10-Q 1 snv-6302012x10q.htm FORM 10-Q SNV-6.30.2012-10Q
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, 2012
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
Tangible Equity Units
Series B Participating Cumulative Preferred Stock Purchase Rights
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 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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer
x
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
¨  (Do not check if a smaller reporting company)
Smaller reporting company
¨
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, 2012
Common Stock, $1.00 Par Value
 
 
 
786,575,516 shares




Table of Contents
 
 
 
 
 
Page
Financial Information
 
 
 
Index of Defined Terms
 
Item 1.
Financial Statements
 
 
 
Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011 (unaudited)
 
 
Consolidated Statements of Operations for the Six and Three Months Ended June 30, 2012 and 2011 (unaudited)
 
 
Consolidated Statements of Comprehensive Income (Loss) for the Six and Three Months Ended June 30, 2012 and 2011 (unaudited)
 
 
Consolidated Statements of Changes in Shareholders' Equity for the Six Months Ended June 30, 2012 and 2011 (unaudited)
 
 
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2012 and 2011 (unaudited)
 
 
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 6.
Exhibits
 
Signatures
 
 
 
Index to Exhibits
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 






SYNOVUS FINANCIAL CORP.
INDEX OF DEFINED TERMS
2013 Senior Notes – Synovus' outstanding 4.875% Senior Notes due February 15, 2013
2019 Senior Notes – Synovus' outstanding 7.875% Senior Notes due February 15, 2019 
ALCO – Synovus' Asset Liability Management Committee
ALL – Allowance for Loan Losses
AMT – Alternative Minimum Tax
ARRA – American Recovery and Reinvestment Act of 2009
ASC – Accounting Standards Codification
ASU – Accounting Standards Update
AUM – Assets under management
BAM – Broadway Asset Management, Inc., a wholly-owned subsidiary of Synovus Financial Corp.
Basel III – a global regulatory framework developed by the Basel Committee on Banking Supervision
BCBS – Basel Committee on Banking Supervision
BSA/AML – Bank Secrecy Act / Anti-Money Laundering
BOV – broker’s opinion of value
b.p. – basis point (b.p.s - basis points)
CD – certificate of deposit
C&D – residential construction and development loans
C&I – commercial and industrial loans
CB&T – Columbus Bank and Trust Company, a division of Synovus Bank. Synovus Bank is a wholly-owned subsidiary of Synovus Financial Corp.
CAMELS Rating System – A term defined by bank supervisory authorities, referring to Capital, Assets, Management, Earnings, Liquidity, and Sensitivity to Market Risk
CEO – Chief Executive Officer
CFO – Chief Financial Officer
CFPB – Consumer Finance Protection Bureau
Charter Consolidation – Synovus’ consolidation of its 30 banking subsidiaries into a single bank charter in 2010
CMO – collateralized mortgage obligation
Code – Internal Revenue Code of 1986, as amended
Common Stock – Common Stock, par value $1.00 per share, of Synovus Financial Corp.
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
CPP – U.S. Department of the Treasury Capital Purchase Program
CRE – commercial real estate
CROA – Credit Repair Organization Act
DIF – Deposit Insurance Fund
Dodd-Frank Act – The Dodd-Frank Wall Street Reform and Consumer Protection Act
DRR – Designated Reserve Ratio

i


DTA – deferred tax asset
EBITDA – earnings before interest, depreciation and amortization
EESA – Emergency Economic Stabilization Act of 2008
EITF – Emerging Issues Task Force
EL – expected loss
EPS – earnings per share
Exchange Act – Securities Exchange Act of 1934, as amended
FASB – Financial Accounting Standards Board
FDIC – Federal Deposit Insurance Corporation
FINRA – Financial Industry Regulatory Authority
FFIEC – Federal Financial Institutions Examination Council
FHLB – Federal Home Loan Bank
FICO – Fair Isaac Corporation
GA DBF – Georgia Department of Banking and Finance
GAAP – Accounting Principles Generally Accepted in the United States of America
GDP – gross domestic product
Georgia Commissioner – Banking Commissioner of the State of Georgia
GSE – government sponsored enterprise
HELOC – home equity line of credit
IASB – International Accounting Standards Board
IFRS – International Financial Reporting Standards
IOLTA – Interest on Lawyer Trust Account
IPO – Initial Public Offering
IRC – Internal Revenue Code of 1986, as amended
IRS – Internal Revenue Service
LGD – loss given default
LIBOR – London Interbank Offered Rate
LIHTC – Low Income Housing Tax Credit
LTV – loan-to-collateral value ratio
MAD – Managed Assets Division, a division of Synovus Bank
MBS – mortgage-backed securities
MOU – Memorandum of Understanding
NBER – National Bureau of Economic Research
nm – not meaningful
NPA – non-performing assets
NPL – non-performing loans
NPR – notice of proposed rulemaking
NSF – non-sufficient funds
NYSE – New York Stock Exchange

