Document
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, 2017
Commission file number 1-10312
______________________________
SYNOVUS FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
______________________________
|
| | |
Georgia | | 58-1134883 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
|
| | |
1111 Bay Avenue Suite 500, Columbus, Georgia | | 31901 |
(Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (706) 649-2311
Securities registered pursuant to Section 12(b) of the Act:
|
| |
Title of each class | Name of each exchange on which registered |
Common Stock, $1.00 Par Value Series B Participating Cumulative Preferred Stock Purchase Rights Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series C | New York Stock Exchange New York Stock Exchange New 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 x NO ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). YES x 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” and “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check One):
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| | | |
Large accelerated filer | x | Accelerated filer | ¨ |
| | | |
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller 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 7(a)2(B) of the Securities Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x
Indicate the number of shares outstanding of each of the issuer’s class of common stock, as of the latest practicable date.
|
| | | | | |
Class | | | | July 31, 2017 |
|
Common Stock, $1.00 Par Value | | | | 121,501,638 |
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Table of Contents
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| | | | |
| | | | Page |
| Financial Information | |
| | Index of Defined Terms | |
| Item 1. | Financial Statements (Unaudited) | |
| | Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016 | |
| | Consolidated Statements of Income for the Six and Three Months Ended June 30, 2017 and 2016 | |
| | Consolidated Statements of Comprehensive Income for the Six and Three Months Ended June 30, 2017 and 2016 | |
| | Consolidated Statements of Changes in Shareholders' Equity for the Six Months Ended June 30, 2017 and 2016 | |
| | Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2017 and 2016 | |
| | 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 | |
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SYNOVUS FINANCIAL CORP.
INDEX OF DEFINED TERMS
ALCO – Synovus' Asset Liability Management Committee
ASC – Accounting Standards Codification
ASU – Accounting Standards Update
ATM – Automatic teller machine
Basel III – A global regulatory framework developed by the Basel Committee on Banking Supervision
BOLI – Bank-Owned Life Insurance
BOV – Broker’s opinion of value
bp – Basis point (bps - basis points)
C&I – Commercial and industrial loans
CCC – Central clearing counterparty
CET1 – Common Equity Tier 1 Capital defined by Basel III capital rules
CME – Chicago Mercantile Exchange
CMO – Collateralized Mortgage Obligation
Code – Internal Revenue Code of 1986, as amended
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
CRE – Commercial real estate
DIF – Deposit Insurance Fund
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
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.
Federal Reserve Board – The 7-member Board of Governors that oversees the Federal Reserve System, establishes monetary policy, 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.
FFIEC – Federal Financial Institutions Examination Council
FHLB – Federal Home Loan Bank
FICO – Fair Isaac Corporation
GA DBF – Georgia Department of Banking and Finance
GAAP – Generally Accepted Accounting Principles in the United States of America
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 acquisition as "Global One."
HELOC – Home equity line of credit
LIBOR – London Interbank Offered Rate
LTV – Loan-to-collateral value ratio
NAICS – North American Industry Classification System
nm – not meaningful
NPA – Non-performing assets
NPL – Non-performing loans
NSF – Non-sufficient funds
OCI – Other comprehensive income
OTC– Over-the-counter
ORE – Other real estate
OTTI – Other-than-temporary impairment
Parent Company – Synovus Financial Corp.
SBA – Small Business Administration
SCM – State, county, and municipal
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
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' 2016 Form 10-K – Synovus' Annual Report on Form 10-K for the year ended December 31, 2016
Synovus Mortgage – Synovus Mortgage Corp., a wholly-owned subsidiary of Synovus Bank
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)
Treasury – United States Department of the Treasury
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 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
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
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, 2017 | | December 31, 2016 |
ASSETS | | | |
Cash and cash equivalents | $ | 377,213 |
| | 395,175 |
|
Interest bearing funds with Federal Reserve Bank | 468,148 |
| | 527,090 |
|
Interest earning deposits with banks | 6,012 |
| | 18,720 |
|
Federal funds sold and securities purchased under resale agreements | 46,847 |
| | 58,060 |
|
Trading account assets, at fair value | 3,045 |
| | 9,314 |
|
Mortgage loans held for sale, at fair value | 61,893 |
| | 51,545 |
|
Investment securities available for sale, at fair value | 3,827,058 |
| | 3,718,195 |
|
Loans, net of deferred fees and costs | 24,430,512 |
| | 23,856,391 |
|
Allowance for loan losses | (248,095 | ) | | (251,758 | ) |
Loans, net | $ | 24,182,417 |
| | 23,604,633 |
|
Premises and equipment, net | 416,364 |
| | 417,485 |
|
Goodwill | 57,092 |
| | 59,678 |
|
Other intangible assets | 11,843 |
| | 13,223 |
|
Other real estate | 19,476 |
| | 22,308 |
|
Deferred tax asset, net | 320,403 |
| | 395,356 |
|
Other assets | 890,155 |
| | 813,220 |
|
Total assets | $ | 30,687,966 |
| | 30,104,002 |
|
LIABILITIES AND SHAREHOLDERS' EQUITY | | | |
Liabilities | | | |
Deposits: | | | |
Non-interest bearing deposits | $ | 7,363,476 |
| | 7,085,804 |
|
Interest bearing deposits, excluding brokered deposits | 16,387,032 |
| | 16,183,273 |
|
Brokered deposits | 1,468,308 |
| | 1,378,983 |
|
Total deposits | 25,218,816 |
| | 24,648,060 |
|
Federal funds purchased and securities sold under repurchase agreements | 150,379 |
| | 159,699 |
|
Long-term debt | 2,107,245 |
| | 2,160,881 |
|
Other liabilities | 213,579 |
| | 207,438 |
|
Total liabilities | $ | 27,690,019 |
| | 27,176,078 |
|
Shareholders' Equity | | | |
Series C Preferred Stock – no par value. Authorized 100,000,000 shares; 5,200,000 shares issued and outstanding at June 30, 2017 and December 31, 2016 | $ | 125,980 |
| | 125,980 |
|
Common stock - $1.00 par value. Authorized 342,857,143 shares; 142,498,906 issued at June 30, 2017 and 142,025,720 issued at December 31, 2016; 121,661,092 outstanding at June 30, 2017 and 122,266,106 outstanding at December 31, 2016 | 142,499 |
| | 142,026 |
|
Additional paid-in capital | 3,029,754 |
| | 3,028,405 |
|
Treasury stock, at cost – 20,837,814 shares at June 30, 2017 and 19,759,614 shares at December 31, 2016 | (709,944 | ) | | (664,595 | ) |
Accumulated other comprehensive loss | (47,865 | ) | | (55,659 | ) |
Retained earnings | 457,523 |
| | 351,767 |
|
Total shareholders’ equity | 2,997,947 |
| | 2,927,924 |
|
Total liabilities and shareholders' equity | $ | 30,687,966 |
| | 30,104,002 |
|
| | | |
See accompanying notes to unaudited interim consolidated financial statements.
SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
|
| | | | | | | | | | | | | |
| Six Months Ended June 30, | | Three Months Ended June 30, |
(in thousands, except per share data) | 2017 | | 2016 | | 2017 | | 2016 |
Interest income: | | | | | | | |
Loans, including fees | $ | 511,319 |
| | 462,892 |
| | $ | 261,971 |
| | 232,974 |
|
Investment securities available for sale | 40,099 |
| | 33,655 |
| | 20,266 |
| | 16,685 |
|
Trading account assets | 49 |
| | 34 |
| | 21 |
| | 12 |
|
Mortgage loans held for sale | 972 |
| | 1,238 |
| | 505 |
| | 650 |
|
Federal Reserve Bank balances | 2,515 |
| | 2,019 |
| | 1,304 |
| | 1,020 |
|
Other earning assets | 2,957 |
| | 1,878 |
| | 1,443 |
| | 1,052 |
|
Total interest income | 557,911 |
| | 501,716 |
| | 285,510 |
| | 252,393 |
|
Interest expense: | | | | | | | |
Deposits | 35,075 |
| | 32,214 |
| | 18,118 |
| | 16,200 |
|
Federal funds purchased and securities sold under repurchase agreements | 84 |
| | 96 |
| | 45 |
| | 51 |
|
Long-term debt | 31,728 |
| | 29,763 |
| | 16,250 |
| | 14,693 |
|
Total interest expense | 66,887 |
| | 62,073 |
| | 34,413 |
| | 30,944 |
|
Net interest income | 491,024 |
| | 439,643 |
| | 251,097 |
| | 221,449 |
|
Provision for loan losses | 18,934 |
| | 16,070 |
| | 10,260 |
| | 6,693 |
|
Net interest income after provision for loan losses | 472,090 |
| | 423,573 |
| | 240,837 |
| | 214,756 |
|
Non-interest income: | | | | | | | |
Service charges on deposit accounts | 39,593 |
| | 39,950 |
| | 19,820 |
| | 20,240 |
|
Fiduciary and asset management fees | 24,676 |
| | 22,854 |
| | 12,524 |
| | 11,580 |
|
Brokerage revenue | 14,436 |
| | 13,821 |
| | 7,210 |
| | 7,338 |
|
Mortgage banking income | 11,548 |
| | 11,425 |
| | 5,784 |
| | 5,941 |
|
Bankcard fees | 16,438 |
| | 16,718 |
| | 8,253 |
| | 8,346 |
|
Investment securities gains (losses), net | 7,667 |
| | 67 |
| | (1 | ) | | — |
|
(Decrease) increase in fair value of private equity investments, net | (3,166 | ) | | (278 | ) | | (1,352 | ) | | 113 |
|
Other fee income | 11,033 |
| | 10,084 |
| | 6,164 |
| | 5,280 |
|
Other non-interest income | 18,314 |
| | 16,392 |
| | 10,299 |
| | 9,048 |
|
Total non-interest income | 140,539 |
| | 131,033 |
| | 68,701 |
| | 67,886 |
|
Non-interest expense: | | | | | | | |
Salaries and other personnel expense | 212,404 |
| | 198,419 |
| | 105,213 |
| | 97,061 |
|
Net occupancy and equipment expense | 59,264 |
| | 53,360 |
| | 29,933 |
| | 26,783 |
|
Third-party processing expense | 26,223 |
| | 22,814 |
| | 13,620 |
| | 11,698 |
|
FDIC insurance and other regulatory fees | 13,645 |
| | 13,344 |
| | 6,875 |
| | 6,625 |
|
Professional fees | 12,907 |
| | 13,307 |
| | 7,551 |
| | 6,938 |
|
Advertising expense | 11,258 |
| | 9,761 |
| | 5,346 |
| | 7,351 |
|
Foreclosed real estate expense, net | 3,582 |
| | 7,272 |
| | 1,448 |
| | 4,588 |
|
Earnout liability adjustment | 1,707 |
| | — |
| | 1,707 |
| | — |
|
Merger-related expense | 86 |
| | — |
| | — |
| | — |
|
Loss on early extinguishment of debt, net | — |
| | 4,735 |
| | — |
| | — |
|
Fair value adjustment to Visa derivative | — |
| | 720 |
| | — |
| | 360 |
|
Restructuring charges, net | 6,524 |
| | 6,981 |
| | 13 |
| | 5,841 |
|
Other operating expenses | 41,533 |
| | 46,131 |
| | 20,041 |
| | 21,366 |
|
Total non-interest expense | 389,133 |
| | 376,844 |
| | 191,747 |
| | 188,611 |
|
Income before income taxes | 223,496 |
| | 177,762 |
| | 117,791 |
| | 94,031 |
|
Income tax expense | 75,635 |
| | 64,773 |
| | 41,788 |
| | 33,574 |
|
Net income | 147,861 |
| | 112,989 |
| | 76,003 |
| | 60,457 |
|
Dividends on preferred stock | 5,119 |
| | 5,119 |
| | 2,559 |
| | 2,559 |
|
Net income available to common shareholders | $ | 142,742 |
| | 107,870 |
| | $ | 73,444 |
| | 57,898 |
|
Net income per common share, basic | $ | 1.17 |
| | 0.85 |
| | $ | 0.60 |
| | 0.46 |
|
Net income per common share, diluted | 1.16 |
| | 0.85 |
| | 0.60 |
| | 0.46 |
|
Weighted average common shares outstanding, basic | 122,251 |
| | 126,164 |
| | 122,203 |
| | 125,100 |
|
Weighted average common shares outstanding, diluted | 123,043 |
| | 126,778 |
| | 123,027 |
| | 125,699 |
|
| | | | | | | |
See accompanying notes to unaudited interim consolidated financial statements.
SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2017 | | 2016 |
(in thousands) | Before-tax Amount | | Tax (Expense) Benefit | | Net of Tax Amount | | Before-tax Amount | | Tax (Expense) Benefit | | Net of Tax Amount |
Net income | $ | 223,496 |
| | (75,635 | ) | | 147,861 |
| | 177,762 |
| | (64,773 | ) | | 112,989 |
|
Net change related to cash flow hedges: | | | | | | | | | | | |
Reclassification adjustment for losses realized in net income | 130 |
| | (50 | ) | | 80 |
| | 337 |
| | (130 | ) | | 207 |
|
Net unrealized gains on investment securities available for sale: | | | | | | | | | | | |
Reclassification adjustment for net gains realized in net income | (7,667 | ) | | 2,952 |
| | (4,715 | ) | | (67 | ) | | 26 |
| | (41 | ) |
Net unrealized gains arising during the period | 20,250 |
| | (7,797 | ) | | 12,453 |
| | 66,215 |
| | (25,493 | ) | | 40,722 |
|
Net unrealized gains | 12,583 |
| | (4,845 | ) | | 7,738 |
| | 66,148 |
| | (25,467 | ) | | 40,681 |
|
Post-retirement unfunded health benefit: | | | | | | | | | | | |
Reclassification adjustment for gains realized in net income | (40 | ) | | 16 |
| | (24 | ) | | (104 | ) | | 40 |
| | (64 | ) |
Actuarial gains arising during the period | — |
| | — |
| — |
| — |
| | — |
| | — |
| | — |
|
Net unrealized (realized) gains | $ | (40 | ) | | 16 |
| | (24 | ) | | (104 | ) | | 40 |
| | (64 | ) |
Other comprehensive income | $ | 12,673 |
| | (4,879 | ) | | 7,794 |
| | 66,381 |
| | (25,557 | ) | | 40,824 |
|
Comprehensive income | | | | | $ | 155,655 |
| | | | | | 153,813 |
|
| | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, |
| 2017 | | 2016 |
(in thousands) | Before-tax Amount | | Tax (Expense) Benefit | | Net of Tax Amount | | Before-tax Amount | | Tax (Expense) Benefit | | Net of Tax Amount |
Net income | $ | 117,791 |
| | (41,788 | ) | | 76,003 |
| | 94,031 |
| | (33,574 | ) | | 60,457 |
|
Net change related to cash flow hedges: | | | | | | | | | | | |
Reclassification adjustment for losses realized in net income | 65 |
| | (25 | ) | | 40 |
| | 64 |
| | (25 | ) | | 39 |
|
Net unrealized gains on investment securities available for sale: |
|
| | | | | | | | | | |
Reclassification adjustment for net losses realized in net income | 1 |
| | — |
| | 1 |
| | — |
| | — |
| | — |
|
Net unrealized gains arising during the period | 11,150 |
| | (4,293 | ) | | 6,857 |
| | 19,044 |
| | (7,332 | ) | | 11,712 |
|
Net unrealized gains | 11,151 |
| | (4,293 | ) | | 6,858 |
| | 19,044 |
| | (7,332 | ) | | 11,712 |
|
Post-retirement unfunded health benefit: | | | | | | | | | | | |
Reclassification adjustment for gains realized in net income | (20 | ) | | 8 |
| | (12 | ) | | (10 | ) | | 4 |
| | (6 | ) |
Actuarial gains arising during the period | — |
| | — |
| — |
| — |
| | — |
| | — |
| | — |
|
Net unrealized (realized) gains | $ | (20 | ) | | 8 |
| | (12 | ) | | (10 | ) | | 4 |
| | (6 | ) |
Other comprehensive income | $ | 11,196 |
| | (4,310 | ) | | 6,886 |
| | 19,098 |
| | (7,353 | ) | | 11,745 |
|
Comprehensive income | | | | | $ | 82,889 |
| | | | | | 72,202 |
|
| | | | | | | | | | | |
See accompanying notes to unaudited interim consolidated financial statements.
SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | |
(in thousands, except per share data) | Series C Preferred Stock | | Common Stock | | Additional Paid-in Capital | | Treasury Stock | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | Total |
Balance at December 31, 2015 | $ | 125,980 |
| | 140,592 |
| | 2,989,981 |
| | (401,511 | ) | | (29,819 | ) | | 174,973 |
| | 3,000,196 |
|
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | 112,989 |
| | 112,989 |
|
Other comprehensive income, net of income taxes | — |
| | — |
| | — |
| | — |
| | 40,824 |
| | — |
| | 40,824 |
|
Cash dividends declared on common stock -$0.24 per share | — |
| | — |
| | — |
| | — |
| | — |
| | (30,015 | ) | | (30,015 | ) |
Cash dividends paid on Series C Preferred Stock | — |
| | — |
| | — |
| | — |
| | — |
| | (5,119 | ) | | (5,119 | ) |
Repurchases of common stock | — |
| | — |
| |
|
| | (171,547 | ) | | — |
| | — |
| | (171,547 | ) |
Restricted share unit activity | — |
| | 298 |
| | (4,814 | ) | | — |
| | — |
| | (89 | ) | | (4,605 | ) |
Stock options exercised | — |
| | 118 |
| | 1,917 |
| | — |
| | — |
| | — |
| | 2,035 |
|
Share-based compensation net tax benefit | — |
| | — |
| | 52 |
| | — |
| | — |
| | — |
| | 52 |
|
Share-based compensation expense | — |
| | — |
| | 6,849 |
| | — |
| | — |
| | — |
| | 6,849 |
|
Balance at June 30, 2016 | $ | 125,980 |
| | 141,008 |
| | 2,993,985 |
| | (573,058 | ) | | 11,005 |
| | 252,739 |
| | 2,951,659 |
|
| | | | | | | | | | | | | |
Balance at December 31, 2016 | $ | 125,980 |
| | 142,026 |
| | 3,028,405 |
| | (664,595 | ) | | (55,659 | ) | | 351,767 |
| | 2,927,924 |
|
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | 147,861 |
| | 147,861 |
|
Other comprehensive income, net of income taxes | — |
| | — |
| | — |
| | — |
| | 7,794 |
| | — |
| | 7,794 |
|
Cash dividends declared on common stock - $0.30 per share | — |
| | — |
| | — |
| | — |
| | — |
| | (36,696 | ) | | (36,696 | ) |
Cash dividends paid on Series C Preferred Stock | — |
| | — |
| | — |
| | — |
| | — |
| | (5,119 | ) | | (5,119 | ) |
Repurchases of common stock | — |
| | — |
| | — |
| | (45,349 | ) | | — |
| | — |
| | (45,349 | ) |
Restricted share unit activity | — |
| | 330 |
| | (7,850 | ) | | — |
| | — |
| | (290 | ) | | (7,810 | ) |
Stock options exercised | — |
| | 143 |
| | 2,361 |
| | — |
| | — |
| | — |
| | 2,504 |
|
Share-based compensation expense | — |
| | — |
| | 6,838 |
| | — |
| | — |
| | — |
| | 6,838 |
|
Balance at June 30, 2017 | $ | 125,980 |
| | $ | 142,499 |
| | 3,029,754 |
| | (709,944 | ) | | (47,865 | ) | | 457,523 |
| | 2,997,947 |
|
| | | | | | | | | | | | | |
See accompanying notes to unaudited interim consolidated financial statements.
SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
| | | | | | |
| Six Months Ended June 30, |
(in thousands) | 2017 | | 2016 |
Operating Activities | | | |
Net income | $ | 147,861 |
| | 112,989 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Provision for loan losses | 18,934 |
| | 16,070 |
|
Depreciation, amortization, and accretion, net | 29,334 |
| | 28,506 |
|
Deferred income tax expense | 70,484 |
| | 61,283 |
|
Decrease in trading account assets | 6,269 |
| | 4,096 |
|
Originations of mortgage loans held for sale | (325,094 | ) | | (320,304 | ) |
Proceeds from sales of mortgage loans held for sale | 323,861 |
| | 299,186 |
|
Gain on sales of mortgage loans held for sale, net | (7,049 | ) | | (6,946 | ) |
Increase in other assets | (14,525 | ) | | (33,152 | ) |
(Decrease) increase in other liabilities | (9,667 | ) | | 13,162 |
|
Investment securities gains, net | (7,667 | ) | | (67 | ) |
Losses and write-downs on other real estate, net | 2,856 |
| | 6,089 |
|
Decrease in fair value of private equity investments, net | 3,166 |
| | 278 |
|
Losses and write-downs on other assets held for sale, net | — |
| | 7,902 |
|
Loss on early extinguishment of debt, net | — |
| | 4,735 |
|
Share-based compensation expense | 6,838 |
| | 6,849 |
|
Net cash provided by operating activities | $ | 245,601 |
| | 200,676 |
|
Investing Activities | | | |
Net decrease (increase) in interest earning deposits with banks | 12,708 |
| | (7,154 | ) |
Net decrease (increase) in federal funds sold and securities purchased under resale agreements | 11,213 |
| | (7,866 | ) |
Net decrease (increase) in interest bearing funds with Federal Reserve Bank | 58,942 |
| | (74,519 | ) |
Proceeds from maturities and principal collections of investment securities available for sale | 313,902 |
| | 443,128 |
|
Proceeds from sales of investment securities available for sale | 338,381 |
| | 243,609 |
|
Purchases of investment securities available for sale | (748,754 | ) | | (623,046 | ) |
Proceeds from sales of loans | 10,747 |
| | 7,739 |
|
Proceeds from sales of other real estate | 5,492 |
| | 16,282 |
|
Net increase in loans | (612,309 | ) | | (660,778 | ) |
Purchases of bank-owned life insurance policies | (75,000 | ) | | — |
|
Net increase in premises and equipment | (15,386 | ) | | (16,769 | ) |
Proceeds from sales of other assets held for sale | 3,158 |
| | 296 |
|
Net cash used in investing activities | $ | (696,906 | ) | | (679,078 | ) |
Financing Activities | | | |
Net increase in demand and savings deposits | 367,450 |
| | 595,342 |
|
Net increase in certificates of deposit | 202,927 |
| | 87,466 |
|
Net (decrease) increase in federal funds purchased and securities sold under repurchase agreements | (9,320 | ) | | 70,154 |
|
Repayments on long-term debt | (1,128,591 | ) | | (1,455,067 | ) |
Proceeds from issuance of long-term debt | 1,075,000 |
| | 1,400,000 |
|
Dividends paid to common shareholders | (18,349 | ) | | (30,015 | ) |
Dividends paid to preferred shareholders | (5,119 | ) | | (5,119 | ) |
Stock options exercised | 2,504 |
| | 2,035 |
|
Repurchases of common stock | (45,349 | ) | | (171,547 | ) |
Restricted stock activity | (7,810 | ) | | (4,605 | ) |
Net cash provided by financing activities | $ | 433,343 |
| | 488,644 |
|
(Decrease) increase in cash and cash equivalents | (17,962 | ) | | 10,242 |
|
Cash and cash equivalents at beginning of period | 395,175 |
| | 367,092 |
|
Cash and cash equivalents at end of period | $ | 377,213 |
| | 377,334 |
|
|
| | | | | | |
| | | |
Supplemental Cash Flow Information | | | |
Cash paid during the period for: | | | |
Income tax payments, net | $ | 8,768 |
| | 5,849 |
|
Interest paid | 67,007 |
| | 64,424 |
|
Non-cash Activities | | | |
Premises and equipment transferred to other assets held for sale | — |
| | 18,677 |
|
Other assets held for sale transferred to premises and equipment | 4,450 |
| | — |
|
Loans foreclosed and transferred to other real estate | 5,516 |
| | 8,631 |
|
Loans transferred to other loans held for sale at fair value | 10,584 |
| | 7,314 |
|
Dividends declared on common stock during the period but paid after period-end | 18,349 |
| | — |
|
See accompanying notes to unaudited interim consolidated financial statements.
