Fair Value Accounting

3 Months Ended

Mar. 31, 2024

Note 5 - Fair Value Accounting

See "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" of Synovus' 2023 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, 2024								December 31, 2023
(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:
Collateralized mortgage obligations issued by U.S. Government sponsored enterprises	$	—	$	2,914	$	—	$	2,914	$	—	$	2,910	$	—	$	2,910
Other mortgage-backed securities	—		—		—		—		—		2,149		—		2,149
State and municipal securities	—		72		—		72		—		—		—		—
Asset-backed securities	—		4,425		—		4,425		—		7,839		—		7,839

Total trading securities	$	—	$	7,411	$	—	$	7,411	$	—	$	12,898	$	—	$	12,898
Investment securities available for sale:
U.S. Treasury securities	$	615,409	$	—	$	—	$	615,409	$	597,629	$	—	$	—	$	597,629
U.S. Government agency securities	—		28,783		—		28,783		—		28,940		—		28,940
Mortgage-backed securities issued by U.S. Government agencies	—		911,918		—		911,918		—		925,664		—		925,664
Mortgage-backed securities issued by U.S. Government sponsored enterprises	—		6,182,911		—		6,182,911		—		6,430,379		—		6,430,379
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	—		564,940		—		564,940		—		587,595		—		587,595
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	—		1,381,730		—		1,381,730		—		1,209,783		—		1,209,783
Corporate debt securities and other debt securities	—		8,824		—		8,824		—		8,672		—		8,672
Total investment securities available for sale	$	615,409	$	9,079,106	$	—	$	9,694,515	$	597,629	$	9,191,033	$	—	$	9,788,662
Mortgage loans held for sale	$	—	$	36,698	$	—	$	36,698	$	—	$	47,338	$	—	$	47,338
Other investments	—		—		13,115		13,115		—		—		12,560		12,560
Mutual funds and mutual funds held in rabbi trusts	59,649		—		—		59,649		53,742		—		—		53,742

Derivative assets	—		103,589		—		103,589		—		94,903		—		94,903
Liabilities
Securities sold short	$	2,469	$	—	$	—	$	2,469	$	3,496	$	—	$	—	$	3,496
Mutual funds held in rabbi trusts	44,759		—		—		44,759		38,735		—		—		38,735
Derivative liabilities	—		286,094		—		286,094		—		259,650		—		259,650

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 instrument-specific credit risk.


Mortgage Loans Held for Sale
(in thousands)	As of March 31, 2024		As of December 31, 2023
Fair value	$	36,698	$	47,338
Unpaid principal balance	35,793		45,627
Fair value less aggregate unpaid principal balance	$	905	$	1,711


Changes in Fair Value Included in Net Income	Three Months Ended March 31,				Location in Consolidated Statements of Income
(in thousands)	2024		2023
Mortgage loans held for sale	$	(806)	$	303		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' 2023 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, 2024 and 2023, 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 measured at fair value on a recurring basis.


		Three Months Ended March 31, 2024
(in thousands)		Other Investments
Beginning balance at December 31, 2023		$	12,560
Total gains (losses) realized/unrealized:
Included in earnings		(21)
Additions		576

Ending balance at March 31, 2024		$	13,115
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, 2024		$	(21)

	Three Months Ended March 31, 2023
(in thousands)		Other Investments
Beginning balance at December 31, 2022		$	11,172
Total gains (losses) realized/unrealized:
Included in earnings		(28)
Additions		511

Ending balance at March 31, 2023		$	11,655
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, 2023		$	(28)

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, 2024						Fair Value Adjustments for the Three Months Ended March 31, 2024		Location in Consolidated Statements of Income
(in thousands)	Level 1		Level 2		Level 3
Loans(1)	$	—	$	—	$	117,571	$	15,328	Provision for (reversal of) credit losses




	March 31, 2023						Fair Value Adjustments for the Three Months Ended March 31, 2023		Location in Consolidated Statements of Income
	Level 1		Level 2		Level 3
Loans(1)	$	—	$	—	$	49	$	50	Provision for (reversal of) credit losses
Other loans held for sale	—		—		391,157		16,750		Loss on other loans held for sale
Qualpay receivable	—		—		31,109		15,789		Recovery of NPA; Other operating expense(2)
Other assets held for sale	—		—		450		50		Other operating expense

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

(2) Recovery of NPA amount was $13.1 million in non-interest revenue while other operating expense amount was a reversal of $2.7 million.