ii


OCI – Other Comprehensive Income
OFAC – Office of Foreign Assets Control
ORE – other real estate
ORM – Operational Risk Management
OTTI – other-than-temporary impairment
Parent Company – Synovus Financial Corp.
PD – probability of default
POS – point-of-sale
RCSA – Risk Control Self-Assessment
SAB – SEC Staff Accounting Bulletin
SBA – Small Business Administration
SEC – U.S. Securities and Exchange Commission
Securities Act – Securities Act of 1933, as amended
Series A Preferred Stock – Synovus' Fixed Rate Cumulative Perpetual Preferred Stock, Series A, without par value
Shared Deposit – Prior to the Charter Consolidation, Synovus offered this deposit product which gave its customers the opportunity to access up to $7.5 million in FDIC insurance by spreading deposits across its 30 separately-chartered banks.
Synovus – Synovus Financial Corp.
Synovus Bank – A Georgia state-chartered bank, formerly known as Columbus Bank and Trust Company, and wholly-owned subsidiary of Synovus, through which Synovus conducts its banking operations
Synovus' 2011 Form 10-K – Synovus' Annual Report on Form 10-K for the year ended December 31, 2011
Synovus Mortgage – Synovus Mortgage Corp., a wholly-owned subsidiary of Synovus Bank
Synovus Trust Company, N. A. – a wholly-owned subsidiary of Synovus Bank
TAGP – Transaction Account Guarantee Program
TARP – Troubled Assets Relief Program
TBA – to-be-announced securities with respect to mortgage-related securities to be delivered in the future (MBSs and CMOs)
TDR – troubled debt restructuring (as defined in ASC 310-40)
Tender Offer – Offer by Synovus to purchase, for cash, all of its outstanding 2013 Notes, which commenced on February 7, 2012 and expired on March 6, 2012
tMEDS – tangible equity units, each composed of a prepaid common stock purchase contract and a junior subordinated amortizing note
TSYS – Total System Services, Inc.
UCL – Unfair Competition Law
USA PATRIOT Act – Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism
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
Visa IPO – The initial public offering of shares of Class A Common Stock by Visa, Inc. on March 25, 2008

iii



PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
SYNOVUS FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except share and per share data)
 
June 30,
2012
 
December 31,
2011
ASSETS
 
 
 
 
Cash and cash equivalents
 
$
523,302

 
510,423

Interest bearing funds with Federal Reserve Bank
 
1,301,244

 
1,567,006

Interest earning deposits with banks
 
16,003

 
13,590

Federal funds sold and securities purchased under resale agreements
 
118,098

 
158,916

Trading account assets, at fair value
 
12,331

 
16,866

Mortgage loans held for sale, at fair value
 
120,007

 
161,509

Other loans held for sale
 
32,601

 
30,156

Investment securities available for sale, at fair value
 
3,570,346

 
3,690,125

Loans, net of deferred fees and costs
 
19,680,127

 
20,079,813

Allowance for loan losses
 
(453,325
)
 
(536,494
)
Loans, net
 
19,226,802

 
19,543,319

Premises and equipment, net
 
475,944

 
486,923

Goodwill
 
24,431

 
24,431

Other intangible assets, net
 
6,693

 
8,525

Other real estate
 
174,941

 
204,232

Other assets
 
691,367

 
746,824

Total assets
 
$
26,294,110

 
27,162,845

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
Liabilities
 
 
 
 
Deposits:
 
 
 
 
Non-interest bearing deposits
 
$
5,607,680

 
5,366,868

Interest bearing deposits, excluding brokered deposits
 
14,808,493

 
15,261,710

Brokered deposits
 
1,148,892

 
1,783,174

Total deposits
 
21,565,065

 
22,411,752

Federal funds purchased and securities sold under repurchase agreements
 
351,173

 
313,757

Long-term debt
 
1,301,616

 
1,364,727

Other liabilities
 
222,867

 
245,157

Total liabilities
 
23,440,721

 
24,335,393

Shareholders' Equity:
 
 
 
 
   Series A Preferred Stock – no par value. Authorized 100,000,000 shares; 967,870
    issued and outstanding at June 30, 2012 and December 31, 2011
 
952,093

 
947,017

   Common stock - $1.00 par value. Authorized 1,200,000,000 shares;
    issued 792,268,968 at June 30, 2012 and 790,988,880 at
    December 31, 2011; outstanding 786,575,516 at June 30, 2012
    and 785,295,428 at December 31, 2011    
 
792,269

 
790,989

Additional paid-in capital
 
2,215,201

 
2,241,171

   Treasury stock, at cost – 5,693,452 shares at both June 30, 2012 and
    December 31, 2011    
 
(114,176
)
 
(114,176
)
Accumulated other comprehensive income
 
7,003

 
21,093

Accumulated deficit
 
(999,001
)
 
(1,058,642
)
Total shareholders’ equity
 
2,853,389

 
2,827,452

Total liabilities and shareholders' equity
 
$
26,294,110

 
27,162,845

See accompanying notes to unaudited interim consolidated financial statements

1


SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
Six Months Ended June 30,
 
Three Months Ended June 30,
(in thousands, except per share data)
2012
 
2011
 
2012
 
2011
Interest income:
 
 
 
 
 
 
 
Loans, including fees
$
470,805

 
521,634

 
232,283

 
256,597

      Investment securities available for sale
40,472

 
57,350

 
19,089

 
27,925

      Trading account assets
515

 
478

 
236

 
222

      Mortgage loans held for sale
2,496

 
3,034

 
1,129

 
1,223

      Federal Reserve Bank balances
2,009

 
3,524

 
958

 
1,742

      Other earning assets
167

 
464

 
114

 
343

Total interest income
516,464

 
586,484

 
253,809

 
288,052

Interest expense:
 
 
 
 
 
 
 
Deposits
56,385

 
95,432

 
25,898

 
45,869

Federal funds purchased and securities sold under repurchase agreements
350

 
594

 
170

 
297

Long-term debt
25,413

 
22,063

 
14,385

 
10,925

Total interest expense
82,148

 
118,089

 
40,453

 
57,091

Net interest income
434,316

 
468,395

 
213,356

 
230,961

Provision for loan losses
110,271

 
261,905

 
44,222

 
120,159

Net interest income after provision for loan losses
324,045

 
206,490

 
169,134

 
110,802

Non-interest income:
 
