that we could realize losses if we sell non-performing assets and the proceeds we receive are lower than the carrying value of such assets;
(23)our ability to receive dividends from our subsidiaries could affect our liquidity, including our ability to pay dividends or take other capital actions;
(24)risks related to regulatory approval to take certain actions, including any dividends on our common stock or preferred stock, any repurchases of common stock or any issuance or redemption of any other regulatory capital instruments, as well as any applications in respect of expansionary initiatives;instruments;


(25)risks related to the continued use, availability and reliability of LIBOR and other "benchmark" rates;

(26)the risk that Federal Tax Reform could have an adverse impact on our business or our customers, including with respect to demand and pricing for our loan products;
(27)the costs and effects of litigation, investigations, inquiries or similar matters, or adverse facts and developments related thereto;thereto, including the costs and effects of litigation related to our participation in government stimulus programs associated with the COVID-19 pandemic;

(28)(27)risks related to the fluctuation in our stock price;
(29)the effects of any damages to our reputation resulting from developments related to any of the items identified above; and

45


(30)(28)other factors and other information contained in this Report and in other reports and filings that we make with the SEC under the Exchange Act, including, without limitation, those found in "Part III - Item 1A. Risk Factors" of this Report.
For a discussion of these and other risks that may cause actual results to differ from expectations, refer to “Part I-Item 1A. Risk Factors” and other information contained in Synovus' 20182019 Form 10-K and our other periodic filings, including quarterly reports on Form 10-Q and current reports on Form 8-K, that we file from time to time with the SEC. All written or oral forward-looking statements that are made by or are attributable to Synovus are expressly qualified by this cautionary notice. You should not place undue reliance on any forward-looking statements since those statements speak only as of the date on which the statements are made.Synovus undertakes no obligation to update any forward-looking information and statements, whether oral or written, to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of new information or unanticipated events, except as may otherwise be required by law.
INTRODUCTION AND CORPORATE PROFILE
Synovus Financial Corp. is a financial services company and a registered bank holding company headquartered in Columbus, Georgia. Through its wholly-owned subsidiary, Synovus Bank, a Georgia state-chartered bank that is a member of the Federal Reserve System, the Company provides commercial and retail banking in addition to a full suite of specialized products and services including private banking, treasury management, wealth management, mortgage services, premium finance and international banking. Synovus also provides mortgage services, financial planning, and investment advisory services through its wholly-owned subsidiaries, Synovus Mortgage, Synovus Trust and Synovus Securities, as well as its GLOBALT and Creative Financial Group divisions.
Synovus Bank is positioned in some of the highest growth markets in the Southeast, with 297293 branches in Alabama, Florida, Georgia, South Carolina, and Tennessee.
The following financial review summarizes the significant trends, changes in our business, transactions, and other matters affecting Synovus’ results of operations for the three and six months ended June 30, 20192020 and financial condition as of June 30, 20192020 and December 31, 2018.2019. This discussion supplements, and should be read in conjunction with, the unaudited interim consolidated financial statements and notes thereto contained elsewhere in this Report and the consolidated financial statements of Synovus, the notes thereto, and management’s discussion and analysis contained in Synovus’ 20182019 Form 10-K.
Management's Discussion and Analysis of Financial Condition and Results of Operations consists of:
Discussion of Results of Operations - Reviews Synovus' financial performance, as well as selected balance sheet items, items from the statements of income, significant transactions, and certain key ratios that illustrate Synovus' performance.

Credit Quality, Capital Resources and Liquidity - Discusses credit quality, market risk, capital resources, and liquidity, as well as performance trends. It also includes a discussion of liquidity policies, how Synovus obtains funding, and related performance.

Additional Disclosures - Discusses additional important matters including critical accounting policies and non-GAAP financial measures used within this Report.
A reading of each section is important to understand fully our financial performance.
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DISCUSSION OF RESULTS OF OPERATIONS
Table 1 - Consolidated Financial Highlights
Three Months Ended June 30,Six Months Ended June 30,
(dollars in thousands, except per share data)20202019Change20202019Change
Net interest income$376,566  $397,262  (5.2)%$749,826  $794,438  (5.6)%
Provision for credit losses(1)
141,851  12,119  nm300,573  35,688  742.2  
Non-interest revenue173,484  89,807  93.2  277,341  169,185  63.9  
Adjusted non-interest revenue(2)
95,368  90,197  5.7  194,745  168,643  15.5  
Total FTE revenues550,911  487,880  12.9  1,028,814  965,064  6.6  
Adjusted total revenues(2)
472,795  488,270  (3.2) 946,218  964,522  (1.9) 
Non-interest expense284,141  264,126  7.6  560,421  556,537  0.7  
Adjusted non-interest expense(2)
276,411  256,707  7.7  547,567  499,360  9.7  
Income before income taxes124,058  210,824  (41.2) 166,173  371,398  (55.3) 
Net income93,192  156,184  (40.3) 131,712  276,370  (52.3) 
Net income available to common shareholders84,901  153,034  (44.5) 115,131  270,070  (57.4) 
Net income per common share, basic0.58  0.97  (40.7) 0.78  1.70  (53.9) 
Net income per common share, diluted0.57  0.96  (40.3) 0.78  1.68  (53.7) 
Adjusted net income per common share, diluted(2)
0.23  1.00  (76.9) 0.44  1.98  (78.0) 
Net interest margin(3)
3.13 %3.69 %(56)  bps3.25 %3.74 %(49)  bps
Net charge-off ratio(3)
0.24  0.13  11  0.23  0.16   
Return on average assets(3)
0.71  1.34  (63) 0.52  1.21  (69) 
Adjusted return on average assets(2)(3)
0.32  1.39  (107) 0.32  1.42  (110) 
Efficiency ratio-FTE51.58  54.14  (256) 54.47  57.67  (320) 
Adjusted tangible efficiency ratio(2)
57.91  52.08  583  57.31  51.17  614  
Table 1 - Consolidated Financial Highlights           
 Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands, except per share data)2019 2018 Change 2019 2018 Change
Net interest income$397,262
 $284,577
 39.6 % $794,438
 $558,861
 42.2 %
Provision for loan losses12,119
 11,790
 2.8
 35,688
 24,566
 45.3
Non-interest income89,807
 73,387
 22.4
 169,185
 140,433
 20.5
Adjusted non-interest income(1)
90,197
 74,720
 20.7
 168,643
 144,822
 16.4
Total FTE revenues487,880
 358,084
 36.2
 965,064
 699,530
 38.0
Adjusted total revenues(1)
488,270
 359,417
 35.9
 964,522
 703,919
 37.0
Non-interest expense264,126
 204,057
 29.4
 556,537
 399,234
 39.4
Adjusted non-interest expense(1)
256,707
 203,026
 26.4
 499,360
 401,144
 24.5
Income before income taxes210,824
 142,117
 48.3
 371,398
 275,494
 34.8
Net income156,184
 111,181
 40.5
 276,370
 214,348
 28.9
Net income available to common shareholders153,034
 108,622
 40.9
 270,070
 209,229
 29.1
Net income per common share, basic0.97
 0.92
 6.0
 1.70
 1.77
 (3.9)
Net income per common share, diluted0.96
 0.91
 5.5
 1.68
 1.75
 (4.4)
Adjusted net income per common share, diluted(1)
1.00
 0.92
 8.4
 1.98
 1.78
 11.6
Net interest margin(2)
3.69% 3.86% (17) bps 3.74% 3.82% (8) bps
Net charge-off ratio(2)
0.13
 0.29
 (16) 0.16
 0.18
 (2)
Return on average assets(2)
1.34
 1.42
 (8) 1.21
 1.38
 (17)
Adjusted return on average assets(1)(2)
1.39
 1.43
 (4) 1.42
 1.39
 3
Efficiency ratio-FTE54.14
 56.99
 (285) 57.67
 57.07
 60
Adjusted tangible efficiency ratio(1)
52.08
 56.41
 (433) 51.17
 56.90
 (573)
            
(1)  Beginning January 1, 2020, provision calculation is based on current expected credit loss methodology. Prior to January 1, 2020, calculation was based on incurred loss methodology.
(2) See “Non-GAAP"Table 14 - Reconciliation of Non-GAAP Financial Measures” in this Report for the applicable reconciliation to the most comparable GAAP measure.
(2)(3) Annualized
June 30, 2019 March 31, 2019 Sequential Quarter Change June 30, 2018 Year-Over-Year ChangeJune 30, 2020March 31, 2020Sequential Quarter ChangeJune 30, 2019Year-Over-Year Change
(dollars in thousands)(dollars in thousands)
Loans, net of deferred fees and costs$36,138,561
 $35,634,501
 $504,060
 $25,134,056
 $11,004,505
Loans, net of deferred fees and costs$39,914,297  $38,258,024  $1,656,273  $36,138,561  $3,775,736  
Total average loans35,777,127
 35,320,014
 457,113
 24,946,307
 10,830,820
Total average loans40,136,090  37,593,045  2,543,045  35,777,127  4,358,963  
Total deposits37,966,722
 38,075,190
 (108,468) 26,442,688
 11,524,034
Total deposits44,194,580  39,826,585  4,367,995  37,966,722  6,227,858  
Core deposits(1)
34,963,178
 35,366,186
 (403,008) 24,591,678
 10,371,500
Core transaction deposits(1)
23,268,923
 23,168,085
 100,838
 19,091,115
 4,177,808
Core deposits (excludes brokered deposits)Core deposits (excludes brokered deposits)39,904,278  35,838,637  4,065,641  34,963,178  4,941,100  
Core transaction deposits (excludes brokered and public fund deposits)Core transaction deposits (excludes brokered and public fund deposits)29,425,251  24,790,621  4,634,630  23,268,923  6,156,328  
Total average deposits37,899,662
 37,826,952
 72,710
 26,268,074
 11,631,588
Total average deposits43,096,475  38,687,207  4,409,268  37,899,662  5,196,813  
Non-performing assets ratio(3)
0.39% 0.44% (5)bps 0.50% (11)bps
Non-performing loans ratio(3)
0.34
 0.40
 (6) 0.47
 (13)
Non-performing assets ratioNon-performing assets ratio0.44 %0.50 %(6)  bps0.39 % bps
Non-performing loans ratioNon-performing loans ratio0.37  0.41  (4) 0.34   
Past due loans over 90 days0.02
 0.01
 1
 0.01
 1
Past due loans over 90 days0.02  0.02  —  0.02  —  
CET1 capital (transitional)$3,899,532
 $3,790,395
 $109,137
 $2,838,616
 $1,060,916
CET1 capitalCET1 capital$3,827,229  $3,744,415  $82,814  $3,899,532  $(72,303) 
Tier 1 capital4,094,672
 3,985,535
 109,137
 3,156,805
 937,867
Tier 1 capital4,364,374  4,281,560  82,814  4,094,672  269,702  
Total risk-based capital4,913,043
 4,803,641
 109,402
 3,668,904
 1,244,139
Total risk-based capital5,459,568  5,289,039  170,529  4,913,043  546,525  
CET1 capital ratio (transitional)9.61% 9.52% 9 bps 10.12% (51)bps
CET1 capital ratioCET1 capital ratio8.90 %8.70 %20   bps9.61 %(71) bps
Tier 1 capital ratio10.09
 10.01
 8
 11.25
 (116)Tier 1 capital ratio10.15  9.95  20  10.09   
Total risk-based capital ratio12.11
 12.06
 5
 13.08
 (97)Total risk-based capital ratio12.70  12.29  41  12.11  59  
Total shareholders’ equity to total assets ratio10.05
 9.86
 19
 9.98
 7
Total shareholders’ equity to total assets ratio9.34  10.01  (67) 10.05  (71) 
Tangible common equity ratio(1)
8.56
 8.34
 22
 8.77
 (21)
Tangible common equity ratio(1)
7.41  7.94  (53) 8.56  (115) 
Return on average common equity(2)
13.90
 10.98
 292
 15.39
 (149)
Return on average common equity(2)
7.48  2.75  473  13.90  (642) 
Adjusted return on average common equity(1)(2)
14.43
 15.03
 (60) 15.56
 (113)
Adjusted return on average common equity(1)(2)
3.00  2.79  21  14.43  nm
Adjusted return on average tangible common equity(1)(2)
16.70
 17.52
 (82) 15.97
 73
Adjusted return on average tangible common equity(1)(2)
3.60  3.39  21  16.70  nm
         
(1) See “Non-GAAP"Table 14 - Reconciliation of Non-GAAP Financial Measures” in this Report for the applicable reconciliation to the most comparable GAAP measure.
(2) Quarter annualized
47

(3)
COVID-19 Healthcare Crisis and Economic Environment
The ongoing COVID-19 healthcare crisis and public health response to contain it have triggered For purposesrecessionary economic and financial market conditions during a large portion of this table, 2019 non-performing loans exclude acquired loans accounted for under ASC 310-30 that are currently accruing income.the first half of 2020. During March 2020 in an effort to lessen the impact of COVID-19 on consumers and businesses, the Federal Reserve reduced the federal funds rate 1.5 percentage points to 0.00 to 0.25 percent and the U.S. government enacted the CARES Act, the largest economic stimulus package in the nation’s history.

Synovus' response to the COVID-19 pandemic included measures to improve the health and safety of our team members, customers, and communities including remote work capabilities and branch service enhancements; bonus payments to hourly team members required to work on-site;payment deferments on approximately $6 billionof our loan portfolio and forgiveness of NSF and monthly service charges for customers impacted. Additionally, Synovus participated in delivering PPP loans to close to 19,000 customers beginning on April 3, 2020 and funded nearly $2.9 billion in PPP loans during the second quarter. The average PPP loan was approximately $150 thousand, and the customers that received those loans employ over 335 thousand individuals.
In light of current economic uncertainty, Synovus has suspended its share repurchase activity beyond the $16.2 million completed during the first quarter and withdrawn 2020 guidance and long-term goals announced at the beginning of the year. Significant economic uncertainty remains, including the trajectory of the economic recovery which will be impacted by any additional government stimulus plans.

Executive Summary
Net income available to common shareholders for the second quarter of 20192020 was $153.0$84.9 million, or $0.96$0.57 per diluted common share, an increasea decline of 40.9%44.5% and 5.5%40.3%, respectively, compared to the second quarter of 2018. Adjusted2019 and adjusted net income per common share, diluted(1) was $0.23, down 76.9% compared to $1.00 for the second quarter of 2019, up 8.4% compared to $0.92 for the second quarter of 2018.2019. Net income available to common shareholders for the first six months of 20192020 was $270.1$115.1 million, or $1.68$0.78 per diluted common share, an increasea decline of 29.1%57.4% and decrease of 4.4%53.7%, respectively, compared to the first six months of 2018. Adjusted2019 and adjusted net income per common share, diluted(1) was $0.44, down 78.0% compared to $1.98 for the first six months of 2019. The year-over-year decline for all periods was driven by a significant increase in provision for credit losses following the adoption of CECL on January 1, 2020, as well as the impact of COVID-19, a 225 bps reduction in the federal funds rate, and PAA including loan discount accretion and deposit premium amortization that positively impacted 2019.
Net interest income for the six months ended June 30, 2020 was $749.8 million, down $44.6 million, or 5.6%, compared to the same period in 2019. The decrease in year-over-year net interest income was due to declines of $36.2 million in PAA associated with the FCB acquisition and declines in market interest rates, which were somewhat offset by higher average earning assets. Net interest margin was down 49 bps over the comparable six-month periods to 3.25%, due primarily to the decline in market interest rates in addition to declines in PAA. On a sequential quarter basis, net interest income was up $3.3 million, or 0.9%, and net interest margin for the second quarter was 3.13%, which was down 24 bps compared to the first quarter of 2020. The sequential quarter decline in net interest margin was primarily driven by the full quarter impact of the March 2020 emergency rate cuts by the Federal Reserve, as well as excess liquidity. While the second half of the year is expected to be favorably impacted by additional PPP fee accretion as PPP loans are forgiven, net interest income and net interest margin are expected to experiencedownward pressure due to certain strategic balance sheet management activities which were completed late in the second quarter.
Non-interest revenue for the second quarter of 2020 was $173.5 million, up $83.7 million, or 93.2%, and year-to-date was $277.3 million, up $108.2 million, or 63.9%, compared to the same periods in 2019 and included gains on sales of investment securities available for sale of $69.4 million and $78.1 million, respectively. Adjusted non-interest revenue(1) for the second quarter of 2020 was $95.4 million, up $5.2 million, or 5.7%, and on a year-to-date basis was $194.7 million compared to $168.6 million for the first six months of 2019, up 11.6% compared to $1.78 for the first six months of 2018. Results for 2019 include the impact of the Merger with FCB, which closed on January 1, 2019. Synovus incurred $7.4 million and $57.1 million in merger-related expense associated with the FCB acquisition for the second quarter and year-to-date 2019, respectively. On the Acquisition Date, the preliminary estimated fair values of FCB included approximately $12.4 billion of identifiable assets, $9.3 billion in loans, and $10.9 billion in deposits. Return on average assets for the first six months of 2019 was 1.21%, down 17 basis points from the first six months of 2018, and the adjusted return on average assets(1) was 1.42% for the first six months of 2019, up 3 basis points from the first six months of 2018.
Net interest income was $397.3 million for the three months ended June 30, 2019, and $794.4 million for the six months ended June 30, 2019, up 39.6% and 42.2%, respectively, over the comparable periods of 2018. Both quarter-over-quarter and year-over-year increases were driven primarily by the FCB acquisition. Net interest margin was down 17 basis points and 8 basis points over the comparable three and six-month periods to 3.69% and 3.74%, respectively, impacted by the FCB acquisition, the continued deposit shift to time deposits, and the issuance of subordinated debt. Year-to-date June 30, 2019, the yield on earning assets was 4.80%, an increase of 41 basis points compared to the six months ended June 30, 2018, while the total cost of funds increased 51 basis points to 1.11%.
Non-interest income for the second quarter of 2019 was $89.8 million, up $16.4$26.1 million, or 22.4%, compared15.5%. The increase in adjusted non-interest revenue was due primarily to the second quarter of 2018. On a year-to-date basis, non-intereststrong growth in mortgage banking income was $169.2 million compared to $140.4 million for the first six months of 2018, up $28.8 million, or 20.5%. These increases were primarily with record production driven by the FCB acquisition withcurrent rate environment. As mortgage activity normalizes, Synovus believes a reduction of adjusted non-interest revenue in the third quarter is likely before we see a return to consistent growth in mostfee revenue categories.as the economy recovers.
Non-interest expense for the second quarter of 20192020 was $264.1$284.1 million, up $60.1$20.0 million, or 29.4%7.6%, and adjusted non-interest expense(1) of $276.4 million was up$19.7 million, or 7.7%, compared to the second quarter of 2018.2019. On a year-to-date basis, non-interest expense was up $157.3$3.9 million, or 39.4%0.7%, versusand adjusted non-interest expense(1) was up $48.2 million, or 9.7%, compared to the same period a year ago. Comparisons to prior year are impactedin 2019. The increase in adjusted expense during 2020 was largely driven by the FCB acquisitionmortgage production commissions, expense associated with Synovus' internal revenue growth and merger-related expense.efficiency initiative, "Synovus Forward", COVID-19 related expenses, and investments in talent and technology. The efficiency ratio-FTE for the first six months of 20192020 was 57.67%54.47%, compared to 57.07%57.67% for the first six months of 2018.2019. The adjusted tangible efficiency ratio(1) for the first six months of 20192020 was 51.17%57.31%, down 573 basis pointsup 614 bps compared to the same period a year ago. Synovus expects expenses to decline in the second half of the year as mortgage production commissions decline with normalized mortgage activity, COVID-19 related expenses decline, and Synovus Forward initiatives are implemented.
Synovus continued
48


