syn-20230630

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, 2023

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) 641-6500

______________________________


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 Par Value	SNV	New York Stock Exchange
Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D	SNV - PrD	New York Stock Exchange
Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series E	SNV - PrE	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 31, 2023, 146,167,089 shares of the registrant's common stock, $1.00 par value, were outstanding.

Table of Contents

Page

Part I.

Financial Information

Index of Defined Terms

Item 1.

Financial Statements (Unaudited)

Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022

Consolidated Statements of Income for the Three and Six Months Ended June 30, 2023 and 2022

Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2023 and 2022

Consolidated Statements of Changes in Shareholders' Equity for the Three and Six Months Ended June 30, 2023 and 2022

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022

Notes to Unaudited Interim Consolidated Financial Statements

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

Part II.

Other Information

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibits

Signatures

SYNOVUS FINANCIAL CORP.

INDEX OF DEFINED TERMS

Throughout this discussion, references to "Synovus", "we", "our", "us", "the Company" and similar terms refer to the consolidated entity consisting of Synovus Financial Corp. and its subsidiaries unless the context indicates that we refer only to the Parent Company, Synovus Financial Corp. When we refer to the "Bank" or "Synovus Bank" we mean our only bank subsidiary, Synovus Bank.

ACL – Allowance for credit losses (ALL, reserve on unfunded loan commitments, and reserve, if required, on debt securities)

ALCO – Synovus' Asset Liability Management Committee

ALL – Allowance for loan losses

AOCI – Accumulated other comprehensive income (loss)

ASC – Accounting Standards Codification

ASU – Accounting Standards Update

ATM – Automatic teller machine

Basel III – The third Basel Accord developed by the Basel Committee on Banking Supervision to strengthen existing regulatory capital requirements

BOLI – Bank-owned life insurance

bp(s) – Basis point(s)

C&I – Commercial and industrial

CARES Act – The Coronavirus Aid, Relief, and Economic Security Act

CECL – Current expected credit losses

CET1 – Common Equity Tier 1 Capital defined by Basel III capital rules

CIB – Corporate and Investment Banking

CMO – Collateralized mortgage obligation

Code – Internal Revenue Code, as amended

Company – Synovus Financial Corp. and its wholly-owned subsidiaries, except where the context requires otherwise

Covered Litigation – Certain Visa litigation for which Visa is indemnified by Visa USA members

COVID-19 – Coronavirus disease 2019

CRA – Community Reinvestment Act

CRE – Commercial real estate

DCF – Discounted cash flow

ESG – Environmental, social, and governance

EVE – Economic value of equity

Exchange Act – Securities Exchange Act of 1934, as amended

FASB – Financial Accounting Standards Board

FCA – Financial Conduct Authority, a regulatory authority of the United Kingdom

FDIC – Federal Deposit Insurance Corporation

FDM – Financial Difficulty Modification

Federal Reserve Bank – One of the 12 banks that are the operating arms of the U.S. central bank. They implement the policies of the Federal Reserve Board, supervise bank holding companies and certain banking institutions, and also conduct economic research

Federal Reserve Board – The 7-member Board of Governors that oversees the Federal Reserve System, establishes monetary policy (interest rates, credit, etc.), and monitors the economic health of the country. Its members are appointed by the President subject to Senate confirmation, and serve 14-year terms

Federal Reserve System or Federal Reserve – The Federal Reserve Board plus 12 Federal Reserve Banks, with each one serving member banks in its own district. The Federal Reserve has broad regulatory powers over the money supply and the credit structure of the economy

FFIEC – Federal Financial Institutions Examination Council

FFIEC Retail Credit Classification Policy – FFIEC Uniform Retail Credit Classification and Account Management Policy

FHLB – Federal Home Loan Bank

FICO – Fair Isaac Corporation

FOMC – Federal Open Market Committee

FTP – Funds transfer pricing

GA DBF – Georgia Department of Banking and Finance

GAAP – Generally Accepted Accounting Principles in the United States of America

HTC– Historic tax credit

Interagency Supervisory Guidance – Interagency Supervisory Guidance on Allowance for Loan and Lease Losses Estimation Practices for Loans and Lines of Credit Secured by Junior Liens on 1-4 Family Residential Properties

LIBOR – London Interbank Offered Rate

LIHTC – Low Income Housing Tax Credit

LTV – Loan-to-collateral value ratio

MBS – Mortgage-backed security

MPS – Merchant processing servicer(s)

NAICS – North American Industry Classification System

nm – not meaningful

NPA – Non-performing assets

NPL – Non-performing loans

NSF – Non-sufficient funds

OCI – Other comprehensive income (loss)

ORE – Other real estate

Parent Company – Synovus Financial Corp.

PPP – Paycheck Protection Program established as part of the CARES Act and launched on April 3, 2020 by the SBA and Treasury

Qualpay – Qualpay, Inc.

SBA – Small Business Administration

SBIC – Small Business Investment Company

SEC – U.S. Securities and Exchange Commission

Securities Act – Securities Act of 1933, as amended

Series D Preferred Stock – Synovus' Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D, $25 liquidation preference

Series E Preferred Stock – Synovus' Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series E, $25 liquidation preference

SOFR – Secured Overnight Financing Rate

Synovus – Synovus Financial Corp.

Synovus Bank – A Georgia state-chartered bank and wholly-owned subsidiary of Synovus through which Synovus conducts its banking operations

Synovus' 2022 Form 10-K – Synovus' Annual Report on Form 10-K for the year ended December 31, 2022

Synovus Securities – Synovus Securities, Inc., a wholly-owned subsidiary of Synovus

Synovus Trust – Synovus Trust Company, N.A., a wholly-owned subsidiary of Synovus Bank

TDR – Troubled debt restructuring (as defined in ASC 310-40)

TE – Taxable equivalent

UPB – Unpaid principal balance

Visa – The Visa U.S.A., Inc. card association or its affiliates, collectively

Visa Class A shares – Class A shares of common stock issued by Visa are publicly traded shares which are not subject to restrictions on sale

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. Class B shares will be convertible into Visa Class A shares using a then-current conversion ratio upon the lifting of restrictions with respect to sale of Visa Class B shares

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

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, 2023		December 31, 2022
ASSETS
Cash and due from banks	$	576,148	$	624,097
Interest-bearing funds with Federal Reserve Bank	1,391,961		1,280,684
Interest earning deposits with banks	50,254		34,632
Federal funds sold and securities purchased under resale agreements	35,788		38,367
Total cash, cash equivalents, and restricted cash	2,054,151		1,977,780
Investment securities available for sale, at fair value	9,621,175		9,678,103
Loans held for sale (includes $62,616 and $51,136 measured at fair value, respectively)	514,450		391,502
Loans, net of deferred fees and costs	44,353,537		43,716,353
Allowance for loan losses	(471,238)		(443,424)
Loans, net	43,882,299		43,272,929
Cash surrender value of bank-owned life insurance	1,100,114		1,089,280
Premises, equipment, and software, net	365,443		370,632
Goodwill	475,573		452,390
Other intangible assets, net	61,538		27,124
Other assets	2,580,848		2,471,638
Total assets	$	60,655,591	$	59,731,378
LIABILITIES AND EQUITY
Liabilities
Deposits:
Non-interest-bearing deposits	$	13,565,602	$	15,639,899
Interest-bearing deposits	36,514,790		33,231,660
Total deposits	50,080,392		48,871,559
Federal funds purchased and securities sold under repurchase agreements	83,384		146,588
Other short-term borrowings	1,461		603,384
Long-term debt	4,021,411		4,109,597
Other liabilities	1,661,175		1,524,449
Total liabilities	55,847,823		55,255,577
Equity
Shareholders' equity:
Preferred stock - no par value; authorized 100,000,000 shares; issued 22,000,000	537,145		537,145
Common stock - $1.00 par value; authorized 342,857,143 shares; issued 170,808,134 and 170,141,492, respectively; outstanding 146,153,276 and 145,486,634, respectively	170,808		170,141
Additional paid-in capital	3,933,548		3,920,346
Treasury stock, at cost; 24,654,858 shares	(944,484)		(944,484)
Accumulated other comprehensive income (loss), net	(1,395,175)		(1,442,117)
Retained earnings	2,480,686		2,234,770
Total Synovus Financial Corp. shareholders' equity	4,782,528		4,475,801
Noncontrolling interest in subsidiary	25,240		—
Total equity	4,807,768		4,475,801
Total liabilities and equity	$	60,655,591	$	59,731,378

See accompanying notes to unaudited interim consolidated financial statements.

SYNOVUS FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	2023		2022		2023		2022
Interest income:
Loans, including fees	$	670,230	$	391,307	$	1,299,787	$	752,399
Investment securities available for sale	60,421		50,312		121,475		97,562
Loans held for sale	5,801		8,600		11,378		14,781
Federal Reserve Bank balances	17,410		1,593		34,228		2,382
Other earning assets	5,281		1,960		9,154		2,710
Total interest income	759,143		453,772		1,476,022		869,834
Interest expense:
Deposits	241,780		18,501		415,715		32,160
Long-term debt	55,915		8,769		98,444		18,913
Other borrowings	5,917		1,114		25,580		1,126
Total interest expense	303,612		28,384		539,739		52,199
Net interest income	455,531		425,388		936,283		817,635
Provision for (reversal of) credit losses	38,881		12,688		71,035		24,088
Net interest income after provision for (reversal of) credit losses	416,650		412,700		865,248		793,547
Non-interest revenue:
Service charges on deposit accounts	23,477		23,491		46,451		46,030
Fiduciary and asset management fees	20,027		20,100		39,723		40,377
Card fees	17,059		16,089		32,884		30,846
Brokerage revenue	20,908		15,243		43,466		29,898
Mortgage banking income	4,609		3,904		8,467		9,857
Capital markets income	6,975		7,393		20,700		12,864
Income from bank-owned life insurance	6,878		9,165		14,140		15,722
Investment securities gains (losses), net	—		—		1,030		—
Recovery of NPA	—		—		13,126		—
Other non-interest revenue	12,343		1,881		25,415		17,006
Total non-interest revenue	112,276		97,266		245,402		202,600
Non-interest expense:
Salaries and other personnel expense	183,001		161,063		371,926		325,747
Net occupancy, equipment, and software expense	42,785		43,199		85,645		86,076
Third-party processing and other services	21,659		21,952		43,493		42,947
Professional fees	9,597		10,865		18,560		19,338
FDIC insurance and other regulatory fees	11,162		6,894		21,429		13,144
Restructuring charges (reversals)	(110)		(1,850)		(843)		(8,274)
Loss on other loans held for sale	2,360		—		19,110		—
Other operating expense	36,727		39,928		69,714		75,523
Total non-interest expense	307,181		282,051		629,034		554,501
Income before income taxes	221,745		227,915		481,616		441,646
Income tax expense	47,801		49,863		105,513		92,558
Net income	173,944		178,052		376,103		349,088
Less: Net income (loss) attributable to noncontrolling interest	(166)		—		(166)		—
Net income attributable to Synovus Financial Corp.	174,110		178,052		376,269		349,088
Less: Preferred stock dividends	8,291		8,291		16,581		16,581
Net income available to common shareholders	$	165,819	$	169,761	$	359,688	$	332,507
Net income per common share, basic	$	1.13	$	1.17	$	2.46	$	2.29
Net income per common share, diluted	1.13		1.16		2.45		2.27
Weighted average common shares outstanding, basic	146,113		145,328		145,957		145,301
Weighted average common shares outstanding, diluted	146,550		146,315		146,644		146,489

See accompanying notes to unaudited interim consolidated financial statements.

SYNOVUS FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)


	Three Months Ended June 30,
	2023						2022
(in thousands)	Before-tax Amount		Income Tax		Net of Tax Amount		Before-tax Amount		Income Tax		Net of Tax Amount
Net income	$	221,745	$	(47,801)	$	173,944	$	227,915	$	(49,863)	$	178,052
Unrealized gains (losses) on investment securities available for sale:
Net unrealized gains (losses) arising during the period	(109,525)		26,659		(82,866)		(429,408)		102,328		(327,080)
Reclassification adjustment for realized (gains) losses included in net income	—		—		—		—		—		—
Net change	(109,525)		26,659		(82,866)		(429,408)		102,328		(327,080)
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Net unrealized gains (losses) arising during the period	(73,123)		17,798		(55,325)		(48,332)		11,517		(36,815)
Reclassification adjustment for realized (gains) losses included in net income	42,748		(10,405)		32,343		(978)		233		(745)
Net change	(30,375)		7,393		(22,982)		(49,310)		11,750		(37,560)
Total other comprehensive income (loss)	$	(139,900)	$	34,052	$	(105,848)	$	(478,718)	$	114,078	$	(364,640)
Comprehensive income (loss)					68,096						(186,588)
Less: comprehensive income (loss) attributable to noncontrolling interest					(166)						—
Comprehensive income (loss) attributable to Synovus Financial Corp.					$	68,262					$	(186,588)

	Six Months Ended June 30,
	2023						2022
(in thousands)	Before-tax Amount		Income Tax		Net of Tax Amount		Before-tax Amount		Income Tax		Net of Tax Amount
Net income	$	481,616	$	(105,513)	$	376,103	$	441,646	$	(92,558)	$	349,088
Unrealized gains (losses) on investment securities available for sale:
Net unrealized gains (losses) arising during the period	43,556		(10,601)		32,955		(1,050,890)		249,351		(801,539)
Reclassification adjustment for realized (gains) losses included in net income	(1,030)		251		(779)		—		—		—
Net change	42,526		(10,350)		32,176		(1,050,890)		249,351		(801,539)
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Net unrealized gains (losses) arising during the period	(63,123)		15,364		(47,759)		(184,310)		43,878		(140,432)
Reclassification adjustment for realized (gains) losses included in net income	82,640		(20,115)		62,525		(3,167)		754		(2,413)
Net change	19,517		(4,751)		14,766		(187,477)		44,632		(142,845)
Total other comprehensive income (loss)	$	62,043	$	(15,101)	$	46,942	$	(1,238,367)	$	293,983	$	(944,384)
Comprehensive income (loss)					423,045						(595,296)
Less: comprehensive income (loss) attributable to noncontrolling interest					(166)						—
Comprehensive income (loss) attributable to Synovus Financial Corp.					$	423,211					$	(595,296)

See accompanying notes to unaudited interim consolidated financial statements.

SYNOVUS FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(unaudited)


	Synovus Financial Corp. Shareholders' Equity

(in thousands, except per share data)	Preferred Stock		Common Stock		Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Noncontrolling Interest		Total
Balance at March 31, 2023	$	537,145	$	170,714	$	3,925,449	$	(944,484)	$	(1,289,327)	$	2,370,633	—		$	4,770,130

Net income (loss)	—		—		—		—		—		174,110		(166)		173,944
Other comprehensive income (loss), net of income taxes	—		—		—		—		(105,848)		—		—		(105,848)
Cash dividends declared on common stock - $0.38 per share	—		—		—		—		—		(55,536)		—		(55,536)
Cash dividends declared on preferred stock(1)	—		—		—		—		—		(8,291)		—		(8,291)

Restricted share unit vesting and taxes paid related to net share settlement	—		83		48		—		—		(230)		—		(99)
Stock options exercised, net	—		11		216		—		—		—		—		227
Share-based compensation expense	—		—		7,835		—		—		—		—		7,835
Acquisition of non-controlling interest	—		—		—		—		—		—		25,406		25,406
Balance at June 30, 2023	$	537,145	$	170,808	$	3,933,548	$	(944,484)	$	(1,395,175)	$	2,480,686	$	25,240	$	4,807,768

Balance at March 31, 2022	$	537,145	$	169,912	$	3,899,269	$	(941,168)	$	(662,065)	$	1,821,542	$	—	$	4,824,635
Net income (loss)	—		—		—		—		—		178,052		—		178,052
Other comprehensive income (loss), net of income taxes	—		—		—		—		(364,640)		—		—		(364,640)
Cash dividends declared on common stock - $0.34 per share	—		—		—		—		—		(49,416)		—		(49,416)
Cash dividends declared on preferred stock(1)	—		—		—		—		—		(8,291)		—		(8,291)
Repurchases of common stock including costs to repurchase	—		—		—		(3,316)		—		—		—		(3,316)

Restricted share unit vesting and taxes paid related to net share settlement	—		48		1,086		—		—		(1,536)		—		(402)
Stock options exercised, net	—		53		919		—		—		—		—		972
Share-based compensation expense	—		—		6,844		—		—		—		—		6,844

Balance at June 30, 2022	$	537,145	$	170,013	$	3,908,118	$	(944,484)	$	(1,026,705)	$	1,940,351	$	—	$	4,584,438


	Synovus Financial Corp. Shareholders' Equity

(in thousands, except per share data)	Preferred Stock		Common Stock		Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Noncontrolling Interest		Total
Balance at December 31, 2022	$	537,145	$	170,141	$	3,920,346	$	(944,484)	$	(1,442,117)	$	2,234,770	$	—	$	4,475,801
Cumulative-effect of change in accounting principle for ASU 2023-02	—		—		—		—		—		(297)		—		(297)
Net income (loss)	—		—		—		—		—		376,269		(166)		376,103
Other comprehensive income (loss), net of income taxes	—		—		—		—		46,942		—		—		46,942
Cash dividends declared on common stock - $0.76 per share	—		—		—		—		—		(111,038)		—		(111,038)
Cash dividends declared on preferred stock(2)	—		—		—		—		—		(16,581)		—		(16,581)

Restricted share unit vesting and taxes paid related to net share settlement	—		466		(8,231)		—		—		(2,437)		—		(10,202)
Stock options exercised, net	—		201		3,523		—		—		—		—		3,724
Share-based compensation expense	—		—		17,910		—		—		—		—		17,910
Acquisition of non-controlling interest	—		—		—		—		—		—		25,406		25,406
Balance at June 30, 2023	$	537,145	$	170,808	$	3,933,548	$	(944,484)	$	(1,395,175)	$	2,480,686	$	25,240	$	4,807,768

Balance at December 31, 2021	$	537,145	$	169,384	$	3,894,109	$	(931,497)	$	(82,321)	$	1,709,980	$	—	$	5,296,800
Net income (loss)	—		—		—		—		—		349,088		—		349,088
Other comprehensive income (loss), net of income taxes	—		—		—		—		(944,384)		—		—		(944,384)
Cash dividends declared on common stock - $0.68 per share	—		—		—		—		—		(98,858)		—		(98,858)
Cash dividends declared on preferred stock(2)	—		—		—		—		—		(16,581)		—		(16,581)
Repurchases of common stock including costs to repurchase	—		—		—		(12,987)		—		—		—		(12,987)

Restricted share unit vesting and taxes paid related to net share settlement	—		350		(6,063)		—		—		(3,278)		—		(8,991)
Stock options exercised, net	—		279		5,327		—		—		—		—		5,606

Share-based compensation expense	—		—		14,745		—		—		—		—		14,745

Balance at June 30, 2022	$	537,145	$	170,013	$	3,908,118	$	(944,484)	$	(1,026,705)	$	1,940,351	$	—	$	4,584,438

(1) For the three months ended June 30, 2023 and 2022, dividends per share were $0.39 and $0.37 for Series D and Series E Preferred Stock, respectively.

(2) For the six months ended June 30, 2023 and 2022, dividends per share were $0.79 and $0.73 for Series D and Series E Preferred Stock, respectively.

See accompanying notes to unaudited interim consolidated financial statements.