 
 
 
 
 
 
Service charges on deposit accounts
36,915

 
39,556

 
18,684

 
19,238

Fiduciary and asset management fees
21,627

 
23,416

 
10,792

 
11,879

Brokerage revenue
12,942

 
12,511

 
6,295

 
6,291

Mortgage banking income
13,986

 
8,042

 
7,983

 
5,547

Bankcard fees
16,072

 
22,782

 
8,493

 
12,125

Investment securities gains, net
24,253

 
1,797

 
4,170

 
377

Other fee income
9,651

 
10,220

 
4,951

 
5,289

Increase (decrease) in fair value of private equity investments, net
7,372

 
(169
)
 
7,279

 
(301
)
Other non-interest income
17,798

 
13,858

 
7,830

 
7,404

Total non-interest income
160,616

 
132,013

 
76,477

 
67,849

Non-interest expense:
 
 
 
 
 
 
 
Salaries and other personnel expense
187,795

 
184,849

 
95,173

 
91,749

Net occupancy and equipment expense
52,865

 
58,717

 
26,159

 
28,883

FDIC insurance and other regulatory fees
27,966

 
30,362

 
13,302

 
15,956

Foreclosed real estate expense, net
43,680

 
64,609

 
20,708

 
39,872

(Gains) losses on other loans held for sale, net
(99
)
 
(1,746
)
 
(1,058
)
 
480

Professional fees
19,196

 
20,129

 
9,929

 
10,893

Data processing expense
16,735

 
18,201

 
8,712

 
9,251

Visa indemnification charges
4,713

 
96

 
1,734

 
92

Restructuring charges
2,252

 
27,439

 
1,393

 
3,106

Other operating expenses
56,296

 
59,475

 
32,212

 
22,133

Total non-interest expense
411,399

 
462,131

 
208,264

 
222,415

Income (loss) before income taxes
73,262

 
(123,628
)
 
37,347

 
(43,764
)
Income tax benefit
(2,182
)
 
(5,220
)
 
(2,105
)
 
(4,764
)
Net income (loss)
75,444

 
(118,408
)
 
39,452

 
(39,000
)
Net loss attributable to non-controlling interest

 
(220
)
 

 

Net income (loss) available to controlling interest
75,444

 
(118,188
)
 
39,452

 
(39,000
)
Dividends and accretion of discount on preferred stock
29,272

 
28,970

 
14,649

 
14,504

Net income (loss) available to common shareholders
$
46,172

 
(147,158
)
 
24,803

 
(53,504
)
Earnings per common share:
 
 
 
 
 
 
 
Net income (loss) available to common shareholders, basic
$
0.06

 
(0.19
)
 
0.03

 
(0.07
)
Net income (loss) available to common shareholders, diluted
0.05

 
(0.19
)
 
0.03

 
(0.07
)
Weighted average common shares outstanding, basic
786,355

 
785,260

 
786,576

 
785,277

Weighted average common shares outstanding, diluted
909,542

 
785,260

 
909,761

 
785,277

See accompanying notes to unaudited interim consolidated financial statements.

2


SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
 
Six Months Ended June 30, 2012
 
Six Months Ended June 30, 2011
 
Three Months Ended June 30, 2012
 
Three Months Ended June 30, 2011
(in thousands)
Before-tax Amount
 
Tax (Expense) Benefit
 
Net of Tax Amount
 
Before-tax Amount
 
Tax (Expense) Benefit
 
Net of Tax Amount
 
Before-tax Amount
 
Tax (Expense) Benefit
 
Net of Tax Amount
 
Before-tax Amount
 
Tax (Expense) Benefit
 
Net of Tax Amount
Net income (loss)
$
73,262

 
2,182

 
75,444

 
(123,628
)
 
5,220

 
(118,408
)
 
37,347

 
2,105

 
39,452

 
(43,764
)
 
4,764

 
(39,000
)
Net unrealized gains (losses) on cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net unrealized gains (losses) arising during the period
(1,555
)
 
608

 
(947
)
 
(6,974
)
 
2,614

 
(4,360
)
 
(420
)
 
171

 
(249
)
 
(3,069
)
 
1,305

 
(1,764
)
Valuation allowance for the change in deferred taxes arising from unrealized gains/losses(1)

 
(608
)
 
(608
)
 

 

 

 

 
(171
)
 
(171
)
 

 
1,309

 
1,309

Net unrealized gains (losses)
(1,555
)
 

 
(1,555
)
 
(6,974
)
 
2,614

 
(4,360
)
 
(420
)
 

 
(420
)
 
(3,069
)
 
2,614

 
(455
)
Net unrealized gains (losses) on investment securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net unrealized gains (losses) arising during the period
11,076

 
(4,263
)
 
6,813

 
22,462

 
(8,250
)
 
14,212

 
13,146

 
(5,062
)
 
8,084

 
34,146

 
(12,799
)
 
21,347

Reclassification adjustment for (gains) losses realized in net income
(24,253
)
 
9,338

 
(14,915
)
 
(1,797
)
 
692

 
(1,105
)
 
(4,170
)
 
1,605

 
(2,565
)
 
(377
)
 
145

 
(232
)
Valuation allowance for the change in deferred taxes arising from unrealized gains/losses(1)  

 
(5,075
)
 