Notes to Unaudited Interim Consolidated Financial Statements
Note 1 - Significant Accounting Policies
Business Operations
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 company 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 and international banking.
Synovus Bank is positioned in some of the highest growth markets in the Southeast, with 248 branches and 327 ATMs in Georgia, Alabama, South Carolina, Florida, and Tennessee.
Basis of Presentation
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' 2016 Form 10-K. There have been no significant changes to the accounting policies as disclosed in Synovus' 2016 Form 10-K.
In preparing the unaudited interim consolidated financial statements in accordance with 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 significant change relate to the determination of the allowance for loan losses, the fair value of investment securities, the fair value of private equity investments, and contingent liabilities related to legal matters.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and due from banks. At December 31, 2016, $533 thousand of the due from banks balance was restricted as to withdrawal. There were no cash and cash equivalents restricted as to withdrawal at June 30, 2017.
Short-term Investments
Short-term investments consist of interest bearing funds with the Federal Reserve Bank, interest earning deposits with banks, and federal funds sold and securities purchased under resale agreements. At June 30, 2017 and December 31, 2016, interest bearing funds with the Federal Reserve Bank included $120.5 million and $130.0 million, respectively, on deposit to meet Federal Reserve Bank requirements. Interest earning deposits with banks include $5.9 million and $5.6 million at June 30, 2017 and December 31, 2016, respectively, which are pledged as collateral in connection with certain letters of credit. Federal funds sold include $43.3 million and $56.1 million at June 30, 2017 and December 31, 2016, respectively, which are pledged to collateralize certain derivative financial instruments. Federal funds sold and securities purchased under resale agreements, and federal funds purchased and securities sold under repurchase agreements, generally mature in one day.
Recently Adopted Accounting Standards Updates
During 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 simplifies various aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This accounting standard update includes a requirement to record all tax effects associated with share-based compensation through the income statement. Prior to 2017, tax benefits in excess of compensation cost (“windfalls”) and tax deficiencies (“shortfalls”) were recorded in equity. During the six and three months ended June 30, 2017, Synovus recognized $4.5 million and $378 thousand, respectively, of income tax benefits from excess tax benefits that occurred during the six months ended June 30, 2017 from the vesting of restricted share units and exercise of stock options. As of January 1, 2017, Synovus had no previously unrecognized excess tax benefits. Additionally, beginning January 1, 2017, Synovus modified the denominator in the diluted earnings per common share calculation under the treasury stock method to exclude future excess tax benefits as part of the assumed proceeds. Synovus elected to retain its existing accounting policy election to estimate award forfeitures.
During 2015, the FASB issued ASU 2015-17, Income Taxes: Balance Sheet Classification of Deferred Taxes, which became effective January 1, 2017. ASU 2015-17 requires that deferred income tax liabilities and assets be classified as noncurrent in the statement of financial position instead of separating deferred taxes into current and noncurrent amounts. Also, valuation allowances will no longer be classified between current and noncurrent because these allowances will be required to be classified as noncurrent under the new standard. This ASU only impacts classification in the balance sheet, and has no impact on required deferred tax footnote disclosures (i.e., required presentation of “gross” deferred tax assets and “gross” deferred tax liabilities). The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by this ASU. There is no impact to our balance sheet as a result of this standard because Synovus has not historically distinguished deferred taxes on the balance sheet as current vs. non-current.
Reclassifications
Prior periods' consolidated financial statements are reclassified whenever necessary to conform to the current periods' presentation.
Note 2 - Acquisition
On October 1, 2016, Synovus completed its acquisition of all of the outstanding stock of Global One. Prior to its acquisition, Global One was an Atlanta-based private specialty financial services company that lended primarily to commercial entities, with all loans fully collateralized by cash value life insurance policies and/or annuities issued by investment grade life insurance companies. Under the terms of the merger agreement, Synovus acquired Global One for an up-front payment of $30 million, consisting of the issuance of 821 thousand shares of Synovus common stock valued at $26.6 million and $3.4 million in cash, with additional payments to Global One's former shareholders over the next three to five years based on earnings from the Global One business as further discussed below.
The acquisition of Global One constituted a business combination. Accordingly, the assets acquired and liabilities assumed were recorded at their estimated fair values as shown in the following table. The determination of fair value required management to make estimates about discount rates, future expected earnings and cash flows, market conditions, future loan growth, and other future events that are highly subjective in nature and subject to change. These fair value estimates reflect measurement period adjustments to the amounts reported as of December 31, 2016, the most significant of which consist of a reduction in goodwill of $2.6 million and a decrease in the estimated fair value of contingent consideration of $1.8 million (the income statement impact of such adjustments was insignificant). These fair value estimates are considered preliminary and are subject to change for up to one year after the closing date of the acquisition as additional information becomes available.
|
| | | | |
Global One | | October 1, 2016 |
(in thousands) | | Fair Value |
Assets acquired: | | |
Cash and due from banks | | $ | 9,554 |
|
Commercial and industrial loans(1) | | 357,307 |
|
Goodwill(2) | | 32,661 |
|
Other intangible assets | | 12,500 |
|
Other assets | | 3,904 |
|
Total assets acquired | | $ | 415,926 |
|
Liabilities assumed: | | |
Notes payable(3) | | $ | 358,560 |
|
Contingent consideration | | 12,234 |
|
Deferred tax liability, net | | 3,229 |
|
Other liabilities | | 11,903 |
|
Total liabilities assumed | | $ | 385,926 |
|
Consideration paid | | $ | 30,000 |
|
| | |
Cash paid | | $ | 3,408 |
|
Fair value of common stock issued | | 26,592 |
|
| | |
(1) The unpaid principal balance of the loans was $356.7 million.