SYNOVUS FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Six Months Ended June 30,
(in thousands)	2023		2022
Operating Activities
Net income	$	376,103	$	349,088
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for (reversal of) credit losses	71,035		24,088
Depreciation, amortization, and accretion, net	41,854		36,991
Deferred income tax expense (benefit)	19,194		(3,227)
Originations of loans held for sale	(311,902)		(2,095,264)
Proceeds from sales and payments on loans held for sale	603,486		1,926,118
Gain on sales of loans held for sale, net	(5,739)		(7,277)
(Increase) decrease in other assets	(155,005)		(107,698)
Increase (decrease) in other liabilities	59,529		72,987
Investment securities (gains) losses, net	(1,030)		—
Share-based compensation expense	16,951		14,511
Other	(377)		677
Net cash provided by (used in) operating activities	714,099		210,994
Investing Activities
Net cash received in business combination, net of cash paid	8,009		—
Proceeds from maturities and principal collections of investment securities available for sale	449,581		1,226,967
Proceeds from sales of investment securities available for sale	82,595		—
Purchases of investment securities available for sale	(440,014)		(1,269,468)
Proceeds from sales of loans	84,132		47,130
Purchases of loans	(10,623)		(361,567)
Net (increase) decrease in loans	(1,183,701)		(1,594,366)
Net (purchases) redemptions of Federal Home Loan Bank stock	49,935		(45,700)
Net (purchases) redemptions of Federal Reserve Bank stock	(15,564)		(536)
Net proceeds from settlement (purchases) of bank-owned life insurance policies	3,360		3,106
Net increase in premises, equipment and software	(12,703)		(11,260)
Other	6,976		33,984
Net cash provided by (used in) investing activities	(978,017)		(1,971,710)
Financing Activities
Net increase (decrease) in deposits	1,217,129		(389,758)
Net increase (decrease) in federal funds purchased and securities sold under repurchase agreements	(63,204)		81,109
Net increase (decrease) in other short-term borrowings	(601,923)		254,818
Repayments and redemption of long-term debt	(3,304,600)		(400,000)
Proceeds from long-term debt, net	3,220,912		1,000,000
Dividends paid to common shareholders	(104,967)		(97,293)
Dividends paid to preferred shareholders	(16,581)		(16,581)
Repurchases of common stock	—		(12,987)
Issuances, net of taxes paid, under equity compensation plans	(6,477)		(3,385)
Net cash provided by (used in) financing activities	340,289		415,923
Increase (decrease) in cash and cash equivalents including restricted cash	76,371		(1,344,793)
Cash, cash equivalents, and restricted cash, at beginning of period	1,977,780		3,009,853
Cash, cash equivalents, and restricted cash at end of period	$	2,054,151	$	1,665,060

Supplemental Disclosures:
Income taxes paid	$	57,988	$	88,090
Interest paid	478,101		52,330
Non-cash Activities
Loans transferred (from) to other loans held for sale	427,903		(9,386)
Settlement of acquired debt	31,109		—

See accompanying notes to unaudited interim consolidated financial statements.

Notes to Unaudited Interim Consolidated Financial Statements

Note 1 - Basis of Presentation and Accounting Policies

General

The accompanying unaudited interim consolidated financial statements of Synovus Financial Corp. include the accounts of the Parent Company and its consolidated subsidiaries. Synovus Financial Corp. is a financial services company based in Columbus, Georgia. Through its wholly-owned subsidiary, Synovus Bank, a Georgia state-chartered bank that is a member of the Federal Reserve System, the Company provides commercial and consumer banking in addition to a full suite of specialized products and services, including private banking, treasury management, wealth management, mortgage services, premium finance, asset-based lending, structured lending, capital markets, and international banking. Synovus also provides financial planning and investment advisory services through its wholly-owned subsidiaries, Synovus Trust and Synovus Securities, as well as its GLOBALT and Creative Financial Group divisions. Synovus Bank is positioned in markets in the Southeast, with 246 branches and 358 ATMs in Alabama, Florida, Georgia, South Carolina, and Tennessee.

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the instructions to the SEC Form 10-Q and Article 10 of Regulation S-X; therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, comprehensive income (loss), 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' 2022 Form 10-K.

Acquisition

On June 1, 2023, Synovus acquired a 60% equity interest in Qualpay, Inc., a provider of a cloud-based platform that combines a payment gateway with merchant processing solutions, allowing merchants and independent software vendors to integrate payments into their software or websites. In addition, Synovus acquired three of the five seats on Qualpay's Board of Directors.

Under the terms of the agreement, Synovus acquired a controlling interest in Qualpay in exchange for the settlement of Qualpay's debt to Synovus of $31.1 million and $7.0 million in cash. Synovus accounted for the transaction as a business combination and recorded the assets acquired, which primarily consisted of intangible assets and goodwill, liabilities assumed, noncontrolling interest, and consideration exchanged at their preliminary estimated fair values on the acquisition date. Refer to Note 4 - Goodwill and Other Intangible Assets for additional information. The balance of the noncontrolling interest at June 30, 2023 was $25.2 million. The transaction was not material to the consolidated statements of income for the three and six months ended June 30, 2023.

Investments in Tax Credit Structures

Synovus invests in certain LIHTC partnerships, which are engaged in the development and operation of affordable multi-family housing pursuant to Section 42 of the Code. Additionally, Synovus invests in certain new market tax credit partnerships pursuant to Section 45D of the Code, certain HTCs pursuant to Section 47 of the Code, and certain solar energy tax credit partnerships pursuant to Section 48 of the Code. Synovus typically acts as a limited partner in these investments and does not exert control over the operating or financial policies of the partnerships and as such, is not considered the primary beneficiary of the partnership. For certain of its LIHTC investments, Synovus provides financing during the construction and development of the properties and is at risk for the funded amount of its equity investment plus the outstanding amount of any construction loans in excess of the fair value of the collateral for the loan, but has no obligation to fund the operations or working capital of the partnerships and is not exposed to losses beyond Synovus’ investment. Synovus receives tax credits related to these investments, which are subject to recapture by taxing authorities based on compliance provisions required to be met at the project level.

Synovus applies the proportional amortization method of accounting for its LIHTC and HTC partnerships. Effective January 1, 2023, upon the adoption of ASU 2023-02, Synovus also began applying the proportional amortization method of accounting to its qualifying new market tax credit partnership. The proportional amortization method recognizes the amortized cost of the investment as a component of income tax expense. Prior to the adoption of ASU 2023-02, Synovus applied the equity method of accounting to its new market tax credit partnership. For the three and six months ended June 30, 2023, Synovus recognized LIHTC, HTC, and new market tax credit partnership tax credits of $10.9 million and $21.8 million, respectively, and amortization expense of $10.7 million and $20.8 million, respectively, which were included within income tax expense in the consolidated statements of income. For the three and six months ended June 30, 2022, Synovus recognized LIHTC investment partnerships tax credits of $7.8 million and $15.3 million, respectively, and amortization expense of $8.0 million and $16.0 million, respectively, which were included within income tax expense in the consolidated statements of income.

Reclassifications

Prior periods' consolidated financial statements are reclassified whenever necessary to conform to the current periods' presentation.

Use of Estimates in the Preparation of Financial Statements

In preparing the 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 revenue and expense 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 ACL, estimates of fair value, income taxes, and contingent liabilities.

Recent Accounting Pronouncements

The following table provides a brief description of accounting standards adopted or issued in 2023 and the estimated effect on the Company’s financial statements.


Standard	Description	Required date of adoption	Effect on Company's financial statements or other significant matters
Standards Adopted
ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosure	In March 2022, the FASB issued ASU 2022-02 to eliminate TDR accounting guidance while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The ASU also provides guidance for vintage table disclosures and gross write-offs. The ASU requires an entity to disclose current-period gross write-offs by year of origination for financing receivables within the scope of Subtopic 326-20.	January 1, 2023	The Company adopted this standard on January 1, 2023 on a prospective basis. The adoption of this standard did not have a material impact to the consolidated financial statements. See Note 3, Loans and Allowance for Loan Losses, for the required disclosures in accordance with this ASU.

ASU 2023-02, Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method	In March 2023, the FASB issued ASU 2023-02, which expands the population of investments for which an investor may elect to apply the proportional amortization method. Under the ASU, an investor in a tax equity investment may elect the proportional amortization method for qualifying investments on a tax credit program-by-program basis. To qualify for the proportional amortization method, an investment must meet the criteria previously applicable to LIHTC investments, as clarified by the ASU.	January 1, 2024. Early adoption is permitted as of an interim period with retrospective application back to the beginning of the fiscal year.	The Company early adopted this standard on January 1, 2023, on a modified retrospective basis. The adoption of this standard did not have a material impact to the consolidated financial statements. The Company recognized a cumulative effect adjustment of $297 thousand at adoption to decrease the beginning balance of retained earnings as of January 1, 2023, for the difference between the previous method used to account for the tax equity investment and the application of the proportional amortization method since the investment was entered into.

Note 2 - Investment Securities Available for Sale

The amortized cost, gross unrealized gains and losses, and estimated fair values of investment securities available for sale at June 30, 2023 and December 31, 2022 are summarized below.


	June 30, 2023
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury securities	$	517,626	$	—	$	(43,736)	$	473,890
U.S. Government agency securities	52,397		—		(3,794)		48,603
Mortgage-backed securities issued by U.S. Government agencies	928,031		—		(110,681)		817,350
Mortgage-backed securities issued by U.S. Government sponsored enterprises	7,979,131		508		(1,202,246)		6,777,393
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	732,938		—		(116,987)		615,951
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	954,792		—		(75,442)		879,350

Corporate debt securities and other debt securities	8,958		—		(320)		8,638
Total investment securities available for sale	$	11,173,873	$	508	$	(1,553,206)	$	9,621,175

	December 31, 2022
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury securities	$	515,953	$	—	$	(44,140)	$	471,813
U.S. Government agency securities	52,411		—		(3,613)		48,798
Mortgage-backed securities issued by U.S. Government agencies	904,593		1,624		(113,468)		792,749
Mortgage-backed securities issued by U.S. Government sponsored enterprises	8,144,374		936		(1,250,240)		6,895,070
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	769,498		—		(114,371)		655,127
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	877,590		—		(71,645)		805,945

Corporate debt securities and other debt securities	8,908		—		(307)		8,601
Total investment securities available for sale	$	11,273,327	$	2,560	$	(1,597,784)	$	9,678,103

At June 30, 2023 and December 31, 2022, investment securities with a carrying value of $4.56 billion and $4.47 billion, respectively, were pledged to secure certain deposits and other liabilities, as required by law or contractual agreements.

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, 2023 and December 31, 2022 are presented below.


	June 30, 2023
	Less than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. Treasury securities	$	92,580	$	(4,858)	$	356,275	$	(38,878)	$	448,855	$	(43,736)
U.S. Government agency securities	258		—		48,346		(3,794)		48,604		(3,794)
Mortgage-backed securities issued by U.S. Government agencies	301,213		(5,938)		516,137		(104,743)		817,350		(110,681)
Mortgage-backed securities issued by U.S. Government sponsored enterprises	893,627		(45,280)		5,832,438		(1,156,966)		6,726,065		(1,202,246)
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	11,090		(489)		604,860		(116,498)		615,950		(116,987)
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	394,493		(18,190)		484,857		(57,252)		879,350		(75,442)
Corporate debt securities and other debt securities	—		—		8,638		(320)		8,638		(320)
Total	$	1,693,261	$	(74,755)	$	7,851,551	$	(1,478,451)	$	9,544,812	$	(1,553,206)

	December 31, 2022
	Less than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. Treasury securities	$	139,737	$	(6,789)	$	307,582	$	(37,351)	$	447,319	$	(44,140)
U.S. Government agency securities	28,938		(1,053)		19,603		(2,560)		48,541		(3,613)
Mortgage-backed securities issued by U.S. Government agencies	187,655		(5,952)		521,395		(107,516)		709,050		(113,468)
Mortgage-backed securities issued by U.S. Government sponsored enterprises	1,473,348		(120,135)		5,365,233		(1,130,105)		6,838,581		(1,250,240)
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	119,649		(10,311)		535,478		(104,060)		655,127		(114,371)
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	565,382		(29,383)		240,564		(42,262)		805,946		(71,645)
Corporate debt securities and other debt securities	8,601		(307)		—		—		8,601		(307)
Total	$	2,523,310	$	(173,930)	$	6,989,855	$	(1,423,854)	$	9,513,165	$	(1,597,784)

As of June 30, 2023, Synovus had 96 investment securities in a loss position for less than twelve months and 335 investment securities in a loss position for twelve months or longer. Synovus does not intend to sell investment securities in an unrealized loss position prior to the recovery of the unrealized loss, which may not be until maturity, and has the ability and intent to hold those securities for that period of time. Additionally, Synovus is not currently aware of any circumstances which will require it to sell any of the securities that are in an unrealized loss position prior to the respective securities' recovery of all such unrealized losses. As such, no write-downs to the amortized cost basis of the portfolio were recorded at June 30, 2023.

At June 30, 2023, no ACL was established for investment securities. Substantially all of the unrealized losses on the securities portfolio were the result of changes in market interest rates compared to the date the securities were acquired rather than the credit quality of the issuers or underlying loans. U.S. Treasury and agency securities and agency mortgage-backed securities are issued, guaranteed or otherwise supported by the United States government, an agency of the United States government, or a government sponsored enterprise.

The amortized cost and fair value by contractual maturity of investment securities available for sale at June 30, 2023 are shown below. The expected life of MBSs 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, MBSs and CMOs, which are not due at a single maturity date, have been classified based on the final contractual maturity date.


	Distribution of Maturities at June 30, 2023
(in thousands)	Within One Year		1 to 5 Years		5 to 10 Years		More Than 10 Years		Total
Amortized Cost
U.S. Treasury securities	$	24,834	$	442,928	$	49,864	$	—	$	517,626
U.S. Government agency securities	258		52,139		—		—		52,397
Mortgage-backed securities issued by U.S. Government agencies	48		324		4		927,655		928,031
Mortgage-backed securities issued by U.S. Government sponsored enterprises	—		19,900		82,822		7,876,409		7,979,131
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	—		69		11,416		721,453		732,938
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	—		681,844		208,954		63,994		954,792

Corporate debt securities and other debt securities	—		8,958		—		—		8,958
Total amortized cost	$	25,140	$	1,206,162	$	353,060	$	9,589,511	$	11,173,873

Fair Value
U.S. Treasury securities	$	24,834	$	408,618	$	40,438	$	—	$	473,890
U.S. Government agency securities	258		48,345		—		—		48,603
Mortgage-backed securities issued by U.S. Government agencies	47		311		4		816,988		817,350
Mortgage-backed securities issued by U.S. Government sponsored enterprises	—		18,789		76,538		6,682,066		6,777,393
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	—		66		10,936		604,949		615,951
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	—		643,973		176,619		58,758		879,350

Corporate debt securities and other debt securities	—		8,638		—		—		8,638
Total fair value	$	25,139	$	1,128,740	$	304,535	$	8,162,761	$	9,621,175

Gross gains and gross losses on sales of securities available for sale for the three and six months ended June 30, 2023 and 2022 are presented below. The specific identification method is used to reclassify gains and losses out of other comprehensive income (loss) at the time of sale.


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Gross realized gains on sales	$	—	$	—	$	1,030	$	—
Gross realized losses on sales	—		—		—		—
Investment securities gains (losses), net	$	—	$	—	$	1,030	$	—

Note 3 - Loans and Allowance for Loan Losses

Aging and Non-Accrual Analysis

The following tables provide a summary of current, accruing past due, and non-accrual loans by portfolio class as of June 30, 2023 and December 31, 2022.


	June 30, 2023
(in thousands)	Current		Accruing 30-89 Days Past Due		Accruing 90 Days or Greater Past Due		Total Accruing Past Due		Non-accrual with an ALL		Non-accrual without an ALL		Total
Commercial, financial and agricultural	$	14,001,859	$	19,134	$	1,482	$	20,616	$	119,134	$	25,281	$	14,166,890
Owner-occupied	8,314,520		27,625		—		27,625		6,197		16,000		8,364,342
Total commercial and industrial	22,316,379		46,759		1,482		48,241		125,331		41,281		22,531,232
Investment properties	12,236,317		2,596		—		2,596		29,692		1,661		12,270,266
1-4 family properties	610,704		865		—		865		3,326		831		615,726
Land and development	406,568		200		—		200		1,138		—		407,906
Total commercial real estate	13,253,589		3,661		—		3,661		34,156		2,492		13,293,898
Consumer mortgages	5,332,966		4,441		—		4,441		41,877		—		5,379,284
Home equity	1,757,068		6,983		—		6,983		9,936		—		1,773,987
Credit cards	184,145		1,481		2,051		3,532		—		—		187,677
Other consumer loans	1,162,938		17,978		110		18,088		6,402		31		1,187,459
Total consumer	8,437,117		30,883		2,161		33,044		58,215		31		8,528,407
Loans, net of deferred fees and costs	$	44,007,085	$	81,303	$	3,643	$	84,946	$	217,702	$	43,804	$	44,353,537


	December 31, 2022
(in thousands)	Current		Accruing 30-89 Days Past Due		Accruing 90 Days or Greater Past Due		Total Accruing Past Due		Non-accrual with an ALL		Non-accrual without an ALL		Total
Commercial, financial and agricultural	$	13,798,639	$	15,033	$	1,437	$	16,470	$	48,008	$	11,299	$	13,874,416
Owner-occupied	8,181,649		487		—		487		9,499		605		8,192,240
Total commercial and industrial	21,980,288		15,520		1,437		16,957		57,507		11,904		22,066,656
Investment properties	11,639,614		960		—		960		1,785		1,688		11,644,047
1-4 family properties	613,049		762		—		762		2,172		950		616,933
Land and development	388,098		77		—		77		1,158		—		389,333
Total commercial real estate	12,640,761		1,799		—		1,799		5,115		2,638		12,650,313
Consumer mortgages	5,163,417		13,969		210		14,179		36,847		—		5,214,443
Home equity	1,742,412		7,795		1		7,796		6,830		—		1,757,038
Credit cards	200,047		1,843		1,722		3,565		—		—		203,612
Other consumer loans	1,795,799		21,269		3		21,272		7,220		—		1,824,291
Total consumer	8,901,675		44,876		1,936		46,812		50,897		—		8,999,384
Loans, net of deferred fees and costs	$	43,522,724	$	62,195	$	3,373	$	65,568	$	113,519	$	14,542	$	43,716,353

Interest income on non-accrual loans outstanding that would have been recorded if the loans had been current and performing in accordance with their original terms was $6.6 million and $2.0 million for the three months ended June 30, 2023 and 2022, respectively, and $9.9 million and $5.4 million for the six months ended June 30, 2023 and 2022, respectively. Of the interest income recognized during the three months ended June 30, 2023 and 2022, cash-basis interest income was $7.8 million and $410 thousand, respectively. Cash-basis interest income was $9.4 million and $964 thousand for the six months ended June 30, 2023 and 2022, respectively.

Pledged Loans

Loans with carrying values of $23.47 billion and $16.09 billion, respectively, were pledged as collateral for borrowings and capacity at June 30, 2023 and December 31, 2022, respectively, to the FHLB and Federal Reserve Bank.

Portfolio Segment Risk Factors

The risk characteristics and collateral information of each portfolio segment are as follows:

Commercial and Industrial Loans - The C&I loan portfolio is comprised of general middle market and commercial banking clients across a diverse set of industries. In accordance with Synovus' lending policy, each loan undergoes a detailed underwriting process, which incorporates uniform underwriting standards and oversight in proportion to the size and complexity of the lending relationship. These loans are secured by collateral such as business equipment, inventory, and real estate. Credit decisions on loans in the C&I portfolio are based on cash flow from the operations of the business as the primary source of repayment of the debt, with underlying real estate or other collateral being the secondary source of repayment.

Commercial Real Estate Loans - CRE loans primarily consist of income-producing investment properties loans. Additionally, CRE loans include 1-4 family properties loans as well as land and development loans. Investment properties loans consist of construction and mortgage loans for income-producing properties and are primarily made to finance multi-family properties, hotels, office buildings (medical and non-medical), shopping centers, warehouses and other commercial development properties. 1-4 family properties loans include construction loans to homebuilders and commercial mortgage loans related to 1-4 family rental properties and are almost always secured by the underlying property being financed by such loans. These properties are primarily located in the markets served by Synovus. Land and development loans include commercial and residential development as well as land acquisition loans and are secured by land held for future development, typically in excess of one year. Properties securing these loans are substantially within markets served by Synovus, and our preference is to obtain some level of recourse from project sponsors. Loans in this portfolio are underwritten based on the LTV of the collateral and the capacity of the guarantor(s).