(5,075
)
 

 

 

 

 
3,457

 
3,457

 

 
5,096

 
5,096

Net unrealized gains (losses)
(13,177
)
 

 
(13,177
)
 
20,665

 
(7,558
)
 
13,107

 
8,976

 

 
8,976

 
33,769

 
(7,558
)
 
26,211

Amortization of post-retirement unfunded health benefit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization arising during the period
642

 
(247
)
 
395

 

 

 

 
642

 
(247
)
 
395

 

 

 

Valuation allowance for the change in deferred taxes arising from amortization

 
247

 
247

 

 

 

 

 
247

 
247

 

 

 

Net amortization
642

 

 
642

 

 

 

 
642

 

 
642

 

 

 

Other comprehensive income (loss)
(14,090
)
 

 
(14,090
)
 
13,691

 
(4,944
)
 
8,747

 
9,198

 

 
9,198

 
30,700

 
(4,944
)
 
25,756

Less: comprehensive loss attributable to non-controlling interest

 

 

 
(220
)
 

 
(220
)
 

 

 

 

 

 

Comprehensive income (loss)
$
59,172

 
2,182

 
61,354

 
(109,717
)
 
276

 
(109,441
)
 
46,545

 
2,105

 
48,650

 
(13,064
)
 
(180
)
 
(13,244
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) In accordance with ASC 740-20-45-11(b), the deferred tax asset valuation allowance associated with unrealized gains and losses not recognized in income is charged directly to other comprehensive income (loss). See accompanying notes to unaudited interim consolidated financial statements.



3


SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited)
 
 
 
(in thousands, except per share data)
Preferred
Stock
 
Common
Stock
 
Additional
Paid-in
Capital
 
Treasury
Stock
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Accumulated
 Deficit
 
Non-Controlling
Interest
 
Total
Balance at December 31, 2010
$
937,323

 
790,956

 
2,293,263

 
(114,176
)
 
57,158

 
(966,606
)
 
26,629

 
3,024,547

Net loss

 

 

 

 

 
(118,188
)
 
(220
)
 
(118,408
)
Other comprehensive income, net of taxes

 

 

 

 
8,747

 

 

 
8,747

Cash dividends declared on common stock - $0.02 per share

 

 

 

 

 
(15,705
)
 

 
(15,705
)
Cash dividends paid on preferred stock

 

 
(24,197
)
 

 

 

 

 
(24,197
)
Accretion of discount on preferred stock
4,773

 

 
(4,773
)
 

 

 

 

 

Restricted share unit activity

 
17

 
(17
)
 

 

 

 

 

Share-based compensation expense

 

 
2,363

 

 

 

 

 
2,363

Change in ownership at majority-owned subsidiary

 

 

 

 

 

 
(26,409
)
 
(26,409
)
Balance at June 30, 2011
$
942,096

 
790,973

 
2,266,639

 
(114,176
)
 
65,905

 
(1,100,499
)
 

 
2,850,938

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2011
$
947,017

 
790,989

 
2,241,171

 
(114,176
)
 
21,093

 
(1,058,642
)
 

 
2,827,452

Net Income

 

 

 

 

 
75,444

 

 
75,444

Other comprehensive loss, net of taxes

 

 

 

 
(14,090
)
 

 

 
(14,090
)
Cash dividends declared on common stock - $0.02 per share

 

 

 

 

 
(15,730
)
 

 
(15,730
)
Cash dividends paid on preferred stock

 

 
(24,197
)
 

 

 

 

 
(24,197
)
Accretion of discount on preferred stock
5,076

 

 
(5,076
)
 

 

 

 

 

Restricted share unit activity

 
1,280

 
(1,207
)
 

 

 
(73
)
 

 

Share-based compensation expense

 

 
4,510

 

 

 

 

 
4,510

Balance at June 30, 2012
$
952,093

 
792,269

 
2,215,201

 
(114,176
)
 
7,003

 
(999,001
)
 

 
2,853,389

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to unaudited interim consolidated financial statements.



4


SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
Six Months Ended June 30,
(in thousands)
2012
 
2011
Operating Activities
 
 
 
Net income (loss)
$
75,444

 
(118,408
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Provision for loan losses
110,271

 
261,905

Depreciation, amortization, and accretion, net
28,234

 
23,412

Deferred income tax expense (benefit)
153

 
(5,304
)
Decrease in interest receivable
8,006

 
10,950

Decrease in interest payable
(2,511
)
 
(10,248
)
Decrease in trading account assets
4,535

 
6,164

Originations of mortgage loans held for sale
(512,192
)
 
(392,707
)
Proceeds from sales of mortgage loans held for sale
552,708

 
542,665

(Gains) losses on sale of mortgage loans held for sale, net
(2,526
)
 
296

 Decrease in prepaid and other assets
52,713

 
55,864

Decrease in accrued salaries and benefits
(4,544
)
 
(6,388
)
Decrease in other liabilities
(15,235
)
 
(3,687
)
Investment securities gains, net
(24,253
)
 
(1,797
)
Gains on sales of other loans held for sale, net
(99
)
 
(1,746
)
Losses on other real estate, net
33,859

 
54,543

(Increase) decrease in fair value of private equity investments, net
(7,372
)
 
169

Gains on sales of other assets held for sale, net
(164
)
 
(261
)
Write downs on other loans held for sale
2,806

 
11,313

Write downs on other assets held for sale
1,228

 
5,698

Share-based compensation
4,510

 
2,363

Other, net
(438
)
 