(2) The goodwill is not expected to be deductible for tax purposes.
(3) The unpaid principal balance of the notes payable was $357.0 million.
Under the terms of the merger agreement, the purchase price includes additional annual payments ("Earnout Payments") to Global One's former shareholders over the next three to five years, with amounts based on a percentage of "Global One Earnings," as defined in the merger agreement. The Earnout Payments will consist of shares of Synovus common stock as well as a smaller cash consideration component.
Other intangible assets consist of existing borrower relationships (11 years useful life), trade name (10 years useful life), and distribution network (8 years useful life) with June 30, 2017 net carrying values of $10.1 million, $1.0 million, and $544 thousand, respectively.
The following is a description of the methods used to determine the fair values of significant assets and liabilities:
Commercial and industrial loans: The fair value of loans was determined based on a discounted cash flow approach. The most significant assumptions used in the valuation of the loan portfolio consisted of the prepayment rate, the probability of extension at maturity, the interest rates on extended loans, and the discount rates. All loans are fully collateralized by cash value life insurance policies and/or annuities issued by investment grade insurance companies. Based on a history of no principal losses on the loan portfolio since inception as well as the collateral position, no losses were estimated in the event of default.
Notes payable: The notes payable were extinguished immediately after the closing of the acquisition. Accordingly, the fair value of notes payable was determined based on the amounts paid to extinguish such notes, inclusive of applicable prepayment penalties, which is consistent with the perspective of a market participant.
Contingent consideration: The fair value of the contingent consideration, which represents the fair value of the above referenced Earnout Payments, was determined based on option pricing methods and a Monte Carlo simulation. The most significant assumptions used in the valuation of the contingent consideration were the expected cash flows, volatility, and discount rates. Future changes in the fair value of the contingent consideration will be recognized in earnings until the contingent consideration arrangement is settled.
Note 3 - Share Repurchase Program
Synovus' Board of Directors authorized an up to $200 million share repurchase program that will expire at the end of 2017. This program was announced on January 17, 2017. As of June 30, 2017, Synovus had repurchased under this program a total of $45.3 million, or 1.1 million shares, at an average price of $42.04 per share.
Note 4 - Investment Securities
The amortized cost, gross unrealized gains and losses, and estimated fair values of investment securities available for sale at June 30, 2017 and December 31, 2016 are summarized below.
|
| | | | | | | | | | | | | |
| | June 30, 2017 |
(in thousands) | | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
U.S. Treasury securities | | $ | 83,493 |
| | — |
| | (360 | ) | | 83,133 |
|
U.S. Government agency securities | | 12,088 |
| | 223 |
| | — |
| | 12,311 |
|
Mortgage-backed securities issued by U.S. Government agencies | | 132,710 |
| | 640 |
| | (1,125 | ) | | 132,225 |
|
Mortgage-backed securities issued by U.S. Government sponsored enterprises | | 2,881,234 |
| | 6,169 |
| | (30,998 | ) | | 2,856,405 |
|
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | | 734,804 |
| | 84 |
| | (12,468 | ) | | 722,420 |
|
State and municipal securities | | 290 |
| | — |
| | — |
| | 290 |
|
Corporate debt and other securities | | 20,279 |
| | 205 |
| | (210 | ) | | 20,274 |
|
Total investment securities available for sale | | $ | 3,864,898 |
| | 7,321 |
| | (45,161 | ) | | 3,827,058 |
|
| | | | | | | | |
| | December 31, 2016 |
(in thousands) | | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
U.S. Treasury securities | | $ | 108,221 |
| | 225 |
| | (644 | ) | | 107,802 |
|
U.S. Government agency securities | | 12,727 |
| | 266 |
| | — |
| | 12,993 |
|
Mortgage-backed securities issued by U.S. Government agencies | | 174,440 |
| | 1,116 |
| | (1,354 | ) | | 174,202 |
|
Mortgage-backed securities issued by U.S. Government sponsored enterprises | | 2,543,495 |
| | 5,416 |
| | (42,571 | ) | | 2,506,340 |
|
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | | 905,789 |
| | 1,214 |
| | (16,561 | ) | | 890,442 |
|
State and municipal securities | | 2,780 |
| | 14 |
| | — |
| | 2,794 |
|
Equity securities | | 919 |
| | 2,863 |
| | — |
| | 3,782 |
|
Corporate debt and other securities | | 20,247 |
| | — |
| | (407 | ) | | 19,840 |
|
Total investment securities available for sale | | $ | 3,768,618 |
| | 11,114 |
| | (61,537 | ) | | 3,718,195 |
|
| | | | | | | | |
At June 30, 2017 and December 31, 2016, investment securities with a carrying value of $1.73 billion and $2.04 billion, respectively, were pledged to secure certain deposits and securities sold under repurchase agreements as required by law and contractual agreements.
Synovus has reviewed investment securities that are in an unrealized loss position as of June 30, 2017 and December 31, 2016 for OTTI and does not consider any securities in an unrealized loss position to be other-than-temporarily impaired. If Synovus intended to sell a security in an unrealized loss position, the entire unrealized loss would be reflected in earnings. Synovus does not intend to sell investment securities in an unrealized loss position prior to the recovery of the unrealized loss, which may 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.
Declines in the fair value of available for sale securities below their cost that are deemed to have OTTI are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income. 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. As of June 30, 2017, Synovus had 92 investment securities in a loss position for less than twelve months and 3 investment securities in a loss position for twelve months or longer.