Consumer Loans - The consumer loan portfolio consists of a wide variety of loan products offered through Synovus' banking network, including first and second residential mortgages, home equity, and consumer credit card loans, as well as home improvement loans, student, personal, and auto loans from third-party lending ("other consumer loans"). Together, consumer mortgages and home equity comprise the majority of Synovus' consumer loans and are secured by first and second liens on residential real estate primarily located in the markets served by Synovus. The primary source of repayment for all consumer loans is generally the personal income of the borrower(s).

Credit Quality Indicators

The credit quality of the loan portfolio is reviewed and updated no less frequently than annually using the standard asset classification system utilized by the federal banking agencies. These classifications are divided into three groups: Not Criticized (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 categorized 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) secured by junior liens on 1-4 family residential properties also consider available information on the payment status of any associated senior liens with other financial institutions.

The following table summarizes each loan portfolio class by risk grade and origination year as of June 30, 2023 as required under CECL. In addition, gross charge-offs by loan portfolio class and origination year as of June 30, 2023 are included below as a result of the adoption of ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosure.


	June 30, 2023
	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans
(in thousands)	2023		2022		2021		2020		2019		Prior		Amortized Cost Basis		Converted to Term Loans		Total
Commercial, financial and agricultural
Pass	$	583,998	$	1,186,752	$	1,615,563	$	923,404	$	676,245	$	1,412,658	$	7,095,080	$	55,621	$	13,549,321
Special Mention	1,707		3,273		3,534		1,739		79,760		8,590		128,409		—		227,012
Substandard(1)	21,349		15,116		20,897		39,306		37,140		24,995		198,893		9,609		367,305
Doubtful(2)	—		—		—		—		—		—		22,103		—		22,103
Loss(3)(4)	—		—		—		—		—		363		786		—		1,149
Total commercial, financial and agricultural	607,054		1,205,141		1,639,994		964,449		793,145		1,446,606		7,445,271		65,230		14,166,890
Current YTD Period:
Gross charge-offs	—		1,633		1,804		961		909		604		21,102		203		27,216
Owner-occupied
Pass	564,996		1,575,827		1,586,180		1,082,709		793,757		1,533,957		871,721		—		8,009,147
Special Mention	930		3,578		18,888		24,065		11,094		58,422		17,782		—		134,759
Substandard(1)	606		23,263		13,090		46,545		12,319		95,938		12,249		—		204,010
Loss(4)	—		—		245		16,000		—		181		—		—		16,426
Total owner-occupied	566,532		1,602,668		1,618,403		1,169,319		817,170		1,688,498		901,752		—		8,364,342
Current YTD Period:
Gross charge-offs	—		—		353		2,922		223		—		—		—		3,498
Total commercial and industrial	1,173,586		2,807,809		3,258,397		2,133,768		1,610,315		3,135,104		8,347,023		65,230		22,531,232
Current YTD Period:
Gross charge-offs	$	—	$	1,633	$	2,157	$	3,883	$	1,132	$	604	$	21,102	$	203	$	30,714
Investment properties
Pass	319,091		3,004,555		3,469,385		1,445,709		1,198,543		2,091,311		497,661		—		12,026,255
Special Mention	—		2,218		76,076		—		10,476		61,316		—		—		150,086
Substandard(1)	5,189		856		1,305		173		1,661		37,465		19,576		—		66,225
Doubtful	—		—		—		—		—		27,635		—		—		27,635
Loss(4)	—		—		—		—		—		65		—		—		65
Total investment properties	324,280		3,007,629		3,546,766		1,445,882		1,210,680		2,217,792		517,237		—		12,270,266
Current YTD Period:
Gross charge-offs	—		—		—		—		—		—		—		—		—
1-4 family properties
Pass	114,841		178,720		125,043		37,420		32,360		67,586		51,887		—		607,857
Special Mention	—		408		—		193		—		311		—		—		912
Substandard(1)	1,643		1,605		1,363		423		714		1,164		45		—		6,957
Total 1-4 family properties	116,484		180,733		126,406		38,036		33,074		69,061		51,932		—		615,726
Current YTD Period:
Gross charge-offs	—		—		—		—		—		24		—		—		24


	June 30, 2023
	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans
(in thousands)	2023		2022		2021		2020		2019		Prior		Amortized Cost Basis		Converted to Term Loans		Total

Land and development
Pass	72,661		104,219		55,794		18,335		34,027		82,124		6,703		—		373,863
Special Mention	—		507		—		—		—		29,629		—		—		30,136
Substandard(1)	583		—		36		720		610		1,958		—		—		3,907
Total land and development	73,244		104,726		55,830		19,055		34,637		113,711		6,703		—		407,906
Current YTD Period:
Gross charge-offs	—		—		—		77		—		—		—		—		77
Total commercial real estate	514,008		3,293,088		3,729,002		1,502,973		1,278,391		2,400,564		575,872		—		13,293,898
Current YTD Period:
Gross charge-offs	$	—	$	—	$	—	$	77	$	—	$	24	$	—	$	—	$	101
Consumer mortgages
Pass	431,398		854,063		1,113,312		1,275,929		433,164		1,218,986		34		—		5,326,886
Substandard(1)	—		1,113		5,090		14,348		7,824		23,326		—		—		51,701
Loss(4)	—		—		—		—		4		693		—		—		697
Total consumer mortgages	431,398		855,176		1,118,402		1,290,277		440,992		1,243,005		34		—		5,379,284
Current YTD Period:
Gross charge-offs	22		58		251		320		297		840		—		—		1,788
Home equity
Pass	—		—		—		—		—		—		1,260,275		501,262		1,761,537
Substandard(1)	—		—		—		—		—		—		7,860		4,157		12,017
Loss(4)	—		—		—		—		—		—		317		116		433
Total home equity	—		—		—		—		—		—		1,268,452		505,535		1,773,987
Current YTD Period:
Gross charge-offs	—		—		—		—		—		—		555		49		604
Credit cards
Pass	—		—		—		—		—		—		185,639		—		185,639
Substandard(1)	—		—		—		—		—		—		765		—		765
Loss(3)	—		—		—		—		—		—		1,273		—		1,273
Total credit cards	—		—		—		—		—		—		187,677		—		187,677
Current YTD Period:
Gross charge-offs	—		—		—		—		—		—		3,513		—		3,513
Other consumer loans
Pass	71,649		220,975		275,382		137,128		39,518		136,511		299,159		—		1,180,322
Substandard(1)	—		678		3,303		1,731		546		717		103		—		7,078
Loss(3)	—		—		—		—		—		6		53		—		59
Total other consumer loans	71,649		221,653		278,685		138,859		40,064		137,234		299,315		—		1,187,459
Current YTD Period:
Gross charge-offs(5)	52		2,804		16,591		1,865		1,235		1,052		1,272		—		24,871
Total consumer	503,047		1,076,829		1,397,087		1,429,136		481,056		1,380,239		1,755,478		505,535		8,528,407
Current YTD Period:
Gross charge-offs	$	74	$	2,862	$	16,841	$	2,185	$	1,533	$	1,892	$	5,340	$	49	$	30,776
Loans, net of deferred fees and costs	$	2,190,641	$	7,177,726	$	8,384,486	$	5,065,877	$	3,369,762	$	6,915,907	$	10,678,373	$	570,765	$	44,353,537
Current YTD Period:
Gross charge-offs	$	74	$	4,495	$	18,999	$	6,145	$	2,664	$	2,520	$	26,442	$	252	$	61,591

(1) The majority of loans within Substandard risk grade are accruing loans at June 30, 2023.

(2) Loans within Doubtful risk grade are on non-accrual status and generally have an ALL equal to 50% of the loan amount.

(3) Represent amounts that were 120 days past due. These credits are downgraded to the Loss category with an ALL 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.

(4) Loans within Loss risk grade are on non-accrual status and have an ALL equal to the full loan amount.

(5) Includes $7.9 million in gross charge-offs related to the transfer of third-party consumer loans to held for sale.

The following table summarizes each loan portfolio class by risk grade and origination year as of December 31, 2022 as required under CECL.


	December 31, 2022
	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans
(in thousands)	2022		2021		2020		2019		2018		Prior		Amortized Cost Basis		Converted to Term Loans		Total
Commercial, financial and agricultural
Pass	$	1,276,814	$	1,911,353	$	1,009,230	$	782,100	$	536,001	$	1,037,488	$	6,862,070	$	43,748	$	13,458,804
Special Mention	4,131		14,289		12,691		6,637		5,716		2,777		81,889		1,710		129,840
Substandard(1)	13,751		17,780		38,943		42,773		18,405		21,418		131,422		1,003		285,495

Loss(2)	—		—		—		—		—		—		277		—		277
Total commercial, financial and agricultural	1,294,696		1,943,422		1,060,864		831,510		560,122		1,061,683		7,075,658		46,461		13,874,416
Owner-occupied
Pass	1,537,016		1,675,524		1,137,889		909,525		664,734		1,103,500		866,920		—		7,895,108
Special Mention	4,238		6,760		24,175		13,913		5,024		69,500		—		—		123,610
Substandard(1)	19,437		13,381		63,925		7,415		51,364		17,755		—		—		173,277
Loss(3)	—		245		—		—		—		—		—		—		245
Total owner-occupied	1,560,691		1,695,910		1,225,989		930,853		721,122		1,190,755		866,920		—		8,192,240
Total commercial and industrial	2,855,387		3,639,332		2,286,853		1,762,363		1,281,244		2,252,438		7,942,578		46,461		22,066,656
Investment properties
Pass	2,671,660		3,245,669		1,532,230		1,220,974		775,747		1,543,724		541,118		—		11,531,122
Special Mention	2,379		1,550		—		14,570		5,908		2,388		146		—		26,941
Substandard(1)	5,973		1,455		176		1,688		51,767		3,931		20,994		—		85,984
Total investment properties	2,680,012		3,248,674		1,532,406		1,237,232		833,422		1,550,043		562,258		—		11,644,047
1-4 family properties
Pass	248,418		154,181		44,032		33,246		27,053		55,543		47,732		—		610,205
Special Mention	1		—		752		—		—		297		—		—		1,050
Substandard(1)	1,309		1,429		75		741		836		1,243		45		—		5,678
Total 1-4 family properties	249,728		155,610		44,859		33,987		27,889		57,083		47,777		—		616,933
Land and development
Pass	119,801		84,055		21,984		39,484		18,600		64,854		5,078		—		353,856
Special Mention	—		—		744		—		29,618		1,118		—		—		31,480
Substandard(1)	699		325		220		627		472		1,654		—		—		3,997
Total land and development	120,500		84,380		22,948		40,111		48,690		67,626		5,078		—		389,333
Total commercial real estate	3,050,240		3,488,664		1,600,213		1,311,330		910,001		1,674,752		615,113		—		12,650,313


	December 31, 2022
	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans
(in thousands)	2022		2021		2020		2019		2018		Prior		Amortized Cost Basis		Converted to Term Loans		Total
Consumer mortgages
Pass	$	857,489	$	1,188,652	$	1,356,065	$	458,441	$	182,834	$	1,118,686	$	143	$	—	$	5,162,310
Substandard(1)	1,153		6,452		8,519		9,442		6,167		19,662		—		—		51,395
Loss(3)	—		—		—		4		—		734		—		—		738
Total consumer mortgages	858,642		1,195,104		1,364,584		467,887		189,001		1,139,082		143		—		5,214,443
Home equity
Pass	—		—		—		—		—		—		1,241,201		504,272		1,745,473
Substandard(1)	—		—		—		—		—		—		6,534		4,512		11,046
Loss(3)	—		—		—		—		—		—		402		117		519
Total home equity	—		—		—		—		—		—		1,248,137		508,901		1,757,038
Credit cards
Pass	—		—		—		—		—		—		201,898		—		201,898
Substandard(1)	—		—		—		—		—		—		617		—		617
Loss(2)	—		—		—		—		—		—		1,097		—		1,097
Total credit cards	—		—		—		—		—		—		203,612		—		203,612
Other consumer loans
Pass	284,045		524,601		457,684		61,760		31,662		142,189		313,565		—		1,815,506
Substandard(1)	1,417		3,810		1,648		712		163		888		139		—		8,777
Loss(2)	—		—		—		—		—		8		—		—		8
Total other consumer loans	285,462		528,411		459,332		62,472		31,825		143,085		313,704		—		1,824,291
Total consumer	1,144,104		1,723,515		1,823,916		530,359		220,826		1,282,167		1,765,596		508,901		8,999,384
Loans, net of deferred fees and costs	$	7,049,731	$	8,851,511	$	5,710,982	$	3,604,052	$	2,412,071	$	5,209,357	$	10,323,287	$	555,362	$	43,716,353

(1) The majority of loans within Substandard risk grade are accruing loans at December 31, 2022.

(2) Represent amounts that were 120 days past due. These credits are downgraded to the Loss category with an ALL 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.

(3) Loans within Loss risk grade are on non-accrual status and have an ALL equal to the full loan amount.

Collateral-Dependent Loans

We classify a loan as collateral-dependent when our borrower is experiencing financial difficulty, and we expect repayment to be provided substantially through the operation or sale of collateral. Our commercial loans have collateral that is comprised of real estate and business assets. Our consumer loans have collateral that is substantially comprised of residential real estate.

There were no significant changes in the extent to which collateral secures our collateral-dependent loans during the three and six months ended June 30, 2023.

Rollforward of Allowance for Loan Losses

The following tables detail the changes in the ALL by loan segment for the three and six months ended June 30, 2023 and 2022. During the three and six months ended June 30, 2023 and 2022, Synovus charged-off $1.3 million and $7.9 million in previously established reserves for credit losses associated with the transfer of $3.8 million and $427.9 million, respectively, in certain third-party consumer loans to held for sale as part of our overall balance sheet management strategy. $711 thousand in reserves were added as a result of purchases of $10.6 million of third-party lending loans for the three months ended June 30, 2023. $3.7 million and $7.5 million in reserves were added as a result of purchases of $180.2 million and $361.6 million of third-party lending loans for the three and six months ended June 30, 2022, respectively.


	As Of and For the Three Months Ended June 30, 2023
(in thousands)	Commercial & Industrial		Commercial Real Estate		Consumer		Total
Allowance for loan losses:
Beginning balance at March 31, 2023	$	158,688	$	160,392	$	137,930	$	457,010
Charge-offs	(22,841)		(5)		(13,410)		(36,256)
Recoveries	6,402		378		3,080		9,860
Provision for (reversal of) loan losses	17,738		8,961		13,925		40,624
Ending balance at June 30, 2023	$	159,987	$	169,726	$	141,525	$	471,238

	As Of and For the Three Months Ended June 30, 2022
(in thousands)	Commercial & Industrial		Commercial Real Estate		Consumer		Total
Allowance for loan losses:
Beginning balance at March 31, 2022	$	178,722	$	94,696	$	141,538	$	414,956
Charge-offs	(15,512)		(252)		(7,934)		(23,698)
Recoveries	3,208		572		3,353		7,133
Provision for (reversal of) loan losses	(6,410)		9,202		6,654		9,446
Ending balance at June 30, 2022	$	160,008	$	104,218	$	143,611	$	407,837

	As Of and For the Six Months Ended June 30, 2023
(in thousands)	Commercial & Industrial		Commercial Real Estate		Consumer		Total
Allowance for loan losses:
Beginning balance at December 31, 2022	$	161,550	$	143,575	$	138,299	$	443,424
Charge-offs	(30,714)		(101)		(30,776)		(61,591)
Recoveries	9,878		662		6,105		16,645
Provision for (reversal of) loan losses	19,273		25,590		27,897		72,760
Ending balance at June 30, 2023	$	159,987	$	169,726	$	141,525	$	471,238

	As Of and For the Six Months Ended June 30, 2022
(in thousands)	Commercial & Industrial		Commercial Real Estate		Consumer		Total
Allowance for loan losses:
Beginning balance at December 31, 2021	$	188,364	$	97,760	$	141,473	$	427,597
Charge-offs	(29,275)		(2,708)		(16,862)		(48,845)
Recoveries	5,571		933		7,167		13,671
Provision for (reversal of) loan losses	(4,652)		8,233		11,833		15,414
Ending balance at June 30, 2022	$	160,008	$	104,218	$	143,611	$	407,837

The ALL of $471.2 million and the reserve for unfunded commitments of $55.7 million, which is recorded in other liabilities, comprise the total ACL of $527.0 million at June 30, 2023. The ACL increased $26.1 million compared to the December 31, 2022 ACL of $500.9 million, which consisted of the ALL of $443.4 million and the reserve for unfunded commitments of $57.5 million. The ACL to loans coverage ratio of 1.19% at June 30, 2023 was 4 bps higher compared to December 31, 2022. The increase in the ACL from December 31, 2022 resulted primarily from deterioration in economic factors and increased specific reserves.

The ACL is estimated using a two-year reasonable and supportable forecast period. To the extent the lives of the loans in the portfolio extend beyond the period for which a reasonable and supportable forecast can be made, the Company reverts on a straight-line basis back to the historical rates over a one-year period. Synovus utilizes multiple economic forecast scenarios sourced from a reputable third-party provider that are probability-weighted internally. The current scenarios include a consensus baseline forecast, an upside scenario reflecting an accelerated recovery, a downside scenario that reflects adverse economic conditions, and a stagflation scenario, which also assumes adverse economic conditions. At June 30, 2023, the unemployment rate is the input that most significantly impacts our estimate. The multi-scenario forecast used in our estimate

includes a peak weighted average unemployment rate of 5.7% over the forecasted period at June 30, 2023, compared to 5.1% at December 31, 2022.

Financial Difficulty Modifications

When borrowers are experiencing financial difficulty, Synovus may make certain loan modifications as part of its loss mitigation strategies to maximize expected payment. All loan modifications, renewals, and refinancings where borrowers are experiencing financial difficulty are evaluated for FDM classification. To be classified as an FDM, the modifications must be in the form of providing an interest rate reduction relative to the current interest rate, principal forgiveness, or an other-than-insignificant payment delay or extension of the maturity of the loan. An FDM is tracked for 12 months following the modification(s) granted. The effect of these modifications is already included in the ACL because our use of a DCF model captures loan level changes including modified terms as part of the estimation process.

The following table presents the amortized cost of FDM loans by loan portfolio class that were modified during the three and six months ended June 30, 2023.



	Three Months Ended June 30, 2023
(in thousands)	Interest Rate Reduction		Term Extension		Principal Forgiveness and Term Extensions		Interest Rate Reduction and Term Extension		Total		Percentage of Total by Financing Class
Commercial, financial and agricultural	$	1,972	$	7,464	$	13,401	$	1,187	$	24,024	0.2	%
Owner-occupied	—		388		—		—		388		—
Total commercial and industrial	1,972		7,852		13,401		1,187		24,412		0.1
Investment properties	—		660		—		—		660		—
1-4 family properties	—		1,680		—		382		2,062		0.3
Land and development	—		—		—		—		—		—
Total commercial real estate	—		2,340		—		382		2,722		—
Consumer mortgages	695		—		—		—		695		—
Home equity	—		339		—		276		615		—
Credit cards	—		—		—		—		—		—
Other consumer loans	2		314		—		256		572		—
Total consumer	697		653		—		532		1,882		—
Total FDMs	$	2,669	$	10,845	$	13,401	$	2,101	$	29,016	0.1	%

	Six Months Ended June 30, 2023
(in thousands)	Interest Rate Reduction		Term Extension		Principal Forgiveness and Term Extensions		Interest Rate Reduction and Term Extension		Total		Percentage of Total by Financing Class
Commercial, financial and agricultural	$	1,972	$	22,297	$	13,401	$	1,428	$	39,098	0.3	%
Owner-occupied	—		1,828		—		41,259		43,087		0.5
Total commercial and industrial	1,972		24,125		13,401		42,687		82,185		0.4
Investment properties	—		660		—		—		660		—
1-4 family properties	—		3,006		—		382		3,388		0.6
Land and development	—		—		—		—		—		—
Total commercial real estate	—		3,666		—		382		4,048		—
Consumer mortgages	807		—		—		—		807		—
Home equity	—		426		—		290		716		—
Credit cards	—		—		—		—		—		—
Other consumer loans	2		450		—		482		934		0.1
Total consumer	809		876		—		772		2,457		—
Total FDMs	$	2,781	$	28,667	$	13,401	$	43,841	$	88,690	0.2	%

During the three and six months ended June 30, 2023, there were no FDMs that subsequently defaulted. Defaults are

defined as the earlier of the FDM being placed on non-accrual status or reaching 90 days past due with respect to principal and/or interest payments. As of June 30, 2023, there were no commitments to lend a material amount of additional funds to any borrower whose loan was classified as a FDM.