(7,732
)
Net cash provided by operating activities
305,133

 
427,064

Investing Activities
 
 
 
Net increase in interest earning deposits with banks
(2,413
)
 
(7,687
)
Net decrease in federal funds sold and securities purchased under repurchase agreements
40,818

 
32,922

Net decrease in interest bearing funds with Federal Reserve Bank
265,762

 
258,619

Proceeds from maturities and principal collections of investment securities available for sale
584,914

 
573,759

Proceeds from sales of investment securities available for sale
733,621

 
17,044

Purchases of investment securities available for sale
(1,202,234
)
 
(389,724
)
Proceeds from sales of other loans held for sale
177,510

 
194,220

Proceeds from sale of other real estate
70,496

 
88,003

Principal payments on other loans held for sale
4,133

 
28,305

Net (increase) decrease in loans
(53,111
)
 
425,919

Purchases of premises and equipment
(9,263
)
 
(9,014
)
Proceeds from disposals of premises and equipment
3,005

 
2,014

Proceeds from sales of other assets held for sale
1,740

 
492

Net cash provided by investing activities
614,978

 
1,214,872

Financing Activities
 
 
 
Net increase (decrease) in demand and savings deposits
281,637

 
(347,750
)
Net (decrease) in certificates of deposit
(1,128,324
)
 
(1,277,537
)
Net increase (decrease) in federal funds purchased and other short-term borrowings
37,416

 
(46,760
)
Principal repayments on long-term debt
(351,331
)
 
(74,706
)
Proceeds from issuance of long-term debt
293,370

 
165,000

Dividends paid to common shareholders
(15,803
)
 
(15,705
)
Dividends paid to preferred shareholders
(24,197
)
 
(24,197
)

5


Net cash used in financing activities
(907,232
)
 
(1,621,655
)
Increase in cash and cash equivalents
12,879

 
20,281

Cash and cash equivalents at beginning of period
510,423

 
389,021

Cash and cash equivalents at end of period
$
523,302

 
409,302

 
 
 
 
Supplemental Cash Flow Information
 
 
 
Cash (received) paid during the period for:
 
 
 
Income tax (refunds) payments, net
$
(8,339
)
 
225

Interest paid
61,555

 
104,760

Non-cash Activities:
 
 
 
(Decrease) increase in net unrealized gains on investment securities available for sale(1)    
(13,177
)
 
20,665

Decrease in net unrealized gains on hedging instruments(1)    
(1,555
)
 
(6,974
)
Mortgage loans held for sale transferred to loans at fair value
1,542

 
6,377

Loans foreclosed and transferred to other real estate at fair value
71,928

 
125,356

Loans transferred to other loans held for sale, at fair value
189,029

 
289,587

Other loans held for sale foreclosed and transferred to other real estate at fair value
3,136

 
8,137

Premises and equipment transferred to other assets held for sale
2,402

 
28,048

Impairment loss on investment securities available for sale
(450
)
 

 
 
 
 
(1) Changes in net unrealized gains on investment securities available for sale, fair value hedges, and cash flow hedges have not been adjusted for the impact of deferred taxes.
See accompanying notes to unaudited interim consolidated financial statements.


6


Notes to Unaudited Interim Consolidated Financial Statements

Note 1 - Significant Accounting Policies
Business Operations
The accompanying unaudited interim consolidated financial statements of Synovus include the accounts of the Parent Company and its consolidated subsidiaries. Synovus provides integrated financial services, including commercial and retail banking, financial management, insurance, and mortgage services to its customers through 30 locally-branded divisions of its wholly-owned subsidiary bank, Synovus Bank, and other offices 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, 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' 2011 Form 10-K. There have been no significant changes to the accounting policies as disclosed in Synovus' 2011 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 valuation of other real estate; the valuation of impaired and other loans held for sale; the fair value of investment securities; the fair value of private equity investments, the valuation of long-lived assets, goodwill, and other intangible assets; the valuation of deferred tax assets; the valuation of the Visa indemnification liability; and other contingent liabilities. In connection with the determination of the allowance for loan losses and the valuation of certain impaired loans and other real estate, management obtains independent appraisals for significant properties and properties collateralizing impaired loans. In making this determination, management also considers other factors or recent developments, such as changes in absorption rates or market conditions at the time of valuation and anticipated sales prices based on management’s plans for disposition.
A substantial portion of Synovus’ loans are secured by real estate in five Southeastern states (Georgia, Alabama, Florida, South Carolina, and Tennessee). Accordingly, the ultimate collectability of a substantial portion of Synovus’ loan portfolio is susceptible to changes in market conditions in these areas. Total commercial real estate loans represent approximately 35% of the total loan portfolio at June 30, 2012. Due to declines in real estate values over the past four years, the commercial real estate portfolio loans may have a greater risk of non-collection than other loans. Based on available information, management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions, the ability of borrowers to repay their loans, and management’s plans for disposition. In addition, various regulatory agencies, as an integral part of their examination process, periodically review Synovus’ allowance for loan losses. Such agencies may require Synovus to make changes to the allowance for loan losses based on their judgment of information available to them at the time of their examination.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and due from banks. At June 30, 2012 and December 31, 2011, cash and cash equivalents included $78.2 million and $73.3 million, respectively, on deposit to meet Federal Reserve Bank requirements. At June 30, 2012 and December 31, 2011, $15.6 million of the due from banks balance was restricted as to withdrawal, including $15.0 million on deposit pursuant to a payment network arrangement.
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. Interest earning deposits with banks include $11.2 million at June 30, 2012 and $10.4 million at December 31, 2011, which is pledged as collateral in connection with certain letters of credit. Federal funds sold include $113.6 million at June 30, 2012, and $141.0 million at December 31, 2011, which is pledged to collateralize certain derivative instruments in a net liability position. Federal funds sold and securities purchased under resale agreements, federal funds purchased and securities sold under repurchase agreements, generally mature in one day.
Recently Adopted Accounting Standards Updates
Effective January 1, 2012, Synovus adopted the provisions of the following ASUs:

