Note 4 - Loans and Allowance for Loan Losses

Loans outstanding, by classification, at December 31, 2018 and 2017 are summarized below.



	December 31,
(in thousands)	2018			2017
Commercial, financial, and agricultural	$	7,449,698		$	7,179,487
Owner-occupied	5,331,508			4,844,163
Total commercial and industrial	12,781,206			12,023,650
Investment properties	5,560,951			5,670,065
1-4 family properties	679,870			781,619
Land and development	323,670			483,604
Total commercial real estate	6,564,491			6,935,288
Consumer mortgages	2,934,235			2,633,503
Home equity lines	1,515,796			1,514,227
Credit cards	258,245			232,676
Other consumer loans	1,916,743			1,473,451
Total consumer	6,625,019			5,853,857
Total loans	25,970,716			24,812,795
Deferred fees and costs, net	(24,143		)	(25,331		)
Total loans, net of deferred fees and costs	$	25,946,573		$	24,787,464

The following is a summary of current, accruing past due, and non-accrual loans by class as of December 31, 2018 and 2017.



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-occupied	5,317,023		5,433		81		5,514		8,971		5,331,508
Total commercial and industrial	12,689,324		13,421		195		13,616		78,266		12,781,206
Investment properties	5,557,224		1,312		34		1,346		2,381		5,560,951
1-4 family properties	674,648		2,745		96		2,841		2,381		679,870
Land and development	319,978		739		—		739		2,953		323,670
Total commercial real estate	6,551,850		4,796		130		4,926		7,715		6,564,491
Consumer mortgages	2,922,136		7,150		—		7,150		4,949		2,934,235
Home equity lines	1,496,562		7,092		28		7,120		12,114		1,515,796
Credit cards	252,832		3,066		2,347		5,413		—		258,245
Other consumer loans	1,894,352		17,604		1,098		18,702		3,689		1,916,743
Total consumer	6,565,882		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	⁽¹⁾

	December 31, 2017
( 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	$	7,097,127	$	11,214	$	1,016	$	12,230	$	70,130	$	7,179,487
Owner-occupied	4,830,150		6,880		479		7,359		6,654		4,844,163
Total commercial and industrial	11,927,277		18,094		1,495		19,589		76,784		12,023,650
Investment properties	5,663,665		2,506		90		2,596		3,804		5,670,065
1-4 family properties	775,023		3,545		202		3,747		2,849		781,619
Land and development	476,131		1,609		67		1,676		5,797		483,604
Total commercial real estate	6,914,819		7,660		359		8,019		12,450		6,935,288
Consumer mortgages	2,622,061		3,971		268		4,239		7,203		2,633,503
Home equity lines	1,490,808		5,629		335		5,964		17,455		1,514,227
Credit cards	229,015		1,930		1,731		3,661		—		232,676
Other consumer loans	1,461,223		10,333		226		10,559		1,669		1,473,451
Total consumer	5,803,107		21,863		2,560		24,423		26,327		5,853,857
Total loans	$	24,645,203	$	47,617	$	4,414	$	52,031	$	115,561	$	24,812,795	⁽²⁾


⁽¹⁾	Total before net deferred fees and costs of $24.1 million.


⁽²⁾	Total before net deferred fees and costs of $25.3 million.

Interest income recorded on non-accrual loans outstanding at December 31, 2018 and 2017 was $3.2 million and $2.7 million during 2018 and 2017, respectively. Interest income that would have been recorded on these non-accrual loans if the loans were performing in accordance with their contractual terms was $7.3 million and $9.1 million during 2018 and 2017, respectively.

Loans with carrying values of $8.40 billion and $7.93 billion were pledged as collateral for borrowings and capacity at December 31, 2018 and 2017 respectively, to the FHLB and Federal Reserve Bank.

The credit quality of the loan portfolio is reviewed and updated at least quarterly using the standard asset classification system utilized by the federal banking agencies. These classifications are divided into three groups – Not Classified (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) secured by junior liens on 1-4 family residential properties also consider available information on the payment status of the associated senior lien with other financial institutions.