The following presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the three and six months ended June 30, 2023.


	Three Months Ended June 30, 2023					Six Months Ended June 30, 2023
(Dollars in thousands)	Principal Forgiveness and Term Extensions		Weighted Average Interest Rate Reduction		Weighted Average Term Extension (in months)	Principal Forgiveness and Term Extensions		Weighted Average Interest Rate Reduction		Weighted Average Term Extension (in months)
Commercial, financial and agricultural	$	1,200	1.1	%	41	$	1,200	1.2	%	28
Owner-occupied	—		—		17	—		1.7		9

Investment properties	—		—		30	—		—		30
1-4 family properties	—		0.3		12	—		0.3		12


Consumer mortgages	—		1.9		0	—		1.6		0
Home equity	—		0.4		250	—		0.5		262

Other consumer loans	—		2.7		61	—		3.1		64

Synovus monitors the performance of FDMs to understand the effectiveness of its modification efforts. The following table provides a summary of current, accruing past due, and non-accrual loans on an amortized cost basis by loan portfolio class that have been modified since January 1, 2023.



	As of June 30, 2023
(in thousands)	Current		Accruing 30-89 Days Past Due		Accruing 90 Days or Greater Past Due		Non-accrual (1)		Total
Commercial, financial and agricultural	$	25,697	$	—	$	—	$	13,401	$	39,098
Owner-occupied	43,087		—		—		—		43,087
Total commercial and industrial	68,784		—		—		13,401		82,185
Investment properties	660		—		—		—		660
1-4 family properties	1,708		—		—		1,680		3,388
Land and development	—		—		—		—		—
Total commercial real estate	2,368		—		—		1,680		4,048
Consumer mortgages	—		—		—		807		807
Home equity	716		—		—		—		716
Credit cards	—		—		—		—		—
Other consumer loans	386		—		—		548		934
Total consumer	1,102		—		—		1,355		2,457
Total FDMs	$	72,254	$	—	$	—	$	16,436	$	88,690

(1) Loans were on non-accrual when modified and subsequently classified as FDMs.

TDR Disclosures Prior to Adoption of ASU 2022-02

Prior to the adoption of ASU 2022-02, Synovus accounted for a modification to the contractual terms of a loan that resulted in granting concessions to a borrower experiencing financial difficulties as a TDR. The following tables present, by concession

type, the post-modification balance for loans modified or renewed during the three and six months ended June 30, 2022 that were reported as accruing or non-accruing TDRs.


TDRs by Concession Type
	Three Months Ended June 30, 2022
(in thousands, except contract data)	Number of Contracts	Below Market Interest Rate		Other Concessions(1)		Total
Commercial, financial and agricultural	23	$	8,534	$	266	$	8,800
Owner-occupied	7	22,430		—		22,430
Total commercial and industrial	30	30,964		266		31,230
Investment properties	2	690		—		690
1-4 family properties	4	1,984		—		1,984
Land and development	1	437		—		437
Total commercial real estate	7	3,111		—		3,111
Consumer mortgages	3	159		162		321
Home equity	14	2,490		39		2,529
Other consumer loans	4	—		91		91
Total consumer	21	2,649		292		2,941
Total TDRs	58	$	36,724	$	558	$	37,282	(2)

	Six Months Ended June 30, 2022
(in thousands, except contract data)	Number of Contracts	Below Market Interest Rate		Other Concessions(1)		Total
Commercial, financial and agricultural	56	$	26,434	$	807	$	27,241
Owner-occupied	20	28,534		3,857		32,391
Total commercial and industrial	76	54,968		4,664		59,632
Investment properties	5	1,279		6,610		7,889
1-4 family properties	11	3,197		—		3,197
Land and development	4	3,168		—		3,168
Total commercial real estate	20	7,644		6,610		14,254
Consumer mortgages	10	1,176		266		1,442
Home equity	25	3,419		39		3,458
Other consumer loans	6	—		139		139
Total consumer	41	4,595		444		5,039
Total TDRs	137	$	67,207	$	11,718	$	78,925	(2)

(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 three and six months ended June 30, 2022.

(2) No net charge-offs were recorded during the three and six months ended June 30, 2022.

For both the three and six months ended June 30, 2022, there were 3 defaults with a recorded investment of $430 thousand 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). As of June 30, 2022 and December 31, 2022, there were no commitments to lend a material amount of additional funds to any borrower whose loan was classified as a TDR.

Note 4 - Goodwill and Other Intangible Assets

Effective April 1, 2023, Synovus changed its internal management reporting structure to transfer Capital Markets activities and related personnel from the Financial Management Services segment to the Wholesale Banking segment. See Note 10 - Segment Reporting for additional information. In connection with the transfer, management reallocated a portion of the Wealth Management goodwill that was attributable to the Financial Management Services segment to Wholesale Banking using a relative fair value approach, and no indicators of impairment were identified.

On June 1, 2023, Synovus acquired a 60% equity interest and a majority of the Board seats in Qualpay, which constituted a business combination. In connection with the acquisition, Synovus recorded $23.2 million of goodwill and $38.7 million of other intangible assets based on preliminary fair value estimates of the assets acquired and liabilities assumed in the transaction. Upon receipt of final fair value estimates during the measurement period, which must be within one year of the acquisition date, Synovus will record any adjustments to the preliminary fair value estimates in the reporting period in which the adjustments are determined. See Note 1 - Basis of Presentation and Accounting Policies for additional information on the Qualpay transaction.

Goodwill allocated to each reporting unit at June 30, 2023 and December 31, 2022 is presented as follows:


(in thousands)	Wholesale Banking Reporting Unit		Community Banking Reporting Unit		Consumer Banking Reporting Unit		Wealth Management Reporting Unit		Total Goodwill
Balance at December 31, 2022	$	171,636	$	141,622	$	114,701	$	24,431	$	452,390
Changes during the period from:
Reallocation	4,197		—		—		(4,197)		—
Acquisition	—		23,183		—		—		23,183
Balance at June 30, 2023	$	175,833	$	164,805	$	114,701	$	20,234	$	475,573

Goodwill is evaluated for impairment on an annual basis or whenever an event occurs or circumstances change to indicate that it is more likely than not that an impairment loss has been incurred (i.e., a triggering event). Synovus performs its annual evaluation of goodwill impairment during the fourth quarter of each year.

During the second quarter of 2023, Synovus assessed the events and circumstances that have generated significant market trading volatility in the banking industry, particularly for regional banks like Synovus. Due to the uncertain environment as well as Synovus' stock price trading below book value during the month of May 2023, Synovus elected to perform a quantitative assessment of goodwill impairment as of May 31, 2023, which included determining the estimated fair value of each reporting unit containing goodwill, utilizing a combination of discounted cash flow and market-based approaches, and comparing that fair value to each reporting unit's carrying amount. The discounted cash flow method included updated internal forecasts, long-term profitability targets, growth rates, and discount rates. The market approach was based on a comparison of certain financial metrics of Synovus' reporting units to guideline public company peers. Based on the quantitative assessment performed, the fair value of each of these reporting units exceeded their respective carrying values; therefore, we concluded goodwill was not impaired as of our May 31, 2023 test date and determined that it was not more likely than not that the fair value had declined below carrying value at the reporting until level as of June 30, 2023.

The following table shows the gross carrying amount and accumulated amortization of other intangible assets as of June 30, 2023 and December 31, 2022. The CDI is being amortized over its estimated useful life of approximately ten years utilizing an accelerated method. Other intangible assets resulting from the Qualpay acquisition, which primarily include client relationships, partner relationships, and developed technology, are being amortized on a straight-line basis over their estimated useful lives ranging from five to eight years. Aggregate other intangible assets amortization expense is included in other operating expense on the consolidated statements of income, and for the three and six months ended June 30, 2023 was $2.4 million and $4.3 million, respectively. Aggregate other intangible assets amortization expense for the three and six months ended June 30, 2022 was $2.1 million and $4.2 million, respectively.


(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
June 30, 2023
CDI	$	57,400	$	(38,615)	$	18,785
Client Relationships	29,300		(6,854)		22,446
Partner Relationships	6,900		(115)		6,785
Developed Technology	11,091		(185)		10,906
Other	3,900		(1,284)		2,616
Total other intangible assets	$	108,591	$	(47,053)	$	61,538

December 31, 2022
CDI	57,400		(35,484)		$	21,916
Client Relationships	10,800		(6,136)		4,664


Other	1,700		(1,156)		544
Total other intangible assets	$	69,900	$	(42,776)	$	27,124

Note 5 - Shareholders' Equity and Other Comprehensive Income (Loss)

Repurchases of Common Stock

Synovus announced on January 18, 2023 that its Board of Directors authorized share repurchases of up to $300 million in 2023. During the three and six months ended June 30, 2023, Synovus did not complete any share repurchases of its common stock.

Changes in Accumulated Other Comprehensive Income (Loss) by Component (Net of Income Taxes)

The following tables illustrate activity within the balances in accumulated other comprehensive income (loss) by component for the three and six months ended June 30, 2023 and 2022.


Changes in Accumulated Other Comprehensive Income (Loss) by Component (Net of Income Taxes)
(in thousands)	Net unrealized gains (losses) on investment securities available for sale(1)		Net unrealized gains (losses) on cash flow hedges(1)		Total
Balance at March 31, 2023	$	(1,105,221)	$	(184,106)	$	(1,289,327)
Other comprehensive income (loss) before reclassifications	(82,866)		(55,325)		(138,191)
Amounts reclassified from AOCI	—		32,343		32,343
Net current period other comprehensive income (loss)	(82,866)		(22,982)		(105,848)
Balance at June 30, 2023	$	(1,188,087)	$	(207,088)	$	(1,395,175)

Balance at March 31, 2022	$	(542,439)	$	(119,626)	$	(662,065)
Other comprehensive income (loss) before reclassifications	(327,080)		(36,815)		(363,895)
Amounts reclassified from AOCI	—		(745)		(745)
Net current period other comprehensive income (loss)	(327,080)		(37,560)		(364,640)
Balance at June 30, 2022	$	(869,519)	$	(157,186)	$	(1,026,705)

Balance, December 31, 2022	$	(1,220,263)	$	(221,854)	$	(1,442,117)
Other comprehensive income (loss) before reclassifications	32,955		(47,759)		(14,804)
Amounts reclassified from AOCI	(779)		62,525		61,746
Net current period other comprehensive income (loss)	32,176		14,766		46,942
Balance at June 30, 2023	$	(1,188,087)	$	(207,088)	$	(1,395,175)

Balance, December 31, 2021	$	(67,980)	$	(14,341)	$	(82,321)
Other comprehensive income (loss) before reclassifications	(801,539)		(140,432)		(941,971)
Amounts reclassified from AOCI	—		(2,413)		(2,413)
Net current period other comprehensive income (loss)	(801,539)		(142,845)		(944,384)
Balance at June 30, 2022	$	(869,519)	$	(157,186)	$	(1,026,705)

(1) For all periods presented, the ending balance in net unrealized gains (losses) on investment securities available for sale and cash flow hedges includes unrealized losses of $13.3 million and $12.1 million, respectively, related to residual tax effects remaining in OCI due to previously established deferred tax asset valuation allowances in 2010 and 2011. In accordance with ASC 740-20-45-11(b), under the portfolio approach, these unrealized losses are realized at the time the entire portfolio is sold or disposed.

Note 6 - Fair Value Accounting

See "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" of Synovus' 2022 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.


	June 30, 2023								December 31, 2022
(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	$	—	$	2,875	$	—	$	2,875	$	—	$	2,991	$	—	$	2,991
Other mortgage-backed securities	—		2,685		—		2,685		—		3,185		—		3,185
State and municipal securities	—		—		—		—		—		48		—		48
Asset-backed securities	—		15,907		—		15,907		—		2,071		—		2,071

Total trading securities	$	—	$	21,467	$	—	$	21,467	$	—	$	8,295	$	—	$	8,295
Investment securities available for sale:
U.S. Treasury securities	$	473,890	$	—	$	—	$	473,890	$	471,813	$	—	$	—	$	471,813
U.S. Government agency securities	—		48,603		—		48,603		—		48,798		—		48,798
Mortgage-backed securities issued by U.S. Government agencies	—		817,350		—		817,350		—		792,749		—		792,749
Mortgage-backed securities issued by U.S. Government sponsored enterprises	—		6,777,393		—		6,777,393		—		6,895,070		—		6,895,070
Collateralized mortgage obligations issued by U.S. Government agencies or sponsored enterprises	—		615,951		—		615,951		—		655,127		—		655,127
Commercial mortgage-backed securities issued by U.S. Government agencies or sponsored enterprises	—		879,350		—		879,350		—		805,945		—		805,945
Corporate debt securities and other debt securities	—		8,638		—		8,638		—		8,601		—		8,601
Total investment securities available for sale	$	473,890	$	9,147,285	$	—	$	9,621,175	$	471,813	$	9,206,290	$	—	$	9,678,103
Mortgage loans held for sale	$	—	$	62,616	$	—	$	62,616	$	—	$	51,136	$	—	$	51,136
Other investments	—		—		11,770		11,770		—		—		11,172		11,172
Mutual funds and mutual funds held in rabbi trusts	51,147		—		—		51,147		42,659		—		—		42,659
SBA loans servicing asset	—		—		2,234		2,234		—		—		2,354		2,354
Derivative assets	—		119,659		—		119,659		—		89,815		—		89,815
Liabilities
Securities sold short	$	1,461	$	—	$	—	$	1,461	$	3,370	$	—	$	—	$	3,370
Mutual funds held in rabbi trusts	36,380		—		—		36,380		27,944		—		—		27,944
Derivative liabilities	—		365,390		3,937		369,327		—		339,227		3,453		342,680

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 June 30, 2023		As of December 31, 2022
Fair value	$	62,616	$	51,136
Unpaid principal balance	61,536		50,264
Fair value less aggregate unpaid principal balance	$	1,080	$	872


Changes in Fair Value Included in Net Income	Three Months Ended June 30,				Six Months Ended June 30,				Location in Consolidated Statements of Income
(in thousands)	2023		2022		2023		2022
Mortgage loans held for sale	$	(95)	$	805	$	208	$	(1,545)	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' 2022 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 and six months ended June 30, 2023 and 2022, 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 June 30, 2023
(in thousands)		Other Investments		SBA Loans Servicing Asset		Visa Derivative
Beginning balance		$	11,655	$	2,412	$	(1,111)
Total gains (losses) realized/unrealized:
Included in earnings		(43)		(303)		(3,027)
Additions		158		125		—
Settlements		—		—		201
Ending balance		$	11,770	$	2,234	$	(3,937)
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 June 30, 2023		$	(43)	$	(303)	$	(3,027)

	Three Months Ended June 30, 2022
(in thousands)		Other Investments		SBA Loans Servicing Asset		Visa Derivative
Beginning balance		$	12,093	$	3,451	$	(1,776)
Total gains (losses) realized/unrealized:
Included in earnings		(7,037)		(510)		(3,500)
Additions		6,027		—		—
Settlements		—		214		283
Ending balance		$	11,083	$	3,155	$	(4,993)
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 June 30, 2022		$	(7,037)	$	(510)	$	(3,500)


	Six Months Ended June 30, 2023
(in thousands)	Other Investments		SBA Loans Servicing Asset		Visa Derivative
Beginning balance	$	11,172	$	2,354	$	(3,453)
Total gains (losses) realized/unrealized:
Included in earnings	(71)		(515)		(3,027)
Additions	669		395		—
Settlements	—		—		2,543
Ending balance	$	11,770	$	2,234	$	(3,937)
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 June 30, 2023	$	(71)	$	(515)	$	(3,027)

	Six Months Ended June 30, 2022
(in thousands)	Other Investments		SBA Loans Servicing Asset		Visa Derivative
Beginning balance	$	12,185	$	3,233	$	(3,535)
Total gains (losses) realized/unrealized:
Included in earnings	(7,129)		(772)		(3,500)

Additions	6,027		—		—
Settlements	—		694		2,042
Ending balance	$	11,083	$	3,155	$	(4,993)
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 June 30, 2022	$	(7,129)	$	(772)	$	(3,500)

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.


	June 30, 2023						Fair Value Adjustments for the				Location in Consolidated Statements of Income
(in thousands)	Level 1		Level 2		Level 3		Three Months Ended June 30, 2023		Six Months Ended June 30, 2023
Loans(1)	$	—	$	—	$	30,123	$	6,413	$	6,462	Provision for credit losses
Other loans held for sale	—		—		346,897		2,360		19,110		Loss on other loans held for sale



	June 30, 2022						Fair Value Adjustments for the				Location in Consolidated Statements of Income
	Level 1		Level 2		Level 3		Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
Loans(1)	$	—	$	—	$	24,360	$	8,900	$	9,239	Provision for credit losses
Other assets held for sale	—		—		2,725		—		492		Other operating expense

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

Fair Value of Financial Instruments

The following tables present the carrying and estimated fair values of financial instruments at June 30, 2023 and December 31, 2022. 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' 2022 Form 10-K for a description of how fair value measurements are determined.