7


ASU 2011-05, Presentation of Comprehensive Income. ASU 2011-05 was the result of a joint project with the IASB and FASB, and amends the guidance in ASC 220, Comprehensive Income, by eliminating the option to present components of OCI in the statement of changes in shareholders' equity. Instead, the new guidance now requires entities to present all non-owner changes in shareholders' equity either as a single continuous statement of comprehensive income or as two separate but consecutive statements. Synovus elected the two separate statement approach. In addition, certain provisions of ASU 2011-05 were temporarily amended by ASU 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update 2011-05. One of the provisions of ASU 2011-05 requires entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented (for both interim and annual financial statements). This requirement is indefinitely deferred by ASU 2011-12, and will be further deliberated by the FASB at a future date. During the deferral period, Synovus will comply with all existing requirements for reclassification adjustments in ASC 220, which states that "(a)n entity may display reclassification adjustments on the face of the financial statement in which comprehensive income is reported, or it may disclose reclassification adjustments in the notes to the financial statements."
ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure in U.S. GAAP and IFRS. This ASU amends Topic 820 to add both additional clarifications to existing fair value measurement and disclosure requirements. Clarifications were made to the relevancy of the highest and best use valuation concept, measurement of an instrument classified in an entity's shareholders' equity and disclosure of quantitative information about the unobservable inputs for Level 3 fair value measurements. Required changes to the fair value disclosures can be found in Note 7.
ASU 2011-03, Reconsideration of Effective Control for Repurchase Agreements. This ASU focuses the transferor's assessment of effective control on its contractual rights and obligations by removing the requirements to assess its ability to exercise those rights or honor those obligations. Synovus does not currently access wholesale funding markets through sales of securities with agreements to repurchase. Repurchase agreements are offered through a commercial banking sweep product as a short-term investment opportunity for customers. All such arrangements are common in the banking industry and are accounted for as borrowings at Synovus. There was no impact to Synovus' unaudited interim consolidated financial statements upon adoption of this standard.
ASU 2011-08, Testing Goodwill for Impairment. Under the provisions of this update to the accounting standards, an entity has the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step goodwill impairment test. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. An entity can choose to perform the qualitative assessment on none, some or all of its reporting units. Moreover, an entity can bypass the qualitative assessment for any reporting unit in any period and proceed directly to step one of the impairment test, and then resume performing the qualitative assessment in any subsequent period. Synovus completed its annual goodwill impairment testing effective June 30, 2012. Synovus did not apply the qualitative assessment provisions of this ASU. See Management's Discussion and Analysis for additional information regarding Synovus' annual goodwill impairment tests.
Recently Issued Accounting Standards Updates
In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The ASU requires additional disclosures about financial instruments and derivative instruments that are offset or subject to an enforceable master netting arrangement or similar agreement. This ASU is effective for the interim reporting period ending March 31, 2013, with retrospective disclosure for all comparative periods presented. At this time, Synovus does not have any financial instruments that would be subject to the new requirements of ASU 2011-11; therefore, the ASU is not expected to impact Synovus' financial position, results of operations, or cash flows.
Reclassifications
Prior periods' consolidated financial statements are reclassified whenever necessary to conform to the current periods' presentation.
Subsequent Events
Synovus has evaluated, for consideration or disclosure, all transactions, events, and circumstances subsequent to the date of the consolidated balance sheet and through the date the accompanying unaudited interim consolidated financial statements were issued, and has reflected or disclosed those items within the unaudited interim consolidated financial statements and related footnotes as deemed appropriate, if any.



8


Note 2 - Investment Securities
The following table summarizes Synovus' available for sale investment securities as of June 30, 2012 and December 31, 2011.
 
 
June 30, 2012
(in thousands)
 
Amortized Cost(1)
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
 Fair Value
U.S. Treasury securities
 
$
307

 

 

 
307

U.S. Government agency securities
 
37,238

 
2,442

 

 
39,680

Securities issued by U.S. Government sponsored enterprises
 
559,306

 
5,248

 
(28
)
 
564,526

Mortgage-backed securities issued by U.S. Government agencies
 
272,813

 
7,303

 
(71
)
 
280,045

Mortgage-backed securities issued by U.S. Government sponsored enterprises
 
2,006,398

 
50,229

 

 
2,056,627

Collateralized mortgage obligations issued by U.S. Government sponsored enterprises
 
602,109

 
2,785

 
(4,728
)
 
600,166

State and municipal securities
 
20,378

 
739

 
(20
)
 
21,097

Equity securities
 
3,647

 
39

 

 
3,686

Other investments
 
5,000

 
2

 
(790
)
 
4,212

Total
 
$
3,507,196

 
68,787

 
(5,637
)
 
3,570,346

 
 
 
 
 
 
 
 
 
 
 
December 31, 2011
(in thousands)
 
Amortized Cost(1)
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
U.S. Treasury securities
 
$
426

 

 

 
426

U.S. Government agency securities
 
37,489

 
3,004

 

 
40,493

Securities issued by U.S. Government sponsored enterprises
 
667,707

 
8,333

 
(619
)
 