At June 30, 2020, total loans of $39.91 billion increased $1.66 billion, or 4.3%, sequentially, and increased $2.75 billion, or 7.4%, from December 31, 2019. The growth in total loans at June 30, 2020 included $2.71 billion in PPP loans net of unearned fees funded during the second quarter, offset partially by the transfer of certain third-party lending partnership consumer loans to benefitheld for sale during the second quarter totaling $801.0 million. We expect loans to be fairly flat over the second half of the year, as compared to balances at June 30, 2020, excluding the impact of PPP loan forgiveness.
The ACL at June 30, 2020 totaled $649.7 million, an increase of $366.9 million from December 31, 2019, reflecting a building of the ACL required under CECL primarily as a result of deterioration in the economic environment due to the impact of COVID-19. The ACL to loans coverage ratio was 1.63%, or 1.74%, excluding PPP loans, at June 30, 2020. Current credit metrics remain stable credit environment with the non-performing assets ratioNPAs at 39 basis points, non-performing loans ratio44 bps, NPLs at 34 basis points,37 bps, and total past due loans at 22 basis points. Net charge-offs for the second quarter of 2019 were 13 basis points, annualized, down from 19 basis points in the first quarter of 2019.12 bps. Year-to-date, net charge-offs are 23 bps compared to 16 basis points, well within Synovus' guidancebps in the prior year. Synovus does expect some pressure on credit metrics over the next few quarters, which aligns with the reserve builds in the first half of 15-20 basis points. For the second quarteryear under the pro-cyclical nature of 2019, the provision for loan losses was $12.1 million, a decline of $11.5 million,CECL.
Total period-end deposits at June 30, 2020 increased $4.37 billion, or 48.6%11.0%, compared to the first quarter of 2019, primarily due to lower charge-offsMarch 31, 2020, and reduction of impaired reserves. The allowance for loan losses at June 30, 2019 was $257.4 million,increased $5.79 billion, or 0.71% of total loans, compared to $250.6 million, or 0.97% of total loans, at December 31, 2018, reflecting a lower ratio at June 30, 2019 due to the impact of acquisition date accounting for acquired loans.
Sequential quarter loan growth of $504.1 million, or 5.7% annualized, was broad-based across all categories. At June 30, 2019, total loans were $36.14 billion, an increase of $10.19 billion, or39.2%15.1%, compared to December 31, 2018, including acquired loan balances from FCB of $9.29 billion. On a year-to-date basis, organic loan growth was $902.8 million, or 5.2% annualized, with growth of $463.5 million in consumer loans, $238.7 million in CRE loans, and $200.0 million in C&I loans.
Total deposits of $37.97 billion at June 30, 2019, declined slightly by $108.5 million, or 1.1% annualized, compared to the first quarter of 2019, from decreases in public funds and other time deposits of $278.7 million and $225.1 million, respectively. The decline in these deposits was offset partiallyled by growth in brokered deposits of $294.5 million, which largely replaced maturing time deposits at a shorter duration, andnon-interest bearing demand deposits. The growth in non-interest-bearing demand deposits occurred in conjunction with Synovus' PPP lending effort. Synovus also experienced broad-based growth across interest-bearing core transaction depositsaccounts compared to both March 31, 2020 and December 31, 2019.
At June 30, 2020, Synovus' CET1 ratio was 8.90%, in excess of regulatory requirements including the cap(1), which increased $100.8 million during the quarter. Comparedital conservation buffer of 2.5%. The June 30, 2020 CET1 ratio improved 20 bps compared to March 31, 2020 and declined 5 bps compared to December 31, 2018, total period-end deposits increased $11.25 billion, or 42.1%,2019. During the latter part of the second quarter of 2020, Synovus executed certain balance sheet management activities including $10.93 billionrepositioning the investment securities portfolio and transitioning certain third-party lending partnership loans to held for sale. These actions settled subsequent to quarter-end, at the margin, and are expected to provide further support to capital ratios in deposits acquired from FCB and $315.7 millionthe third quarter of organic growth.2020.
On June 17, 2019, the Company announced that the Board of Directors increased its prior $400 million share repurchase authorization to $725 million for the year 2019, of which $345.0 million was repurchased during the first six months of 2019. On July 1, 2019, Synovus completed a $350 million public offering of Series E Preferred Stock. Proceeds from the preferred stock offering will be used for general corporate purposes, including share repurchases under the new authorization. At June 30, 2019, Synovus' regulatory capital levels continue to be well above regulatory capital requirements.

More detail on Synovus' financial results for the three and six months ended June 30, 20192020 may be found in subsequent sections of "Item 2. – Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Report. See also "Item 1A. - Risk Factors" of this Report.

2019 Outlook
For the full year 2019, compared to 2018(2), previously stated guidance has been updated for deposit growth and effective income tax rate, considering the interest rate environment, other macroeconomic factors, and internal initiatives. Additionally, Synovus expects revenue growth to be at the lower end of the guidance range provided, due to the interest rate environment.
Loan growth of 5.5% to 7.5%
Deposit growth of 3.0% to 5.0%
Revenue growth of 5.5% to 7.5%
Adjusted tangible non-interest expense growth of 2% to 4%
Effective income tax rate of 24% to 25%
Net charge-off ratio of 15 to 20 basis points
(1) See "Non-GAAP"Table 14 - Reconciliation of Non-GAAP Financial Measures"Measures” in this Report for applicable reconciliation to the most comparable GAAP measure.measure.
(2) 2018 results are on a pro forma combined basis for Synovus and FCB.
Changes in Financial Condition
During the six months ended June 30, 2019,2020, total assets increased $14.65$5.92 billion from $32.67$48.20 billion at December 31, 20182019 to $47.32$54.12 billion. Loans increased $2.75 billion, due primarily to the acquisition of FCB on January 1, 2019. On the Acquisition Date, the preliminary estimated fair values of FCB included $12.4 billion of identifiable assets, $9.3including $2.71 billion in PPP loans net of unearned fees, and $10.9loans held for sale increased $785.8 million as Synovus transitioned certain third-party lending partnership consumer loans to held for sale. Investment securities available for sale increased $418.8 million and cash and cash equivalents increased $384.3 million. Additional increases in total assets at June 30, 2020, compared to December 31, 2019, included a $1.29 billion receivable for securities available for sale sold during the quarter that will settle after quarter-end and additional investments in BOLI policies of $262.4 million. Other assets increased $351.2 million and included an increase in the fair value of derivative assets of $357.0 million.
The growth in assets was primarily funded by increases of $5.79 billion in deposits. Other short-term borrowings declined $1.45 billion and long-term debt increased $174.0 million. Additionally, based on preliminary purchase price allocations, goodwilltotal liabilities at June 30, 2020 included an accrued liability of $923.0 million for purchases of securities available for sale that will settle after quarter-end. Other liabilities increased by $435.1 million. Excluding the acquired balances of FCB, loans increased $902.8$315.1 million and included an increase in the fair value of derivative liabilities of $159.1 million, an increase in income taxes payable of $67.5 million, and an increase in reserves on unfunded commitments of $59.7 million. Total shareholders' equity increased $111.3 million during the six months ended June 30, 2020, primarily due to net income of $131.7 million, increases in unrealized gains of $50.6 million in investment securities available for sale increased $714.4 million while cash and cash equivalents declined $193.9 million. Excluding the acquired balances of FCB, increases of $680.0$86.8 million in other short-term borrowings, $495.7cash flow hedges, offset partially by dividends declared on common stock of $97.2 million.
Synovus adopted CECL on January 1, 2020 with an increase to the ALL of $83.0 million and an increase to the reserve on unfunded commitments of $27.4 million with offsetting increases in long-term debt,loans of $62.2 million related to acquired PCI loans and $315.7net deferred tax assets of $12.5 million in deposits providedand a reduction to retained earnings of $35.7 million. The ACL at June 30, 2020 was $649.7 million, an increase of $366.9 million from December 31, 2019, reflecting significant economic stress due to the funding source for the growth in assets. COVID-19 healthcare crisis.
The loan to deposit ratio was 90.3% at June 30, 2020, compared to 96.8% at December 31, 2019, and 95.2% at June 30, 2019, compared to 97.1% at December 31, 2018, and 95.1% at June 30, 2018.2019.
49


Loans
The following table compares the composition of the loan portfolio at June 30, 2019,2020, December 31, 2018,2019, and June 30, 2018.2019.
Table 2 - Loans by Portfolio Class          
 June 30, 2019 December 31, 2018 June 30, 2019 vs. December 31, 2018 % Change June 30, 2018 June 30, 2019 vs. June 30, 2018 % Change
(dollars in thousands)Total Loans Total Originated Loans 
Total Acquired(1) Loans
 Total Loans  Total Loans 
Commercial, financial and agricultural$9,717,746
 $7,801,210
 $1,916,536
 $7,449,698
 30.4 % $7,271,080
 33.6%
Owner-occupied6,529,797
 5,366,404
 1,163,393
 5,331,508
 22.5
 5,004,392
 30.5
Total commercial and industrial16,247,543
 13,167,614
 3,079,929
 12,781,206
 27.1
 12,275,472
 32.4
Investment properties9,005,100
 5,927,706
 3,077,394
 5,560,951
 61.9
 5,509,596
 63.4
1-4 family properties747,390
 643,448
 103,942
 679,870
 9.9
 720,710
 3.7
Land and development595,957
 364,688
 231,269
 323,670
 84.1
 413,865
 44.0
Total commercial real estate10,348,447
 6,935,842
 3,412,605
 6,564,491
 57.6
 6,644,171
 55.8
Consumer mortgages5,407,762
 3,194,027
 2,213,735
 2,934,235
 84.3
 2,750,935
 96.6
Home equity lines1,650,745
 1,587,854
 62,891
 1,515,796
 8.9
 1,453,855
 13.5
Credit cards258,283
 258,283
 
 258,245
 
 238,424
 8.3
Other consumer loans2,249,337
 2,237,406
 11,931
 1,916,743
 17.4
 1,793,916
 25.4
Total consumer9,566,127
 7,277,570
 2,288,557
 6,625,019
 44.4
 6,237,130
 53.4
Deferred fees and costs, net(23,556) (23,556) 
 (24,143) (2.4) (22,717) 3.7
Total loans$36,138,561
 $27,357,470
 $8,781,091
 $25,946,573
 39.3 % $25,134,056
 43.8%
              
(1) Represents $9.29 billion (at fair value) of loans acquired from FCB, net of paydowns and payoffs since acquisition date.
Table 2 - Loans by Portfolio Class
June 30, 2020 vs. December 31, 2019 ChangeJune 30, 2020 vs. June 30, 2019 % Change
(dollars in thousands)June 30, 2020December 31, 2019June 30, 2019
Commercial, financial and agricultural$13,136,696  32.9 %$10,239,559  27.6 %$2,897,137  28.3 %$9,716,939  26.9 %$3,419,757  35.2 %
Owner-occupied6,801,580  17.0  6,529,811  17.6  271,769  4.2  6,511,805  18.0  289,775  4.4  
Total commercial and industrial19,938,276  49.9  16,769,370  45.2  3,168,906  18.9  16,228,744  44.9  3,709,532  22.9  
Investment properties9,447,200  23.7  9,004,327  24.2  442,873  4.9  8,914,992  24.7  532,208  6.0  
1-4 family properties696,808  1.7  780,015  2.1  (83,207) (10.7) 804,426  2.2  (107,618) (13.4) 
Land and development683,527  1.7  709,442  1.9  (25,915) (3.7) 647,828  1.8  35,699  5.5  
Total commercial real estate10,827,535  27.1  10,493,784  28.2  333,751  3.2  10,367,246  28.7  460,289  4.4  
Consumer mortgages5,811,376  14.6  5,546,368  14.9  265,008  4.8  5,407,762  15.0  403,614  7.5  
Home equity lines1,710,264  4.3  1,713,157  4.6  (2,893) (0.2) 1,650,745  4.6  59,519  3.6  
Credit cards250,448  0.6  268,841  0.7  (18,393) (6.8) 258,283  0.7  (7,835) (3.0) 
Other consumer loans1,474,583  3.7  2,396,294  6.5  (921,711) (38.5) 2,249,337  6.2  (774,754) (34.4) 
Total consumer9,246,671  23.2  9,924,660  26.7  (677,989) (6.8) 9,566,127  26.5  (319,456) (3.3) 
Total loans40,012,482  100.2  37,187,814  100.1  2,824,668  7.6  36,162,117  100.1  3,850,365  10.6  
Deferred fees and costs, net(98,185) (0.2) (25,364) (0.1) (72,821) 287.1  (23,556) (0.1) (74,629) 316.8  
Total loans, net of deferred fees and costs$39,914,297  100.0 %$37,162,450  100.0 %$2,751,847  7.4 %$36,138,561  100.0 %$3,775,736  10.4 %
At June 30, 2019,2020, total loans, were $36.14net of deferred fees and costs of $39.91 billion, an increase of $10.19 billion, or39.3%, and $11.00increased $2.75 billion, or 43.8%7.4%, from December 31, 2019 led by C&I growth of $3.17 billion, including $2.71 billion in PPP loans net of unearned fees, and CRE growth of $333.8 million, partially offset by a $678.0 million decline in consumer loans. We expect loans to be fairly flat over the second half of the year, as compared to December 31, 2018 andbalances at June 30, 2018, respectively, including acquired2020, excluding the impact of PPP loan balances from FCB of $9.29 billion.

Excluding acquired FCB balances, period-end loans increased $902.8 million, or 5.2% annualized, compared to December 31, 2018, with growth of $463.5 million, or 10.3% annualized, in consumer loans, $238.7 million, or 4.8% annualized, in CRE loans, and $200.0 million, or 2.5% annualized, in C&I loans.The mix within the loan portfolio has shifted slightly as a result of the consolidation with FCB, but it remains in-line with the targets indicated in our strategic plan.forgiveness. C&I loans remain the largest component of our balance sheetloan portfolio, representing 44.9%49.9% of total loans, while CRE and consumer loans represent 28.6%,27.1% and 26.5%23.2%, respectively. Our portfolio composition is established through a comprehensive concentration management policy which sets limits for C&I, CRE, and consumer loan levels as well as for sub-categories therein.
U.S. Small Business Administration Paycheck Protection Program (PPP)
Synovus is participating in the Paycheck Protection Program (“PPP”), which is a loan program that originated from the CARES Act and was subsequently expanded by the Paycheck Protection Program and Health Care Enhancement Act (“PPPHCEA Act”) which was passed by Congress on April 23, 2020 and signed into law on April 24, 2020. PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. These loans carry a fixed rate of 1.00% and a term of two years, if not forgiven, in whole or in part. The loans are guaranteed by the SBA. The SBA pays the originating bank a processing fee ranging from 1% to 5%, based on the size of the loan. Synovus began accepting applications from qualified customers on April 3, 2020 and has provided nearly $2.9 billion in funding to close to 19,000 customers through the PPP as of June 30, 2020. The average PPP loan was approximately $150 thousand, and the customers that received those loans employ over 335 thousand individuals.
Commercial Loans
Total commercial loans (which are comprised of C&I and CRE loans) at June 30, 20192020 were $26.60$30.77 billion, or 73.5%77.0% of the total loan portfolio, compared to $19.35$27.26 billion, or 74.5%73.4%, at December 31, 20182019 and $18.92$26.60 billion, or 75.2%73.6%, at June 30, 2018.2019.
At June 30, 2019,2020, Synovus had six5 commercial loan relationships with total commitments of $100 million or more (including amounts funded), with no single relationship exceeding $125$150 million in commitments.
Commercial and Industrial Loans
The C&I loan portfolio represents the largest category of Synovus' total loan portfolio.portfolio and is primarily comprised of general middle market and commercial banking clients across a diverse set of industries. The following table shows the composition of the C&I loan portfolio aggregated by NAICS code. 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. As of June 30, 2019, approximately 92%2020, 80.1% (93.0% excluding PPP loans) of Synovus' C&I loans are secured by real
50


estate, business equipment, inventory, and other types of collateral.collateral compared to 92.6% as of December 31, 2019. C&I loans of $16.25 billion, representing 44.9% of the total loan portfolio, grew $3.47$3.17 billion, or 27.1%18.9%, from December 31, 2018 including acquired loan balances from FCB2019, driven primarily by $2.71 billion in PPP loans net of $3.27 billion. Excluding acquired FCB balances, growth was $200.0 million, or 2.5% annualized, compared to December 31, 2018 and was driven by continued strong contributions across a number of markets, lending specialties, and industries.unearned fees at June 30, 2020.
Table 3 - Commercial and Industrial Loans by Industry
June 30, 2020December 31, 2019
(dollars in thousands)Amount
%(1)
Amount
%(1)
Health care and social assistance$3,567,225  17.9 %$3,083,355  18.4 %
Finance and insurance1,487,083  7.5  1,263,521  7.5  
Manufacturing1,387,812  7.0  1,208,688  7.2  
Retail trade1,376,393  6.9  1,202,958  7.2  
Accommodation and food services1,315,174  6.6  921,515  5.5  
Professional, scientific, and technical services1,269,710  6.4  883,433  5.3  
Wholesale trade1,197,540  6.0  1,138,145  6.8  
Other services1,168,152  5.9  1,005,420  6.0  
Real estate and rental and leasing1,164,789  5.8  1,126,828  6.7  
Construction1,089,184  5.5  702,892  4.2  
Transportation and warehousing957,299  4.8  854,954  5.1  
Arts, entertainment and recreation825,993  4.1  771,846  4.6  
Real estate other669,717  3.4  615,441  3.7  
Educational services580,615  2.9  409,639  2.4  
Public Administration421,781  2.1  342,329  2.0  
Administration, support, waste management, and remediation406,743  2.0  302,711  1.8  
Agriculture, forestry, fishing, and hunting402,946  2.0  369,185  2.2  
Information372,992  1.9  314,740  1.9  
Other Industries277,128  1.3  251,770  1.5  
Total commercial and industrial loans$19,938,276  100.0 %$16,769,370  100.0 %
Table 3 - Commercial and Industrial Loans by Industry
 June 30, 2019 December 31, 2018
(dollars in thousands)Amount 
%(1)
 Amount 
%(1)
Health care and social assistance$2,995,374
 18.4% $3,044,132
 23.8%
Retail trade1,227,234
 7.6
 903,965
 7.1
Manufacturing1,216,021
 7.5
 1,077,460
 8.4
Finance and insurance1,192,218
 7.3
 906,955
 7.1
Wholesale trade1,098,361
 6.8
 693,920
 5.4
Other services948,847
 5.8
 793,948
 6.2
Arts, entertainment and recreation916,433
 5.6
 234,310
 1.8
Accommodation and food services888,969
 5.5
 663,106
 5.2
Real estate and rental and leasing888,531
 5.5
 675,824
 5.3
Professional, scientific, and technical services872,600
 5.4
 844,929
 6.6
Transportation and warehousing834,626
 5.1
 477,386
 3.7
Construction726,359
 4.5
 615,903
 4.8
Other industries555,118
 3.4
 235,143
 2.0
Real estate other517,983
 3.2
 452,360
 3.5
Educational services359,202
 2.2
 284,840
 2.2
Agriculture, forestry, fishing, and hunting356,959
 2.2
 344,136
 2.7
Information329,746
 2.0
 251,208
 2.0
Administration, support, waste management, and remediation322,962
 2.0
 281,681
 2.2
Total commercial and industrial loans$16,247,543
 100.0% $12,781,206
 100.0%
        
(1) Loan balance in each category expressed as a percentage of total C&I loans.
At June 30, 2019, $9.722020, $13.14 billion of C&I loans, or 26.9%32.9% of the total loan portfolio, included PPP loans of $2.71 billion net of unearned fees and represented loans originated for the purpose of financing commercial, financial, and agricultural business activities. The primary source of repayment on these loans is revenue generated from products or services offered by the business or organization. The secondary source of repayment is the collateral, which consists primarily of equipment, inventory, accounts receivable, time deposits, cash surrender value of life insurance, and other business assets.