	June 30, 2023
(in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial assets
Total cash, cash equivalents, and restricted cash	$	2,054,151	$	2,054,151	$	2,054,151	$	—	$	—
Trading securities	21,467		21,467		—		21,467		—
Investment securities available for sale	9,621,175		9,621,175		473,890		9,147,285		—
Loans held for sale	514,450		514,450		—		62,616		451,834
Other investments	11,770		11,770		—		—		11,770
Mutual funds and mutual funds held in rabbi trusts	51,147		51,147		51,147		—		—
Loans, net	43,882,299		41,977,636		—		—		41,977,636
SBA loans servicing asset	2,234		2,234		—		—		2,234
FRB and FHLB stock	273,951		273,951		—		273,951
Derivative assets	119,659		119,659		—		119,659		—
Financial liabilities
Non-interest-bearing deposits	$	13,565,602	$	13,565,602	$	—	$	13,565,602	$	—
Non-time interest-bearing deposits	26,929,264		26,929,264		—		26,929,264		—
Time deposits	9,585,526		9,596,056		—		9,596,056		—
Total deposits(1)	$	50,080,392	$	50,090,922	$	—	$	50,090,922	$	—
Federal funds purchased and securities sold under repurchase agreements	83,384		83,384		83,384		—		—
Securities sold short	1,461		1,461		1,461		—		—

Long-term debt	4,021,411		3,949,290		—		3,949,290		—
Mutual funds held in rabbi trusts	36,380		36,380		36,380		—		—
Derivative liabilities	369,327		369,327		—		365,390		3,937

(1) 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, 2022
(in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial assets
Total cash, cash equivalents, and restricted cash	$	1,977,780	$	1,977,780	$	1,977,780	$	—	$	—
Trading securities	8,295		8,295		—		8,295		—
Investment securities available for sale	9,678,103		9,678,103		471,813		9,206,290		—
Loans held for sale	391,502		391,085		—		51,136		339,949
Other investments	11,172		11,172		—		—		11,172
Mutual funds and mutual funds held in rabbi trusts	42,659		42,659		42,659		—		—
Loans, net	43,272,929		42,192,295		—		—		42,192,295
SBA loans servicing asset	2,354		2,354		—		—		2,354
FRB and FHLB stock	308,321		308,321		—		308,321		—
Derivative assets	89,815		89,815		—		89,815		—

Financial liabilities
Non-interest-bearing deposits	$	15,639,899	$	15,639,899	$	—	$	15,639,899	$	—
Non-time interest-bearing deposits	26,936,635		26,936,635		—		26,936,635		—
Time deposits	6,295,025		6,260,315		—		6,260,315		—
Total deposits(1)	$	48,871,559	$	48,836,849	$	—	$	48,836,849	$	—
Federal funds purchased and securities sold under repurchase agreements	146,588		146,588		146,588		—		—
Securities sold short	3,370		3,370		3,370		—		—
Short-term FHLB advances	600,014		600,014		—		600,014		—
Long-term debt	4,109,597		4,120,113		—		4,120,113		—
Mutual funds held in rabbi trusts	27,944		27,944		27,944		—		—
Derivative liabilities	342,680		342,680		—		339,227		3,453

Note 7 - Derivative Instruments and Hedging Activities

Synovus utilizes derivative instruments to manage its exposure to various types of interest rate risk, exposures related to liquidity and credit risk, and to facilitate client transactions. The primary types of derivative instruments utilized by Synovus consist of interest rate swaps, interest rate lock commitments made to prospective mortgage loan clients, commitments to sell fixed-rate mortgage loans, and foreign currency exchange forwards. Interest rate lock commitments represent derivative instruments since it is intended that such loans will be sold. Synovus also provides foreign currency exchange services, primarily forward contracts, with counterparties to allow commercial clients to mitigate exchange rate risk. Synovus covers its risk by entering into an offsetting foreign currency exchange forward contract. Synovus enters into risk participation agreements with financial institution counterparties where we are either a participant or a lead bank so that the risk of default on the interest rate swaps is shared. Synovus either pays or receives a fee depending on the participation type. Synovus is party to master netting arrangements with its dealer counterparties; however, Synovus does not offset assets and liabilities under these arrangements for financial statement presentation purposes. See "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" to the consolidated financial statements of Synovus' 2022 Form 10-K for additional information regarding accounting policies for derivatives.

Hedging Derivatives

Cash flow hedging relationships mitigate exposure to the variability of future cash flows or other forecasted transactions. Synovus has entered into interest rate swap contracts to manage overall cash flow changes related to interest rate risk exposure on index-based variable rate commercial loans. The contracts effectively modify Synovus' exposure to interest rate risk by utilizing receive fixed/pay index-based variable rate interest rate swaps.

For cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported initially as a component of accumulated other comprehensive income (loss), net of the tax impact, and subsequently reclassified into earnings when the hedged transaction affects earnings with the impacts recorded in the same income statement line item used to

present the earnings effect of the hedged item. When a cash flow hedge relationship is discontinued but the hedged cash flows, or forecasted transactions, are still expected to occur, gains or losses that were accumulated in OCI are amortized into earnings over the same periods in which the hedged transactions are still expected to affect earnings. If, however, it is probable the forecasted transactions will no longer occur, the remaining accumulated amounts in OCI for the impacted cash flow hedges are immediately recognized in earnings.

Synovus recorded no unrealized gains (losses) during the three and six months ended June 30, 2023 and 2022 related to terminated cash flow hedges. Synovus recognized a pre-tax loss of $6.1 million and $11.5 million during the three and six months ended June 30, 2023, respectively, and pre-tax income of $1.0 million and $3.2 million for the three and six months ended June 30, 2022, respectively, related to the amortization of terminated cash flow hedges. Amounts related to the amortization of terminated cash flow hedges are being recognized into earnings in conjunction with the effective terms of the original swaps through the third quarter of 2026.

As of June 30, 2023, Synovus expects to reclassify into earnings approximately $161 million in pre-tax loss due to the receipt or payment of interest payments on all cash flow hedges within the next twelve months. Included in this amount is approximately $23 million in pre-tax loss related to the amortization of terminated cash flow hedges. As of June 30, 2023, the maximum length of time over which Synovus is hedging its exposure to the variability in future cash flows is through the fourth quarter of 2027.

Fair value hedging relationships mitigate exposure to the change in fair value of an asset or liability. Synovus has entered into receive-fixed, pay-variable interest rate swap contracts to hedge the change in the fair value due to fluctuations in market interest rates for outstanding fixed-rate long-term debt and fixed-rate term interest-bearing deposits. The changes in fair value of the fair value hedges are recorded through earnings with an offset against changes in the fair value of the hedged item within interest expense in the consolidated statements of income. All components of each derivative instrument’s gain/(loss) are included in the assessment of hedge effectiveness.

Derivatives Not Designated as Hedges

Derivatives not designated as hedges include those that are entered into as either economic hedges to facilitate client needs or as part of Synovus' overall risk management strategy. Economic hedges are those that do not qualify to be treated as a fair value hedge or cash flow hedge for accounting purposes but are necessary to economically manage the risk exposure associated with the assets and liabilities of Synovus. For derivative instruments that are not designated as hedging instruments, changes in the fair value of the derivatives are recognized in earnings immediately.

Counterparty Credit Risk and Collateral

Entering into derivative contracts potentially exposes Synovus to the risk of counterparties’ failure to fulfill their legal obligations, including, but not limited to, potential amounts due or payable under each derivative contract. Notional principal amounts are often used to express the volume of these transactions, but the amounts potentially subject to credit risk are much smaller. Synovus assesses the credit risk of its dealer counterparties by regularly monitoring publicly available credit rating information, evaluating other market indicators, and periodically reviewing detailed financials. Dealer collateral requirements are determined via risk-based policies and procedures and in accordance with existing agreements. Synovus seeks to minimize dealer credit risk by dealing with highly rated counterparties and by obtaining collateral for exposures above certain predetermined limits. Management closely monitors credit conditions within the client swap portfolio, which management deems to be of higher risk than dealer counterparties. Collateral is secured at origination and credit related fair value adjustments are recorded against the asset value of the derivative as deemed necessary based upon an analysis, which includes consideration of the current asset value of the swap, client risk rating, collateral value, and client standing with regards to its swap contractual obligations and other related matters. Such asset values fluctuate based upon changes in interest rates regardless of changes in notional amounts and changes in client specific risk.

Collateral Requirements

Certain derivative transactions have collateral requirements, both at the inception of the trade and as the value of each derivative position changes. As of June 30, 2023 and December 31, 2022, Synovus had recorded the right to reclaim cash collateral of $87.5 million and $66.8 million, respectively. As of June 30, 2023 and December 31, 2022, Synovus had recorded the obligation to return cash collateral of $5.7 million and $7.7 million, respectively.

For derivatives cleared through central clearing houses, the variation margin payments made are legally characterized as settlements of the derivatives. As a result, these variation margin payments are netted against the fair value of the respective derivative contracts in the consolidated balance sheets and related disclosures.

The following table reflects the estimated fair value of derivative instruments included in other assets and other liabilities on the consolidated balance sheets along with their respective notional amounts on a gross basis.


	June 30, 2023						December 31, 2022
			Estimated Fair Value						Estimated Fair Value
(in thousands)	Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities
Derivatives in cash flow hedging relationships:
Interest rate contracts (1)	$	8,900,000	$	—	$	20,469	$	5,250,000	$	—	$	8,286
Total cash flow hedges			$	—	$	20,469			$	—	$	8,286

Derivatives in fair value hedging relationships:
Interest rate contracts	$	3,510,611	$	—	$	24,047	$	2,230,232	$	—	$	8,093
Total fair value hedges			$	—	$	24,047			$	—	$	8,093
Total derivatives designated as hedging instruments			$	—	$	44,516			$	—	$	16,379

Derivatives not designated as hedging instruments:
Interest rate contracts (2)	$	16,877,530	$	118,256	$	320,872	$	10,276,754	$	89,310	$	322,329
Mortgage derivatives - interest rate lock commitments	68,311		912		—		50,218		350		—
Mortgage derivatives - forward commitments to sell fixed-rate mortgage loans	96,000		405		—		76,500		155		—
Risk participation agreements	735,282		—		2		635,891		—		3
Foreign exchange contracts	32,522		86		—		20,439		—		516
Visa derivative	—		—		3,937		—		—		3,453
Total derivatives not designated as hedging instruments			$	119,659	$	324,811			$	89,815	$	326,301

(1) Notionals as of June 30, 2023 include $3.40 billion of derivatives with maturities less than three months related to the transition from LIBOR to SOFR.

(2) Notionals as of June 30, 2023 include $5.47 billion of derivatives with maturities less than three months related to the transition from LIBOR to SOFR.

The following table presents the effect of hedging derivative instruments in the consolidated statements of income and the total amounts for the respective line item affected for the three and six months ended June 30, 2023 and 2022.


	Three Months Ended June 30, 2023
	Interest Income		Interest Expense
(in thousands)	Loans, including fees		Deposits		Long-term debt
Total interest income/expense amounts presented in the consolidated statements of income	$	670,230	$	241,780	$	55,915

Gain/(loss) on cash flow hedging relationships:(1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI, pre-tax, to interest income on loans	$	(42,748)	$	—	$	—
Pre-tax income (loss) recognized on cash flow hedges	$	(42,748)	$	—	$	—

Gain/(loss) on fair value hedging relationships:
Amounts related to interest settlements and amortization on derivatives	$	—	$	(5,782)	$	(4,510)
Recognized on derivatives	—		(20,466)		(20,823)
Recognized on hedged items	—		20,466		20,823
Pre-tax income (loss) recognized on fair value hedges	$	—	$	(5,782)	$	(4,510)


	Three Months Ended June 30, 2022
	Interest Income		Interest Expense
(in thousands)	Loans, including fees		Deposits		Long-term debt
Total interest income/expense amounts presented in the consolidated statements of income	$	391,307	$	18,501	$	8,769

Gain/(loss) on cash flow hedging relationships:(1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI, pre-tax, to interest income on loans	$	978	$	—	$	—
Pre-tax income (loss) recognized on cash flow hedges	$	978	$	—	$	—

Gain/(loss) on fair value hedging relationships:

Recognized on derivatives	$	—	(2,818)		$	(1,455)
Recognized on hedged items	—		2,818		1,455
Pre-tax income (loss) recognized on fair value hedges	$	—	—		$	—


	Six Months Ended June 30, 2023
	Interest Income		Interest Expense
(in thousands)	Loans, including fees		Deposits		Long-term debt
Total interest income/expense amounts presented in the consolidated statements of income	$	1,299,787	$	415,715	$	98,444

Gain/(loss) on cash flow hedging relationships:(1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI, pre-tax, to interest income on loans	$	(82,640)	$	—	$	—
Pre-tax income (loss) recognized on cash flow hedges	$	(82,640)	$	—	$	—

Gain/(loss) on fair value hedging relationships:
Amounts related to interest settlements and amortization on derivatives	$	—	$	(9,153)	$	(7,231)
Recognized on derivatives	—		(8,296)		(5,427)
Recognized on hedged items	—		8,296		5,427
Pre-tax income (loss) recognized on fair value hedges	$	—	$	(9,153)	$	(7,231)


	Six Months Ended June 30, 2022
	Interest Income		Interest Expense
(in thousands)	Loans, including fees		Deposits		Long-term debt
Total interest income/expense amounts presented in the consolidated statements of income	$	752,399	$	32,160	$	18,913

Gain/(loss) on cash flow hedging relationships:(1)
Interest rate contracts:
Realized gains (losses) reclassified from AOCI, pre-tax, to interest income on loans	$	3,167	$	—	$	—
Pre-tax income (loss) recognized on cash flow hedges	$	3,167	$	—	$	—

Gain/(loss) on fair value hedging relationships:

Recognized on derivatives	$	—	$	(2,818)	$	(1,455)
Recognized on hedged items	—		2,818		1,455
Pre-tax income (loss) recognized on fair value hedges	$	—	$	—	$	—

(1) See "Part I - Item 1. Financial Statements and Supplementary Data - Note 5 - Shareholders' Equity and Other Comprehensive Income (Loss)" for gain (loss) recognized on cash flow hedging relationships in AOCI.

The following table presents the carrying amount and associated cumulative basis adjustment related to the application of hedge accounting that is included in the carrying amount of the hedged assets/(liabilities) in fair value hedging relationships.


	June 30, 2023				December 31, 2022
	Hedged Items Currently Designated				Hedged Items Currently Designated
(in thousands)	Carrying Amount of Assets/(Liabilities)		Hedge Accounting Basis Adjustment		Carrying Amount of Assets/(Liabilities)		Hedge Accounting Basis Adjustment
Interest-bearing deposits	$	(2,460,611)	$	8,296	$	(1,680,000)	$	24,227
Long-term debt	(1,042,450)		5,427		(545,787)		19,348

The pre-tax effect of changes in fair value from derivative instruments not designated as hedging instruments in the consolidated statements of income for the three and six months ended June 30, 2023 and 2022 is presented below.


		Gain (Loss) Recognized in Consolidated Statements of Income
		Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	Location in Consolidated Statements of Income	2023		2022		2023		2022
Derivatives not designated as hedging instruments:
Interest rate contracts(1)	Capital markets income	$	(690)	$	736	$	(672)	$	1,409
Mortgage derivatives - interest rate lock commitments	Mortgage banking income	(547)		394		562		(924)
Mortgage derivatives - forward commitments to sell fixed-rate mortgage loans	Mortgage banking income	578		(3,210)		250		355
Risk participation agreements	Capital markets income	(2)		10		1		35
Foreign exchange contracts	Capital markets income	73		320		602		385
Visa derivative	Other non-interest expense	(3,027)		(3,500)		(3,027)		(3,500)
Total derivatives not designated as hedging instruments		$	(3,615)	$	(5,250)	$	(2,284)	$	(2,240)

(1) Gain (loss) represents net fair value adjustments (including credit related adjustments) for client swaps.

Note 8 - Net Income Per Common Share

The following table displays a reconciliation of the information used in calculating basic and diluted net income per common share for the three and six months ended June 30, 2023 and 2022. Diluted net income per common share incorporates the potential impact of contingently issuable shares, including awards which require future service as a condition of delivery of the underlying common stock.


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	2023		2022		2023		2022
Basic Net Income Per Common Share:
Net income available to common shareholders	$	165,819	$	169,761	$	359,688	$	332,507
Weighted average common shares outstanding	146,113		145,328		145,957		145,301
Net income per common share, basic	$	1.13	$	1.17	$	2.46	$	2.29
Diluted Net Income Per Common Share:
Net income available to common shareholders	$	165,819	$	169,761	$	359,688	$	332,507
Weighted average common shares outstanding	146,113		145,328		145,957		145,301
Effect of dilutive outstanding equity-based awards	437		987		687		1,188
Weighted average diluted common shares	146,550		146,315		146,644		146,489
Net income per common share, diluted	$	1.13	$	1.16	$	2.45	$	2.27

For the three months ended June 30, 2023 and 2022, there were 273 thousand and 21 thousand, respectively, potentially dilutive shares related to stock options to purchase shares of common stock that were outstanding. For the six months ended June 30, 2023 and 2022, there were 273 thousand and 11 thousand, respectively, potentially dilutive shares related to stock options to purchase shares of common stock that were outstanding. These potentially dilutive shares were not included in the computation of diluted net income per common share because the effect would be anti-dilutive.

Note 9 - Commitments and Contingencies

In the normal course of business, Synovus enters into commitments to extend credit such as loan commitments and letters of credit to meet the financing needs of its clients. Synovus uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Commitments to extend credit are agreements to lend to a client as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Synovus also has commitments to fund certain tax credits, CRA partnerships, and other investments.

The contractual amount of these financial instruments represents Synovus' maximum credit risk should the counterparty draw upon the commitment, and should the counterparty subsequently fail to perform according to the terms of the contract. Since many of the commitments are expected to expire without being drawn upon, total commitment amounts do not necessarily represent future cash requirements. Additionally, certain commitments (primarily consumer) can generally be canceled by providing notice to the borrower.

The ACL associated with unfunded commitments and letters of credit is recorded within other liabilities on the consolidated balance sheets. At June 30, 2023 and December 31, 2022, the ACL for unfunded commitments was $55.7 million and $57.5 million, respectively. Additionally, an immaterial amount of unearned fees relating to letters of credit are recorded within other liabilities on the consolidated balance sheets.

Synovus also invests in tax credit partnerships, CRA partnerships, including SBIC programs, and other investments. The SBIC is a program initiated by the SBA in 1958 to assist in the funding of small business loans.


(in thousands)	June 30, 2023		December 31, 2022
Letters of credit(1)	$	203,911	$	220,622
Commitments to fund commercial and industrial loans	10,143,330		9,970,733
Commitments to fund commercial real estate, construction, and land development loans	3,100,361		3,629,531
Commitments under home equity lines of credit	2,163,660		2,156,641
Unused credit card lines	463,440		461,443
Other loan commitments	698,093		742,976
Total letters of credit and unfunded lending commitments	$	16,772,795	$	17,181,946


Tax credits, CRA partnerships, and other investments with a future funding commitment:
Carrying amount included in other assets	$	525,072	$	488,944
Amount of future funding commitments	300,722		283,212
Permanent and short-term construction loans and letter of credit commitments(2)	208,699		177,998
Funded portion of permanent and short-term loans and letters of credit(3)	195,748		234,166

(1) Represent the contractual amount net of risk participations purchased of approximately $23.4 million and $25.7 million at June 30, 2023 and December 31, 2022, respectively.

(2) Represent the contractual amount net of risk participations of $10.0 million and $4.7 million at June 30, 2023 and December 31, 2022, respectively.

(3) Represent the contractual amount net of risk participations of $2.9 million and $6.9 million at June 30, 2023 and December 31, 2022, respectively.

Merchant Services

In accordance with credit and debit card association rules, Synovus provides merchant processing services for clients with a contractual arrangement under which certain sales and processing support are provided through an outside merchant services provider with Synovus owning the merchant contract relationship. In addition, Synovus sponsors various third-party MPS businesses that process credit and debit card transactions on behalf of merchants. In connection with these services, a liability may arise in the event of a billing dispute between the merchant and a cardholder that is ultimately resolved in the cardholder's favor. If the merchant defaults on its obligations, the cardholder, through its issuing bank, generally has until six months after the date of the transaction to present a chargeback to the MPS, which is primarily liable for any losses on covered transactions. However, if a sponsored MPS fails to meet its obligations, then Synovus, as the sponsor, could be held liable for the disputed amount. Synovus seeks to mitigate this risk through its contractual arrangements with the MPS and the merchants by withholding future settlements, retaining cash reserve accounts and/or obtaining other security. For the three and six months ended June 30, 2023, Synovus and the sponsored entities processed and settled $29.39 billion and $59.50 billion of transactions, respectively. For the three and six months ended June 30, 2022, Synovus and the sponsored entities processed and settled $31.00 billion and $59.60 billion of transactions, respectively.

Synovus previously covered chargebacks for Qualpay when their cash reserve account was unavailable to support them. The remaining amount, net of reserves, included in other assets and classified in NPAs, was $15.3 million as of December 31, 2022. During the first quarter of 2023, Synovus received regulatory approval for the previously announced proposed strategic investment in Qualpay. Upon regulatory approval, Synovus wrote up the balance to the contractual amount due of $31.1 million by reversing a prior impairment charge of $2.7 million through non-interest expense and recognizing a recovery of $13.1 million in non-interest revenue. On June 1, 2023, the Qualpay acquisition closed, and the contractual amount due was settled. See Note 1 - Basis of Presentation and Accounting Policies for additional discussion on the Qualpay acquisition.