Gross unrealized losses on investment securities and the fair value 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, 2017 and December 31, 2016 are presented below.
|
| | | | | | | | | | | | | | | | | | |
| June 30, 2017 |
| 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 | $ | 64,342 |
| | 360 |
| | — |
| | — |
| | 64,342 |
| | 360 |
|
Mortgage-backed securities issued by U.S. Government agencies | 95,492 |
| | 1,125 |
| | — |
| | — |
| | 95,492 |
| | 1,125 |
|
Mortgage-backed securities issued by U.S. Government sponsored enterprises | 2,161,449 |
| | 30,998 |
| | — |
| | — |
| | 2,161,449 |
| | 30,998 |
|
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | 668,342 |
| | 11,678 |
| | 23,212 |
| | 790 |
| | 691,554 |
| | 12,468 |
|
Corporate debt and other securities | — |
| | — |
| | 5,069 |
| | 210 |
| | 5,069 |
| | 210 |
|
Total | $ | 2,989,625 |
| | 44,161 |
| | 28,281 |
| | 1,000 |
| | 3,017,906 |
| | 45,161 |
|
| | | | | | | | | | | |
| December 31, 2016 |
| 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 | $ | 64,023 |
| | 644 |
| | — |
| | — |
| | 64,023 |
| | 644 |
|
Mortgage-backed securities issued by U.S. Government agencies | 128,121 |
| | 1,240 |
| | 3,626 |
| | 114 |
| | 131,747 |
| | 1,354 |
|
Mortgage-backed securities issued by U.S. Government sponsored enterprises | 2,123,181 |
| | 42,571 |
| | — |
| | — |
| | 2,123,181 |
| | 42,571 |
|
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | 682,492 |
| | 15,653 |
| | 24,801 |
| | 908 |
| | 707,293 |
| | 16,561 |
|
Corporate debt and other securities | 14,952 |
| | 48 |
| | 4,888 |
| | 359 |
| | 19,840 |
| | 407 |
|
Total | $ | 3,012,769 |
| | 60,156 |
| | 33,315 |
| | 1,381 |
| | 3,046,084 |
| | 61,537 |
|
| | | | | | | | | | | |
The amortized cost and fair value by contractual maturity of investment securities available for sale at June 30, 2017 are shown below. The expected life of mortgage-backed securities 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 securities 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, 2017 |
(in thousands) | Within One Year | | 1 to 5 Years | | 5 to 10 Years | | More Than 10 Years | | No Stated Maturity | | Total |
Amortized Cost | | | | | | | | | | | |
U.S. Treasury securities | $ | 18,791 |
| | 64,702 |
| | — |
| | — |
| | — |
| | 83,493 |
|
U.S. Government agency securities | 1,000 |
| | 5,612 |
| | 5,476 |
| | — |
| | — |
| | 12,088 |
|
Mortgage-backed securities issued by U.S. Government agencies | — |
| | — |
| | 34,868 |
| | 97,842 |
| | — |
| | 132,710 |
|
Mortgage-backed securities issued by U.S. Government sponsored enterprises | 47 |
| | 2,262 |
| | 535,035 |
| | 2,343,890 |
| | — |
| | 2,881,234 |
|
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | — |
| | — |
| | 22,173 |
| | 712,631 |
| | — |
| | 734,804 |
|
State and municipal securities | 110 |
| | 180 |
| | — |
| | — |
| | — |
| | 290 |
|
Corporate debt and other securities | — |
| | — |
| | 15,000 |
| | 2,000 |
| | 3,279 |
| | 20,279 |
|
Total amortized cost | $ | 19,948 |
| | 72,756 |
| | 612,552 |
| | 3,156,363 |
| | 3,279 |
| | 3,864,898 |
|
| | | | | | | | | | | |
Fair Value | | | | | | | | | | | |
U.S. Treasury securities | $ | 18,791 |
| | 64,342 |
| | — |
| | — |
| | — |
| | 83,133 |
|
U.S. Government agency securities | 1,004 |
| | 5,682 |
| | 5,625 |
| | — |
| | — |
| | 12,311 |
|
Mortgage-backed securities issued by U.S. Government agencies | — |
| | — |
| | 35,007 |
| | 97,218 |
| | — |
| | 132,225 |
|
Mortgage-backed securities issued by U.S. Government sponsored enterprises | 48 |
| | 2,390 |
| | 529,968 |
| | 2,323,999 |
| | — |
| | 2,856,405 |
|
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises | — |
| | — |
| | 21,950 |
| | 700,470 |
| | — |
| | 722,420 |
|
State and municipal securities | 110 |
| | 180 |
| | — |
| | — |
| | — |
| | 290 |
|
Corporate debt and other securities | — |
| | — |
| | 15,205 |
| | 1,927 |
| | 3,142 |
| | 20,274 |
|
Total fair value | $ | 19,953 |
| | 72,594 |
| | 607,755 |
| | 3,123,614 |
| | 3,142 |
| | 3,827,058 |
|
| | | | | | | | | | | |
Proceeds from sales, gross gains, and gross losses on sales of securities available for sale for the three months ended June 30, 2017 and 2016 are presented below. The specific identification method is used to reclassify gains and losses out of other comprehensive income at the time of sale.
|
| | | | | | | | | | | | | | |
| | Six Months Ended June 30, | | Three Months Ended June 30, |
(in thousands) | | 2017 | | 2016 | | 2017 | | 2016 |
Proceeds from sales of investment securities available for sale | | $ | 338,381 |
| | 243,609 |
| | $ | 55,752 |
| | — |
|
Gross realized gains on sales | | 7,942 |
| | 954 |
| | 239 |
| | — |
|
Gross realized losses on sales | | (275 | ) | | (887 | ) | | (240 | ) | | — |
|
Investment securities gains, net | | $ | 7,667 |
| | 67 |
| | $ | (1 | ) | | — |
|
| | | | | | | | |
Note 5 - Restructuring Charges
For the six and three months ended June 30, 2017 and 2016, total restructuring charges consist of the following components:
|
| | | | | | | | | | | | | |
| Six Months Ended June 30, | | Three Months Ended June 30, |
(in thousands) | 2017 | | 2016 | | 2017 | | 2016 |
Severance charges | $ | 6,453 |
| | — |
| | $ | — |
| | — |
|
Lease termination charges | — |
| | 31 |
| | — |
| | (13 | ) |
Asset impairment charges | — |
| | 6,866 |
| | — |
| | 5,821 |
|
Loss (gain) on sale of assets held for sale, net | (4 | ) | | 13 |
| | (4 | ) | | 13 |
|
Other charges | 75 |
| | 71 |
| | 17 |
| | 20 |
|
Total restructuring charges, net | $ | 6,524 |
| | 6,981 |
| | $ | 13 |
| | 5,841 |
|
| | | | | | | |
During the first quarter of 2017, Synovus recorded severance charges of $6.5 million including $6.2 million for termination benefits incurred in conjunction with a voluntary early retirement program offered during the first quarter of 2017. This program was part of Synovus' ongoing efficiency initiatives. The $6.2 million accrual was based on the benefits to be paid to employees who accepted the early retirement offer on or prior to the expiration of the program on March 30, 2017. For the three months ended June 30, 2016, Synovus recorded restructuring charges of $5.8 million with $4.8 million of those charges related to Synovus' corporate real estate optimization activities and $1.0 million associated with branch closures. Restructuring charges associated with branch closures during the first quarter of 2016 totaled $1.1 million.