At June 30, 2019, $6.532020, $6.80 billion of C&I loans, or 18.0%17.0% of the total loan portfolio, represented loans originated for the purpose of financing owner-occupied properties. The financing of owner-occupied facilities is considered a C&I loan even though there is improved real estate as collateral. This treatment is a result of the credit decision process, which focuses on cash flow from operations of the business to repay the debt. The secondary source of repayment on these loans is the underlying real estate. These loans are predominately secured by owner-occupied and other real estate, and to a lesser extent, other types of collateral.
Commercial Real Estate Loans
CRE loans consist primarily of income-producing investment properties loans. Additionally, CRE loans include 1-4 family properties loans as well as land and development loans.loans. Total CRE loans were $10.35of $10.83 billion representing 28.6% of the total loan portfolio, and increased $3.78 billion,$333.8 million, or 57.6%3.2%, from December 31, 2018,2019, driven by the FCB acquisition, which included $3.55 billion of CRE loans on the Acquisition Date. Excluding the acquisition, CRE loans grew $238.7 million, or 4.8% annualized, as compared to December 31, 2018, ledprimarily by growth in income-producing investment properties.
Investment Properties Loans
Investment properties loans consist of construction and mortgage loans for income-producingincome-producing properties and are primarily made to finance multi-family properties, hotels, office buildings, shopping centers, warehouses and other commercial development properties. Total investment properties loans as of June 30, 20192020 were $9.01$9.45 billion, or 87.0%87.3% of the total CRE loan portfolio, and increased $442.9 million, or 4.9%, 24.9% of the total loan portfolio, compared to $5.56 billion, or 84.7% of the total CRE loan portfolio and 21.4% of the total loan portfolio, atfrom December 31, 2018. The increase in investment properties was primarily driven by FCB which included $3.15 billion of acquired investment properties loans. Excluding the Merger, investment properties loans grew $291.7 million, or 6.8% annualized, compared to December 31, 2018, driven by increases in2019 with most sub-categories including multi-family, office buildings, and hotels.experiencing growth other than shopping centers, which were slightly down.
1-4 Family Properties Loans
1-4 family properties loans include construction loans to homebuildershome builders and commercial mortgage loans related to real estate investors1-4 family rental properties and are almost always secured by the underlying property being financed by such loans. These
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properties are primarily located in the markets served by Synovus. At June 30, 2019,2020, 1-4 family properties loans totaled $747.4$696.8 million, or 7.2%6.4% of the total CRE loan portfolio, and 2.1% of the total loan portfolio, compared to $679.9decreased by $83.2 million, or 10.4% of the total CRE loan portfolio and 2.6% of the total loan portfolio, at10.7%, from December 31, 2018. Outside of $112.0 million loans acquired from FCB, 1-4 family properties loans declined by $44.5 million, or 11.3% annualized, compared to December 31, 2018.2019.
Land and Development Loans
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). Total landLand and development loans were $596.0of $683.5 million at June 30, 2019, or 1.6% of the total loan portfolio, an increase of $272.32020 decreased slightly from $709.4 million or 84.1% fromat December 31, 2018, which was driven by $280.9 million of loans acquired from FCB. Outside of the acquisition, land and development loans declined slightly by $8.6 million, or 2.9% annualized, compared to December 31, 2018.2019.
Consumer Loans
The consumer loan portfolio consists of a wide variety of loan products offered through Synovus' banking network as well as third-party lending partnerships, including first and second residential mortgages, home equity lines,HELOCs, and credit card loans, as well as home improvementimprovement, student, and personal loans student loans, and other consumer loans.from third-party lending partnerships. The majority of Synovus' consumer loans are consumer mortgages and home equity linesHELOCs secured by first and second liens on residential real estate primarily located in the markets served by Synovus.
Consumer loans at June 30, 2020 of $9.25 billion decreased $678.0 million, or 6.8%, compared to December 31, 2019 totaled $9.57primarily due to the transfer of certain third-party lending partnership loans to held for sale, partially offset by growth in consumer mortgages. Consumer mortgages grew $265.0 million, or 4.8%, from December 31, 2019 due to record production primarily resulting from the low rate environment in addition to continued successful recruiting of MLOs. HELOCs decreased $2.9 million from December 31, 2019. Credit card loans of $250.4 million at June 30, 2020 included $53.0 million of commercial credit card loans,and decreased $18.4 million from $268.8 million at December 31, 2019. Other consumer loans decreased $921.7 million, or 38.5%, from December 31, 2019 primarily due to the transfer of $801.0 million of Synovus' third-party lending partnership loans to held-for-sale. As of June 30, 2020, these partnerships had combined balances of $1.13 billion, representing 26.5%or 2.8% of the total loan portfolio, compared to $6.63$1.98 billion, or 25.5%5.3% of the total loan portfolio, at December 31, 2018. Consumer loans increased $2.94 billion, or 44.4%, from December 31, 2018, primarily driven by $2.48 billion of loans acquired from FCB. Excluding the acquisition, consumer loans grew $463.5 million, or 10.3% annualized, compared to December 31, 2018.
Consumer mortgages grew $2.47 billion, or 84.3%, from December 31, 20182019.. Excluding the $2.40 billion in consumer mortgages acquired in the FCB acquisition, year-to-date growth of $76.9 million, or 2.9% annualized, was driven by solid production in the private wealth, physician and affordable mortgage products as well as production added by mortgage loan originators hired in 2018 and 2019. HELOCs increased $134.9 million, or 8.9%, from December 31, 2018, driven primarily by the FCB acquisition. Excluding FCB acquired loans, HELOCs increased $69.1 million, or 8.8% annualized, compared to December 31, 2018.Credit card loans totaled $258.3 million at June 30, 2019, including $72.1 million of commercial credit card loans, and increased slightly compared to $258.2 million at December 31, 2018. Other consumer loans increased $332.6 million, or 17.4%, from December 31,

2018, primarily due to our two consumer-based lending partnerships. As of June 30, 2019, these partnerships had combined balances of $1.91 billion, or 5.3% of the total loan portfolio.
Consumer loans are subject to uniform lending policies and consist primarily of loans with strong borrower credit scores. Synovus makes consumer lending decisions based upon a number of key credit risk determinants including FICO scores as well as loan-to-value and debt-to-income ratios. Risk levels 1-6 (descending)Consumer loans are generally assigned to consumer loans based upon a risk score matrix.rating on a 9-point scale based on credit bureau scores, with a loan grade of 1 assigned as the lowest level of risk and a loan grade of 6 as the highest level of risk. No loans graded higher than a 6 at origination are approved for funding. At least annually, the consumer loan portfolio data is sent to a consumer credit reporting agency for a refresh of customers' credit scores so that management can evaluate ongoing consistency or negative migration in the quality of the portfolio, which impacts the allowance for loan losses.ALL. Revolving lines of credit are reviewed for anya material change in financial circumstances, and when appropriate, the line of credit may be suspended for further advances. FICO scores within the residential real estate portfolio have generally remained stable over the last several years. As of June 30, 2019,2020, weighted-average FICO scores within the residential real estate portfolio based on committed balances were 784789 for HELOCs and 785778 for Consumer Mortgages.


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Deposits
Deposits provide the most significant funding source for interest earning assets. The following table shows the relative composition of period-end deposits asas of the dates indicated.See Table 10 - Average Balances and Yields/Rates in this Report for information on average deposits including average rates.
Table 4 - Composition of Period-end Deposits
(dollars in thousands)June 30, 2020
%(1)
March 31, 2020
%(1)
December 31, 2019
%(1)
June 30, 2019
%(1)
Non-interest-bearing demand deposits(2)
$11,830,675  26.8 %$8,968,756  22.5 %$8,661,220  22.6 %$8,577,612  22.6 %
Interest-bearing demand deposits(2)
5,057,234  11.4  4,617,368  11.6  4,769,505  12.4  4,847,242  12.8  
Money market accounts(2)
11,457,223  26.0  10,255,014  25.8  9,827,357  25.6  8,952,875  23.6  
Savings deposits(2)
1,080,119  2.4  949,483  2.4  909,500  2.4  891,194  2.3  
Public funds5,347,351  12.1  5,261,383  13.2  4,622,318  12.0  4,351,304  11.5  
Time deposits(2)
5,131,676  11.6  5,786,633  14.5  6,185,611  16.1  7,342,951  19.3  
Brokered deposits4,290,302  9.7  3,987,948  10.0  3,429,993  8.9  3,003,544  7.9  
Total deposits$44,194,580  100.0 %$39,826,585  100.0 %$38,405,504  100.0 %$37,966,722  100.0 %
Core deposits(3) 
$39,904,278  90.3 %$35,838,637  90.0 %$34,975,511  91.1 %$34,963,178  92.1 %
Core transaction deposits(4) 
$29,425,251  66.6 %$24,790,621  62.2 %$24,167,582  62.9 %$23,268,923  61.3 %
Time deposits greater than $100,000, including brokered and public funds$6,875,462  15.6 %$7,176,468  18.0 %$7,262,833  18.9 %$8,290,297  21.8 %
Brokered time deposits$2,442,940  5.5 %$2,229,596  5.6 %$2,154,095  5.6 %$2,095,240  5.5 %
Table 4 - Composition of Period-end Deposits          
(dollars in thousands)June 30, 2019 
%(1)
 March 31, 2019 
%(1)
 December 31, 2018 
%(1)
 June 30, 2018 
%(1)
Non-interest-bearing demand deposits, excluding public funds$8,577,612
 22.6% $8,440,520
 22.2% $6,926,513
 25.9% $6,820,002
 25.8%
Interest-bearing demand deposits, excluding public funds4,847,242
 12.8
 4,911,215
 12.8
 3,690,689
 13.9
 4,060,293
 15.4
Money market accounts, excluding brokered deposits and public funds8,952,875
 23.6
 8,912,528
 23.4
 7,681,836
 28.7
 7,388,202
 27.9
Savings deposits, excluding public funds891,194
 2.3
 903,822
 2.4
 812,495
 3.0
 822,618
 3.1
Public funds4,351,304
 11.5
 4,630,022
 12.2
 2,374,892
 8.9
 2,224,631
 8.4
Time deposits, excluding brokered deposits and public funds7,342,951
 19.3
 7,568,079
 19.9
 3,685,867
 13.8
 3,275,932
 12.4
Brokered deposits3,003,544
 7.9
 2,709,004
 7.1
 1,548,030
 5.8
 1,851,010
 7.0
Total deposits$37,966,722
 100.0% $38,075,190
 100.0% $26,720,322
 100.0% $26,442,688
 100.0%
Core deposits(2)    
$34,963,178
 92.1% $35,366,186
 92.9% $25,172,292
 94.2% $24,591,678
 93.0%
Core transaction deposits(3)    
$23,268,923
 61.3% $23,168,085
 60.8% $19,111,533
 71.5% $19,091,115
 72.2%
                
Time deposits greater than $100,000, including brokered deposits and public funds$8,290,297
 21.8% $8,318,082
 21.8% $3,749,928
 14.0% $3,667,029
 13.9%
                
Brokered time deposits$2,095,240
 5.5% $1,902,962
 5.0% $1,199,670
 4.5% $1,507,996
 5.7%
                
(1)Deposits balance in each category expressed as percentage of total deposits.
(2)Excluding any public funds or brokered deposits.
(3) Core deposits exclude brokered deposits. See “Non-GAAP Financial Measures” in this Report for the applicable reconciliation.
(4) (3)Core transaction deposits excludeconsist of non-interest-bearing demand deposits, interest-bearing demand deposits, money market accounts, and savings deposits excluding public funds and brokered deposits and public funds. See “Non-GAAP Financial Measures” in this Report for the applicable reconciliation.deposits.
Total period-end deposits decreased $108.5at June 30, 2020 increased $4.37 billion, or 11.0%, compared to March 31, 2020, and increased $5.79 billion, or 15.1%, compared to December 31, 2019, led by growth in non-interest-bearing demand deposits. The growth in non-interest-bearing demand deposits occurred in conjunction with Synovus' PPP lending effort. Synovus also experienced broad-based growth across interest-bearing core transaction accounts compared to both March 31, 2020 and December 31, 2019. The quarterly growth in interest-bearing core transaction accounts included growth in money market accounts of $1.20 billion, NOW accounts of $439.9 million, or 1.1% annualized,and savings balances of $130.6 million, offset somewhat by declines in higher cost time deposits of $655.0 million. Additionally, Synovus increased funding by $302.4 million in lower priced brokered deposits, at June 30, 2020, compared to March 31, 2020. Interest-bearing deposit costs declined 45 bps during the second quarter of 2020, compared to the first quarter of 2019. The quarterly decline resulted from decreases in public funds and other time deposits of $278.7 million and $225.1 million, respectively. The decline in these deposits was offset partially by growth in brokered deposits of $294.5 million, which largely replaced maturing time deposits at a shorter duration, and growth in core transaction deposits, which increased $100.8 million during2020.
On an average basis, the quarter. Compared to December 31, 2018, total period-end deposits increased $11.25 billion, or 42.1%, driven by the acquisition of FCB which contributed $10.93 billionincrease in total deposits including $9.67was $4.41 billion, in core deposits on the Acquisition Date. Excluding the acquired balances, total deposits grew $315.7 millionor 11.4%, compared to December 31, 2018.

the first quarter of 2020.

Non-interest Revenue
Non-interest Income
Non-interest incomerevenue for the second quarter of 20192020 was $89.8$173.5 million, up $16.4$83.7 million, or 22.4%93.2%, and year-to-date was $277.3 million, up $108.2 million, or 63.9% compared to the same periods in 2019 and included gains on sales of investment securities available for sale of $69.4 million and $78.1 million, respectively. Adjusted non-interest revenue, which excludes net investment securities gains and gain on sale/fair value increase/(decrease) of private equity investments, for the second quarter of 2018 including2020 was $95.4 million, up $5.2 million, or 5.7%, from the impactsecond quarter of the acquisition of FCB. On2019, and on a year-to-date basis non-interest income was $169.2$194.7 million compared to $140.4$168.6 million for the first six months of 2018. The $28.82019, up $26.1 million, or 20.5%,15.5%. The increase is impactedin adjusted non-interest revenue was due primarily to strong growth in mortgage banking income with record production driven by the FCB acquisition. Adjusted non-interest income, which excludes net investment securities losses and changes in fair valuecurrent rate environment.As mortgage activity normalizes, Synovus believes a reduction of private equity investments, was up $15.5 million, or 20.7%, for the second quarter of 2019 compared to the second quarter of 2018, and year-to-date, adjusted non-interest income was up $23.8 million, or 16.4%, comparedrevenue in the third quarter is likely before we see a return to the first six months of 2018, withconsistent growth in mostfee revenue categories.as the economy recovers. See "Part II"Table 14 - Item 7. Management's Discussion and AnalysisReconciliation of Financial Condition and Results of Operations - Non-GAAP Financial Measures" ofMeasures” in this Report for applicable reconciliation to GAAP measures.
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The following table shows the principal components of non-interest income.revenue.
Table 5 - Non-interest revenue
Three Months Ended June 30,Six Months Ended June 30,
(dollars in thousands)20202019% Change20202019% Change
Service charges on deposit accounts$15,567  $21,994  (29.2)%$36,255  $42,853  (15.4)%
Fiduciary and asset management fees14,950  14,478  3.3  30,124  28,057  7.4  
Card fees9,186  11,161  (17.7) 20,136  22,037  (8.6) 
Brokerage revenue9,984  10,052  (0.7) 22,383  19,431  15.2  
Mortgage banking income23,530  7,907  197.6  35,757  12,962  175.9  
Capital markets income6,050  8,916  (32.1) 17,294  14,161  22.1  
Income from bank-owned life insurance7,756  5,176  49.8  13,794  10,466  31.8  
Investment securities gains (losses), net69,409  (1,845) nm78,144  (1,771) nm
Gain on sale and increase/(decrease) in fair value of private equity investments8,707  1,455  nm4,452  2,313  nm
Other non-interest revenue8,345  10,513  (20.6) 19,002  18,676  1.7  
Total non-interest revenue$173,484  $89,807  93.2 %$277,341  $169,185  63.9 %
Table 5 - Non-interest income           
 Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands)2019 2018 % Change 2019 2018 % Change
Service charges on deposit accounts$21,994
 $19,999
 10.0 % $42,853
 $39,938
 7.3%
Fiduciary and asset management fees14,478
 13,983
 3.5
 28,057
 27,419
 2.3
Card fees11,161
 10,833
 3.0
 22,037
 21,032
 4.8
Brokerage revenue10,052
 8,709
 15.4
 19,431
 17,085
 13.7
Capital markets income8,385
 1,118
 650.0
 13,291
 2,086
 537.2
Mortgage banking income7,907
 4,839
 63.4
 12,962
 9,887
 31.1
Income from bank-owned life insurance5,176
 3,733
 38.7
 10,466
 7,949
 31.7
Investment securities losses, net(1,845) (1,296) nm
 (1,771) (1,296) nm
Increase (decrease) in fair value of private equity investments, net1,455
 (37) nm
 2,313
 (3,093) nm
Other non-interest income11,044
 11,506
 (4.0) 19,546
 19,426
 0.6
Total non-interest income$89,807
 $73,387
 22.4 % $169,185
 $140,433
 20.5%
            
Three and Six Months Ended June 30, 20192020 compared to June 30, 20182019
Service charges on deposit accounts for the three and six months ended June 30, 20192020 were up $2.0down $6.4 million, or 10.0%29.2%, and $2.9$6.6 million, or 7.3%15.4%, respectively, includingdue primarily to the impact of FCB.COVID-19, including fewer transactions, fee waivers, and the impact of higher average balances due to stimulus funds. Service charges on deposit accounts consist of NSF fees, account analysis fees, and all other service charges. NSF fees were up $940 thousand,down $5.1 million, or 10.8%52.8%, and $659 thousand,$4.9 million, or 3.7%26.6%, for the three and six months ended June 30, 2019, respectively, primarily due to the FCB acquisition.2020, respectively. Account analysis fees were up $823down $432 thousand, or 12.7%5.9%, and $1.8 million,$451 thousand, or 14.5%3.2%, for the three and six months ended June 30, 2019,2020, respectively. All other service charges on deposit accounts, which consist primarily of monthly fees on retail demand deposits, saving accounts, and small business accounts, for the three and six months ended June 30, 2019,2020, were up $233down $909 thousand, or 17.9%, and $441 thousand,$1.3 million, or 12.5%, respectively.
Fiduciary and asset management fees are derived from providing estate administration, personal trust, corporate trust, corporate bond, investment management, and financial planning services. Fiduciary and asset management fees increased $495$472 thousand, or 3.5%3.3%, and $638 thousand,$2.1 million, or 2.3%7.4%, for the three and six months ended June 30, 2019,2020, respectively. The increases were driven by growth in total assets under management which increased by 10.0%4.7% year-over-year to $15.82 billion (including growth in brokerage assets under management).$16.56 billion.
Card fees for the three and six months ended June 30, 20192020 were down $2.0 million, increased $328 thousand, or 3.0%17.7%, and $1.0$1.9 million, or 4.8%8.6%, respectively, including growth indue to lower transaction volume andas a result of the impact of FCB.COVID-19. Card fees consist primarily of credit card interchange fees, debit card interchange fees, and merchant discounts. Card fees are reported net of certain associated expense items including customer loyalty program expenses and network expenses.
Brokerage revenue was $10.1 million and $19.4of $10.0 million for the three months ended June 30, 2020 was essentially flat, and for the six months ended June 30, 2019, respectively,2020 was $22.4 million, up $1.3$3.0 million, or 15.4%, and up $2.3 million, or 13.7%, compared to15.2%. The year-over-year growth for the three andfirst six months ended June 30, 2018.of 2020 was driven by growth in assets under management, increasing contributions from 2019 new hires, and higher transaction revenue from elevated market volatility. Brokerage revenue consists primarily of brokerage commissions as well as advisory fees earned from the management of customer assets. Brokerage assets under management were $3.94 billion at June 30, 2020, an increase of 19.6% from $3.29 billion at June 30, 2019, an increase2019.
Mortgage banking income was significantly higher in the first six months of 19.3% from $2.76 billion at June 30, 2018.
Capital markets income primarily includes fee income from customer derivative and investment banking transactions. Capital markets income increased $7.32020, with increases of $15.6 million and $11.2$22.8 million for the three and six months ended June 30, 2019, respectively, driven by contributions from newly acquired Florida markets.