Legal Proceedings

Synovus and its subsidiaries are subject to various legal proceedings, claims and disputes that arise in the ordinary course of its business. Additionally, in the ordinary course of business, Synovus and its subsidiaries are subject to regulatory and governmental examinations, information gathering requests, inquiries and investigations. Synovus, like many other financial institutions, has been the target of legal actions and other proceedings asserting claims for damages and related relief for losses. These actions include mortgage loan and other loan put-back claims, claims and counterclaims asserted by individual borrowers related to their loans, allegations of violations of state and federal laws and regulations relating to banking practices, including putative class action matters. In addition to actual damages, if Synovus does not prevail in such asserted legal actions, credit-related litigation could result in additional write-downs or charge-offs of assets, which could adversely affect Synovus' results of operations during the period in which the write-down or charge-off were to occur.

Synovus carefully examines and considers each legal matter, and, in those situations where Synovus determines that a particular legal matter presents loss contingencies that are both probable and reasonably estimable, Synovus establishes an appropriate reserve. An event is considered to be probable if the future event is likely to occur. While the final outcome of any legal proceeding is inherently uncertain, based on the information currently available, advice of counsel and available insurance coverage, management believes that the amounts accrued with respect to legal matters as of June 30, 2023 are adequate. The actual costs of resolving legal claims may be higher or lower than the amounts accrued.

In addition, where Synovus determines that there is a reasonable possibility of a loss in respect of legal matters, Synovus considers whether it is able to estimate the total reasonably possible loss or range of loss. Under GAAP, an event is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely,” and an event is “remote” if the “chance of the future event or events occurring is slight." In many situations, Synovus may be unable to estimate reasonably possible losses due to the preliminary nature of the legal matters, as well as a variety of other factors and uncertainties. For those legal matters where Synovus is able to estimate a range of reasonably possible losses, management currently estimates the aggregate range from our outstanding litigation is from zero to $5 million in excess of the amounts accrued, if any, related to those matters. This estimated aggregate range is based upon information currently available to Synovus, and the actual losses could prove to be lower or higher. As there are further developments in these legal matters, Synovus will reassess these matters, and the estimated range of reasonably possible losses may change as a result of this assessment. Based on Synovus' current knowledge and advice of counsel, management presently does not believe that the liabilities arising from these legal matters will have a material adverse effect on Synovus' consolidated financial condition, results of operations or cash flows. However, it is possible that the ultimate resolution of these legal matters could have a material adverse effect on Synovus' results of operations or financial condition for any particular period.

Synovus intends to vigorously pursue all available defenses to these legal matters but will also consider other alternatives, including settlement, in situations where there is an opportunity to resolve such legal matters on terms that Synovus considers to be favorable, including in light of the continued expense and distraction of defending such legal matters. Synovus maintains insurance coverage, which may be available to cover legal fees, or potential losses that might be incurred in connection with such legal matters. The above-noted estimated range of reasonably possible losses does not take into consideration insurance coverage, which may or may not be available for the respective legal matters.

Note 10 - Segment Reporting

Synovus' business segments are based on the products and services provided or the clients served and reflect the manner in which financial information is evaluated by the chief operating decision maker. During the second quarter of 2023, Synovus updated its internal management reporting structure to transfer Capital Markets activities and related personnel from the Financial Management Services segment to the Wholesale Banking segment. Accordingly, its operating segment reporting structure was also updated. Synovus has four major reportable business segments: Wholesale Banking, Community Banking, Consumer Banking, and Financial Management Services, with functional activities such as treasury, technology, operations, marketing, finance, enterprise risk, legal, human resources, corporate communications, executive management, among others, included in Treasury and Corporate Other.

Business segment results are determined based upon Synovus' management reporting system, which assigns balance sheet and income statement items to each of the business segments. Certain assets, liabilities, revenue, and expense not allocated or attributable to a particular business segment are included in Treasury and Corporate Other. Synovus's third-party consumer loans and loans held for sale, PPP loans, as well as CIB are included in Treasury and Corporate Other. The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to GAAP. As a result, reported segment results are not necessarily comparable with similar information reported by other financial institutions.

The Wholesale Banking business segment serves primarily larger corporate and governmental clients by providing commercial lending, capital markets, deposit, and capital markets services through specialty teams including middle market,

CRE, senior housing, national accounts, premium finance, structured lending, healthcare, asset-based lending, public finance, restaurant services, community investment capital, and capital markets.

The Community Banking business segment primarily serves small and medium-sized commercial clients as well as individual private wealth clients using a relationship-based approach. The commercial component of this segment focuses on locally owned and operated businesses. Private wealth services are delivered to the individuals operating the businesses as well as other individuals in the communities in which the Community Bank operates. A comprehensive set of banking products are offered to the client set, including a full suite of lending, payments, and depository products as well as financial planning services.

The Consumer Banking business segment serves individual and small business clients through its branch and ATM network, in addition to digital and telephone channels. This segment provides individuals and small businesses with an array of comprehensive banking products and services, including depository accounts, credit and debit cards, payment solutions, goal-based planning, home equity and other consumer loans, and small business lending solutions.

The Financial Management Services business segment serves its clients by providing mortgage, trust services, professional portfolio management for fixed-income securities, securities underwriting and distribution, the execution of securities transactions as a broker/dealer, asset management, financial planning, and family office services, as well as the provision of individual investment advice on equity and other securities.

Synovus uses a centralized FTP methodology to attribute appropriate net interest income to the business segments. The intent of the FTP methodology is to transfer interest rate risk from the business segments by providing matched duration funding of assets and liabilities. The result is to centralize the financial impact, management, and reporting of interest rate risk in the Treasury and Corporate Other function, where it can be centrally monitored and managed. Treasury and Corporate Other includes certain assets and/or liabilities managed within that function. Additionally, Treasury and Corporate Other also charges (credits) an internal cost of funds for assets held in (or pays for funding provided by) each business segment. The process for determining FTP is based on a number of factors and assumptions, including prevailing market interest rates, the expected lives of various assets and liabilities, and the Company's broader funding profile.

The following tables present certain financial information for each reportable business segment for the three and six months ended June 30, 2023 and 2022. The application and development of management reporting methodologies is a dynamic process and is subject to periodic enhancements. As these enhancements are made, financial results presented by each reportable business segment may be periodically revised. Loan and deposit transfers occur from time to time between reportable business segments primarily to maintain the migration of clients and relationship managers between segments. Prior periods have been adjusted accordingly.


	Three Months Ended June 30, 2023
(in thousands)	Wholesale Banking		Community Banking		Consumer Banking		Financial Management Services		Treasury and Corporate Other		Synovus Consolidated
Net interest income	$	194,334	$	110,242	$	158,113	$	17,134	$	(24,292)	$	455,531
Non-interest revenue	13,752		12,584		20,983		49,085		15,872		112,276
Non-interest expense	33,141		33,833		49,103		42,607		148,497		307,181
Pre-provision net revenue (PPNR)	$	174,945	$	88,993	$	129,993	$	23,612	$	(156,917)	$	260,626


	Three Months Ended June 30, 2022
(in thousands)	Wholesale Banking		Community Banking		Consumer Banking		Financial Management Services		Treasury and Corporate Other		Synovus Consolidated
Net interest income	$	169,736	$	100,892	$	103,727	$	17,655	$	33,378	$	425,388
Non-interest revenue	9,285		12,468		22,095		45,195		8,223		97,266
Non-interest expense	27,062		32,822		47,795		44,297		130,075		282,051
Pre-provision net revenue (PPNR)	$	151,959	$	80,538	$	78,027	$	18,553	$	(88,474)	$	240,603


	Six Months Ended June 30, 2023
(in thousands)	Wholesale Banking		Community Banking		Consumer Banking		Financial Management Services		Treasury and Corporate Other		Synovus Consolidated
Net interest income	$	393,434	$	221,647	$	312,744	$	33,681	$	(25,223)	$	936,283
Non-interest revenue	29,652		38,124		41,711		102,291		33,624		245,402
Non-interest expense	66,989		67,215		96,737		86,653		311,440		629,034
Pre-provision net revenue (PPNR)	$	356,097	$	192,556	$	257,718	$	49,319	$	(303,039)	$	552,651


	Six Months Ended June 30, 2022
(in thousands)	Wholesale Banking		Community Banking		Consumer Banking		Financial Management Services		Treasury and Corporate Other		Synovus Consolidated
Net interest income	$	325,984	$	197,019	$	201,132	$	35,818	$	57,682	$	817,635
Non-interest revenue	17,683		26,051		43,739		90,359		24,768		202,600
Non-interest expense	53,742		63,090		92,662		88,404		256,603		554,501
Pre-provision net revenue (PPNR)	$	289,925	$	159,980	$	152,209	$	37,773	$	(174,153)	$	465,734


	June 30, 2023
(dollars in thousands)	Wholesale Banking		Community Banking		Consumer Banking		Financial Management Services		Treasury and Corporate Other		Synovus Consolidated
Loans, net of deferred fees and costs	$	26,923,516	$	8,061,533	$	2,845,695	$	5,330,753	$	1,192,040	$	44,353,537
Total deposits	$	13,094,855	$	10,204,029	$	18,496,141	$	206,107	$	8,079,260	$	50,080,392
Total full-time equivalent employees	342		599		1,540		752		1,864		5,097

	December 31, 2022
(dollars in thousands)	Wholesale Banking		Community Banking		Consumer Banking		Financial Management Services		Treasury and Corporate Other		Synovus Consolidated
Loans, net of deferred fees and costs	$	25,865,667	$	8,138,606	$	2,933,504	$	5,157,014	$	1,621,562	$	43,716,353
Total deposits	$	12,942,732	$	10,798,409	$	18,561,521	$	102,496	$	6,466,401	$	48,871,559
Total full-time equivalent employees	337		598		1,529		768		1,795		5,027

Note 11 - Subsequent Events

Pending sale of medical office loans

On July 19, 2023, Synovus signed a purchase and sale agreement to sell approximately $1.3 billion of medical office loans; accordingly, a charge-off of the existing ACL of approximately $23 million has been recorded, and the loans have been reclassified to other loans held-for-sale subsequent to the end of the second quarter of 2023. The transaction is expected to result in an after-tax net loss of approximately $25 million that represents the difference between the amortized cost and the estimated value of the loan proceeds.

Voluntary Early Retirement Program

In July 2023, Synovus incurred approximately $19 million in one-time termination benefits, recorded as restructuring charges, associated with a voluntary early retirement program offered to certain qualified employees.

Execution of third-party consumer loans sale

On July 25, 2023, Synovus sold approximately $316 million of third-party consumer loans held for sale, with the remaining $22 million of the portfolio expected to settle in the third quarter of 2023. Synovus previously recognized a $19.1 million year-to-date loss as of June 30, 2023.

ITEM 2. – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In this Report, the words “Synovus,” “the Company,” “we,” “us,” and “our” refer to Synovus Financial Corp. together with Synovus Bank and Synovus' other wholly-owned subsidiaries, except where the context requires otherwise.

FORWARD-LOOKING STATEMENTS

Certain statements made or incorporated by reference in this Report which are not statements of historical fact, including those under “Management's Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Report, constitute forward-looking statements within the meaning of, and subject to the protections of, Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements include statements with respect to Synovus' beliefs, plans, objectives, goals, targets, expectations, anticipations, assumptions, estimates, intentions and future performance and involve known and unknown risks, many of which are beyond Synovus' control and which may cause Synovus' actual results, performance or achievements or the financial services industry or economy generally, to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

All statements other than statements of historical fact are forward-looking statements. You can identify these forward-looking statements through Synovus' use of words such as “believes,” “anticipates,” “expects,” “may,” “will,” “assumes,” “predicts,” “could,” “should,” “would,” “intends,” “targets,” “estimates,” “projects,” “plans,” “potential” and other similar words and expressions of the future or otherwise regarding the outlook for Synovus' future business and financial performance and/or the performance of the financial services industry and economy in general. Forward-looking statements are based on the current beliefs and expectations of Synovus' management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statements in this document. Many of these factors are beyond Synovus' ability to control or predict. These factors include, but are not limited to:


(1)						competition in the financial services industry, including competition from nontraditional banking institutions such as Fintechs;

(2)						our ability to realize the expected benefits from our strategic initiatives or other operational and execution goals in the time period expected, which could negatively affect our future profitability;

(3)						an economic downturn and contraction, including a recession, and the resulting effects on our capital, financial condition, credit quality, results of operations and future growth, including that the strength of the current economic environment could be further weakened by prolonged periods of inflation and rising interest rates;

(4)						changes in the cost and availability of funding due to changes in the deposit market and credit market;

(5)						restrictions or limitations on access to funds from historical and alternative sources of liquidity could adversely affect our overall liquidity, which could restrict our ability to make payments on our obligations and our ability to support asset growth and sustain our operations and the operations of Synovus Bank;

(6)						potential impacts of the recent adverse developments in the banking industry highlighted by high-profile bank failures, including impacts on client confidence, deposit outflows, liquidity, and the regulatory response thereto;

(7)						our ability to attract and retain employees and the impact of senior leadership transitions that are key to our strategic initiatives;

(8)						our strategic implementation of new lines of business, new products and services, and new technologies and the expansion of our existing business opportunities with a renewed focus on innovation;

(9)						prolonged periods of high inflation and their effects on our business, profitability, and our stock price;

(10)						changes in the interest rate environment, including changes to the federal funds rate, and competition in our primary market area may result in increased funding costs or reduced earning assets yields, thus reducing margins and net interest income;

(11)						the impact of recent, proposed, and potential changes in governmental policy, laws and regulations, potential, proposed, and recently enacted changes in monetary policy and in the regulation and taxation of banks and financial institutions, or the interpretation or application thereof and the uncertainty of future implementation and enforcement of these regulations, including rising inflationary pressures and interest rate increases;

(12)						we may be required to make substantial expenditures to keep pace with regulatory initiatives and the rapid technological changes in the financial services industry;

(13)						our current and future information technology system enhancements and operational initiatives may not be successfully implemented, which could negatively impact our operations;

(14)						our business relationships with, and reliance upon, third parties that have strategic partnerships with us or that provide key components of our business infrastructure, including the costs of services and products provided to us by third parties, and disruptions in service or financial difficulties with a third-party vendor or business relationship;


(15)						our enterprise risk management framework, our compliance program, or our corporate governance and supervisory oversight functions may not identify or address risks adequately, which may result in unexpected losses;

(16)						our asset quality may deteriorate or that our allowance for credit losses may prove to be inadequate or may be negatively affected by credit risk exposures;

(17)						the ability of our operational framework to identify and manage risks associated with our business, such as credit risk, compliance risk, reputational risk, and operational risk, including by virtue of our relationships with third-party business partners, as well as our relationships with third-party vendors and other service providers;

(18)						we may be exposed to potential losses in the event of fraud and/or theft, or in the event that a third-party vendor, obligor, or business partner fails to pay amounts due to us under that relationship or under any arrangement that we enter into with them;

(19)						if economic conditions worsen further or regulatory capital rules are modified, we may be required to undertake initiatives to improve or conserve our capital position;

(20)						our ability to identify and address cyber-security risks (including those impacting our vendors and other third parties) such as data security breaches, malware, "denial of service" attacks, "hacking", and identity theft, a failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption, or damage of our systems, increased costs, significant losses, or adverse effects to our reputation;

(21)						the impact on our financial results, reputation, and business if we are unable to comply with all applicable federal and state regulations or other supervisory actions or directives and any necessary capital initiatives;

(22)						our ability to receive dividends from our subsidiaries could affect our liquidity, including our ability to pay dividends or take other capital actions;

(23)						our ESG strategies and initiatives, the scope and pace of which could alter our reputation and shareholder, employee, client, and third-party relationships;

(24)						the risks related to the transition from LIBOR to any alternate reference rate we may use;

(25)						we could realize losses if we sell assets and the proceeds we receive are lower than the carrying value of such assets and such losses could negatively impact market perceptions of us and could lead to deposit withdrawals;

(26)						our ability to obtain regulatory approval to take certain actions, including any dividends on our common stock or preferred stock, any repurchases of common stock, or any other issuance or redemption of any other regulatory capital instruments, as well as any applications in respect to strategic initiatives;

(27)						we may not be able to identify suitable bank and non-bank acquisition opportunities as part of our growth strategy and even if we are able to identify attractive acquisition opportunities, we may not be able to complete such transactions on favorable terms or realize the anticipated benefits from such acquisitions;

(28)						our concentrated operations in the Southeastern U.S. make us vulnerable to local economic conditions, local weather catastrophes, public health issues, and other external events;

(29)						the costs and effects of litigation, investigations, or similar matters, or adverse facts and developments related thereto;

(30)						the fluctuation in our stock price and general volatility in the stock market;

(31)						the effects of any damages to our reputation resulting from developments related to any of the items identified above; and

(32)						other factors and other information contained in this Report and in other reports and filings that we make with the SEC under the Exchange Act, including, without limitation, those found in "Part II - Item 1A. Risk Factors" of this Report.

For a discussion of these and other risks that may cause actual results to differ from expectations, refer to “Part I - Item 1A. Risk Factors” and other information contained in Synovus' 2022 Form 10-K and our other periodic filings, including quarterly reports on Form 10-Q and current reports on Form 8-K, that we file from time to time with the SEC. All written or oral forward-looking statements that are made by or are attributable to Synovus are expressly qualified by this cautionary notice. You should not place undue reliance on any forward-looking statements since those statements speak only as of the date on which the statements are made. Synovus undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of new information or unanticipated events, except as may otherwise be required by law.

INTRODUCTION AND CORPORATE PROFILE

Synovus Financial Corp. is a financial services company and a registered bank holding company headquartered in Columbus, Georgia. Through its wholly-owned subsidiary, Synovus Bank, a Georgia state-chartered bank that is a member of the Federal Reserve System, the Company provides commercial and consumer banking in addition to a full suite of specialized products and services, including private banking, treasury management, wealth management, mortgage services, premium finance, asset-based lending, structured lending, capital markets, and international banking. Synovus also provides financial

planning and investment advisory services through its wholly-owned subsidiaries, Synovus Trust and Synovus Securities, as well as its GLOBALT and Creative Financial Group divisions.

Synovus Bank is positioned in some of the highest growth markets in the Southeast, with 246 branches in Alabama, Florida, Georgia, South Carolina, and Tennessee.

The following financial review summarizes the significant trends, changes in our business, transactions, and other matters affecting Synovus’ results of operations for the three and six months ended June 30, 2023 and financial condition as of June 30, 2023 and December 31, 2022. This discussion supplements, and should be read in conjunction with, the unaudited interim consolidated financial statements and notes thereto contained elsewhere in this Report and the consolidated financial statements of Synovus, the notes thereto, and management’s discussion and analysis contained in Synovus' 2022 Form 10-K.

Management's Discussion and Analysis of Financial Condition and Results of Operations consists of:

•Discussion of Results of Operations - Reviews Synovus' financial performance, as well as selected balance sheet items, items from the statements of income, significant transactions, and certain key ratios that illustrate Synovus' performance.

•Credit Quality, Capital Resources and Liquidity - Discusses credit quality, market risk, capital resources, and liquidity, as well as performance trends. It also includes a discussion of liquidity policies, how Synovus obtains funding, and related performance.

•Additional Disclosures - Discusses additional important matters, including critical accounting policies and non-GAAP financial measures.

A reading of each section is important to fully understand our financial performance.