The following tables present aggregate activity within the accrual for restructuring charges for the six and three months ended June 30, 2017 and 2016:
|
| | | | | | | | | |
(in thousands) | Severance Charges | | Lease Termination Charges | | Total |
Balance at December 31, 2016 | $ | 81 |
| | 3,968 |
| | 4,049 |
|
Accruals for voluntary and involuntary termination benefits | 6,453 |
| | — |
| | 6,453 |
|
Payments | (2,803 | ) | | (438 | ) | | (3,241 | ) |
Balance at June 30, 2017 | $ | 3,731 |
| | 3,530 |
| | 7,261 |
|
| | | | | |
Balance at April 1, 2017 | 6,315 |
| | 3,689 |
| | 10,004 |
|
Payments | (2,584 | ) | | (159 | ) | | (2,743 | ) |
Balance at June 30, 2017 | $ | 3,731 |
| | 3,530 |
| | 7,261 |
|
| | | | | |
|
| | | | | | | | | |
(in thousands) | Severance Charges | | Lease Termination Charges | | Total |
Balance at December 31, 2015 | $ | 1,930 |
| | 4,687 |
| | 6,617 |
|
Accruals for lease terminations | — |
| | 31 |
| | 31 |
|
Payments | (1,337 | ) | | (343 | ) | | (1,680 | ) |
Balance at June 30, 2016 | $ | 593 |
| | 4,375 |
| | 4,968 |
|
| | | | | |
Balance at April 1, 2016 | 1,533 |
| | 4,545 |
| | 6,078 |
|
Accruals for lease terminations | — |
| | (13 | ) | | (13 | ) |
Payments | (940 | ) | | (157 | ) | | (1,097 | ) |
Balance at June 30, 2016 | $ | 593 |
| | 4,375 |
| | 4,968 |
|
| | | | | |
All other charges were paid in the quarters that they were incurred. No other restructuring charges resulted in payment accruals.
Note 6 - Loans and Allowance for Loan Losses
The following is a summary of current, accruing past due, and non-accrual loans by portfolio class as of June 30, 2017 and December 31, 2016. |
| | | | | | | | | | | | | | | | | | | | |
Current, Accruing Past Due, and Non-accrual Loans | |
| June 30, 2017 | |
(in thousands) | Current | | Accruing 30-89 Days Past Due | | Accruing 90 Days or Greater Past Due | | Total Accruing Past Due | | Non-accrual | | Total | |
Investment properties | $ | 6,028,397 |
| | 3,482 |
| | 72 |
| | 3,554 |
| | 3,712 |
| | 6,035,663 |
| |
1-4 family properties | 818,327 |
| | 8,657 |
| | 101 |
| | 8,758 |
| | 8,535 |
| | 835,620 |
| |
Land and development | 529,967 |
| | 1,964 |
| | 126 |
| | 2,090 |
| | 10,931 |
| | 542,988 |
| |
Total commercial real estate | 7,376,691 |
| | 14,103 |
| | 299 |
| | 14,402 |
| | 23,178 |
| | 7,414,271 |
| |
Commercial, financial and agricultural | 6,915,588 |
| | 14,670 |
| | 765 |
| | 15,435 |
| | 69,550 |
| | 7,000,573 |
| |
Owner-occupied | 4,715,325 |
| | 9,291 |
| | 801 |
| | 10,092 |
| | 24,918 |
| | 4,750,335 |
| |
Total commercial and industrial | 11,630,913 |
| | 23,961 |
| | 1,566 |
| | 25,527 |
| | 94,468 |
| | 11,750,908 |
| |
Home equity lines | 1,533,528 |
| | 8,286 |
| | 705 |
| | 8,991 |
| | 20,648 |
| | 1,563,167 |
| |
Consumer mortgages | 2,444,866 |
| | 7,141 |
| | 623 |
| | 7,764 |
| | 18,035 |
| | 2,470,665 |
| |
Credit cards | 223,092 |
| | 1,550 |
| | 1,258 |
| | 2,808 |
| | — |
| | 225,900 |
| |
Other consumer loans | 1,021,355 |
| | 7,197 |
| | 99 |
| | 7,296 |
| | 2,988 |
| | 1,031,639 |
| |
Total consumer | 5,222,841 |
| | 24,174 |
| | 2,685 |
| | 26,859 |
| | 41,671 |
| | 5,291,371 |
| |
Total loans | $ | 24,230,445 |
| | 62,238 |
| | 4,550 |
| | 66,788 |
| | 159,317 |
| | 24,456,550 |
| (1 | ) |
| | | | | | | | | | | | |
| December 31, 2016 | |
(in thousands) | Current | | Accruing 30-89 Days Past Due | | Accruing 90 Days or Greater Past Due | | Total Accruing Past Due | | Non-accrual | | Total | |
Investment properties | $ | 5,861,198 |
| | 2,795 |
| | — |
| | 2,795 |
| | 5,268 |
| | 5,869,261 |
| |
1-4 family properties | 873,231 |
| | 4,801 |
| | 161 |
| | 4,962 |
| | 9,114 |
| | 887,307 |
| |
Land and development | 591,732 |
| | 1,441 |
| | — |
| | 1,441 |
| | 16,233 |
| | 609,406 |
| |
Total commercial real estate | 7,326,161 |
| | 9,037 |
| | 161 |
| | 9,198 |
| | 30,615 |
| | 7,365,974 |
| |
Commercial, financial and agricultural | 6,846,591 | <
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