2020, respectively.Mortgage banking income increased $3.1was driven by higher production and sales, including an increase in refinance volume, due primarily to a decline in long-term interest rates. Total secondary market mortgage loan production was $635.2 million, up $418.3 million, and $889.7 million, up $545.6 million, for both the three and six months ended June 30, 2019. Mortgage2020, respectively.
Capital markets income primarily includes fee income from customer derivative transactions. Additionally, capital markets income includes fee income from capital raising investment banking transactions and foreign exchange as well as other miscellaneous income from capital market transactions. While capital markets income was driven by higher overall production due to an increase$2.9 million lower for the three months ended June 30, 2020, capital markets income for the first six months of 2020 was up $3.1 million, as commercial clients locked in mortgage loan originators andlower rates on borrowings late in the addition of FCB.first quarter.
Income from bank-owned life insurance,BOLI, which includes increases in the cash surrender value of policies and proceeds from insurance benefits, increased $1.4$2.6 million, or 38.7%49.8%, and $2.5$3.3 million, or 31.7%31.8%, for the three and six months ended June 30, 2019, primarily driven by2020, respectively,
54


due primarily to additional investments in BOLI policies during the impactfirst quarter of acquired FCB policies.2020. The first six months of 20192020 included income on proceeds from insurance benefits of $233$706 thousand compared to $561$233 thousand in 2018.2019.
Investment securities losses,gains, net, of $1.8 million for both the three and six months ended June 30, 2019 included net losses due to repositioning of the portfolio to better align with long-term liquidity objectives. Investment securities losses of $1.3 million, for both the three and six months ended June 30, 2018, included a loss of $1.3 million from a strategic sale to improve portfolio performance.
Increase/(decrease) in the fair value of private equity investments was up $1.5$69.4 million and $5.4$78.1 million respectively, for the three and six months ended June 30, 2019 due to favorable2020, respectively, reflected strategic repositioning of the portfolio primarily during the latter part of the second quarter of 2020. The transactions were primarily focused on agency mortgage-backed securities, but also included the disposition of Synovus' remaining $155.0 million in asset-backed securities.
Gain on sale and increase/(decrease) in fair value adjustments toof private equity investments of $1.5 million and $2.3 millionincluded realized gains during the three and six months ended June 30, 2019, respectively, compared to unfavorable fair value adjustmentssecond quarter of $37 thousand and $3.1 million for2020 from the same period a year ago.sale of positions in two publicly traded equity investments, offset partially by write-downs on two smaller remaining investments.
The main components of other non-interest incomerevenue are fees for letters of credit and unused lines of credit, safe deposit box fees, access fees for ATM use, other service charges, income from insurance commissions, gains from sales of GGL/SBA loans, and other miscellaneous items. Gains from salesThe first quarter of GGL/SBA loans were down $1.52020 included a sale-leaseback gain of $2.4 million and $2.1associated with a bank office property while the second quarter of 2020 included expense of $1.6 million respectively, for the three and six months ended June 30, 2019, offset by valuation gains on mutual funds heldrelated to investments in rabbi trusts of $1.8 million and $1.7 million, respectively, for the three and six months ended June 30, 2019.solar energy tax credit partnerships.
Non-interest Expense
Non-interestNon-interest expense for the second quarter of 20192020 was $264.1$284.1 million, up $60.1$20.0 million, or 29.4%7.6%, compared to the second quarter of 2018.2019 and adjusted non-interest expenseof $276.4 million was up $19.7 million, or 7.7%. On a year-to-date basis, non-interest expense was up $157.3$3.9 million, or 39.4%0.7%, versus the same period a year ago. Comparisons to prior year are impacted by the FCB acquisition and merger-related expense. Adjusted non-interest expense, which excludes merger-related expense and certain other items, for the second quarter of 2019 was up $53.7 million, or 26.4%, versus the same period a year ago. On a year-to-date basis, adjusted non-interest expense increased $98.2was up $48.2 million, or 24.5%9.7%. The increase in adjusted expense during 2020 was largely driven by mortgage production commissions, expense associated with Synovus' internal revenue growth and efficiency initiatives, COVID-19 related expenses, and investments in talent and technology. The efficiency ratio-FTE for the first six months of 20192020 was 57.67%54.47%, compared to 57.07%57.67% for the first six months of 2018.2019. The adjusted tangible efficiency ratio for the first six months of 20192020 was 51.17%57.31%, down 573 basis pointsup 614 bps compared to the same period a year ago. Synovus expects expenses to decline in the second half of the year as mortgage production commissions decline with normalized mortgage activity, COVID-19 related expenses decline, and Synovus Forward initiatives are implemented. See "Part II"Table 14 - Item 7. Management's Discussion and AnalysisReconciliation of Financial Condition and Results of Operations - Non-GAAP Financial Measures" ofMeasures” in this Report for applicable reconciliation to GAAP measures.
The following table summarizes the components of non-interest expense.
Table 6 - Non-interest Expense           Table 6 - Non-interest Expense
Three Months Ended June 30, Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
(dollars in thousands)2019 2018 % Change 2019 2018 % Change(dollars in thousands)20202019% Change20202019% Change
Salaries and other personnel expense$143,009
 $111,863
 27.8% $282,436
 $225,583
 25.2%Salaries and other personnel expense$159,597  $143,009  11.6 %$309,274  $282,436  9.5 %
Net occupancy and equipment expense39,851
 32,654
 22.0
 78,245
 64,134
 22.0
Third-party processing expense19,118
 15,067
 26.9
 36,875
 29,012
 27.1
Net occupancy, equipment, and software expenseNet occupancy, equipment, and software expense41,727  39,851  4.7  83,921  78,245  7.3  
Third-party processing and other servicesThird-party processing and other services21,366  19,118  11.8  42,846  36,875  16.2  
Professional fees9,312
 6,284
 48.2
 15,660
 11,789
 32.8
Professional fees15,305  9,312  64.4  25,980  15,660  65.9  
FDIC insurance and other regulatory fees7,867
 6,543
 20.2
 14,629
 13,335
 9.7
FDIC insurance and other regulatory fees6,851  7,867  (12.9) 12,129  14,629  (17.1) 
Advertising expense5,923
 5,220
 13.5
 11,045
 10,312
 7.1
Amortization of intangibles2,410
 292
 nm
 5,802
 583
 nm
Earnout liability adjustmentsEarnout liability adjustments4,908  —  nm4,908  —  nm
Merger-related expense7,401
 
 nm
 57,140
 
 nm
Merger-related expense—  7,401  nm—  57,140  nm
Restructuring chargesRestructuring charges2,822  18  nm6,042  37  nm
Loss on early extinguishment of debtLoss on early extinguishment of debt—  —  nm1,904  —  nm
Other operating expenses29,235
 26,134
 11.9
 54,705
 44,486
 23.0
Other operating expenses31,565  37,550  (15.9) 73,417  71,515  2.7  
Total non-interest expense$264,126
 $204,057
 29.4% $556,537
 $399,234
 39.4%Total non-interest expense$284,141  $264,126  7.6 %$560,421  $556,537  0.7 %
           
Three and Six Months Ended June 30, 20192020 compared to June 30, 20182019
Salaries and other personnel expense increased $31.1$16.6 million, or 27.8%11.6%, and $56.9$26.8 million, or 25.2%9.5%, for the three and six months ended June 30, 2019,2020, respectively, including the impact of FCB,due primarily to higher mortgage production-based commissions, COVID-19 related bonus payments to certain front-line employees, and investments in talent additions, higher production-based commission and incentive compensation expense, annual merit increases, and higher employee insurance..

Net occupancy, equipment, and equipmentsoftware expense increased $7.2$1.9 million, or 22.0%4.7%, and $14.1$5.7 million, or 22.0%7.3%, during the three and six months ended June 30, 2019,2020, respectively, primarily due to additional branches frominvestments in technology as well as increases in net rent expense. Synovus expects net rent expense to decline during the acquisitionsecond half of FCB.2020, as compared to expense during the six months ended June 30, 2020, as Synovus optimizes its physical space with branch and corporate real estate closures.
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Third-party processing expenseand other services includes all third-party core operating system and processing charges as well as third-party loan servicing charges. Third-party processing expense increased $4.1$2.2 million, or 26.9%11.8%, and $7.9$6.0 million, or 27.1%16.2%, for the three and six months ended June 30, 2019,2020, respectively. The increase is primarily associated with loan growth from Synovus' consumer-based lending partnerships andpartnerships. During the acquisitionsecond quarter of FCB.2020, Synovus restructured certain of its third-party consumer-based lending partnership arrangements with a shift of new originations to held for sale. Thus, Synovus expects third-party loan servicing expense to decline in the second half of 2020, as compared to expense during the six months ended June 30, 2020.
Professional fees increased $3.0$6.0 million, or 48.2%64.4%, and $3.9$10.3 million, or 32.8%65.9%, for the three and six months ended June 30, 2019,2020, respectively, primarily from increases in consulting fees duerelated to planned strategicSynovus' internal revenue growth and technology initiatives.efficiency initiative, "Synovus Forward".
FDIC insurance and other regulatory fees were up $1.3 million for both the three and six months ended June 30, 2019 primarily due to the acquisition of FCB, somewhat offset by the FDIC's elimination of the assessment surcharge for all large banks in the fourth quarter of 2018.
Amortization of intangibles was up $2.1down $1.0 million and $5.2$2.5 million for the three and six months ended June 30, 2019,2020, respectively, due primarily to amortizationstrategic balance sheet management actions, aimed at reducing FDIC expense.
Earnout liability fair value adjustments associated with the Global One acquisition are the result of higher than projected earnings and higher earnings estimates over the remaining contractual earnout period, reflecting the continued success of the core deposit intangible asset created from the FCB acquisition, which will be amortized using an accelerated method over an estimated life of 10 years.Global One enterprise. The earnout period ends on June 30, 2021.
In connection with the FCB acquisition, Synovus incurred merger-related expense totaling $7.4 million and $57.1 million for the three and six months ended June 30, 2019, respectively, primarily related to employment compensation agreements, severance, and professional services. See "Note"Part I - Item 1. Financial Statements and Supplementary Data - Note 2 - Acquisitions" in this Report for more information on the acquisition of FCB.
During the three and six months ended June 30, 2020, Synovus recorded $2.8 million and $6.0 million, respectively, in restructuring charges related to branch closures and restructuring of corporate real estate as part of the Synovus Forward initiative. Synovus Bank operated 293 branches at June 30, 2020, compared to 298 branches at December 31, 2019, following the closing of six branches during the first half of 2020 and opening of one new branch. During July, Synovus opened an additional branch and expects to close seven branches during the remainder of 2020.
On February 25, 2020, Synovus terminated a $250 million long-term FHLB obligation and incurred a $1.9 million loss on early extinguishment of debt.
Other operating expenses includes advertising, travel, insurance, network and communication, other taxes, subscriptions and dues, other loan and ORE expense, postage and freight, training, business development, supplies, donations, and other miscellaneous expenses. Other operating expenses were up $3.1down $6.0 million and $10.2up $1.9 million, respectively, for the three and six months ended June 30, 2019 including the impact of FCB. Other operating expenses2020, respectively. Advertising expense was down $3.0 million and $3.4 million for the three and six months ended June 30, 2018 included a benefit of $1.42020, respectively, and travel expense was down $2.5 million and $4.0$2.9 million respectively, from recoveriesfor the three and reductions in litigation contingency accruals andsix months ended June 30, 2020, respectively. Other operating expenses for the six months ended June 30, 2020 includes a $2.3$2.7 million valuation adjustment expense related to the Visa Derivative.on a MPS receivable and a $2.5 million charge from termination of customer swaps.
Income Tax Expense
Income tax expense was $54.6 million and $95.0$34.5 million for the three andsix months ended June 30, 2020, representing an effective tax rate of 20.7%, compared to income tax expense of $95.0 million for the six months ended June 30, 2019, respectively, representing an effective tax rate of 25.9% and 25.6% for the respective periods. Income tax expense was $30.9 million and $61.1 million for the three and six months ended June 30, 2018, respectively, representing an effective tax rate of 21.8% and 22.2% for the respective periods.. The increasedecrease in the effective tax rate for the three andsix months ended June 30, 2020, as compared to the effective tax rate for the six months ended June 30, 2019, reflects a one-time benefit of $2.7 million for carrying back net operating loss deductions to pre-TJCA tax periods, as comparedallowed by the CARES Act, and $2.6 million in other net discrete benefit items, including discrete items related to prior periods. Additionally, the three andeffective tax rate in the first six months ended June 30, 2018,of 2019 was higher largely due to non-deductible merger-related expenses an increase in state tax expense resulting from a shift of earnings into higher tax jurisdictions, and a decrease inassociated with the benefit recognized as a result of employee share-based award vesting.FCB acquisition.
The effective tax rate is affected by many factors including, but not limited to, the level of pre-tax income, bank-owned life insurance,BOLI, tax-exempt interest, and nondeductible expenses. In addition, the effective tax rate is affected by items that may occur in any given period but are not consistent from period-to-period, such as tax benefits related to share-based compensation, jurisdiction statutory tax rate changes, valuation allowance changes, income tax credits earned, and changes to unrecognized tax benefits. Accordingly, the comparability of the effective tax rate between periods may be impacted.
With the exception of the net operating loss carryback deductions and certain state concessions, we do not expect the provisions of the CARES Act to have a significant impact on the Company’s current tax provision.
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CREDIT QUALITY, CAPITAL RESOURCES AND LIQUIDITY
Credit Quality
SynovSynovusus continuously monitors the quality of its loan portfolio by industry, property type, geography, as well as credit quality metrics and maintains an allowance for loan losses that management believes is sufficientmetrics. While we expect to absorb probable losses inherentexperience stress in its loan portfolio. Synovus continued to benefit from a relatively stable creditthe portfolio as we progress through the current economic environment, duringwhich aligns with the reserve builds in the first six monthshalf of 2019.the year under the pro-cyclical nature of CECL, the credit quality of the portfolio at June 30, 2020 was generally stable, due in part to Synovus' deferral relief program offered in response to the impact of COVID-19.

At June 30, 2020, 11.7% of Synovus' loan portfolio, or $4.67 billion, is in sectors we expect to be most sensitive to the COVID-19 pandemic. Within this group, hotels represented the largest exposure at $1.37 billion, followed by shopping centers (excluding those with a grocery, pharmacy, or discount store anchor) at $1.07billion, restaurants at$787 million, retail trade (excluding gas and staples) at $724 million, arts, entertainment, and recreation at $462 million, and oil-related industries at $265 million. While our entire loan portfolio is being continuously assessed, enhanced monitoring for these sectors is ongoing. We are continuously working with these customers to evaluate how the current economic conditions are impacting, and will continue to impact, their business operations.
The table below includes selected credit quality metrics.
Table 7 - Credit Quality Metrics
(dollars in thousands)June 30, 2020December 31, 2019June 30, 2019
Non-performing loans$147,437  $101,636  $124,083  
ORE and other assets30,242  35,810  15,479  
Non-performing assets$177,679  $137,446  $139,562  
 Total loans$39,914,297  $37,162,450  $36,138,561  
 Non-performing loans as a % of total loans0.37 %0.27 %0.34 %
Non-performing assets as a % of total loans, ORE, and specific other assets0.44  0.37  0.39  
Loans 90 days past due and still accruing$8,391  $15,943  $5,851  
As a % of total loans0.02 %0.04 %0.02 %
Total past due loans and still accruing$46,390  $123,793  $80,792  
As a % of total loans0.12 %0.33 %0.22 %
Net charge-offs, quarter$24,046  $8,821  $11,779  
Net charge-offs/average loans, quarter0.24 %0.10 %0.13 %
Net charge-offs, year-to-date$44,107  $57,612  $28,867  
Net charge-offs/average loans, year-to-date0.23 %0.16 %0.16 %
Provision for loan losses, quarter$119,242  $24,470  $12,119  
Provision for unfunded commitments, quarter22,609  **
Provision for credit losses, quarter$141,851  $24,470  $12,119  
Provision for loan losses, year-to-date268,359  87,720  35,688  
Provision for unfunded commitments, year-to-date32,214  **
Provision for credit losses, year-to-date300,573  87,720  35,688  
Allowance for loan losses588,648  281,402  257,376  
Reserve for unfunded commitments61,029  1,375  995  
Allowance for credit losses$649,677  $282,777  $258,371  
ACL to loans coverage ratio1.63 %0.76 %0.71 %
ALL to loans coverage ratio1.47  0.76  0.71  
ACL/NPLs440.65  278.23  208.22  
ALL/NPLs399.25  276.87  207.42  
Table 7 - Credit Quality Metrics 
(dollars in thousands)June 30, 2019 December 31, 2018 June 30, 2018
Non-performing loans(1)
$124,083
 $106,733
 $117,328
Impaired loans held for sale(2)
631
 1,506
 2,733
Other real estate14,848
 6,220
 6,288
Non-performing assets(1)
$139,562
 $114,459
 $126,349
Total loans$36,138,561
 $25,946,573
 $25,134,056
Non-performing loans as a % of total loans0.34% 0.41% 0.47%
Non-performing assets as a % of total loans, other loans held for sale, and ORE0.39
 0.44
 0.50
Loans 90 days past due and still accruing$5,851
 $3,798
 $3,222
As a % of total loans0.02% 0.01% 0.01%
Total past due loans and still accruing(3)
$80,792
 $56,927
 $55,614
As a % of total loans0.22% 0.22% 0.22%
Net charge-offs, quarter$11,779
 $13,044
 $17,829
Net charge-offs/average loans, quarter0.13% 0.20% 0.29%
Net charge-offs, year-to-date$28,867
 $50,410
 $22,109
Net charge-offs/average loans, year-to-date0.16% 0.20% 0.18%
Provision for loan losses, quarter$12,119
 $12,148
 $11,790
Provision for loan losses, year-to-date35,688
 51,697
 24,566
Allowance for loan losses257,376
 250,555
 251,725
Allowance for loan losses as a % of total loans0.71% 0.97% 1.00%
      