Fair Value of Financial Instruments

The following tables present the carrying and estimated fair values of financial instruments at March 31, 2024 and December 31, 2023. 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' 2023 Form 10-K for a description of how fair value measurements are determined.


	March 31, 2024
(in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial assets
Total cash, cash equivalents, and restricted cash	$	2,423,500	$	2,423,500	$	2,423,500	$	—	$	—
Trading securities	7,411		7,411		—		7,411		—
Investment securities available for sale	9,694,515		9,694,515		615,409		9,079,106		—
Loans held for sale	130,586		130,496		—		36,698		93,798
Other investments	13,115		13,115		—		—		13,115
Mutual funds and mutual funds held in rabbi trusts	59,649		59,649		59,649		—		—
Loans, net (1)	42,817,216		41,124,811		—		—		41,124,811

FRB and FHLB stock	213,713		213,713		—		213,713
Derivative assets	103,589		103,589		—		103,589		—
Financial liabilities
Non-interest-bearing deposits	$	12,042,353	$	12,042,353	$	—	$	12,042,353	$	—
Non-time interest-bearing deposits	27,348,773		27,348,773		—		27,348,773		—
Time deposits	11,189,116		11,160,289		—		11,160,289		—
Total deposits (2)	$	50,580,242	$	50,551,415	$	—	$	50,551,415	$	—
Federal funds purchased and securities sold under repurchase agreements	128,244		128,244		128,244		—		—
Securities sold short	2,469		2,469		2,469		—		—
Short-term FHLB advances	250,000		250,000		—		250,000		—
Long-term debt	2,031,735		2,006,557		—		2,006,557		—
Mutual funds held in rabbi trusts	44,759		44,759		44,759		—		—
Derivative liabilities	286,094		286,094		—		286,094		—

(1) Synovus estimates the fair value of loans based on present value of the future cash flows using the interest rate that would be charged for a similar loan to a borrower with similar risk, adjusted for a discount based on the estimated time period to complete a sale transaction with a market participant.

(2) The fair value of deposits with no stated maturity, such as non-interest-bearing demand, interest bearing demand, money market, and savings accounts reflects the carrying amount which is payable on demand, as of the respective date, and may not align with other valuation methods or processes. The fair value of time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.


	December 31, 2023
(in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial assets
Total cash, cash equivalents, and restricted cash	$	2,451,426	$	2,451,426	$	2,451,426	$	—	$	—
Trading securities	12,898		12,898		—		12,898		—
Investment securities available for sale	9,788,662		9,788,662		597,629		9,191,033		—
Loans held for sale	52,768		52,770		—		47,338		5,432
Other investments	12,560		12,560		—		—		12,560
Mutual funds and mutual funds held in rabbi trusts	53,742		53,742		53,742		—		—
Loans, net (1)	42,925,105		41,298,149		—		—		41,298,149

FRB and FHLB stock	184,944		184,944		—		184,944		—
Derivative assets	94,903		94,903		—		94,903		—

Financial liabilities
Non-interest-bearing deposits	$	12,507,616	$	12,507,616	$	—	$	12,507,616	$	—
Non-time interest-bearing deposits	27,449,088		27,449,088		—		27,449,088		—
Time deposits	10,782,481		10,769,002		—		10,769,002		—
Total deposits (2)	$	50,739,185	$	50,725,706	$	—	$	50,725,706	$	—
Federal funds purchased and securities sold under repurchase agreements	189,074		189,074		189,074		—		—
Securities sold short	3,496		3,496		3,496		—		—

Long-term debt	1,932,534		1,939,604		—		1,939,604		—
Mutual funds held in rabbi trusts	38,735		38,735		38,735		—		—
Derivative liabilities	259,650		259,650		—		259,650		—

- 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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