675,421

Mortgage-backed securities issued by U.S. Government agencies
 
266,682

 
19,071

 

 
285,753

Mortgage-backed securities issued by U.S. Government sponsored enterprises
 
1,955,988

 
46,275

 
(257
)
 
2,002,006

Collateralized mortgage obligations issued by U.S. Government sponsored enterprises
 
651,379

 
1,646

 
(1,525
)
 
651,500

State and municipal securities
 
24,530

 
808

 
(20
)
 
25,318

Equity securities
 
4,147

 

 
(388
)
 
3,759

Other investments
 
5,449

 

 

 
5,449

Total
 
$
3,613,797

 
79,137

 
(2,809
)
 
3,690,125

 
 
 
 
 
 
 
 
 
(1) Amortized cost is adjusted for other-than-temporary impairment charges in 2012 and 2011, which have been recognized on the consolidated statements of operations in the applicable period, and were considered inconsequential.
At June 30, 2012 and December 31, 2011, investment securities with a market value of $2.16 billion and $2.48 billion, respectively, were pledged to secure certain deposits, securities sold under repurchase agreements, and payment network arrangements as required by law and contractual agreements.
Synovus has reviewed investment securities that are in an unrealized loss position as of June 30, 2012 and December 31, 2011 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 income. Synovus does not intend to sell any of these investment securities 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.
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

9


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 other-than-temporary impairment. These factors include length of time that the security has been in a loss position, the extent that the fair value has been below amortized cost, and the credit standing of the issuer.
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, 2012 and December 31, 2011 are presented below.
 
June 30, 2012
 
Less than 12 Months
 
12 Months or Longer
 
Total Fair Value
(in thousands)
Number of Securities
 
Fair
Value
 
Unrealized
Losses
 
Number of Securities
 
Fair
Value
 
Unrealized
Losses
 
Number of Securities
 
Fair
Value
 
Unrealized
Losses
Securities issued by U.S. Government sponsored enterprises
2

 
$
56,641

 
(28
)
 

 
$

 

 
2

 
$
56,641

 
(28
)
Mortgage-backed securities issued by U.S. Government agencies
6

 
14,227

 
(71
)
 

 

 

 
6

 
14,227

 
(71
)
Collateralized mortgage obligations issued by U.S. Government sponsored enterprises
5

 
319,735

 
(4,728
)
 

 

 

 
5

 
319,735

 
(4,728
)
State and municipal securities
1

 
34

 
(2
)
 
1

 
883

 
(18
)
 
2

 
917

 
(20
)
Other investments
2

 
2,210

 
(790
)
 

 

 

 
2

 
2,210

 
(790
)
Total
16

 
$
392,847

 
(5,619
)
 
1

 
$
883

 
(18
)
 
17

 
$
393,730

 
(5,637
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2011
 
Less than 12 Months
 
12 Months or Longer
 
Total Fair Value
(in thousands)
Number of Securities
 
Fair
Value
 
Unrealized
Losses
 
Number of Securities
 
Fair
Value
 
Unrealized
Losses
 
Number of Securities
 
Fair
Value
 
Unrealized
Losses
Securities issued by U.S. Government sponsored enterprises
5

 
$
349,370

 
(619
)
 

 
$

 

 
5

 
$
349,370

 
(619
)
Mortgage-backed securities issued by U.S. Government sponsored enterprises
3

 
148,283

 
(257
)
 

 

 

 
3

 
148,283

 
(257
)
Collateralized mortgage obligations issued by U.S. Government sponsored enterprises
5

 
337,060

 
(1,521
)
 
1

 
297

 
(4
)
 
6

 
337,357

 
(1,525
)
State and municipal securities.
1

 
32

 
(3
)
 
1

 
883

 
(17
)
 
2

 
915

 
(20
)
Equity securities
2

 
2,367

 
(388
)
 

 

 

 
2

 
2,367

 
(388
)
Total
16

 
$
837,112

 
(2,788
)
 
2

 
$
1,180

 
(21
)
 
18

 
$
838,292

 
(2,809
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The amortized cost and fair value by contractual maturity of investment securities available for sale at June 30, 2012 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.






10


 
 
Distribution of Maturities at June 30, 2012
(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
 
$
200

 
107

 

 

 

 
307

U.S. Government agency securities
 

 
272

 
29,969

 
6,997

 

 
37,238

Securities issued by U.S. Government sponsored enterprises
 
37,444

 
521,862

 

 

 

 
559,306

Mortgage-backed securities issued by U.S. Government agencies
 

 
198

 
182

 
272,433

 

 
272,813

Mortgage-backed securities issued by U.S. Government sponsored enterprises
 
643

 
14,551

 
1,089,339

 
901,865

 

 
2,006,398

Collateralized mortgage obligations issued by U.S. Government sponsored enterprises
 

 
53

 

 
602,056

 

 
602,109

State and municipal securities
 
2,800

 
8,739

 
4,526

 
4,313

 

 
20,378

Other investments
 
1,000

 

 

 
4,000

 

 
5,000

Securities with no stated maturity
  (equity securities)    
 

 

 

 

 
3,647

 
3,647

Total
 
$
42,087

 
545,782

 
1,124,016

 
1,791,664

 
3,647

 
3,507,196

Fair Value
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
200

 
107

 

 

 

 
307

U.S. Government agency securities
 

 
272

 
31,504

 
7,904

 

 
39,680

Securities issued by U.S. Government sponsored enterprises
 
39,206

 
525,320

 