(1) For purposes of this table, June 30, 2019 non-performing loans exclude acquired loans accounted* Prior to CECL implementation on January 1, 2020, the provision for under ASC 310-30 that are currently accruing income.unfunded commitments was reflected within other non-interest expense.
(2) Represent only impaired loans that have been specifically identified to be sold. Impaired loans held for sale are carried at the lower of cost or fair value, less costs to sell, based primarily on estimated sales proceeds net of selling costs.
(3) For purposes of this table, June 30, 2019 total past due loans and still accruing include acquired loans accounted for under ASC 310-30 that are contractually 30-89 days past due.
Non-performing Assets
Total non-performing assetsNPAs as a percentage of total loans, impaired loans held for sale,ORE, and ORE improved 5 basis pointsspecific other assets were 0.44% at June 30, 2020 compared to 0.37% at December 31, 2019 and 11 basis points, respectively, to 0.39% at June 30, 2019 compared to 0.44% at December 31, 2018 and 0.50% at June 30, 2018.2019. Total NPAs were $139.6$177.7 million at June 30, 2019, a $25.1 million, or 21.9%, increase from $114.52020 compared to $137.4 million at December 31, 20182019 and a $13.2 million, or 10.5%, increase from $126.3$139.6 million at June 30, 2018,2019. The increase in NPLs and NPAs compared to December 31,
57


2019 primarily due to NPAs from the FCB acquisition. NPAs declined $15.7 million, or 10.1%, from the March 31, 2019 balance of $155.3 million, primarily duerelated to the saledesignation of FCB acquired NPLs duringa large C&I relationship as non-performing in the secondfirst quarter of 2019 at a price that exceeded2020.
Provision for Credit Losses and Allowance for Credit Losses
Provision for credit losses of $141.9 million and $300.6 million for the preliminary fair value recorded at the Acquisition Date.
Net Charge-offs
Net charge-offs for thethree and six months ended June 30, 2019 were $28.9 million, or 0.16%, as a percentage of average loans annualized, compared to $22.1 million, or 0.18%, as a percentage of average loans annualized, for the six months ended June 30, 2018. The increase in net charge-offs from 2018 is primarily attributable to a higher level of recoveries2020, respectively, resulted in the previous year. Year-to-date net charge-offsbuilding of 16 basis points is well within Synovus' guidancethe ACL required under CECL primarily as a result of 15-20 basis points. Net charge-offs for the second quarter of 2019 were 13 basis points annualized, down from 29 basis pointsdeterioration in the second quarter of 2018, primarilyeconomic environment due to lower gross charge-offs in the current quarter.

Provision for Loan Losses and Allowance for Loan Losses
For the six months ended June 30, 2019, the provision for loan losses was $35.7 million, an increase of $11.1 million, or 45.3%, compared to the six months ended June 30, 2018.COVID-19. The year-to-date increase in provision expense was driven by organic loan growth as well as an increased level of net charge-offs due to lower recoveries. The provision for loan losses covered 124% of net charge-offs for the six months ended June 30, 2019 compared to 111% for the six months ended June 30, 2018. For the second quarter of 2019, provision expense was $12.1 million, a decline of $11.5 million, or 48.6%, compared to the first quarter of 2019, primarily due to lower charge-offs and reduction of impaired reserves.
The ALLACL at June 30, 20192020 totaled $649.7 million consisting of an ALL of $588.6 million and reserve for unfunded commitments of $61.0 million, resulting in an ACL to loans coverage ratio of 1.63% and an ACL to NPLs ratio of 441%. Excluding PPP loans, the ACL to loans coverage ratio was $257.4 million, or 0.71% of total loans, compared to $250.6 million, or 0.97% of total loans, at December 31, 2018 and $251.7 million, or 1.00% of total loans, at June 30, 2018, reflecting a lower ratio at June 30, 2019 due to the impact of acquisition date accounting for acquired loans. The allowance to non-performing loans at June 30, 2019 remained strong at 207%, compared to 235% at December 31, 2018 and 215% at June 30, 2018.1.74%.
Table 8 - Accruing TDRs by Risk Grade           Table 8 - Accruing TDRs by Risk Grade
June 30, 2019 December 31, 2018 June 30, 2018June 30, 2020December 31, 2019June 30, 2019
(dollars in thousands)Amount % Amount % Amount %(dollars in thousands)Amount%Amount%Amount%
Pass$60,586
 47.9% $50,668
 43.9% $57,013
 45.5%Pass$74,619  44.8 %$70,574  53.0 %$60,586  47.9 %
Special Mention12,841
 10.2
 14,480
 12.5
 19,799
 15.8
Special mentionSpecial mention16,228  9.8  11,735  8.8  12,841  10.2  
Substandard accruing52,942
 41.9
 50,440
 43.6
 48,498
 38.7
Substandard accruing75,614  45.4  50,836  38.2  52,942  41.9  
Total accruing TDRs$126,369
 100.0% $115,588
 100.0% $125,310
 100.0%Total accruing TDRs$166,461  100.0 %$133,145  100.0 %$126,369  100.0 %
           
Troubled Debt Restructurings
Accruing TDRs were $166.5 million at June 30, 2020, compared to $133.1 million at December 31, 2019 and $126.4 million at June 30, 2019, compared to $115.6 million at December 31, 2018 and $125.3 million at June 30, 2018.2019. Accruing TDRs increased $10.8$33.3 million from December 31, 20182019 and$1.1 $40.1 million fromJune 30, 2018. Non-accruing TDRs were $12.8 million at June 30, 2019, compared to $26.2 million at December 31, 2018 and $30.4 million at June 30, 2018, a decrease of $13.4 million and $17.6 million, respectively.2019. The primary driver of the increase in accruing TDRs and decline in non-accruing TDRs compared to December 31, 2018 and June 30, 20182019 is a result of a large TDR relationship being upgraded from non-accruingdesignated as an accruing TDR in the first quarter of 2020 due to accruing status based on the extent of its payment performanceinterest rate and the expectation of the collectability of all contractual amounts.term concessions. Non-accruing TDRs were $8.5 million at June 30, 2020, compared to $17.1 million at December 31, 2019 and $12.8 million at June 30, 2019.
Accruing TDRs are considered performing because they are performing in accordance with the restructuredrestructured terms.At June 30, 2019,2020, December 31, 2018,2019, and June 30, 2018,2019, approximately 97%99%, 98%99%, and 97%, respectively, of accruing TDRs were current. In addition, subsequent defaults on accruing TDRs (defaults 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 within twelve months of the TDR designation) have remainedcontinued to remain at low levels.

Non-TDR Modifications due to COVID-19
Regulatory agencies have encouraged financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of COVID-19. In the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (initially issued on March 22, 2020 and revised on April 7, 2020), for example, the regulatory agencies expressed their view of loan modification programs as positive actions that may mitigate adverse effects on borrowers due to COVID-19 and their unwillingness to criticize institutions for working with borrowers in a safe and sound manner. Moreover, the Interagency Statement provided that eligible loan modifications related to COVID-19 may be accounted for under section 4013 of the CARES Act or in accordance with ASC 310-40. Section 4013 of the CARES Act allows banks to elect to not consider loan modifications related to COVID-19 that are made between March 1, 2020 and the earlier of December 31, 2020, or 60 days after the National Emergency ends to borrowers that are current (i.e., less than 30 days past due as of December 31, 2019) as TDRs. The regulatory agencies further stated that performing loans granted payment deferrals due to COVID-19 are not considered past due or non-accrual. FASB confirmed the foregoing regulatory agencies' view, that such short-term modifications (e.g., six months) made on a good-faith basis in response to COVID-19 for borrowers who are current are not TDRs. Beginning in late March 2020, Synovus provided relief programs consisting primarily of 90-day payment deferral relief to borrowers negatively impacted by COVID-19 and has accounted for these loan modifications in accordance with ASC 310-40.Synovus approved payment deferral relief of principal and interest to borrowers due to the effects of COVID-19 on approximately $6 billion of our loan portfolio. The deferred payments along with interest accrued during the deferral period are generally due and payable on the maturity date of the existing loan. Based on the terms of the deferral relief program which did not provide for forgiveness of interest, Synovus has recognized interest income on loans during the deferral period. As of June 30, 2020, $2.11 billion of the total loan portfolio was in a 90-day deferral status, including $3.2 million under a second 90-day deferral period. Based on reviews of customer cash flows, client surveys, and conversations and interactions with customers, Synovus preliminarily estimates that approximately 3 to 5 percent of total loans will have a second deferral granted for a 90-day deferment. As of August 4, 2020, $701.9 million of the total loan portfolio was in a 90-day deferral status, including $246.0 million under a second 90-day deferral period. The majority of second 90-day payment deferral relief provided to borrowers, as of August 4, 2020, includes deferral of scheduled principal payments only, with no deferral of interest payments.
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Capital Resources
Synovus and Synovus Bank are required to comply with capital adequacy standards established by their primary federal regulator, the Federal Reserve. Synovus and Synovus Bank measure capital adequacy using the standardized approach to the Basel III Final Rule.III. At June 30, 2019,2020, Synovus and Synovus Bank's capital levels remained strong and exceeded well-capitalized requirements currently in effect. The following table presents certain ratios used to measure Synovus and Synovus Bank's capitalization.
Table 9 - Capital Ratios
(dollars in thousands)June 30, 2020December 31, 2019
CET1 capital
Synovus Financial Corp.$3,827,229  $3,743,459  
Synovus Bank4,633,418  4,640,501  
Tier 1 risk-based capital
Synovus Financial Corp.4,364,374  4,280,604  
Synovus Bank4,633,418  4,640,501  
Total risk-based capital
Synovus Financial Corp.5,459,568  5,123,381  
Synovus Bank5,168,612  4,923,279  
CET1 capital ratio
Synovus Financial Corp.8.90 %8.95 %
Synovus Bank10.76  11.10  
Tier 1 risk-based capital ratio
Synovus Financial Corp.10.15  10.23  
Synovus Bank10.76  11.10  
Total risk-based capital to risk-weighted assets ratio
Synovus Financial Corp.12.70  12.25  
Synovus Bank12.01  11.78  
Leverage ratio
Synovus Financial Corp.8.38  9.16  
Synovus Bank8.91  9.94  
Tangible common equity ratio(1)
Synovus Financial Corp.7.41  8.08  
Table 9 - Capital Ratios   
(dollars in thousands)June 30, 2019 December 31, 2018
CET1 capital (transitional)   
Synovus Financial Corp.$3,899,532
 $2,897,997
Synovus Bank4,513,247
 3,382,497
Tier 1 risk-based capital   
Synovus Financial Corp.4,094,672
 3,090,416
Synovus Bank4,513,247
 3,382,497
Total risk-based capital   
Synovus Financial Corp.4,913,043
 3,601,376
Synovus Bank4,771,618
 3,633,457
CET1 capital ratio (transitional)   
Synovus Financial Corp.9.61% 9.95%
Synovus Bank11.13
 11.62
Tier 1 risk-based capital ratio   
Synovus Financial Corp.10.09
 10.61
Synovus Bank11.13
 11.62
Total risk-based capital to risk-weighted assets ratio   
Synovus Financial Corp.12.11
 12.37
Synovus Bank11.77
 12.49
Leverage ratio   
Synovus Financial Corp.8.89
 9.60
Synovus Bank9.80
 10.51
Tangible common equity ratio(1)
   
Synovus Financial Corp.8.56
 8.34
    
(1)See ""Table 14 - Reconciliation of Non-GAAP Financial Measures"Measures” in this Report for the applicable reconciliation to the most comparable GAAP measure.
At June 30, 2019,2020, Synovus' CET1 ratio was 9.61% under the Basel III transitional provisions, and the estimated fully phased-in CET1 ratio was 9.60% (See "Non-GAAP Financial Measures" in this Report)8.90%, both of which are well in excess of regulatory requirements including the capital conservation buffer which has now reachedof 2.5%. The June 30, 2020 CET1 ratio improved 20 bps compared to March 31, 2020 and was 5 bps below the fully-phasedDecember 31, 2019 ratio. During the latter part of the second quarter of 2020, Synovus executed certain balance sheet management activities including repositioning the investment securities portfolio and transitioning certain third-party lending partnership loans to held for sale. These actions settled subsequent to quarter-end, at the margin, and are expected to provide further support to capital ratios in amountthe third quarter of 2.5% effective January 1, 2019. See2020. For additional information on regulatory capital requirements, see "Part II - Item 8. Financial Statements and Supplementary Data - Note 11 - Regulatory Capital" to the consolidated financial statements of Synovus' 20182019 Form 10-K for additional information10-K. Management reviews the Company's capital position on regulatory capital requirements. Management currentlyan on-going basis and believes, based on internal capital analyses and earnings projections, that Synovus' capital positionSynovus is adequatewell positioned to meet current and futurerelevant regulatory minimum capital requirements inclusivestandards.
As a result of the greater economic uncertainty associated with the current pandemic, Synovus suspended its share repurchase activity beyond the $16.2 million (450 thousand shares) of its common stock repurchased during the first quarter.
On March 27, 2020, the federal banking regulators issued an interim final rule, updating CECL transition options, which allows electing banking organizations to delay an estimate of the effect of CECL on regulatory capital conservation buffer.
Effectivefor up to two years, followed by a three-year phase-in transition period. Synovus adopted CECL on January 1, 2019, Synovus completed its acquisition of all2020 and the June 30, 2020 regulatory capital ratios reflect Synovus' election of the outstanding stockfive-year transition provision. For additional information on Synovus' adoption of FCB for total consideration of $1.63 billion. SeeCECL, see "Part I - Item 1. Financial Statements and Supplementary Data - Note 2 - Acquisitions" in this Report for more information on the FCB acquisition.
On June 17, 2019, the Company announced that the Board of Directors increased its prior $400 million share repurchase authorization to $725 million for the year 2019. As of June 30, 2019, Synovus had repurchased under this program a total of $345.0 million, or 9.2 million shares of its common stock, at an average price of $37.43 per share. As of July 31, 2019, the remaining authorization under this program was $286.8 million. The timing and amount of future repurchases under the share repurchase program will depend upon a variety of factors, including market conditions, regulatory requirements, availability of funds, and other relevant considerations, as determined by us and applicable law and regulations.
Additionally, Synovus increased the quarterly common stock dividend by 20% to $0.30 per share effective with the first quarter 2019 dividend paid in April 2019.

On February 7, 2019, Synovus completed a public offering of $300.0 million aggregate principal amount of 5.900% Fixed-to-Fixed Rate Subordinated Notes due in 2029.
On July 1, 2019, Synovus completed a $350 million public offering of Series E Preferred Stock. The offering generated net proceeds of $341.5 million.
In December 2018, the federal banking regulators adopted as final the transitional arrangements to permit banking organizations to phase-in the day-one impact of the adoption of ASU 2016-13, referred to as the current expected credit loss model, on regulatory capital over a period of three years. For additional information on ASU 2016-13, see "Note 1 - Basis of Presentation"Presentation and Accounting Policies" in this Report.
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Dividends
Synovus has historically paid a quarterly cash dividend to the holders of its common stock. Management and the Board of Directors closely monitor current and projected capital levels, liquidity (including dividendsdividends from subsidiaries), financial markets and other economic trends, as well as regulatory requirements regarding the payment of dividends. As Synovus increasednavigates through the quarterlycurrent recession and regulatory guidelines, the approach to common stock dividend by 20% to $0.30 per share effective with the first quarter 2019 dividend paid in April 2019.dividends will be continually evaluated based on an assessment of long-term earnings, capital projections, and liquidity.
Synovus' ability to pay dividends on its common stock and preferred stock is primarily dependent upon dividends and distributions that it receives from its bank and non-banking subsidiaries,subsidiaries, which are restricted by various regulations administered by federal and state bank regulatory authorities.
Synovus declared common stock dividends of $97.2 million, or $0.66 per common share, for the six months ended June 30, 2020, up from $94.5 million, or $0.60 and $0.50 per common share, for the six months ended June 30, 2019, and 2018, respectively. In addition, toSynovus declared dividends paid on its commonpreferred stock Synovus paid dividends of $16.6 million and $6.3 million on its Series D Preferred Stock during the six months ended June 30, 2020 and 2019, and paid dividends of $5.1 million on its Series C Preferred Stock during the six months ended June 30, 2018.respectively.
Liquidity
Liquidity represents the extent to which Synovus has readily available sources of funding needed to meet the needs of depositors, borrowers and creditors, to support asset growth, and to otherwise sustain operations of Synovus and its subsidiaries, at a reasonable cost, on a timely basis, and without adverse consequences. ALCO monitors Synovus' economic, competitive, and regulatory environment and is responsible for measuring, monitoring, and reporting on liquidity and funding risk interest rate risk,as well as market risk.
In accordance with Synovus policies and market risk and has the authority to establish policies relative to these risks.regulatory guidance, ALCO operating under liquidity and funding policies approved by the Board of Directors, actively analyzesevaluates contractual and anticipated cash flows in order to properly manage Synovus’ liquidity position.
Contractual and anticipated cash flows are analyzed under normal and stressed conditions to determine forward-lookingproperly manage the Company’s liquidity needs and sources.profile. Synovus analyzes liquidity needs under various scenarios of market conditions and operating performance. This analysis includes stress testing and measures expected sources and uses of funds under each scenario. Emphasis is placedplaces an emphasis on maintaining numerous sources of current and potentialcontingent liquidity to allow Synovus to meet its obligations to depositors, borrowers, and creditors on a timely basis.
Liquidity is generated primarily through various sources, including, but not limited to, maturities and repayments of loans by customers, maturities and sales of investment securities, and growth in core deposit growth, and access to sources of funds other thanor wholesale deposits. Management continuously monitors and maintains appropriate levels of liquidity so as to provide adequate funding sources to manage customer deposit withdrawals, loan requests, and other funding maturities. Liquidity is also enhanced by the acquisition of new deposits. Each of the local markets monitors deposit flows and evaluates local market conditions in an effort to retain and grow deposits.demands.
Synovus Bank also generates liquidity through the issuance of brokered certificates of deposit and money market accounts. Synovus Bank accesses these funds from a broad geographic base to diversify its sources of fundingfunding and liquidity. On September 25, 2017, Synovus Bank completed the Cabela's Transaction and thereby retained WFB's $1.10 billion brokered time deposit portfolio with a weighted average remaining maturity of approximately 2.53 years and a weighted average rate of 1.83 percent (the balance of these deposits at June 30, 2019 was $530.2 million). In addition, Synovus Bankalso has thethe capacity to access funding through its membership in the FHLB system.system and through the Federal Reserve discount window. During the first quarter of 2020, Synovus increased its FHLB availability by over $2.0 billion through expanding pledged collateral. At June 30, 2019,2020, based on currently pledged collateral, Synovus Bank had access to incremental FHLB funding of $2.06$4.90 billion, subject to FHLB credit policies, through utilization of FHLB advances.policies.
In addition to bank level liquidity management, Synovus must manage liquidity at the parent company level for various operating needs including the servicing of debt, the payment of dividends on our common stock and preferred stock, share repurchases, payment of general corporate expenses and potential capital infusions into subsidiaries. The primary source of liquidity for Synovus consists of dividends from Synovus Bank, which is governed by certain rules and regulations of the GA DBF and the Federal Reserve Bank. Synovus' ability to receive dividends from Synovus Bank in future periods will depend on a number of