Loan Portfolio Credit Exposure by Risk Grade
	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-occupied	5,212,473		55,038		63,572		425		—			5,331,508
Total commercial and industrial	12,402,990		173,226		203,790		1,200		—			12,781,206
Investment properties	5,497,344		40,516		23,091		—		—			5,560,951
1-4 family properties	663,692		6,424		9,754		—		—			679,870
Land and development	297,855		12,786		13,029		—		—			323,670
Total commercial real estate	6,458,891		59,726		45,874		—		—			6,564,491
Consumer mortgages	2,926,712		—		7,425		98		—			2,934,235
Home equity lines	1,501,316		—		13,130		174		1,176			1,515,796
Credit cards	255,904		—		858		—		1,483		⁽⁴⁾	258,245
Other consumer loans	1,912,902		—		3,841		—		—			1,916,743
Total consumer	6,596,834		—		25,254		272		2,659			6,625,019
Total loans	$	25,458,715	$	232,952	$	274,918	$	1,472	$	2,659		$	25,970,716	⁽⁵⁾

	December 31, 2017
(in thousands)	Pass		Special Mention		Substandard⁽¹⁾		Doubtful⁽²⁾		Loss⁽³⁾			Total
Commercial, financial, and agricultural	$	6,929,506	$	115,912	$	132,818	$	1,251	$	—		$	7,179,487
Owner-occupied	4,713,877		50,140		80,073		73		—			4,844,163
Total commercial and industrial	11,643,383		166,052		212,891		1,324		—			12,023,650
Investment properties	5,586,792		64,628		18,645		—		—			5,670,065
1-4 family properties	745,299		19,419		16,901		—		—			781,619
Land and development	431,759		33,766		14,950		3,129		—			483,604
Total commercial real estate	6,763,850		117,813		50,496		3,129		—			6,935,288
Consumer mortgages	2,622,499		—		10,607		291		106			2,633,503
Home equity lines	1,491,105		—		21,079		285		1,758			1,514,227
Credit cards	230,945		—		399		—		1,332		⁽⁴⁾	232,676
Other consumer loans	1,470,944		—		2,168		329		10			1,473,451
Total consumer	5,815,493		—		34,253		905		3,206			5,853,857
Total loans	$	24,222,726	$	283,865	$	297,640	$	5,358	$	3,206		$	24,812,795	⁽⁶⁾

⁽¹⁾Includes $172.3 million and $190.6 million of Substandard accruing loans at December 31, 2018 and December 31, 2017, 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. 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 $24.1 million.


⁽⁶⁾	Total before net deferred fees and costs of $25.3 million.

The following table details the change in the allowance for loan losses by loan segment for the years ended December 31, 2018, 2017 and 2016.



	As Of and For The Year Ended December 31, 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	(48,775		)	(4,408		)	(20,871		)	(74,054		)
Recoveries	7,165			10,188			6,291			23,644
Provision for loan losses	47,930			(11,982		)	15,749			51,697
Ending balance⁽⁴⁾	$	133,123		$	68,796		$	48,636		$	250,555
Ending balance: individually evaluated for impairment	$	10,207		$	2,598		$	744		$	13,549
Ending balance: collectively evaluated for impairment	$	122,916		$	66,198		$	47,892		$	237,006
Loans
Ending balance: total loans^{(1) (4)}	$	12,781,206		$	6,564,491		$	6,625,019		$	25,970,716
Ending balance: individually evaluated for impairment	$	105,422		$	33,198		$	28,306		$	166,926
Ending balance: collectively evaluated for impairment	$	12,675,784		$	6,531,293		$	6,596,713		$	25,803,790

	As Of and For The Year Ended December 31, 2017
(in thousands)	Commercial & Industrial			Commercial Real Estate			Consumer			Total
Allowance for loan losses
Beginning balance	$	125,778		$	81,816		$	44,164		$	251,758
Charge-offs	(49,244		)	(12,193		)	(28,982		)	(90,419		)
Recoveries	6,685			8,026			6,033			20,744
Provision for loan losses	43,584			(2,651		)	26,252			67,185
Ending balance⁽⁴⁾	$	126,803		$	74,998		$	47,467		$	249,268
Ending balance: individually evaluated for impairment	$	9,515		$	4,240		$	1,153		$	14,908
Ending balance: collectively evaluated for impairment	$	117,288		$	70,758		$	46,314		$	234,360
Loans
Ending balance: total loans^{(2) (4)}	$	12,023,650		$	6,935,288		$	5,853,857		$	24,812,795
Ending balance: individually evaluated for impairment	$	111,334		$	56,896		$	32,056		$	200,286
Ending balance: collectively evaluated for impairment	$	11,912,316		$	6,878,392		$	5,821,801		$	24,612,509