DISCUSSION OF RESULTS OF OPERATIONS


Table 1 - Consolidated Financial Highlights
	Three Months Ended June 30,								Six Months Ended June 30,
(dollars in thousands, except per share data)	2023			2022			Change		2023			2022			Change
Net interest income	$	455,531		$	425,388		7	%	$	936,283		$	817,635		15	%
Provision for (reversal of) credit losses	38,881			12,688			206		71,035			24,088			195
Non-interest revenue	112,276			97,266			15		245,402			202,600			21
Total revenue	567,807			522,654			9		1,181,685			1,020,235			16
Non-interest expense	307,181			282,051			9		629,034			554,501			13
Income before income taxes	221,745			227,915			(3)		481,616			441,646			9
Net income attributable to Synovus Financial Corp.	174,110			178,052			(2)		376,269			349,088			8
Net income available to common shareholders	165,819			169,761			(2)		359,688			332,507			8
Net income per common share, basic	1.13			1.17			(3)		2.46			2.29			7
Net income per common share, diluted	1.13			1.16			(3)		2.45			2.27			8
Net interest margin(1)	3.20		%	3.22		%	(2)	bps	3.32		%	3.11		%	21	bps
Net charge-off ratio(1)	0.24			0.16			8		0.20			0.18			2
Return on average assets(1)	1.15			1.26			(11)		1.26			1.24			2
Efficiency ratio-TE	53.99			53.87			12		53.13			54.25			(112)

(1) Annualized


	June 30, 2023			March 31, 2023			Sequential Quarter Change			June 30, 2022			Year-Over-Year Change
(dollars in thousands)
Loans, net of deferred fees and costs	$	44,353,537		$	44,044,939		$	308,598		$	41,204,780		$	3,148,757
Total average loans	44,099,115			43,793,441			305,674			40,590,875			3,508,240
Total deposits	50,080,392			49,953,936			126,456			49,034,700			1,045,692
Core deposits (excludes brokered deposits)	43,550,624			43,705,682			(155,058)			45,411,583			(1,860,959)
Total average deposits	49,719,079			49,025,870			693,209			49,015,994			703,085
Non-performing assets ratio	0.59		%	0.41		%	18		bps	0.33		%	26		bps
Non-performing loans ratio	0.59			0.41			18			0.26			33
Past due loans over 90 days	0.01			0.01			—			0.01			—
CET1 capital	$	5,133,546		$	5,056,613		$	76,933		$	4,612,070		$	521,476
Tier 1 capital	5,670,691			5,593,758			76,933			5,149,215			521,476
Total risk-based capital	6,664,033			6,579,216			84,817			6,059,074			604,959
CET1 capital ratio	9.86		%	9.77		%	9		bps	9.46		%	40		bps
Tier 1 capital ratio	10.89			10.81			8			10.56			33
Total risk-based capital ratio	12.80			12.72			8			12.43			37
Total Synovus Financial Corp. shareholders’ equity to total assets ratio	7.88			7.71			17			7.99			(11)
Return on average common equity(1)	15.5			19.2			(370)			16.5			(100)

(1) Quarter annualized

Economic Environment and Recent Events

In an effort to achieve its inflation objectives, the Federal Reserve has aggressively tightened monetary policy by significantly raising market interest rates throughout 2022 and 2023, with estimates calling for a FOMC policy rate in the range of 5.25% to 6.00% by the end of 2023. The extent of interest rate increases and the period of time that these higher rates will remain in effect continues to depend on the level of inflation and strength of the labor market.

Outside of inflation, economic uncertainty and market disruptions remain, including geopolitical tensions from Russia’s prolonged war in Ukraine, the strained relationship between the U.S. and China, and to a lesser extent, the lingering impact of

the COVID-19 pandemic on global supply chains, tourism, business travel, immigration, and labor participation. Multiple mixed signals make parsing the way ahead difficult as evidenced by the volatility in capital markets and the wide range regarding economic outlook.

U.S. fiscal policy has been expansionary in recent years, leaving a significant federal deficit. The Inflation Reduction Act (IRA), signed into law in August 2022, raises federal revenue by imposing an alternative corporate minimum tax if certain thresholds are met and a non-deductible excise tax on corporate share repurchases. The IRA does not have a significant immediate impact on Synovus.

The bank failures in March and May of 2023 and the subsequent response by both the banking industry and the Federal Reserve served to mitigate the risks of the failures becoming more systemic. However, the residual impacts on the broader economic environment remain uncertain and have generally presented a more challenging outlook for the banking industry. The impact of reactions to the bank failures include a proposed FDIC special assessment, increased regulatory scrutiny, continued pressure on deposits and liquidity, and a generally less sanguine outlook regarding bank profitability going forward.

Despite the headwinds discussed above and our position in strong Southeastern U.S. growth markets, Synovus believes it is well-positioned to execute on our revised 2023 outlook outlined below by capitalizing on our intentional approach to expand our business, diversify our client base, and stay competitive, all while increasing our investments in innovative solutions to further enhance the client experience and sources of revenue and striking a balance between growth and risk management.

Executive Summary

Net income available to common shareholders for the second quarter of 2023 was $165.8 million, or $1.13 per diluted common share, compared to $169.8 million, or $1.16 per diluted common share, for the second quarter of 2022. Net income available to common shareholders for the six months ended June 30, 2023 was $359.7 million, or $2.45 per diluted common share, compared to $332.5 million, or $2.27 per diluted common share, for the six months June 30, 2022. The year-over-year changes were largely impacted by higher net interest income from increased interest rates and strong loan growth and higher non-interest expense primarily resulting from investments in our workforce and new business initiatives. Provision for credit losses was also higher compared to the same periods in 2022, driven by changes in forecasted economic factors within the ACL model and increased net charge-offs.

Net interest income for the six months ended June 30, 2023 was $936.3 million, up $118.6 million, or 15%, compared to the same period in 2022. Net interest margin was up 21 bps over the comparable six-month period to 3.32%, due primarily to the benefits of our asset sensitive balance sheet and substantial average loan growth partially offset by continued increases in funding costs. Net interest margin for the second quarter was 3.20%, down 23 bps sequentially, as the asset side of our balance sheet continued to benefit from higher balances and rates, but higher deposit pricing combined with remixing within our non-interest-bearing deposits resulted in margin compression.

Non-interest revenue for the second quarter of 2023 was $112.3 million, up $15.0 million, or 15%, and year-to-date was $245.4 million, up $42.8 million, or 21%, compared to the same periods in 2022. The primary drivers of the increase in the quarter-to-date comparative periods included higher brokerage revenue and a $7.0 million write-down on a minority fintech investment that impacted earnings on equity method investments in the second quarter of 2022. The primary drivers of the year-to-date increase included higher brokerage revenue, a $13.1 million recovery of a non-performing asset related to Qualpay, higher capital markets income, and the aforementioned $7.0 million write-down on a minority fintech investment. See Note 1 - Basis of Presentation and Accounting Policies and Note 9 - Commitments and Contingencies for further discussion on Qualpay.

Non-interest expense for the second quarter of 2023 was $307.2 million, up $25.1 million, or 9%, and year-to-date was $629.0 million, up $74.5 million, or 13%, compared to the same periods in 2022. The increases were primarily due to investments in and expansion of our workforce and new businesses initiatives, as well as the industry-wide increase in FDIC expense. Year-to-date non-interest expense has also been negatively impacted by a $19.1 million loss associated with third-party consumer loans moved to held for sale, while the comparative period benefited from an $8.3 million reversal of restructuring charges.

At June 30, 2023, loans, net of deferred fees and costs, of $44.35 billion, increased $637.2 million, from December 31, 2022. Growth in C&I loans has been diversified but tempered by slowing utilization and a strategic decline in syndicated loan-only relationships while CRE loan growth was a function of draws related to existing commitments and low levels of pay-offs. The decline in consumer loans was impacted by a $427.9 million move of third-party consumer loans to held for sale.

At June 30, 2023, credit metrics included NPAs and NPLs both at 59 bps and total past dues at 19 bps, as a percentage of total loans. Net charge-offs were $26.4 million, or 24 bps annualized, and $44.9 million, or 20 bps annualized, respectively, for the three and six months ended June 30, 2023. The ACL at June 30, 2023 totaled $527.0 million, an increase of $26.1 million from December 31, 2022, and resulted primarily from deterioration in economic factors and increased specific reserves. The ACL to loans coverage ratio at June 30, 2023 of 1.19% increased 4 bps compared to December 31, 2022.

Total period-end deposits at June 30, 2023 increased $1.21 billion, or 2%, compared to December 31, 2022 and resulted from increased time deposits partially offset by a decline in money market accounts as consumers shifted between these two account types. Brokered deposits also increased as a result of continued proactive management of our balance sheet position. The decrease in non-interest bearing demand deposits was primarily impacted by seasonal cash deployment of excess funds and continued pressures from the rate environment. Average deposit costs of 1.95% for the second quarter of 2023 increased 180 bps from the prior year comparable period primarily due to the impact of the FOMC's rate hikes of 350 bps from June 30, 2022 to June 30, 2023. Deposit costs were impacted by anticipated pricing lags on core interest-bearing deposits as well as the decline in non-interest-bearing demand deposits.

More detail on Synovus' financial results for the three and six months ended June 30, 2023 may be found in subsequent sections of "Item 2. – Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Report. See also "Part 1 – Item 1A. – Risk Factors" of Synovus' 2022 Form 10-K.

2023 Updated Guidance

Updated guidance(1) for the full year 2023, compared to 2022, includes changes in the operating environment that have impacted the banking industry over the past few months:

•Loan growth(2) of 0% to 2%

•Core deposit(3) growth of 1% to 4%

•Adjusted revenue(2)(4)(5) growth of 0% to 3%

•Adjusted non-interest expense(4)(5) growth of 4% to 6%

•Ending CET1 ratio of greater than 10% at year-end 2023

•Effective income tax rate of approximately 22%

(1) Includes the impact of the Qualpay transaction. See Note 1 - Basis of Presentation and Accounting Policies for additional discussion on Qualpay. Outside of loan growth, the ranges provided do not reflect the impact of the proposed FDIC special assessment nor the impact of the planned medical office loan sale. See Note 11 - Subsequent Events for additional information.

(2) Not adjusting for PPP loans or revenue given relatively immaterial impact to 2022 and 2023 forecasted results; assumes no incremental material loan sales outside of the planned third-party consumer sale.

(3) Excludes brokered deposits.

(4) See "Table 14 - Reconciliation of Non-GAAP Financial Measures” for applicable reconciliation to the most comparable GAAP measure.

(5) Guidance based on the 2022 baseline: adjusted revenue baseline of $2.21 billion and adjusted non-interest expense of $1.16 billion.

Changes in Financial Condition

During the six months ended June 30, 2023, total assets increased $924.2 million to $60.66 billion. Total loans increased $637.2 million, with commercial loan growth more than offsetting the $427.9 million move of third-party consumer loans to held for sale. Deposits increased $1.21 billion and resulted from increased time deposits partially offset by a decline in money market accounts as consumers shifted between these two account types. Brokered deposits also increased as a result of continued proactive management of our balance sheet position. The loan to deposit ratio was 88.6% at June 30, 2023 as compared to 89.5% at December 31, 2022. Other short-term borrowings decreased $601.9 million primarily as a result of maturities of short-term FHLB Advances.

Total Synovus Financial Corp. shareholders' equity at June 30, 2023 increased $306.7 million compared to December 31, 2022, driven by growth in retained earnings, which included net income attributable to Synovus Financial Corp. of $376.3 million partially offset by common and preferred stock dividends of $111.0 million and $16.6 million, respectively. The increase was also driven by a decrease in after-tax net unrealized losses on investment securities available for sale and cash flow hedges of $32.2 million and $14.8 million, respectively.

Loans

The following table compares the composition of the loan portfolio at June 30, 2023, December 31, 2022, and June 30, 2022.


Table 2 - Loans by Portfolio Class
									June 30, 2023 vs. December 31, 2022 Change								June 30, 2023 vs. June 30, 2022 Change
(dollars in thousands)	June 30, 2023				December 31, 2022								June 30, 2022
Commercial, financial and agricultural	$	14,166,890	31.9	%	$	13,874,416	31.8	%	$	292,474	2	%	$	13,018,089	31.6	%	$	1,148,801	9	%
Owner-occupied	8,364,342		18.9		8,192,240		18.7		172,102		2		7,760,236		18.8		604,106		8
Total commercial and industrial	22,531,232		50.8		22,066,656		50.5		464,576		2		20,778,325		50.4		1,752,907		8
Investment properties	12,270,266		27.7		11,644,047		26.6		626,219		5		10,408,048		25.3		1,862,218		18
1-4 family properties	615,726		1.4		616,933		1.4		(1,207)		—		641,855		1.6		(26,129)		(4)
Land and development	407,906		0.9		389,333		0.9		18,573		5		453,514		1.0		(45,608)		(10)
Total commercial real estate	13,293,898		30.0		12,650,313		28.9		643,585		5		11,503,417		27.9		1,790,481		16
Consumer mortgages	5,379,284		12.1		5,214,443		11.9		164,841		3		5,124,523		12.4		254,761		5
Home equity	1,773,987		4.0		1,757,038		4.0		16,949		1		1,579,218		3.9		194,769		12
Credit cards	187,677		0.4		203,612		0.5		(15,935)		(8)		194,290		0.5		(6,613)		(3)
Other consumer loans	1,187,459		2.7		1,824,291		4.2		(636,832)		(35)		2,025,007		4.9		(837,548)		(41)
Total consumer	8,528,407		19.2		8,999,384		20.6		(470,977)		(5)		8,923,038		21.7		(394,631)		(4)
Loans, net of deferred fees and costs	$	44,353,537	100.0	%	$	43,716,353	100.0	%	$	637,184	1	%	$	41,204,780	100.0	%	$	3,148,757	8	%

At June 30, 2023, loans, net of deferred fees and costs of $44.35 billion, increased $637.2 million from December 31, 2022. Growth in C&I loans has been diversified but tempered by slowing utilization and a strategic decline in syndicated loan-only relationships while CRE loan growth was a function of draws related to existing commitments and low levels of pay-offs. The decline in consumer loans was impacted by a $427.9 million move of third-party consumer loans to held for sale.

C&I loans remain the largest component of our loan portfolio, representing 50.8% of total loans, while CRE and consumer loans represent 30.0% and 19.2%, respectively. Our portfolio composition is guided by our strategic growth plan, in conjunction with a comprehensive concentration management policy which sets limits for C&I, CRE, and consumer loan levels as well as sub-categories therein.

Commercial Loans

Total commercial loans (which are comprised of C&I and CRE loans) at June 30, 2023 were $35.83 billion, or 80.8% of the total loan portfolio, compared to $34.72 billion, or 79.4%, at December 31, 2022.

Commercial and Industrial Loans

The C&I loan portfolio represents the largest category of Synovus' loan portfolio and is primarily comprised of general middle market and commercial banking clients across a diverse set of industries as well as certain specialized lending verticals. The following table shows the composition of the C&I loan portfolio aggregated by NAICS code. In accordance with Synovus' lending policy, each loan undergoes a detailed underwriting process, which incorporates uniform underwriting standards and

oversight in proportion to the size and complexity of the lending relationship. As of June 30, 2023, 94.8% of Synovus' C&I loans are secured by real estate, business equipment, inventory, and other types of collateral compared to 94.4% as of December 31, 2022. C&I loans at June 30, 2023 grew $464.6 million, or 2%, from December 31, 2022, and resulted from diverse growth across business lines and industries, led by the finance and insurance and healthcare and social assistance industries. C&I loan growth was also impacted by a reduction in same-line utilization as well as strategic decline from syndicated loan-only relationships.


Table 3 - Commercial and Industrial Loans by Industry
		June 30, 2023				December 31, 2022
(dollars in thousands)	NAICS Code	Amount		%(1)		Amount		%(1)
Health care and social assistance	62	$	4,971,391	22.1	%	$	4,815,229	21.8	%
Finance and insurance	52	3,936,002		17.5		3,726,279		16.9
Accommodation and food services	72	1,446,479		6.4		1,377,738		6.2
Manufacturing	31-33	1,404,656		6.2		1,465,395		6.6
Construction	23	1,174,654		5.2		1,112,135		5.0
Real estate and rental and leasing	5311	1,162,735		5.2		1,245,513		5.6
Wholesale trade	42	1,142,719		5.1		1,221,046		5.5
Retail trade	44-45	1,116,511		5.0		1,074,100		4.9
Professional, scientific, and technical services	54	936,573		4.2		944,939		4.3
Transportation and warehousing	48-49	926,071		4.1		892,479		4.0
Other services	81	910,461		4.0		929,777		4.2
Real estate other	53	779,812		3.5		788,457		3.6
Arts, entertainment, and recreation	71	542,290		2.4		476,534		2.2
Public administration	92	483,892		2.1		487,583		2.2
Other industries	(2)	443,222		1.8		353,492		1.7
Educational services	61	407,400		1.8		420,343		1.9
Administration, support, waste management, and remediation	56	289,433		1.3		253,459		1.2
Agriculture, forestry, fishing, and hunting	11	241,762		1.1		250,216		1.1
Information	51	215,169		1.0		231,942		1.1
Total commercial and industrial loans		$	22,531,232	100.0	%	$	22,066,656	100.0	%

(1) Loan balance in each category expressed as a percentage of total C&I loans.

(2) Comprised of NAICS industries that are less than 2% of total C&I loans.

At June 30, 2023, $14.17 billion of C&I loans, or 31.9% of the total loan portfolio, represented loans originated for the purpose of financing commercial, financial and agricultural business activities. The primary source of repayment on these loans is revenue generated from products or services offered by the business or organization. The secondary source of repayment is the collateral, which consists primarily of equipment, inventory, accounts receivable, time deposits, cash surrender value of life insurance, and other business assets.

At June 30, 2023, $8.36 billion of C&I loans, or 18.9% of the total loan portfolio, represented loans originated for the purpose of financing owner-occupied properties. The financing of owner-occupied facilities is considered a C&I loan even though there is improved real estate as collateral. This treatment is a result of the credit decision process, which focuses on cash flow from operations of the business to repay the debt. The secondary source of repayment on these loans is the underlying real estate. These loans are predominantly secured by owner-occupied and other real estate and, to a lesser extent, other types of collateral.

Commercial Real Estate Loans

CRE loans consist primarily of income-producing investment properties loans. Additionally, CRE loans include 1-4 family properties loans as well as land and development loans. Total CRE loans of $13.29 billion increased $643.6 million, or 5%, from December 31, 2022, particularly in the multi-family category, with growth arising from draws related to existing commitments and low levels of pay-off activity. CRE loan balances, specifically investment properties loans, will be impacted by the signing of a purchase and sale agreement in July 2023 to sell approximately $1.3 billion of medical office loans. See Note 11 - Subsequent Events for additional information.

Investment properties loans consist of construction and mortgage loans for income-producing properties and are primarily made to finance multi-family properties, hotels, office buildings (medical and non-medical), shopping centers, warehouses and other commercial development properties. Total investment properties loans as of June 30, 2023 were $12.27 billion, or 92.3% of the CRE loan portfolio, and increased $626.2 million, or 5%, from December 31, 2022, primarily due to growth in most sub-categories.

The following table shows the principal categories of the investment properties loan portfolio at June 30, 2023 and December 31, 2022.


Table 4 - Investment Properties Loan Portfolio
	June 30, 2023				December 31, 2022
(dollars in thousands)	Amount		% (1)		Amount		% (1)
Multi-Family	$	3,597,497	29.3	%	$	3,134,571	26.9	%
Hotels	1,771,381		14.4		1,708,194		14.7
Medical Office Buildings	1,527,195		12.4		1,561,957		13.4
Non-Medical Office Buildings	1,504,611		12.4		1,449,954		12.5
Shopping Centers	1,329,492		10.8		1,403,928		12.0
Warehouses	1,068,734		8.7		1,035,152		8.9
Other investment property	1,471,356		12.0		1,350,291		11.6
Total investment properties loans	$	12,270,266	100.0	%	$	11,644,047	100.0	%

(1) Loan balance in each category expressed as a percentage of total investment properties loans.

1-4 Family Properties Loans

1-4 family properties loans include construction loans to home builders and commercial mortgage loans related to 1-4 family rental properties and are almost always secured by the underlying property being financed by such loans. These properties are primarily located in the markets served by Synovus. At June 30, 2023, 1-4 family properties loans totaled $615.7 million, or 4.6% of the CRE loan portfolio, and decreased slightly from December 31, 2022.