factors, including, without limitation, Synovus Bank's future profits, asset quality, liquidity,liquidity, and overall condition. InIn addition, both the GA DBF rules and relatedFederal Reserve Bank may require approval to pay dividends, based on certain regulatory statutes contain limitations on payments of dividends by Synovus without the approval of the GA DBF.and limitations.
On February 7, 2019,12, 2020, Synovus completed a public offering of $300.0Bank issued $400.0 million aggregate principal amount of 5.900% Fixed-to-Fixed2.289% Fixed-to-Floating Rate SubordinatedSenior Bank Notes due in 2029.  Subject to any redemption prior to February 7, 2029, the notes will bear interest at the rate of 5.900% per annum for the first five years2023. From and thereafter, at a fixed rate which will be 3.379% above the 5-Year Mid-Swap Rate as of the reset date. Interest on the notes will be payable semi-annually in arrears. The notes will mature on February 7, 2029. Proceeds from these notes were primarily used to repurchase common stock under the current authorization.
On July 1, 2019, Synovus completed a $350 million public offering of Series E Preferred Stock. The offering generated net proceeds of $341.5 million. Dividends on the shares are non-cumulative and, if declared, will accrue and be payable, in arrears, quarterly at a rate per annum equal to 5.875% for each dividend period fromincluding the original issue date to, but excluding, July 1, 2024. FromFebruary 10, 2022, the Notes bear interest at a fixed rate of 2.289% per annum, payable semi-annually in arrears on each February 10 and August 10, beginning on August 10, 2020. Unless redeemed, from and including July 1, 2024,February 10, 2022 to but excluding the dividendMaturity Date, the interest rate will change and reset every five years on July 1the Notes is computed quarterly using an interest rate based on the SOFR with a daily index maturity plus a spread of 94.5 bps per annum, payable quarterly in arrears. Synovus Bank may redeem the Notes, at a rate equalits option, on February 10, 2022 (which is the date that is one year prior to the five-year U.S. Treasury RateMaturity Date) upon not less than 10 nor more than 60 days’ prior notice given to holders of the Notes. The redemption price for any redemption is 100% of the principal amount of the Notes, plus 4.127% per annum.accrued and unpaid interest thereon to but excluding the date of redemption. The Series E Preferred Stock isNotes are not redeemable at Synovus'the option in whole or in part, from time to time,election of holders.
On February 25, 2020, Synovus terminated a $250.0 million long-term FHLB obligation and incurred a $1.9 million loss on July 1, 2024 or any subsequent reset date, or in whole but not in part, at any time within 90 days following a regulatory capital treatment event, in each case, at a redemption price equal to $25.00 per share, plus any declared and unpaid dividends, without accumulationearly extinguishment of any undeclared dividends. The Series E Preferred Stock has no preemptive or conversion rights. Except in limited circumstances, the Series E Preferred Stock does not have any voting rights. Proceeds from the preferred stock offering will be used for general corporate purposes, including share repurchases under the new authorization.debt.
Synovus presently believes that the sources of liquidity discussed above, including existing liquid funds on hand, are sufficient to meet its anticipated funding needs. However, if economic conditions were to significantly deteriorate, regulatory
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capital requirements for Synovus or Synovus Bank were to increase as the result of regulatory directives or otherwise, or Synovus believes it is prudent to enhance current liquidity levels, then Synovus may seek additional liquidity from external sources. See "Part I- Item 1A. Risk Factors - the COVID-19 pandemic has resulted in significant market volatility and lower interest rates that could materially affect Synovus’ results of operations and access to capital" of this Report and "Part I – Item 1A. Risk Factors - Changes in the cost and availability of funding due to changes in the deposit market and credit market may adversely affect our capital resources, liquidity and financial results.results" of Synovus' 20182019 Form 10-K. Furthermore, Synovus may, from time to time, take advantage of attractive market opportunities to refinance its existing debt, redeem its preferred stock, or strengthen its liquidity or capital position.
Earning Assets and Sources of Funds
Average total assets for the six months ended June 30, 20192020 increased $14.86$4.54 billion, or 47.4%9.8%, to $46.24$50.78 billion as compared to $31.37$46.24 billion for the first six months of 2018.2019. Average earning assets increased $13.32$3.78 billion, or 45.0%8.8%, in the first six months of 20192020 compared to the same period in 20182019 and represented 92.8%92.0% of average total assets at June 30, 2019,2020, as compared to 94.3%92.8% at June 30, 2018.2019. The increase in average earning assets primarily resulted from a $10.64$3.14 billion increase in average loans, net, andwhich included average PPP loans of $1.11 billion (Synovus funded nearly $2.9 billion of PPP loans during the second quarter of 2020) as well as a $2.66 billion$513.5 million increase in average investment securities primarily attributable tointerest-bearing funds held at the FCB acquisition. Federal Reserve Bank.
Average interest-bearing liabilities increased $11.05$2.35 billion, or 53.2%7.4%, to $31.81$34.16 billion for the first six months of 20192020 compared to the same period in 2018.2019. The increase in average interest-bearing liabilities was primarily related to the $10.93 billion in deposits acquiredresulted from FCB, of which $9.42 billion were interest-bearing. The year-over-year increase in average interest-bearing liabilities included a $5.72 billion increase in average time deposits, a $2.97$2.60 billion increase in average money market deposit accounts, a $1.35 billion increase in average interest-bearing demand deposits, a $608.1 million increase in average other short-term borrowings, and a $256.4$706.7 million increase in average long-term debt, primarily due to the $300.0including $400.0 million aggregate principal amount of fixed-to-fixed rate subordinatedsenior notes issued in February 2019.2020, and a $161.6 million increase in other short-term borrowings. These increases were partially offset by a $1.62 billion, or 15.5%, decrease in average time deposits. Average non-interest-bearing demand deposits increased $1.71$1.49 billion, or 23.0%16.2%, to $9.18$10.67 billion for the first six months of 20192020 compared to the same period in 2018,2019, due primarilylargely to the FCB acquisition.liquidity associated with PPP lending.
Net interest income for the six months ended June 30, 20192020 was $794.4$749.8 million, an increase of $235.6down $44.6 million, or 42.2%5.6%, compared to $558.9the same period in 2019. The decrease in year-over-year net interest income was due to declines of $36.2 million forin PAA (primarily comprised of declines of $13.5 million of loan accretion and $21.9 million of deposit premium amortization) associated with the FCB acquisition and declines in market interest rates, which were somewhat offset by higher average earning assets. Net interest margin was down 49 bps over the comparable six-month periods to 3.25%, due primarily to the decline in market interest rates in addition to declines in PAA. For the six months ended June 30, 2018, driven primarily by2020, the FCB acquisition. Net interest margin was down 8 basis points over the comparable six-month periods to 3.74% , and was impacted by the FCB acquisition, the continued deposit shift to time deposits, and the issuance of subordinated debt. The yield on earning assets was 4.80%4.03%, an increasea decrease of 41 basis points77 bps compared to the six months ended June 30, 2018,2019, while the totaleffective cost of funds increased 51 basis pointsdecreased 28 bps to 1.11%0.78%. The yield on loans increased 38 basis pointsdecreased 83 bps to 5.17%, and4.34% while the yield on investment securities increased 71 basis pointsdecreased 14 bps to 3.05%2.91% over the six months ended June 30, 2018.2019.
On a sequential quarter basis, net interest income was essentially flat. Theup $3.3 million, or 0.9%, and net interest margin for the second quarter was 3.69%3.13%, which was down 9 basis points from24 bps compared to the first quarter of 2019, and included a 1 basis point decrease in earning asset yields and an 8 basis point increase in the total cost of funds. Net interest income and margin for the second quarter of 2019 were favorably impacted by $21.0 million, or 21 basis points, of purchase accounting adjustments primarily comprised of $9.8 million of loan accretion and $11.0 million of deposit premium amortization compared to a favorable impact of $18.8 million, or 19 basis points, including $7.4 million of loan accretion and $11.0 million of deposit premium amortization, in the first quarter of 2019.2020. The sequential quarter decreasedecline in the net interest margin was primarily driven by the full quarter effect of sub-debt issuance and continued upward repricing of

time deposits. The net interest margin, excluding the impact of purchase accounting adjustments was 3.48% forthe March 2020 emergency rate cuts by the Federal Reserve, as well as excess liquidity. The second quarter included average PPP loan balances of $2.21 billion and $9.2 million in accretion of associated PPP processing fees. For the second quarter of 2019, down 11 basis points sequentially.2020, the yield on earning assets decreased 58 bps, while the effective cost of funds decreased 34 bps compared to the first quarter of 2020.

While the second half of the year is expected to be favorably impacted by additional PPP fee accretion as PPP loans are forgiven, net interest income and net interest margin are expected to experience downward pressure due to certain strategic balance sheet management activities which were completed late in the second quarter.
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Quarterly yields earned on average interest-earning assets and rates paid on average interest-bearing liabilities for the five most recent quarters are presented below.
Table 10 - Average Balances and Yields/Rates20202019
(dollars in thousands) (yields and rates annualized)Second QuarterFirst QuarterFourth QuarterThird QuarterSecond Quarter
Interest Earning Assets:
Investment securities(1)(2)
$6,618,533  6,680,047  6,696,768  6,831,036  6,955,386  
Yield2.72 %3.09  3.12  3.14  3.03  
Trading account assets(3)
$6,173  6,306  7,986  5,519  4,853  
Yield2.19 %2.70  2.69  4.01  1.83  
Commercial loans(2)(4)
$30,236,919  27,607,343  26,698,202  26,567,719  26,353,701  
Yield3.95 %4.57  4.82  5.09  5.13  
Consumer loans(4)
$9,899,172  9,985,702  9,809,832  9,633,603  9,423,427  
Yield4.34 %4.60  5.07  5.08  5.17  
Allowance for loan losses$(498,545) (368,033) (269,052) (258,024) (259,284) 
    Loans, net(4)
$39,637,546  37,225,012  36,238,982  35,943,298  35,517,844  
Yield4.08 %4.62  4.93  5.13  5.17  
Mortgage loans held for sale$221,157  86,415  117,909  99,556  70,497  
Yield3.09 %3.67  3.77  3.93  4.27  
Other loans held for sale$19,246  —  —  475  272  
Yield4.19 %—  —  —  —  
Other earning assets(5)
$1,709,086  652,130  514,635  513,160  511,488  
Yield0.11 %1.02  1.71  2.08  2.37  
Federal Home Loan Bank and Federal Reserve Bank Stock(3)
$247,801  284,082  278,586  254,994  234,949  
Yield3.60 %3.38  2.85  3.85  3.29  
Total interest earning assets$48,459,542  44,933,992  43,854,866  43,648,038  43,295,289  
Yield3.75 %4.33  4.60  4.78  4.79  
Interest-Bearing Liabilities:
Interest-bearing demand deposits$7,260,940  6,445,986  6,381,282  6,138,810  6,335,953  
Rate0.21 %0.51  0.60  0.69  0.71  
Money market accounts, excluding brokered deposits$12,238,479  11,548,014  10,526,296  10,138,783  10,024,836  
Rate0.46 %1.00  1.13  1.26  1.23  
Savings deposits$1,036,024  926,822  915,640  900,366  904,183  
Rate0.02 %0.05  0.05  0.05  0.05  
Time deposits under $100,000$1,621,943  1,761,741  1,873,350  2,100,492  2,245,878  
Rate1.43 %1.64  1.27  1.39  1.39  
Time deposits over $100,000$4,772,555  5,051,705  5,198,266  5,957,691  6,331,665  
Rate1.80 %2.04  1.51  1.69  1.70  
Other brokered deposits$1,998,571  1,376,669  1,156,131  993,078  766,718  
Rate0.25 %1.42  1.84  2.47  2.46  
Brokered time deposits$2,244,429  2,166,496  2,121,069  2,119,149  1,985,589  
Rate1.86 %2.11  2.16  2.27  2.28  
   Total interest-bearing deposits$31,172,941  29,277,433  28,172,034  28,348,369  28,594,822  
Rate0.73 %1.18  1.16  1.32  1.30  
Federal funds purchased and securities sold under repurchase agreements$250,232  167,324  192,731  221,045  300,168  
Rate0.12 %0.30  0.24  0.22  0.20  
Other short-term borrowings$550,000  1,384,362  1,565,507  1,307,370  1,090,581  
Rate1.23 %1.66  1.87  2.31  2.59  
Long-term debt$2,834,188  2,678,651  2,153,983  2,286,221  2,114,819  
Rate2.36 %2.78  3.07  3.32  3.53  
Total interest-bearing liabilities$34,807,361  33,507,770  32,084,255  32,163,005  32,100,390  
Rate0.86 %1.30  1.30  1.47  1.48  
Non-interest-bearing demand deposits$11,923,534  9,409,774  9,706,784  9,365,776  9,304,839  
Cost of funds0.65 %1.04  1.02  1.16  1.15  
Effective cost of funds(6)
0.62 %0.96  0.95  1.09  1.10  
Net interest margin3.13 %3.37  3.65  3.69  3.69  
Taxable equivalent adjustment(2)
$861  786  769  819  811  
Table 10 - Average Balances and Yields/Rates2019 2018
(dollars in thousands) (yields and rates annualized)Second Quarter First Quarter Fourth Quarter Third Quarter Second Quarter
Interest Earning Assets:         
Investment securities(1)(2)
$6,955,386
 6,536,199
 4,073,685
 4,061,328
 4,077,679
Yield3.03% 3.06
 2.45
 2.39
 2.36
Trading account assets(3)
$4,853
 2,049
 7,493
 16,646
 23,772
Yield1.83% 1.30
 1.90
 2.52
 2.79
Commercial loans(2)(4)
$26,353,973
 26,140,672
 19,150,252
 19,025,830
 18,857,271
Yield5.13% 5.16
 5.13
 4.98
 4.85
Consumer loans(4)
$9,423,427
 9,180,679
 6,476,026
 6,298,643
 6,092,899
Yield5.17% 5.10
 4.85
 4.80
 4.76
Allowance for loan losses$(259,284) (252,815) (251,098) (251,684) (257,966)
    Loans, net(4)
$35,518,116
 35,068,536
 25,375,180
 25,072,789
 24,692,204
Yield5.17% 5.17
 5.11
 4.99
 4.88
Mortgage loans held for sale$70,497
 34,913
 36,477
 49,030
 50,366
Yield4.27% 4.48
 4.79
 4.71
 4.42
Other earning assets(5)
$511,488
 679,477
 641,832
 544,704
 724,537
Yield2.37% 2.45
 2.20
 1.90
 1.77
Federal Home Loan Bank and Federal Reserve Bank Stock(3)
$234,949
 211,408
 162,369
 163,568
 165,845
Yield3.29% 4.82
 4.31
 4.41
 4.63
Total interest earning assets$43,295,289

42,532,582

30,297,036

29,908,065

29,734,403
Yield4.79% 4.80
 4.69
 4.58
 4.47
Interest-Bearing Liabilities:         
Interest-bearing demand deposits$6,335,953
 6,393,304
 4,692,804
 4,701,204
 5,001,826
Rate0.71% 0.68
 0.41
 0.38
 0.35
Money market accounts, excluding brokered deposits$10,024,836
 10,244,556
 8,050,732
 7,936,621
 7,791,107
Rate1.23% 1.18
 0.89
 0.72
 0.55
Savings deposits$904,183
 901,059
 815,588
 824,935
 829,800
Rate0.05% 0.06
 0.04
 0.03
 0.03
Time deposits under $100,000$2,245,878
 2,238,568
 1,242,811
 1,205,987
 1,161,890
Rate1.39% 1.24
 1.16
 0.99
 0.82
Time deposits over $100,000$6,331,665
 6,211,067
 2,478,649
 2,273,582
 2,021,084
Rate1.70% 1.60
 1.67
 1.46
 1.22
Non-maturing brokered deposits$766,718
 937,629
 349,480
 358,277
 262,976
Rate2.46% 2.60
 2.46
 2.10
 1.94
Brokered time deposits$1,985,589
 1,845,819
 1,275,276
 1,414,700
 1,659,941
Rate2.28% 2.13
 2.03
 1.94
 1.85
   Total interest-bearing deposits$28,594,822
 28,772,002
 18,905,340
 18,715,306
 18,728,624
Rate1.30% 1.24
 0.96
 0.83
 0.70
Federal funds purchased and securities sold under repurchase agreements$300,168
 233,076
 194,370
 230,504
 207,655
Rate0.20% 0.22
 0.18
 0.25
 0.35
Other short-term borrowings$1,090,581
 517,456
 112,228
 146,794
 3,024
Rate2.59% 2.58
 2.51
 2.12
 2.84
Long-term debt$2,114,819
 1,983,910
 1,657,022
 1,656,743
 1,852,094
Rate3.53% 3.33
 3.06
 2.87
 2.66
Total interest-bearing liabilities$32,100,390
 31,506,444

20,868,960

20,749,347

20,791,397
Rate1.48% 1.38
 1.12
 0.99
 0.87
Non-interest-bearing demand deposits$9,304,839
 9,054,949
 8,014,761
 7,672,006
 7,539,451
Cost of funds1.15% 1.07
 0.81
 0.73
 0.64
Effective cost of funds(6)
1.10% 1.02
 0.77
 0.69
 0.61
Net interest margin3.69% 3.78
 3.92
 3.89
 3.86
Taxable equivalent adjustment(2)
$811
 630
 181
 136
 120
          
(1) Excludes net unrealized gains (losses).
(2) Reflects taxable-equivalent adjustments, using the statutory federal income tax rate of 21%, in adjusting interest on tax-exempt loans and investment securities to a taxable-equivalent basis.
(3) Included as a component of other assets on the consolidated balance sheets.
(1)
Excludes net unrealized gains (losses).
(2)
Reflects taxable-equivalent adjustments, using the statutory federal income tax rate of 21%, in adjusting interest on tax-exempt loans and investment securities to a taxable-equivalent basis.
(3)
Included as a component of other assets on the consolidated balance sheets.
(4)Average loans are shown net of deferred fees and costs. Non-performing loansNPLs are included.
(5) Includes interest-bearing funds with Federal Reserve Bank, interest earning deposits with banks, and federal funds sold and securities purchased under resale agreements.
(5)
Includes interest-bearing funds with Federal Reserve Bank, interest earning deposits with banks, and federal funds sold and securities purchased under resale agreements.
(6) Includes the impact of non-interest-bearing capital funding sources.
62


