Fair Value Accounting

3 Months Ended

Mar. 31, 2022

Note 6 - Fair Value Accounting

See "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" of Synovus' 2021 Form 10-K for a description of valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis.

The following table presents assets and liabilities measured at estimated fair value on a recurring basis.


	March 31, 2022								December 31, 2021
(in thousands)	Level 1		Level 2		Level 3		Total Estimated Fair Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
Assets
Trading securities:
Mortgage-backed securities issued by U.S. Government agencies	$	—	$	—	$	—	$	—	$	—	$	197	$	—	$	197
Collateralized mortgage obligations issued by U.S. Government sponsored enterprises	—		483		—		483		—		671		—		671
Other mortgage-backed securities	—		3,362		—		3,362		—		—		—		—
State and municipal securities	—		414		—		414		—		560		—		560
Asset-backed securities	—		5,359		—		5,359		—		6,963		—		6,963
Total trading securities	$	—	$	9,618	$	—	$	9,618	$	—	$	8,391	$	—	$	8,391
Investment securities available for sale:
U.S. Treasury securities	$	394,586	$	—	$	—	$	394,586	$	117,838	$	—	$	—	$	117,838
U.S. Government agency securities	—		51,805		—		51,805		—		54,201		—		54,201
Mortgage-backed securities issued by U.S. Government agencies	—		686,744		—		686,744		—		779,633		—		779,633
Mortgage-backed securities issued by U.S. Government sponsored enterprises	—		7,620,631		—		7,620,631		—		8,012,301		—		8,012,301
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	—		822,878		—		822,878		—		939,623		—		939,623
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	—		530,796		—		530,796		—		481,744		—		481,744
Asset-backed securities	—		337,037		—		337,037		—		514,188		—		514,188
Corporate debt securities and other debt securities	—		18,624		—		18,624		—		18,801		—		18,801
Total investment securities available for sale	$	394,586	$	10,068,515	$	—	$	10,463,101	$	117,838	$	10,800,491	$	—	$	10,918,329
Mortgage loans held for sale	$	—	$	111,992	$	—	$	111,992	$	—	$	108,198	$	—	$	108,198
Other investments	—		—		12,093		12,093		—		—		12,185		12,185
Mutual funds and mutual funds held in rabbi trusts	43,842		—		—		43,842		43,657		—		—		43,657
GGL/SBA loans servicing asset	—		—		3,451		3,451		—		—		3,233		3,233
Derivative assets	—		160,545		—		160,545		—		191,708		—		191,708
Liabilities
Trading liability for short positions	$	—	$	389	$	—	$	389	$	—	$	200	$	—	$	200
Mutual funds held in rabbi trusts	28,095		—		—		28,095		27,205		—		—		27,205
Derivative liabilities	—		230,087		1,776		231,863		—		95,067		3,535		98,602

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 UPB of mortgage loans held for sale 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 March 31, 2022		As of December 31, 2021
Fair value	$	111,992	$	108,198
Unpaid principal balance	111,929		105,785
Fair value less aggregate unpaid principal balance	$	63	$	2,413


Changes in Fair Value Included in Net Income	Three Months Ended March 31,				Location in Consolidated Statements of Income
(in thousands)	2022		2021
Mortgage loans held for sale	$	(2,350)	$	(4,632)	Mortgage banking income

Activity for Level 3 Assets and Liabilities

See "Part II - Item 8. Financial Statements and Supplementary Data - Note 12 - Fair Value Accounting" of Synovus' 2021 Form 10-K for a description of the valuation techniques and significant inputs for Level 3 assets and liabilities that are measured at fair value on a recurring and non-recurring basis. During the three months ended March 31, 2022 and 2021, Synovus did not have any transfers in or out of Level 3 in the fair value hierarchy. The following tables provide rollforwards of Level 3 assets and liabilities measured at fair value on a recurring basis.


					Three Months Ended March 31, 2022
(in thousands)					Other Investments		GGL / SBA Loans Servicing Asset		Visa Derivative
Beginning balance					$	12,185	$	3,233	$	(3,535)
Total gains (losses) realized/unrealized:
Included in earnings					(92)		(262)		—
Additions					—		—		—
Settlements					—		480		1,759
Ending balance					$	12,093	$	3,451	$	(1,776)
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 March 31, 2022					$	(92)	$	—	$	—

			Three Months Ended March 31, 2021
(in thousands)	Investment Securities Available for Sale		Other Investments		GGL / SBA Loans Servicing Asset		Earnout Liability		Visa Derivative
Beginning balance	$	2,021	$	1,021	$	3,258	$	(5,677)	$	(2,048)
Total gains (losses) realized/unrealized:
Included in earnings	—		32		(178)		—		—
Sales	(2,021)		—		—		—		—
Additions	—		—		225		—		—
Settlements	—		—		—		—		280
Ending balance	$	—	$	1,053	$	3,305	$	(5,677)	$	(1,768)
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 March 31, 2021	$	—	$	32	$	—	$	—	$	—

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.