	As Of and For The Year Ended December 31, 2016
(in thousands)	Commercial & Industrial			Commercial Real Estate			Consumer			Total
Allowance for loan losses
Beginning balance	$	122,989		$	87,133		$	42,374		$	252,496
Charge-offs	(25,039		)	(18,216		)	(14,705		)	(57,960		)
Recoveries	9,071			15,226			4,925			$	29,222
Provision for loan losses	18,757			(2,327		)	11,570			28,000
Ending balance⁽⁴⁾	$	125,778		$	81,816		$	44,164		$	251,758
Ending balance: individually evaluated for impairment	$	8,384		$	7,916		$	1,811		$	18,111
Ending balance: collectively evaluated for impairment	$	117,394		$	73,900		$	42,353		$	233,647
Loans
Ending balance: total loans^{(3) (4)}	$	11,543,806		$	7,374,112		$	4,964,464		$	23,882,382
Ending balance: individually evaluated for impairment	$	120,560		$	91,410		$	37,526		$	249,496
Ending balance: collectively evaluated for impairment	$	11,423,246		$	7,282,702		$	4,926,938		$	23,632,886

⁽¹⁾Total before net deferred fees and costs of $24.1 million.


⁽²⁾	Total before net deferred fees and costs of $25.3 million.


⁽³⁾	Total before net deferred fees and costs of $26.0 million.


⁽⁴⁾	As of and for the years ended December 31, 2018, 2017, and 2016, there were no purchased credit-impaired loans and no allowance for loan losses for purchased credit-impaired loans.

Below is a detailed summary of impaired loans (including accruing TDRs) by class as of December 31, 2018 and 2017 and for the years ended December 31, 2018, 2017 and 2016. At December 31, 2018, 2017, and 2016, impaired loans of $51.3 million, $49.0 million, and $53.7 million, respectively, were on non-accrual status.



Impaired Loans (including accruing TDRs)
	December 31, 2018								December 31, 2017
			Recorded Investment								Recorded Investment
(in thousands)	Unpaid Principal Balance		Without an ALL		With an ALL		Related Allowance		Unpaid Principal Balance		Without an ALL		With an ALL		Related Allowance
Commercial, financial, and agricultural	$	65,150	$	22,298	$	34,222	$	7,133	$	75,427	$	8,220	$	65,715	$	7,406
Owner-occupied	49,588		—		48,902		3,074		37,441		—		37,399		2,109
Total commercial and industrial	114,738		22,298		83,124		10,207		112,868		8,220		103,114		9,515
Investment properties	13,916		—		13,916		1,523		23,364		—		23,364		1,100
1-4 family properties	5,586		—		5,586		131		15,056		—		15,056		504
Land and development	16,283		265		13,431		944		20,216		56		18,420		2,636
Total commercial real estate	35,785		265		32,933		2,598		58,636		56		56,840		4,240
Consumer mortgages	19,506		—		19,506		343		18,668		—		18,668		569
Home equity lines	3,264		—		3,235		224		8,039		2,746		5,096		114
Other consumer loans	5,565		—		5,565		177		5,546		—		5,546		470
Total consumer	28,335		—		28,306		744		32,253		2,746		29,310		1,153
Total impaired loans	$	178,858	$	22,563	$	144,363	$	13,549	$	203,757	$	11,022	$	189,264	$	14,908



	Years Ended December 31,
	2018				2017				2016
(in thousands)	Average Recorded Investment		Interest Income Recognized⁽¹⁾		Average Recorded Investment		Interest Income Recognized⁽¹⁾		Average Recorded Investment		Interest Income Recognized⁽¹⁾
Commercial, financial and agricultural	$	65,976	$	2,316	$	72,154	$	2,127	$	58,289	$	1,876
Owner-occupied	42,341		1,851		40,498		1,509		60,694		2,133
Total commercial and industrial	108,317		4,167		112,652		3,636		118,983		4,009
Investment properties	18,564		767		28,749		1,178		38,373		1,485
1-4 family properties	9,813		782		16,099		1,021		40,723		919
Land and development	16,841		249		24,637		404		28,891		1,026
Total commercial real estate	45,218		1,798		69,485		2,603		107,987		3,430
Consumer mortgages	19,516		134		18,319		376		21,863		1,014
Home equity lines	3,491		820		7,748		896		10,713		451
Other consumer loans	5,327		297		4,765		266		5,062		303
Total consumer	28,334		1,251		30,832		1,538		37,638		1,768
Total impaired loans	$	181,869	$	7,216	$	212,969	$	7,777	$	264,608	$	9,207


⁽¹⁾	Of the interest income recognized during the years ended December 31, 2018, 2017, or 2016, cash-basis interest income was $1.8 million, $815 thousand, and $1.0 million, respectively.