Net Interest Income and Rate/Volume Analysis
The following table sets forth the major components of net interest income and the related annualized yields and rates for the six months ended June 30, 20192020 and 2018,2019, as well as the variances between the periods caused by changes in interest rates versus changes in volume.
Table 11 - Net Interest Income and Rate/Volume Analysis
Six Months Ended June 30,2020 Compared to 2019
Average BalancesInterestAnnualized Yield/RateChange due toIncrease (Decrease)
(dollars in thousands)202020192020201920202019VolumeRate
Assets
Interest earning assets:
Investment securities$6,649,290  $6,746,950  $96,593  $102,789  2.91 %3.05 %$(1,481) $(4,715) $(6,196) 
Trading account assets6,240  3,459  76  29  2.45  1.67  23  24  47  
Taxable loans, net(1)
38,396,237  35,206,985  823,156  900,129  4.31  5.16  81,833  (158,806) (76,973) 
Tax-exempt loans, net(1)(2)
468,330  342,848  7,820  6,587  3.36  3.87  2,415  (1,182) 1,233  
Allowance for loan losses(433,289) (256,067) 
Loans, net38,431,278  35,293,766  830,976  906,716  4.34  5.17  84,248  (159,988) (75,740) 
Mortgage loans held for sale153,786  52,803  2,502  1,143  3.25  4.33  2,175  (816) 1,359  
Other loans held for sale9,623  802  204  22  4.19  5.35  235  (53) 182  
Other earning assets(3)
1,180,608  595,018  2,133  7,233  0.36  2.42  7,018  (12,118) (5,100) 
Federal Home Loan Bank and Federal Reserve Bank stock265,942  223,244  4,629  4,479  3.48  4.01  851  (701) 150  
Total interest earning assets46,696,767  42,916,042  937,113  1,022,411  4.03  4.80  93,069  (178,367) (85,298) 
Cash and due from banks536,180  517,958  
Premises and equipment, net489,246  483,420  
Other real estate13,523  14,056  
Cash surrender value of bank-owned life insurance963,428  763,741  
Other assets(4)
2,075,995  1,544,423  
Total assets$50,775,139  $46,239,640  
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits$6,853,463  $6,364,470  $11,871  $21,974  0.35 %0.70 %$1,702  $(11,805) $(10,103) 
Money market accounts13,580,867  10,985,791  48,832  71,264  0.72  1.31  16,905  (39,337) (22,432) 
Savings deposits981,423  902,630  161  258  0.03  0.06  23  (120) (97) 
Time deposits8,809,434  10,430,033  81,612  86,887  1.86  1.68  (13,539) 8,264  (5,275) 
Federal funds purchased and securities sold under repurchase agreements208,778  266,807  201  281  0.19  0.21  (61) (19) (80) 
Other short-term borrowings967,181  805,602  7,509  10,476  1.54  2.59  2,081  (5,048) (2,967) 
Long-term debt2,756,419  2,049,726  35,454  35,392  2.52  3.43  12,054  (11,992) 62  
Total interest-bearing liabilities34,157,565  31,805,059  185,640  226,532  1.08  1.43  19,165  (60,057) (40,892) 
Non-interest-bearing deposits10,666,654  9,180,584  
Other liabilities918,009  689,462  
Shareholders' equity5,032,911  4,564,535  
Total liabilities and equity$50,775,139  $46,239,640  
Interest rate spread:2.95 %3.37 %
Net interest income - FTE/margin(5)
$751,473  $795,879  3.25 %3.74 %$73,904  $(118,310) $(44,406) 
Taxable equivalent adjustment1,647  1,441  
  Net interest income, actual$749,826  $794,438  
Table 11 - Net Interest Income and Rate/Volume Analysis
 Six Months Ended June 30, 2019 Compared to 2018
 Average Balances Interest Annualized Yield/Rate Change due to Increase (Decrease)
(dollars in thousands)2019 2018 2019 2018 2019 2018 Volume Rate 
Assets                 
Interest earning assets:                 
Investment securities$6,746,950
 $4,087,437
 $102,789
 $47,816
 3.05% 2.34% $31,103
 $23,870
 $54,973
Trading account assets3,459
 16,012
 29
 220
 1.67
 2.75
 (171) (20) (191)
Taxable loans, net(1)
35,207,787
 24,854,408
 900,151
 584,543
 5.16
 4.74
 243,358
 72,250
 315,608
Tax-exempt loans, net(1)(2)
342,848
 52,184
 6,587
 1,120
 3.87
 4.33
 6,241
 (774) 5,467
Allowance for loan losses(256,067) (254,818)              
Loans, net35,294,568
 24,651,774
 906,738
 585,663
 5.17
 4.79
 249,599

71,476
 321,075
Mortgage loans held for sale52,803
 44,396
 1,143
 936
 4.33
 4.22
 176
 31
 207
Other earning assets(3)
595,018
 621,131
 7,233
 5,147
 2.42
 1.65
 (212) 2,298
 2,086
Federal Home Loan Bank and Federal Reserve Bank stock223,244
 171,581
 4,479
 3,422
 4.01
 3.99
 1,022
 35
 1,057
  Total interest earning assets42,916,042

29,592,331
 1,022,411

643,204
 4.80
 4.39
 281,517

97,690

379,207
Cash and due from banks517,958
 387,472
              
Premises and equipment, net483,420
 427,291
              
Other real estate14,056
 3,709
              
Cash surrender value of bank-owned life insurance763,741
 543,233
              
Other assets(4)
1,544,423
 420,908
              
Total assets$46,239,640

$31,374,944
              
                  
Liabilities and Shareholders' Equity                
Interest-bearing liabilities:                 
Interest-bearing demand deposits$6,364,470
 $5,016,830
 $21,974
 $8,151
 0.70% 0.33% $2,205
 $11,618
 $13,823
Money market accounts10,985,791
 8,020,066
 71,264
 21,192
 1.31
 0.53
 7,794
 42,278
 50,072
Savings deposits902,630
 820,744
 258
 118
 0.06
 0.03
 12
 128
 140
Time deposits10,430,033
 4,705,778
 86,887
 29,514
 1.68
 1.26
 35,767
 21,606
 57,373
Federal funds purchased and securities sold under repurchase agreements266,807
 204,956
 281
 288
 0.21
 0.28
 86
 (93) (7)
Other short-term borrowings805,602
 197,460
 10,476
 1,516
 2.59
 1.53
 4,614
 4,346
 8,960
Long-term debt2,049,726
 1,793,342
 35,392
 23,328
 3.43
 2.60
 3,306
 8,758
 12,064
Total interest-bearing liabilities31,805,059

20,759,176
 226,532
 84,107
 1.43
 0.81
 53,784

88,641

142,425
Non-interest-bearing deposits9,180,584
 7,465,982
              
Other liabilities689,462
 201,790
              
Shareholders' equity4,564,535
 2,947,996
              
Total liabilities and equity$46,239,640

$31,374,944
              
Interest rate spread:        3.37% 3.58%      
Net interest income - FTE/margin(5)
    $795,879
 $559,097
 3.74% 3.82% $227,733

$9,049

$236,782
Taxable equivalent adjustment    1,441
 236
          
  Net interest income, actual    $794,438
 $558,861
          
                  
(1) Average loans are shown net of unearned income. Non-performing loansNPLs are included. Interest income includes fees as follows: 2020 - $24.4 million, 2019 - $17.1 million, 2018 - $15.5 million.
(2)Reflects taxable-equivalent adjustments, using the statutory federal income tax rate of 21%, in adjusting interest on tax-exempt loans to a taxable-equivalent basis.
(3)Includes interest-bearing funds with Federal Reserve Bank, interest earning deposits with banks, and federal funds sold and securities purchased under resale agreements.
(4)Includes average net unrealized gains (losses) on investment securities available for sale of $(36.5)$218.7 million and $(115.1)$(36.5) million for the six months ended June 30, 20192020 and 2018,2019, respectively.
(5)The net interest margin is calculated by dividing annualized net interest income - FTE by average total interest earnings assets.
63


Market Risk Analysis
Interest rate risk is the primary market risk to which Synovus is potentially exposed. Synovus measures its sensitivity to changes in market interest rates through the use of a simulation model. Synovus uses this simulation model which incorporates all of Synovus’ earning assets and liabilities. These simulations are used to determine a baseline net interest income forecastprojection and the sensitivity of this forecast tothe income profile based on changes in interest rates. These simulations include allsimulations incorporate assumptions and factors, including, but not limited to, changes in market rates, in the size or composition of Synovus’ earning assets and liabilities. Forecastedthe balance sheet, changes, primarily reflecting loan and deposit growth forecasts, are included in the periods modeled. Anticipated deposit mix changes in each interest rate scenario are also included in the periods modeled. Assumptions utilized in the model arerepricing characteristics as well as customer behaviors. This process is reviewed and updated on an ongoingon-going basis and are reviewed and approved byin a manner consistent with Synovus’ ALCO and the Risk Committee of the Board of Directors.governance framework.
Synovus has modeled its baseline net interest income forecastprojection assuming a flat interest rate environment with the federal funds rate at the Federal Reserve’s current targeted range of 2.25%0% to 2.50%0.25% and the current prime rate of 5.50%3.25%. Synovus has modeled the impact of a gradual increase in market interest rates across the targeted federal funds range and the prime rateyield curve of 100 and 200 basis pointsbps and a gradual decline of 100 and 200 basis points25 bps to determine the sensitivity of net interest income for the next twelve months. The lesser decline of the downrate scenario presented was selected in light of the low absolute level of monetary policy rates and generally incorporates an assumption that rates are floored at the zero-lower-bound. Synovus' current rate risk position is considered modestly asset-sensitive and would be expected to benefit net interest income in a rising interest rate environment and reduce net interest income in a declining interest rate environment. The following table represents the estimated sensitivity of net interest income at June 30, 2019,2020, with comparable information for December 31, 2018.2019.
 
Table 12 - Twelve Month Net Interest Income Sensitivity(1)
   Estimated % Change in Net Interest Income as Compared to Unchanged Rates (for the next twelve months)
 
 Change in Short-term Interest Rates (in basis points) June 30, 2019 December 31, 2018
 +200 4.7% 3.4%
 +100 3.0% 2.0%
 Flat —% —%
 -100 (1.5)% (2.0)%
 -200 (4.8)% N/A
      
(1) December 31, 2018 does not include assets and liabilities of FCB which were acquired on January 1, 2019.
Table 12 - Twelve Month Net Interest Income Sensitivity
Estimated % Change in Net Interest Income as Compared to Unchanged Rates (for the next twelve months)
Change in Short-term Interest Rates (in bps)June 30, 2020December 31, 2019
+2001.9%2.8%
+1001.0%2.0%
Flat—%—%
-250.2%N/A
The net interest income simulation model is the primary tool utilized to evaluate potential interest rate risks over a shorter-term time horizon. Synovus also evaluates potential longer-term interest rate risk through modeling and evaluation of EVE. Simulation modeling is utilized to measure the economic value of equityEVE and its sensitivity to immediate changes in interest rates. This EVE modeling allows Synovus to capture longer-term repricing risk and options risk embedded in the balance sheet. These simulations value only the current balance sheet and do not incorporate growth assumptions used in the net interest income simulation. The economic value of equityEVE is the net fair value of assets, liabilities, and off-balance sheet financial instruments derived from the present value of future cash flows discounted at current market interest rates. From this baseline valuation, Synovus evaluates changes in the value of each of these items in various interest rate scenarios to determine the net impact on the economic value of equity.EVE. Key assumptions utilized in the model, namely loan prepayments, investment security prepayments, deposit repricing betas, and non-maturity deposit duration have a significant impact on the results of the EVE simulations. As illustrated in
LIBOR
In July 2017, the table below,Financial Conduct Authority, which regulates LIBOR, announced that it intends to stop persuading or compelling banks to submit rates for the EVE model indicatescalculation of LIBOR after 2021, confirming the continuation of LIBOR will not be guaranteed beyond that compared with a valuation assuming stable rates, EVE is projected to decrease by 0.5% and by 4.3%, assuming an immediate and sustained increase in interest rates of 100 and 200 basis points, respectively. Assuming an immediate 100 basis point and 200 basis point decline in rates, EVE is projected to decrease by 7.0% and 19.2%, respectively. These changes in long-term interest rate sensitivity are primarilydate. However, due to the impactCOVID-19 pandemic, the FCA has since softened its stance on the pre-cessation end dates scheduled in 2020 and early 2021 on the issuance of instruments tied to LIBOR. The ARRC has proposed SOFR as its preferred rate as an alternative to LIBOR and has proposed a paced market transition plan to SOFR from LIBOR. The ARRC recently recommended a spread adjustment methodology for cash products based on a historical median over a five-year lookback period calculating the difference between LIBOR and SOFR. Organizations are currently working on industry-wide and company-specific transition plans as it relates to derivatives and cash markets exposed to LIBOR. As noted within our 10-K Risk Factors, Synovus holds instruments that may be impacted by the discontinuance of LIBOR including floating rate obligations, loans, deposits, derivatives and hedges, and other financial instruments but is not able to currently predict the associated financial impacts of the acquisitiontransition to an alternative reference rate. Synovus has established a cross-functional LIBOR transition working group that is in the process of FCB.i) assessing the Company's current exposure to LIBOR indexed instruments and the data, systems and processes that may also be impacted; ii) establishing an implementation plan; and iii) developing a formal governance structure for the transition.
Table 13 - Economic Value of Sensitivity(1)
    
  Estimated Change in EVE
Immediate Change in Interest Rates (in basis points) June 30, 2019 December 31, 2018
+200 (4.3)% 0.7%
+100 (0.5)% 1.3%
-100 (7.0)% (13.9)%
-200 (19.2)% N/A
     
64
(1) December 31, 2018 does not include assets and liabilities of FCB which were acquired on January 1, 2019.


Critical Accounting Policies
The accounting and financial reporting policies of Synovus are in accordance with GAAP and conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. Synovus has identified certain of its accounting policies as “critical accounting policies,” consisting of those related to the allowance for loan losses, fair value measurements and income taxes. In determining which accounting policies are critical in nature, Synovus has identified the policies that require significant judgment or involve complex estimates. It is management's practice to discuss critical accounting policies with the Board of Directors' Audit Committee, including the development, selection, implementation and disclosure of the critical accounting policies. The application of these policies has a significant impact on Synovus’ unaudited interim consolidated financial statements. Synovus’ financial results could differ significantly if different judgments or estimates are used in the application of these policies. All accounting policies described in "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" in Synovus' 20182019 Form 10-K should be reviewed for a greater understanding of how we record and report our financial performance.performance. Excluding the recently adopted accounting standards and purchased loans accounting policyadoption of ASU 2016-13, Financial Instruments-Credit Losses (CECL) on January 1, 2020 as disclosed in "Note"Part I - Item 1. Financial Statements and Supplementary Data - Note 1 - Basis of Presentation"Presentation and Accounting Policies" in this Report, there have been no significant changes to the accounting policies, estimates and assumptions, or the judgments affecting the application of these estimates and assumptions from those disclosed in Synovus' 20182019 Form 10-K.

Goodwill

Goodwill assessments are highly sensitive to economic projections and the related assumptions and estimates used by management. Synovus includes goodwill impairment analysis and reporting unit valuations as part of its critical accounting policy for fair value measurements. For additional information, see "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" in Synovus' 2019 Form 10-K and "Part I - Item 1. Financial Statements and Supplementary Data - Note 5 - Goodwill and Other Intangible Assets" in this Report.





Non-GAAP Financial Measures
The measures entitled adjusted non-interest income;revenue; adjusted non-interest expense; adjusted total revenues; adjusted tangible efficiency ratio; adjusted net income per common share, diluted; adjusted return on average assets; adjusted return on average common equity; return on average tangible common equity, adjusted return on average tangible common equity; core deposits; core transaction deposits;and tangible common equity ratio; and CET1 ratio (fully phased-in) are not measures recognized under GAAP and therefore are considered non-GAAP financial measures. The most comparable GAAP measures to these measures are total non-interest income;revenue; total non-interest expense; total revenues; efficiency ratio-FTE; net income per common share, diluted; return on average assets; return on average common equity; total deposits;and the ratio of total shareholders' equity to total assets; and the CET1 ratio,assets, respectively.
Management believes that these non-GAAP financial measures provide meaningful additional information about Synovus to assist management and investors in evaluating Synovus’ operating results, financial strength, the performance of its business, and the strength of its capital position. However, these non-GAAP financial measures have inherent limitations as analytical tools and should not be considered in isolation or as a substitute for analyses of operating results or capital position as reported under GAAP. The non-GAAP financial measures should be considered as additional views of the way our financial measures are affected by significant items and other factors, and since they are not required to be uniformly applied, they may not be comparable to other similarly titled measures at other companies. Adjusted total revenues and adjusted non-interest incomerevenue are measures used by management to evaluate non-interest incomerevenue exclusive of net investment securities gains (losses) and gains on sale and changes in fair value of private equity investments, net. Adjusted non-interest expense and the adjusted tangible efficiency ratio are measures utilized by management to measure the success of expense management initiatives focused on reducing recurring controllable operating costs. Adjusted net income per common share, diluted, adjusted return on average assets, and adjusted return on average common equity are measurements used by management to evaluate operating results exclusive of items that management believes are not indicative of ongoing operations and impact period-to-period comparisons. TheReturn on average tangible common equity and adjusted return on average tangible common equity is a measureare measures used by management to compare Synovus' performance with other financial institutions because it calculates the return available to common shareholders without the impact of intangible assets and their related amortization, thereby allowing management to evaluate the performance of the business consistently. Core deposits and core transaction deposits are measures used by management to evaluate organic growth of deposits and the quality of deposits as a funding source. The tangible common equity ratio and CET1 ratio (fully phased-in) areis used by management and bank regulators to assess the strength of our capital position. The computations of these measures are set forth in the tables below.
65


Table 14 - Reconciliation of Non-GAAP Financial Measures       
 Three Months Ended Six Months Ended
(in thousands)June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
Adjusted non-interest income       
Total non-interest income$89,807
 $73,387
 $169,185
 $140,433
Add: Investment securities losses, net1,845
 1,296
 1,771
 1,296
Subtract/add: (Increase) decrease in fair value of private equity investments, net(1,455) 37
 (2,313) 3,093
     Adjusted non-interest income$90,197
 $74,720
 $168,643
 $144,822
        
Adjusted non-interest expense       
Total non-interest expense$264,126
 $204,057
 $556,537
 $399,234
Subtract: Merger-related expense(7,401) 
 (57,140) 
Add: Litigation settlement/contingency expense
 1,400
 
 4,026
Subtract/add: Restructuring charges, net(18) (103) (37) 212
Subtract: Fair value adjustment to Visa derivative
 (2,328) 
 (2,328)
Adjusted non-interest expense$256,707
 $203,026
 $499,360
 $401,144
        