	March 31, 2022						Fair Value Adjustments for the Three Months Ended March 31, 2022		Location in Consolidated Statements of Income
(in thousands)	Level 1		Level 2		Level 3
Loans(1)	$	—	$	—	$	7,483	$	339	Provision for credit losses
Other assets held for sale	—		—		2,725		492		Other operating expense

	March 31, 2021						Fair Value Adjustments for the Three Months Ended March 31, 2021		Location in Consolidated Statements of Income
	Level 1		Level 2		Level 3
Loans(1)	$	—	$	—	$	14,026	$	7,002	Provision for credit losses

(1) Collateral-dependent loans that were written down to fair value of collateral.

ORE properties are included in other assets on the consolidated balance sheets. The carrying value of ORE at March 31, 2022 and December 31, 2021 was $11.4 million and $11.8 million, respectively.

Fair Value of Financial Instruments

The following tables present the carrying and estimated fair values of financial instruments at March 31, 2022 and December 31, 2021. The fair values represent management’s best estimates based on a 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' 2021 Form 10-K for a description of how fair value measurements are determined.


	March 31, 2022
(in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial assets
Total cash, cash equivalents, and restricted cash	$	1,553,503	$	1,553,503	$	1,553,503	$	—	$	—
Trading securities	9,618		9,618		—		9,618		—
Investment securities available for sale	10,463,101		10,463,101		394,586		10,068,515		—
Loans held for sale	723,921		720,640		—		111,992		608,648
Other investments	12,093		12,093		—		—		12,093
Mutual funds and mutual funds held in rabbi trusts	43,842		43,842		43,842		—		—
Loans, net	39,754,194		39,988,199		—		—		39,988,199
GGL/SBA loans servicing asset	3,451		3,451		—		—		3,451
FRB and FHLB stock	174,191		174,191		—		174,191		—
Derivative assets	160,545		160,545		—		160,545		—
Financial liabilities
Non-interest-bearing deposits	$	16,611,344	$	16,611,344	$	—	$	16,611,344	$	—
Non-time interest-bearing deposits	27,876,322		27,876,322		—		27,876,322		—
Time deposits	4,168,578		4,149,009		—		4,149,009		—
Total deposits	$	48,656,244	$	48,636,675	$	—	$	48,636,675	$	—
Federal funds purchased and securities sold under repurchase agreements	501,124		501,124		501,124		—		—
Trading liability for short positions	389		389		—		389		—
Other short-term borrowings	400,000		400,000		—		400,000		—
Long-term debt	805,259		820,634		—		820,634		—
Mutual funds held in rabbi trusts	28,095		28,095		28,095		—		—
Derivative liabilities	231,863		231,863		—		230,087		1,776


	December 31, 2021
(in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial assets
Total cash, cash equivalents, and restricted cash	$	3,009,853	$	3,009,853	$	3,009,853	$	—	$	—
Trading securities	8,391		8,391		—		8,391		—
Investment securities available for sale	10,918,329		10,918,329		117,838		10,800,491		—
Loans held for sale	750,642		749,980		—		108,198		641,782
Other investments	12,185		12,185		—		—		12,185
Mutual funds and mutual funds held in rabbi trusts	43,657		43,657		43,657		—		—
Loans, net	38,884,361		39,118,275		—		—		39,118,275
GGL/SBA loans servicing asset	3,233		3,233		—		—		3,233
FRB and FHLB stock	159,941		159,941		—		159,941		—
Derivative assets	191,708		191,708		—		191,708		—

Financial liabilities
Non-interest-bearing deposits	$	16,392,653	$	16,392,653	$	—	$	16,392,653	$	—
Non-time interest-bearing deposits	28,917,148		28,917,148		—		28,917,148		—
Time deposits	4,117,475		4,125,673		—		4,125,673		—
Total deposits	$	49,427,276	$	49,435,474	$	—	$	49,435,474	$	—
Federal funds purchased and securities sold under repurchase agreements	264,133		264,133		264,133		—		—
Trading liability for short positions	200		200		—		200		—
Long-term debt	1,204,229		1,243,147		—		1,243,147		—
Mutual funds held in rabbi trusts	27,205		27,205		27,205		—		—
Derivative liabilities	98,602		98,602		—		95,067		3,535

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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