The following tables represent, by concession type, the post-modification balance for loans restructured during the years ended December 31, 2018, 2017, and 2016 that were reported as accruing or non-accruing TDRs.



TDRs by Concession Type
	Year Ended December 31, 2018
(in thousands, except contract data)	Number of Contracts	Below Market Interest Rate		Other Concessions⁽¹⁾		Total
Commercial, financial, and agricultural	46	$	3,807	$	3,957	$	7,764
Owner-occupied	16	7,589		5,705		13,294
Total commercial and industrial	62	11,396		9,662		21,058
Investment properties	10	8,070		2,215		10,285
1-4 family properties	25	2,481		2,014		4,495
Land and development	5	122		1,856		1,978
Total commercial real estate	40	10,673		6,085		16,758
Consumer mortgages	19	5,590		93		5,683
Home equity lines	4	172		339		511
Other consumer loans	92	1,834		3,983		5,817
Total consumer	115	7,596		4,415		12,011
Total loans	217	$	29,665	$	20,162	$	49,827	⁽²⁾



	Year Ended December 31, 2017
(in thousands, except contract data)	Number of Contracts	Below Market Interest Rate		Other Concessions⁽¹⁾		Total
Commercial, financial, and agricultural	56	$	9,434	$	12,145	$	21,579
Owner-occupied	4	35		1,705		1,740
Total commercial and industrial	60	9,469		13,850		23,319
Investment properties	1	—		121		121
1-4 family properties	35	2,786		2,040		4,826
Land and development	6	157		1,614		1,771
Total commercial real estate	42	2,943		3,775		6,718
Consumer mortgages	11	2,539		1,190		3,729
Other consumer loans	38	1,624		1,333		2,957
Total consumer	49	4,163		2,523		6,686
Total loans	151	$	16,575	$	20,148	$	36,723	⁽³⁾



TDRs by Concession Type (continued)
	Year Ended December 31, 2016
(in thousands, except contract data)	Number of Contracts	Below Market Interest Rate		Other Concessions⁽¹⁾		Total
Commercial, financial, and agricultural	63	$	17,509	$	7,160	$	24,669
Owner-occupied	9	7,884		550		8,434
Total commercial and industrial	72	25,393		7,710		33,103
Investment properties	4	1,825		3,518		5,343
1-4 family properties	39	5,499		1,488		6,987
Land and development	14	—		4,099		4,099
Total commercial real estate	57	7,324		9,105		16,429
Consumer mortgages	7	413		51		464
Home equity lines	5	225		123		348
Credit cards	—	—		—		—
Other consumer loans	28	394		2,256		2,650
Total consumer	40	1,032		2,430		3,462
Total loans	169	$	33,749	$	19,245	$	52,994	⁽⁴⁾


⁽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 the years ended December 31, 2018, 2017, or 2016.


⁽²⁾	Net charge-offs of $403 thousand were recorded during 2018 upon restructuring of these loans.


⁽³⁾	No charge-offs were recorded during 2017 upon restructuring of these loans.


⁽⁴⁾	No charge-offs were recorded during 2016 upon restructuring of these loans.

For the years ended December 31, 2018, 2017 and 2016, there were eight defaults with a recorded investment of $10.5 million, eight defaults with a recorded investment of $4.0 million, and two defaults with a recorded investment of $181 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).

If at the time that a loan was designated as a TDR the loan was not already impaired, the measurement of impairment resulting from the TDR designation changes from a general pool-level reserve to a specific loan measurement of impairment in accordance with ASC 310-10-35. Generally, the change in the allowance for loan losses resulting from such a TDR is not significant. At December 31, 2018, the allowance for loan losses allocated to accruing TDRs totaling $115.6 million was $6.1 million compared to accruing TDRs of $151.3 million with an allocated allowance for loan losses of $8.7 million at December 31, 2017. Non-accrual non-homogeneous loans (commercial-type impaired loan relationships 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.