Table 14 - Reconciliation of Non-GAAP Financial Measures
Three Months EndedSix Months Ended
(in thousands)June 30, 2020June 30, 2019June 30, 2020June 30, 2019
Adjusted non-interest revenue
Total non-interest revenue$173,484  $89,807  $277,341  $169,185  
Subtract/add: Investment securities (gains) losses, net(69,409) 1,845  (78,144) 1,771  
Subtract: Gain on sale and increase in fair value of private equity investments, net(8,707) (1,455) (4,452) (2,313) 
Adjusted non-interest revenue$95,368  $90,197  $194,745  $168,643  
Adjusted non-interest expense
Total non-interest expense$284,141  $264,126  $560,421  $556,537  
Subtract: Earnout liability adjustments(4,908) —  (4,908) —  
Subtract: Merger-related expense—  (7,401) —  (57,140) 
Subtract: Restructuring charges, net(2,822) (18) (6,042) (37) 
Subtract: Loss on early extinguishment of debt, net—  —  (1,904) —  
Adjusted non-interest expense$276,411  $256,707  $547,567  $499,360  


Three Months EndedSix Months Ended
(in thousands, except per share data)June 30, 2020June 30, 2019June 30, 2020June 30, 2019
Adjusted total revenues and adjusted tangible efficiency ratio
Adjusted non-interest expense$276,411  $256,707  $547,567  $499,360  
Subtract: Amortization of intangibles(2,640) (2,410) (5,280) (5,802) 
Adjusted tangible non-interest expense$273,771  $254,297  $542,287  $493,558  
Net interest income$376,566  $397,262  $749,826  $794,438  
Add: Tax equivalent adjustment861  811  1,647  1,441  
Add: Total non-interest revenue173,484  89,807  277,341  169,185  
Total FTE revenues$550,911  $487,880  $1,028,814  $965,064  
Subtract/add: Investment securities (gains) losses, net(69,409) 1,845  (78,144) 1,771  
Subtract: Gain on sale and increase in fair value of private equity investments, net(8,707) (1,455) (4,452) (2,313) 
Adjusted total revenues$472,795  $488,270  $946,218  $964,522  
Efficiency ratio-FTE51.58 %54.14 %54.47 %57.67 %
 Adjusted tangible efficiency ratio57.91  52.08  57.31  51.17  
Adjusted net income per common share, diluted
Net income available to common shareholders$84,901  $153,034  $115,131  $270,070  
Add: Earnout liability adjustments4,908  —  4,908  —  
Add: Merger-related expense—  7,401  —  57,140  
Add: Restructuring charges, net2,822  18  6,042  37  
Add: Loss on early extinguishment of debt, net—  —  1,904  —  
Subtract/add: Investment securities (gains) losses, net(69,409) 1,845  (78,144) 1,771  
Subtract: Gain on sale and increase in fair value of private equity investments, net(8,707) (1,455) (4,452) (2,313) 
Add/subtract: Tax effect of adjustments19,500  (1,951) 19,335  (7,659) 
Adjusted net income available to common shareholders$34,015  $158,892  $64,724  $319,046  
Weighted average common shares outstanding, diluted147,733  159,077  148,067  160,908  
Adjusted net income per common share, diluted$0.23  $1.00  $0.44  $1.98  

66


Table 14 - Reconciliation of Non-GAAP Financial Measures, continued    

Three Months Ended Six Months Ended
(in thousands, except per share data)June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
Adjusted total revenues and adjusted tangible efficiency ratio       
Adjusted non-interest expense$256,707
 $203,026
 $499,360
 $401,144
Subtract: Amortization of intangibles(2,410) (292) (5,802) (583)
Adjusted tangible non-interest expense$254,297
 $202,734
 $493,558
 $400,561
        
Net interest income$397,262
 $284,577
 $794,438
 $558,861
Add: Tax equivalent adjustment811
 120
 1,441
 236
Add: Total non-interest income89,807
 73,387
 169,185
 140,433
Total FTE revenues$487,880
 $358,084
 $965,064
 $699,530
Add: Investment securities losses, net1,845
 1,296
 1,771
 1,296
Subtract/add: (Increase) decrease in fair value of private equity investments, net(1,455) 37
 (2,313) 3,093
Adjusted total revenues$488,270
 $359,417
 $964,522
 $703,919
Efficiency ratio-FTE54.14% 56.99% 57.67% 57.07%
 Adjusted tangible efficiency ratio52.08
 56.41
 51.17
 56.90
        
Adjusted net income per common share, diluted       
Net income available to common shareholders$153,034
 $108,622
 $270,070
 $209,229
Subtract/add: Income tax expense, net related to State Tax Reform
 (608) 
 717
Add: Merger-related expense7,401
 
 57,140
 
Subtract: Litigation settlement/contingency expense
 (1,400) 
 (4,026)
Add/subtract: Restructuring charges, net18
 103
 37
 (212)
Add: Fair value adjustment to Visa derivative
 2,328
 
 2,328
Add: Investment securities losses, net1,845
 1,296
 1,771
 1,296
Subtract/add: (Increase) decrease in fair value of private equity investments, net(1,455) 37
 (2,313) 3,093
Subtract: Tax effect of adjustments(1,951) (554) (7,659) (582)
Adjusted net income available to common shareholders$158,892
 $109,824
 $319,046
 $211,843
Weighted average common shares outstanding, diluted159,077
 119,139
 160,908
 119,229
Adjusted net income per common share, diluted$1.00
 $0.92
 $1.98
 $1.78
        
Table 14 - Reconciliation of Non-GAAP Financial Measures, continued
Three Months EndedSix Months Ended
(dollars in thousands)June 30, 2020June 30, 2019June 30, 2020June 30, 2019
Adjusted return on average assets (annualized)
Net income$93,192  $156,184  $131,712  $276,370  
Add: Earnout liability adjustments4,908  —  4,908  —  
Add: Merger-related expense—  7,401  —  57,140  
Add: Restructuring charges, net2,822  18  6,042  37  
Add: Loss on early extinguishment of debt, net—  —  1,904  —  
Subtract/add: Investment securities (gains) losses, net(69,409) 1,845  (78,144) 1,771  
Subtract: Gain on sale and increase in fair value of private equity investments, net(8,707) (1,455) (4,452) (2,313) 
Add/subtract: Tax effect of adjustments19,500  (1,951) 19,335  (7,659) 
Adjusted net income$42,306  $162,042  $81,305  $325,346  
Net income annualized374,816  626,452  264,871  557,321  
Adjusted net income annualized170,154  649,949  163,503  656,084  
Total average assets52,853,685  46,679,769  50,775,139  46,239,640  
Return on average assets (annualized)0.71 %1.34 %0.52 %1.21 %
Adjusted return on average assets (annualized)0.32  1.39  0.32  1.42  



67


Table 14 - Reconciliation of Non-GAAP Financial Measures, continued    
 Three Months Ended Six Months Ended
(dollars in thousands)June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
Adjusted return on average assets (annualized)       
Net income$156,184
 $111,181
 $276,370
 $214,348
Subtract/add: Income tax expense, net related to State Tax Reform
 (608) 
 717
Add: Merger-related expense7,401
 
 57,140
 
Subtract: Litigation settlement/contingency expense
 (1,400) 
 (4,026)
Add/subtract: Restructuring charges, net18
 103
 37
 (212)
Add: Fair value adjustment to Visa derivative
 2,328
 
 2,328
Add: Investment securities losses, net1,845
 1,296
 1,771
 1,296
Subtract/add: (Increase) decrease in fair value of private equity investments, net(1,455) 37
 (2,313) 3,093
Subtract: Tax effect of adjustments(1,951) (554) (7,659) (582)
Adjusted net income$162,042
 $112,383
 $325,346
 $216,962
Net income annualized626,452
 445,946
 557,321
 432,249
Adjusted net income annualized649,949
 450,767
 656,084
 437,520
Total average assets46,679,769
 31,502,758
 46,239,640
 31,374,944
Return on average assets1.34% 1.42% 1.21% 1.38%
Adjusted return on average assets (annualized)1.39
 1.43
 1.42
 1.39
        
Table 14 - Reconciliation of Non-GAAP Financial Measures, continued
Three Months Ended
(dollars in thousands)June 30, 2020March 31, 2020June 30, 2019
Adjusted return on average common equity, return on average tangible common equity, and adjusted return on average tangible common equity (annualized)
Net income available to common shareholders$84,901  $30,230  $153,034  
Add: Earnout liability adjustments4,908  —  —  
Add: Merger-related expense—  —  7,401  
Add: Restructuring charges, net2,822  3,220  18  
Add: Loss on early extinguishment of debt, net—  1,904  —  
Subtract/add: Investment securities (gains) losses, net(69,409) (8,734) 1,845  
Subtract/add: (Increase) decrease in fair value of private equity investments(8,707) 4,255  (1,455) 
Add/subtract: Tax effect of adjustments19,500  (167) (1,951) 
Net income available to common shareholders$34,015  $30,708  $158,892  
Adjusted net income available to common shareholders' annualized$136,808  $123,507  $637,314  
Add: Amortization of intangibles7,868  7,868  7,250  
Adjusted net income available to common shareholders excluding amortization of intangibles annualized$144,676  $131,375  $644,564  
Net income available to common shareholders annualized$341,470  $121,584  $613,818  
Add: Amortization of intangibles7,868  7,868  7,250  
Net income available to common shareholders excluding amortization of intangibles$349,338  $129,452  $621,068  
Total average shareholders' equity less preferred stock$4,567,254  $4,424,278  $4,416,705  
Subtract: Goodwill(497,267) (497,267) (487,601) 
Subtract: Other intangible assets, net(51,667) (54,514) (69,853) 
Total average tangible shareholders' equity less preferred stock$4,018,320  $3,872,497  $3,859,251  
Return on average common equity (annualized)7.48 %2.75 %13.90 %
Adjusted return on average common equity (annualized)3.00  2.79  14.43  
Return on average tangible common equity (annualized)8.69  3.34  16.09  
Adjusted return on average tangible common equity (annualized)3.60  3.39  16.70  


(dollars in thousands)June 30, 2020March 31, 2020June 30, 2019
Tangible common equity ratio
Total assets$54,121,989  $50,619,585  $47,318,203  
Subtract: Goodwill(497,267) (497,267) (492,390) 
Subtract: Other intangible assets, net(50,392) (53,032) (61,473) 
Tangible assets$53,574,330  $50,069,286  $46,764,340  
Total shareholders' equity$5,052,968  $5,065,205  $4,753,816  
Subtract: Goodwill(497,267) (497,267) (492,390) 
Subtract: Other intangible assets, net(50,392) (53,032) (61,473) 
Subtract: Preferred Stock, no par value(537,145) (537,145) (195,140) 
Tangible common equity$3,968,164  $3,977,761  $4,004,813  
Total shareholders' equity to total assets ratio9.34 %10.01 %10.05 %
Tangible common equity ratio7.41  7.94  8.56  

68
Table 14 - Reconciliation of Non-GAAP Financial Measures, continued     
 Three Months Ended
(dollars in thousands)June 30, 2019 March 31, 2019 June 30, 2018
Adjusted return on average common equity and adjusted return on average tangible common equity (annualized)     
Net income available to common shareholders$153,034
 $117,036
 $108,622
Subtract: Income tax expense, net related to State Tax Reform
 
 (608)
Add: Merger-related expense7,401
 49,738
 
Subtract: Litigation settlement/contingency expense
 
 (1,400)
Add: Restructuring charges, net18
 19
 103
Add: Fair value adjustment to Visa derivative
 
 2,328
Add/subtract: Investment securities losses (gains), net1,845
 (75) 1,296
Subtract/add: (Increase) decrease in fair value of private equity investments, net(1,455) (858) 37
Subtract: Tax effect of adjustments(1,951) (5,705) (554)
Net income available to common shareholders$158,892
 $160,155
 $109,824
      
Adjusted net income available to common shareholders' annualized$637,314
 $649,518
 $440,502
Add: Amortization of intangibles7,250
 10,317
 896
Adjusted net income available to common shareholders excluding amortization of intangibles annualized$644,564

$659,835

$441,398
      
Total average shareholders' equity less preferred stock$4,416,705
 $4,321,561
 $2,831,368
Subtract: Goodwill(487,601) (480,215) (57,315)
Subtract: Other intangible assets, net(69,853) (75,191) (10,555)
Total average tangible shareholders' equity less preferred stock$3,859,251
 $3,766,155
 $2,763,498
Return on average common equity (annualized)13.90% 10.98% 15.39%
Adjusted return on average common equity (annualized)14.43
 15.03
 15.56
Adjusted return on average tangible common equity (annualized)16.70
 17.52
 15.97
      



Table 14 - Reconciliation of Non-GAAP Financial Measures, continued
(in thousands)June 30, 2019 March 31, 2019 December 31, 2018 June 30, 2018
Period-end core deposits and core transaction deposits       
Total deposits$37,966,722
 $38,075,190
 $26,720,322
 $26,442,688
Subtract: Brokered deposits(3,003,544) (2,709,004) (1,548,030) (1,851,010)
Core deposits34,963,178
 35,366,186
 25,172,292
 24,591,678
Subtract: Time deposits, excluding brokered deposits(7,342,951) (7,568,079) (3,685,867) (3,275,932)
Subtract: Public funds(4,351,304) (4,630,022) (2,374,892) (2,224,631)
Core transaction deposits$23,268,923
 $23,168,085
 $19,111,533
 $19,091,115
        


Table 14 - Reconciliation of Non-GAAP Financial Measures, continued
(dollars in thousands)June 30, 2019
March 31, 2019
June 30, 2018
Tangible common equity ratio     
Total assets$47,318,203
 $46,630,025
 $31,740,305
Subtract: Goodwill(492,390) (485,000) (57,315)
Subtract: Other intangible assets, net(61,473) (74,683) (10,458)
Tangible assets$46,764,340
 $46,070,342
 $31,672,532
Total shareholders' equity$4,753,816
 $4,597,753
 $3,167,694
Subtract: Goodwill(492,390) (485,000) (57,315)
Subtract: Other intangible assets, net(61,473) (74,683) (10,458)
Subtract: Preferred Stock, no par value(195,140) (195,140) (321,118)
Tangible common equity$4,004,813
 $3,842,930
 $2,778,803
Total shareholders' equity to total assets ratio10.05% 9.86% 9.98%
Tangible common equity ratio8.56
 8.34
 8.77
      
CET1 ratio (fully phased-in)     
CET1$3,899,532
    
Total risk-weighted assets40,562,547
    
Total risk-weighted assets (fully phased-in)40,630,953
    
CET1 ratio9.61%   

     CET1 ratio (fully phased-in)9.60
   

      




ITEM 3. – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information presented in the Market Risk Analysis section of the Management's Discussion and Analysis of Financial Condition and Results of Operations is incorporated herein by reference.
ITEM 4. – CONTROLS AND PROCEDURES
In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by Synovus' management, with the participation of Synovus' Chief Executive Officer and Chief Financial Officer, of the effectiveness of Synovus' disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on that evaluation, Synovus' Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2019,2020, Synovus' disclosure controls and procedures were effective.

There have been no material changes in Synovus' internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 20192020 that have materially affected, or are reasonably likely to materially affect, Synovus' internal control over financial reporting.

69


PART II. – OTHER INFORMATION
ITEM 1. – LEGAL PROCEEDINGS
Synovus and its subsidiaries are subject to various legal proceedings, claims and disputes that arise in the ordinary course of its business. Additionally, in the ordinary course of its business, Synovus and its subsidiaries are subject to regulatory examinations, information gathering requests, inquiries and investigations. Synovus, like many other financial institutions, has been the target of legal actions and other proceedings asserting claims for damages and related relief for losses. These actions include mortgage loan and other loan put-back claims, claims and counterclaims asserted by individual borrowers related to their loans, and allegations of violations of state and federal laws and regulations relating to banking practices, and allegations related to Synovus' participation in government stimulus programs, including putative class action matters. In addition to actual damages, if Synovus does not prevail in such asserted legal actions, credit-related litigation could result in additional write-downs or charge-offs of assets, which could adversely affect Synovus' results of operations during the period in which the write-down or charge-off were to occur.
Based on Synovus' current knowledge and advice of counsel, management presently does not believe that the liabilities arising from these legal matters will have a material adverse effect of Synovus' consolidated financial condition, results of operations or cash flows. However, it is possible that the ultimate resolution of these legal matters could have a material adverse effect on Synovus' results of operations and financial condition for any particular period. For additional information, see "Note 12"Part I - Item 1. Financial Statements and Supplementary Data - Note 10 - Commitments and Contingencies" of this Report, which Note is incorporated herein by this reference.
ITEM 1A. – RISK FACTORS
In addition to the other information set forth in this Report, you should carefully consider the factors discussed in "Part I - Item IA - Risk Factors” of Synovus' 20182019 Form 10-K and "Item 1A. - Risk Factors" of Synovus' Form 10-Q for the period ended March 31, 2020 ("1Q 2020 Form 10-Q"), which could materially affect its business, financial position, results of operations, cash flows, or future results. Please be aware that these risks may change over time and other risks may prove to be important in the future. In addition, these risks may be heightened by the disruption and uncertainty resulting from COVID-19. New risks may emerge at any time, and we cannot predict such risks or estimate the extent to which they may affect our business, financial condition or results of operations, or the trading price of our securities.
There are no material changes during the period covered by this Report to the risk factors previously disclosed in the Synovus' 20182019 Form 10-K.10-K and 1Q 2020 Form 10-Q.
ITEM 2. – UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS
(a) None.
(b) None.
(c) Issuer Purchases of Equity Securities:
On June 17, 2019, theThe Company announced on January 24, 2020 that its Board of Directors authorized share repurchases in 2020 at a level that would be consistent with Synovus retaining a 9% CET1 ratio target. As a result of the Board increasedgreater economic uncertainty associated with the current pandemic, Synovus suspended its prior $400 million share repurchase authorization to $725activity beyond the $16.2 million for the year 2019.
Share Repurchases
(in thousands, except per share data) Total Number of Shares Repurchased 
Average Price Paid per Share(1)
 
Total Number
of Shares Repurchased as
Part of
Publicly Announced
Plans or Programs
 
Maximum Approximate
Dollar Value
of Shares
that May Yet Be
Purchased Under the
Plans or Programs
April 2019 
 $
 
 $80,002
May 2019 137
 36.52
 137
 75,002
June 2019 595
 33.58
 595
 380,014
Total 732
 $37.71
 732
 
         
(1) The average price paid per share is calculated on a trade date basis for all open market transactions and excludes commissions and other transaction expenses.

The foregoing repurchases(450 thousand shares) of its common stock repurchased during the second quarter of 2019 were purchased through open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act. The timing and amount of future repurchases under the share repurchase program will depend upon a variety of factors, including market conditions, regulatory requirements, availability of funds, and other relevant considerations, as determined by us and applicable law and regulations.first quarter.

ITEM 3. – DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. – MINE SAFETY DISCLOSURES
None.
ITEM 5. – OTHER INFORMATION
None.
70


ITEM 6. – EXHIBITS  
Exhibit

Number
Description
2.13.1 
3.1
3.2
3.3
3.4
3.5
3.63.2 
3.731.1 
31.1
31.2
32
101
Interactive Data File
104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).

71


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

 
SYNOVUS FINANCIAL CORP.
August 6, 2020SYNOVUS FINANCIAL CORP.
By:
August 2, 2019By:/s/ Andrew J. Gregory, Jr.
DateAndrew J. Gregory, Jr.
Executive Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)


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