 

 

 
564,526

Mortgage-backed securities issued by U.S. Government agencies
 

 
208

 
195

 
279,642

 

 
280,045

Mortgage-backed securities issued by U.S. Government sponsored enterprises
 
676

 
15,180

 
1,100,429

 
940,342

 

 
2,056,627

Collateralized mortgage obligations issued by U.S. Government sponsored enterprises
 

 
53

 

 
600,113

 

 
600,166

State and municipal securities
 
2,833

 
9,025

 
4,665

 
4,574

 

 
21,097

Other investments
 
1,002

 

 

 
3,210

 

 
4,212

Securities with no stated maturity
  (equity securities)    
 

 

 

 

 
3,686

 
3,686

Total
 
$
43,917

 
550,165

 
1,136,793

 
1,835,785

 
3,686

 
3,570,346

 
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds from sales, gross gains, and gross losses on sales of securities available for sale during the six and three months ended June 30, 2012 and 2011 are presented below.
 
 
Six Months Ended June 30,
 
Three Months Ended June 30,
(in thousands)
 
2012
 
2011
 
2012
 
2011
Proceeds
 
$
733,621

 
17,044

 
258,846

 
9,001

Gross realized gains
 
24,703

 
1,801

 
4,170

 
381

Gross realized losses
 
(450
)
 
(4
)
 

 
(4
)
Investment securities gains, net
 
$
24,253

 
1,797

 
4,170

 
377

 
 
 
 
 
 
 
 
 



11


Note 3 - Restructuring Charges
For the six and three months ended June 30, 2012 and 2011 total restructuring charges are as follows:
 
Six Months Ended June 30,
 
Three Months Ended June 30,
(in thousands)
2012
 
2011
 
2012
 
2011
Severance charges
$
1,032

 
16,310

 
826

 
1,698

Lease termination charges
26

 
3,107

 
52

 
(2,290
)
Asset impairment charges
1,064

 
5,437

 
451

 
1,954

Professional fees and other charges
130

 
2,585

 
64

 
1,744

Total restructuring charges
$
2,252

 
27,439

 
1,393

 
3,106

 
 
 
 
 
 
 
 
In January 2011, Synovus announced efficiency and growth initiatives intended to streamline operations, boost productivity, reduce expenses, and increase revenue. During the six months ended June 30, 2011, Synovus implemented most of the components of the initiatives, which resulted in restructuring charges of $27.4 million. During the six and three months ended June 30, 2012, Synovus recognized restructuring charges of $2.3 million and $1.4 million, respectively, associated with these ongoing efficiency initiatives. As part of these efficiency initiatives, during the six and three months ended June 30, 2012, Synovus transferred premises and equipment with a carrying value of $3.8 million and $2.1 million, respectively, immediately preceding the transfer to other assets held for sale, a component of other assets on the consolidated balance sheet. For the six and three months ended June 30, 2012, Synovus recognized impairment charges of $1.1 million and $451 thousand, respectively, related to these assets, and received proceeds of $1.7 million and $454 thousand, respectively, from sales of these assets. The carrying value of the remaining held for sale assets was $7.9 million at June 30, 2012. The liability for restructuring activities was $914 thousand at June 30, 2012, and consists primarily of lease termination payments and estimated severance payments.

Note 4 - Other Loans Held for Sale
Loans are transferred to other loans held for sale at fair value when Synovus makes the determination to sell specifically identified loans. The fair value of the loans is primarily determined by analyzing the underlying collateral of the loan and the anticipated market prices of similar assets less estimated costs to sell. At the time of transfer, if the fair value is less than the carrying amount, the difference is recorded as a charge-off against the allowance for loan losses. Decreases in the fair value subsequent to the transfer, as well as gains/losses realized from sale of these loans, are recognized as (gains) losses on other loans held for sale, net, a component of non-interest expense on the consolidated statements of operations.
During six months ended June 30, 2012, Synovus transferred loans with a carrying value immediately preceding the transfer totaling $263.9 million to other loans held for sale. Synovus recognized charge-offs upon transfer of these loans totaling $74.9 million which resulted in a new cost basis of $189.0 million and were based on the fair value, less estimated costs to sell, of the loans at the time of transfer.
During the six months ended June 30, 2011, Synovus transferred loans with a carrying value immediately preceding the transfer totaling $398.5 million to other loans held for sale. Synovus recognized charge-offs upon transfer on these loans totaling $108.9 million for the six months ended June 30, 2011. These charge-offs which resulted in a new cost basis of $289.6 million for the loans transferred during the six months ended June 30, 2011 were based on the fair value, less estimated costs to sell, of the loans at the time of transfer.

        

12


Note 5 – 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, 2012 and December 31, 2011.
Current, Accruing Past Due, and Non-accrual Loans (1)
 
 
June 30, 2012
 
(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
$
4,320,314

 
8,990

 
98

 
9,088

 
87,208

 
4,416,610

 
1-4 family properties
1,319,628

 
11,174

 
324

 
11,498

 
152,698

 
1,483,824

 
Land acquisition
766,057

 
4,149

 
116

 
4,265

 
213,521

 
983,843

 
Total commercial real estate
6,405,999

 
24,313

 
538

 
24,851

 
453,427

 
6,884,277

 
Commercial and industrial
8,635,844

 
28,845

 
1,607

 
30,452

 
218,337

 
8,884,633

 
Home equity lines
1,570,844

 
8,787

 
97

 
8,884

 
24,177

 
1,603,905

 
Consumer mortgages
1,313,575