Land and Development Loans

Land and development loans include commercial and residential development as well as land acquisition loans and are secured by land held for future development, typically in excess of one year. Properties securing these loans are substantially within markets served by Synovus, and loan terms generally include personal guarantees from the principals. Loans in this portfolio are underwritten based on the LTV of the collateral and the capacity of the guarantor(s). Land and development loans of $407.9 million at June 30, 2023 increased marginally from December 31, 2022.

Consumer Loans

The consumer loan portfolio consists of a wide variety of loan products offered through Synovus' banking network, including first and second residential mortgages, home equity and consumer credit card loans, as well as both secured and unsecured loans from third-party lending. As of June 30, 2023, weighted-average FICO scores within the residential real estate portfolio based on committed balances were 776 for consumer mortgages and 794 for home equity, consistent with year-end 2022 scores.

Consumer loans at June 30, 2023 of $8.53 billion decreased $471.0 million, or 5%, compared to December 31, 2022. Mortgage loans increased $164.8 million from December 31, 2022 largely due to seasonally higher production including our physician product. Other consumer loans decreased $636.8 million from December 31, 2022, primarily due to $427.9 million of third-party consumer loans that moved to held for sale in addition to strategic runoff of the third-party lending portfolio.

Deposits

Deposits provide the most significant funding source for interest earning assets. The following table shows the composition of period-end deposits as of the dates indicated. See Table 11 - Quarter-to-Date Net Interest Income and Rate/Volume Analysis

and Table 12 - Year-to-Date Net Interest Income and Rate/Volume Analysis in this Report for information on average deposits including average rates.


Table 5 - Composition of Period-end Deposits
(dollars in thousands)	June 30, 2023		%(1)		December 31, 2022		%(1)		June 30, 2022		%(1)
Non-interest-bearing demand deposits(2)	$	12,945,531	25.9	%	$	14,574,451	29.8	%	$	15,781,109	32.2	%
Interest-bearing demand deposits(2)	6,255,319		12.5		5,762,302		11.8		6,327,060		12.9
Money market accounts(2)	10,803,670		21.6		12,479,762		25.5		13,793,019		28.1
Savings deposits(2)	1,222,854		2.4		1,396,431		2.9		1,498,727		3.0
Public funds	7,031,410		14.0		6,635,552		13.6		5,863,899		12.0
Time deposits(2)	5,291,840		10.6		2,724,056		5.6		2,147,769		4.4
Brokered deposits	6,529,768		13.0		5,299,005		10.8		3,623,117		7.4
Total deposits	$	50,080,392	100.0	%	$	48,871,559	100.0	%	$	49,034,700	100.0	%
Core deposits(3)	$	43,550,624	87.0	%	$	43,572,554	89.2	%	$	45,411,583	92.6	%

Brokered time deposits	$	4,006,156	8.0	%	$	3,330,946	6.8	%	$	2,314,488	4.7	%
Public funds time deposits	$	287,530	0.6	%	$	240,022	0.5	%	$	611,070	1.2	%

(1) Deposits balance in each category expressed as percentage of total deposits.

(2) Excluding any public funds or brokered deposits.

(3) Core deposits exclude brokered deposits.

Average deposit costs of 1.95% for the second quarter of 2023, which equate to a cycle-to-date total deposit beta of 37% through the second quarter of 2023, increased 51 bps and 180 bps, from the prior quarter and prior year comparable period, respectively, primarily due to the impact of the FOMC's rate hikes of 25 bps during the second quarter of 2023 and 350 bps from June 30, 2022 to June 30, 2023. Deposit costs and betas were impacted by anticipated pricing lags on core interest-bearing deposits as well as the decline in non-interest-bearing demand deposits. We continue to expect further upward pressure on deposit costs and our expectations for through-the-cycle total deposit betas, which we now believe will end the year in the 46%-48% range.

As of June 30, 2023 and December 31, 2022, $22.75 billion and $23.88 billion, respectively, of our deposit portfolio was uninsured, which represents approximately 45% and 49%, respectively, of total deposits. The uninsured amounts are estimated based on the methodologies and assumptions used for the Bank's regulatory reporting requirements. At June 30, 2023, approximately 87% of our deposits are either insured (55%), collateralized (14%), or could be insured by switching to our insured cash sweep program, which has existing capacity (18%).

Non-interest Revenue

The following table shows the principal components of non-interest revenue.


Table 6 - Non-interest Revenue
	Three Months Ended June 30,								Six Months Ended June 30,
(dollars in thousands)	2023		2022		$ Change		% Change		2023		2022		$ Change		% Change
Service charges on deposit accounts	$	23,477	$	23,491	$	(14)	—	%	$	46,451	$	46,030	$	421	1	%
Fiduciary and asset management fees	20,027		20,100		(73)		—		39,723		40,377		(654)		(2)
Card fees	17,059		16,089		970		6		32,884		30,846		2,038		7
Brokerage revenue	20,908		15,243		5,665		37		43,466		29,898		13,568		45
Mortgage banking income	4,609		3,904		705		18		8,467		9,857		(1,390)		(14)
Capital markets income	6,975		7,393		(418)		(6)		20,700		12,864		7,836		61
Income from bank-owned life insurance	6,878		9,165		(2,287)		(25)		14,140		15,722		(1,582)		(10)
Insurance revenue	2,002		2,564		(562)		(22)		4,187		3,983		204		5
Investment securities gains (losses), net	—		—		—		nm		1,030		—		1,030		nm
Recovery of NPA	—		—		—		nm		13,126		—		13,126		nm
Other non-interest revenue	10,341		(683)		11,024		nm		21,228		13,023		8,205		63
Total non-interest revenue	$	112,276	$	97,266	$	15,010	15	%	$	245,402	$	202,600	$	42,802	21	%

Core banking fees (1)	$	46,869	$	45,483	$	1,386	3	%	$	92,930	$	90,887	$	2,043	2	%
Wealth revenue (2)	$	42,937	$	37,907	$	5,030	13	%	$	87,376	$	74,258	$	13,118	18	%

(1) Core banking fees consist of service charges on deposit accounts, card fees, and several other non-interest revenue components including letter of credit fees, ATM fee income, line of credit non-usage fees, gains (losses) from sales of SBA loans, and miscellaneous other service charges.

(2) Consists of fiduciary and asset management, brokerage, and insurance revenue.

Three and Six Months Ended June 30, 2023 compared to June 30, 2022

Service charges on deposit accounts, consisting of account analysis fees, NSF fees, and all other service charges remained relatively flat. The largest category of service charges, account analysis fees, increased $720 thousand, or 7%, compared to the second quarter of 2022 and increased $1.3 million, or 7%, on a comparable year-to-date basis. NSF/overdraft fees were down $1.4 million, or 18%, and $1.8 million, or 12%, on a quarter-to-date and year-to-date basis, respectively, compared to the prior year. We expect this downward trend in NSF/overdraft fees to continue. All other service charges on deposit accounts, which consist primarily of monthly fees on consumer demand deposits and small business accounts, for the three and six months ended June 30, 2023 were up $650 thousand, or 11%, and $920 thousand, or 8%, respectively, compared to the same periods in 2022.

Fiduciary and asset management fees are derived from providing estate administration, personal trust, corporate trust, corporate bond, investment management, financial planning, and family office services. Fiduciary and asset management fees remained steady despite volatility in the equity markets.

Card fees consist primarily of credit card interchange fees, debit card interchange fees, and merchant revenue. Card fees are reported net of certain associated expense items, including client loyalty program expenses and network expenses. Merchant revenue relates to the fees that are charged to merchant clients based on a percentage of their credit or debit card transaction volume amounts. Card fees for the three and six months ended June 30, 2023 were up primarily due to increased merchant revenue resulting from higher sales transaction volumes and new merchants being added in addition to higher credit card transaction volumes from elevated commercial/small business spend activity and account growth.

Brokerage revenue consists primarily of brokerage commissions as well as advisory fees earned from the management of client assets. Brokerage revenue for the three and six months ended June 30, 2023 increased significantly over the prior year comparable periods, benefiting largely from client activity, including movement into short-term liquidity products such as repurchase agreements due to the rate environment.

Mortgage banking income, consisting of net gains on loan origination/sales activities, was higher for the three months ended June 30, 2023, compared to the same period in 2022, primarily due to a favorable change in the mark-to-market partially offset by a $84.2 million, or 37%, decline in loan sales. Mortgage banking income declined on a year-to-date basis primarily as a result of a $180.8 million, or 41%, decrease in loan sales compared to the same period in 2022. Secondary market production was $164.1 million for the three months ended June 30, 2023, a decline of $36.0 million, or 18%, compared to the second quarter of 2022 while year-to-date, it was $269.9 million, a $151.2 million, or 36%, decline compared to the prior year.

Capital markets income primarily includes fee income from client derivative transactions, as well as fee income from debt capital market transactions and foreign exchange. The decline in the second quarter of 2023 compared to the second quarter of 2022 primarily resulted from a $2.4 million decrease in fees on client derivative transactions somewhat offset by a $1.6 million increase in loan syndication arranger fees, while the year-to-date increase was driven by $6.2 million higher loan syndication arranger fees and $777 thousand higher fee income from debt capital market transactions.

Income from BOLI includes increases in the cash surrender value of policies and proceeds from insurance contracts. The decrease for the three and six months ended June 30, 2023 primarily related to $2.5 million in proceeds from insurance benefits in the second quarter of 2022.

The main components of other non-interest revenue are fees for letters of credit and unused lines of credit, safe deposit box fees, access fees for ATM use, other service charges and loan servicing fees, gains (losses) from sales of SBA loans, and other miscellaneous items. The three and six months ended June 30, 2023 comparative period increase was primarily due to the $7.0 million write-down on a minority fintech investment recorded in the second quarter of 2022 and an increase in the fair value of non-qualified deferred compensation plan assets of $4.8 million and $7.5 million, respectively.

Non-interest Expense

The following table summarizes the components of non-interest expense.


Table 7 - Non-interest Expense
	Three Months Ended June 30,								Six Months Ended June 30,
(dollars in thousands)	2023		2022		$ Change		% Change		2023		2022		$ Change		% Change
Salaries and other personnel expense	$	183,001	$	161,063	$	21,938	14	%	$	371,926	$	325,747	$	46,179	14	%
Net occupancy, equipment, and software expense	42,785		43,199		(414)		(1)		85,645		86,076		(431)		(1)
Third-party processing and other services	21,659		21,952		(293)		(1)		43,493		42,947		546		1
Professional fees	9,597		10,865		(1,268)		(12)		18,560		19,338		(778)		(4)
FDIC insurance and other regulatory fees	11,162		6,894		4,268		62		21,429		13,144		8,285		63
Amortization of intangibles	2,420		2,118		302		14		4,277		4,236		41		1
Restructuring charges (reversals)	(110)		(1,850)		1,740		(94)		(843)		(8,274)		7,431		(90)
Valuation adjustment to Visa derivative	3,027		3,500		(473)		(14)		3,027		3,500		(473)		(14)
(Gain) loss on early extinguishment of debt	(377)		—		(377)		nm		(377)		677		(1,054)		(156)

Loss on other loans held for sale	2,360		—		2,360		nm		19,110		—		19,110		—
Other operating expense	31,657		34,310		(2,653)		(8)		62,787		67,110		(4,323)		(6)
Total non-interest expense	$	307,181	$	282,051	$	25,130	9	%	$	629,034	$	554,501	$	74,533	13	%

Three and Six Months Ended June 30, 2023 compared to June 30, 2022

Salaries and other personnel expense increased for the three and six months ended June 30, 2023 primarily due to the impacts of merit and inflationary wage increases, headcount additions, employee healthcare costs, and an increase in the fair value of the non-qualified deferred compensation liability (offset in non-interest revenue). Total headcount of 5,179 was up by 88, or 2%, compared to June 30, 2022 primarily as a result of additions in areas associated with revenue growth and certain critical support functions partially offset by strategic reductions in areas primarily impacted by production volume declines.

Professional fees were down for the three months ended June 30, 2023 mostly due to lower consulting fees largely related to strategic and infrastructure investments while for the six months ended June 30, 2023, the decrease was mostly due to lower legal fees from credit-related items compared to the same periods in 2022.

FDIC insurance and other regulatory fees increased significantly for the three and six months ended June 30, 2023, largely due to the industry-wide 2 bps increase in the deposit insurance initial base assessment rate that began in the first quarter of 2023. In addition, asset growth contributed to a higher assessment base compared to the prior year periods. On May 22, 2023, the FDIC published its proposed rule to charge certain banks a special assessment to cover losses incurred by the Deposit Insurance Fund (DIF) due to bank failures in March 2023. The rule proposes a special assessment at an annual rate of 12.5 bps on a bank's uninsured deposits balance, in excess of $5 billion, as of December 31, 2022, payable in eight quarterly installments beginning in the first quarter of 2024. If the rule is finalized as proposed, we expect to record an expense and corresponding liability of approximately $47 million upon the enactment date, which is the date the final rule is published in the Federal Register.

During the three and six months ended June 30, 2023, Synovus recorded restructuring charges (reversals) including $1.9 million and $3.3 million, respectively, in gains on the sale of branches previously closed, partially offset by $1.7 million and $2.1 million, respectively, of severance. During the three months ended June 30, 2022, Synovus recorded $3.0 million in gains on sales of five closed branches partially offset by restructuring charges associated with additional branch closures. During the six months ended June 30, 2022, Synovus recorded $12.1 million in gains largely relating to the sale of real estate facilities in Columbus, Georgia in addition to gains on sales of closed branches, partially offset by restructuring charges associated with additional branch closures.

During the three months ended June 30, 2023 and 2022, Synovus recorded valuation adjustments of $3.0 million and $3.5 million, respectively, to the Visa derivative following Visa's announcement to fund $500 million and $600 million, respectively, to its litigation escrow account.

During the three months ended June 30, 2023, Synovus Bank repurchased $4.6 million of its 5.90% Fixed-to-Floating Rate Subordinated Notes of $300 million par value on the open market and incurred a $377 thousand gain on this early extinguishment of debt. On February 10, 2022, Synovus Bank redeemed all of its 2.289% Fixed-to-Floating Rate Senior Bank Notes of $400 million par value and incurred a $677 thousand loss on early extinguishment of debt.

During the three and six months ended June 30, 2023, Synovus recorded losses of $2.4 million and $19.1 million, respectively, associated with fair value adjustments on other loans held for sale due to the transfer of third-party consumer loans to held for sale. See Note 3 - Loans and Allowance for Loan Losses for further discussion.

Other operating expense includes advertising, travel, insurance, network and communication, other taxes, subscriptions and dues, other loan and ORE expense, postage and freight, training, business development, supplies, donations, and other miscellaneous expense. Other operating expense was down for the three and six months ended June 30, 2023 largely due to decreased loan expense from lower production. Year-to-date other operating expense was also impacted by the reversal of a $2.7 million impairment charge related to Qualpay recorded in the first quarter of 2023.

Income Tax Expense

Income tax expense was $47.8 million for the three months ended June 30, 2023, compared to $49.9 million for the three months ended June 30, 2022, representing effective tax rates of 21.6% and 21.9%, respectively. Income tax expense was $105.5 million for the six months ended June 30, 2023, compared to income tax expense of $92.6 million for the six months ended June 30, 2022, representing effective tax rates of 21.9% and 21.0%, respectively. The effective tax rate was higher for the six months ended June 30, 2023, primarily due to a decrease in net discrete tax benefits, including share-based compensation and changes in other tax reserves, compared to the prior period, partly offset by an increase in benefits from tax credit investments.

CREDIT QUALITY, CAPITAL RESOURCES AND LIQUIDITY

Credit Quality

Synovus diligently monitors the quality of its loan portfolio by industry, property type, and geography through a thorough portfolio review process and our analytical risk management tools. At June 30, 2023, credit metrics included NPAs and NPLs both at 59 bps and total past dues at 19 bps, as a percentage of total loans. Net charge-offs were $26.4 million, or 24 bps annualized, and $44.9 million, or 20 bps annualized, respectively, for the three and six months ended June 30, 2023, and included $1.3 million and $7.9 million, respectively, for the three and six months ended June 30, 2023, related to the third-party consumer loans moved to held for sale. As we look to the second half of 2023, we expect a net charge-off ratio range of 30-40 bps, which would result in a 2023 net charge-off ratio range of 25-30 bps.

The table below includes selected credit quality metrics.


Table 8 - Credit Quality Metrics
(dollars in thousands)	June 30, 2023			December 31, 2022			June 30, 2022
Non-performing loans	$	261,506		$	128,061		$	109,024
ORE and other assets	—			15,320			26,759
Non-performing assets	$	261,506		$	143,381		$	135,783
Total loans	$	44,353,537		$	43,716,353		$	41,204,780
Non-performing loans as a % of total loans	0.59		%	0.29		%	0.26		%
Non-performing assets as a % of total loans, ORE, and specific other assets	0.59			0.33			0.33
Loans 90 days past due and still accruing	$	3,643		$	3,373		$	2,251
As a % of total loans	0.01		%	0.01		%	0.01		%
Total past due loans and still accruing	$	84,946		$	65,568		$	56,160
As a % of total loans	0.19		%	0.15		%	0.14		%
Net charge-offs, quarter	$	26,396		13,300			$	16,565
Net charge-offs/average loans, quarter	0.24		%	0.12		%	0.16		%
Net charge-offs, year-to-date	$	44,946		$	53,156		$	35,174
Net charge-offs/average loans, year-to-date	0.20		%	0.13		%	0.18		%


Provision for (reversal of) loan losses, quarter	$	40,624		$	35,366		$	9,446
Provision for (reversal of) unfunded commitments, quarter	(1,743)			(482)			3,242
Provision for (reversal of) credit losses, quarter	$	38,881		$	34,884		$	12,688
Provision for (reversal of) loan losses, year-to-date	72,760			68,983			15,414
Provision for (reversal of) unfunded commitments, year-to-date	(1,725)			15,570			8,674
Provision for (reversal of) credit losses, year-to-date	71,035			84,553			24,088



Allowance for loan losses	$	471,238		$	443,424		$	407,837
Reserve for unfunded commitments	55,729			57,455			50,559
Allowance for credit losses	$	526,967		$	500,879		$	458,396
ACL to loans coverage ratio	1.19		%	1.15		%	1.11		%
ALL to loans coverage ratio	1.06			1.01			0.99
ACL/NPLs	201.51			391.13			420.45
ALL/NPLs	180.20			346.26			374.08

Non-performing Assets

Total NPAs were $261.5 million at June 30, 2023, a $118.1 million, or 82%, increase from December 31, 2022 primarily due to the designation of several large commercial relationships as non-performing, which are reserved and collateralized. Our analysis of these new non-performing relationships does not suggest a pattern of systemic risk within specific industries or geographies.

Criticized and Classified Loans

Our loan ratings are aligned to federal banking regulators' definitions of pass and criticized categories, which include special mention, substandard, doubtful, and loss. Substandard accruing and non-accruing loans, doubtful, and loss loans are often collectively referred to as classified. Special mention, substandard, doubtful, and loss loans are often collectively referred to as criticized and classified loans. The following table presents a summary of criticized and classified loans. Criticized and classified loans at June 30, 2023 were 3.0% of total loans, or $1.33 billion, up $390.6 million as compared to 2.2% of total loans, or $942.1 million, at December 31, 2022, primarily due to the migration of several commercial credits.


Table 9 - Criticized and Classified Loans
(dollars in thousands)	June 30, 2023			December 31, 2022
Special mention	$	542,905		$	312,921
Substandard	719,965			626,266
Doubtful	49,738			—
Loss	20,102			2,884
Criticized and Classified loans	$	1,332,710		$	942,071
As a % of total loans	3.0		%	2.2		%

Provision for (Reversal of) Credit Losses and Allowance for Credit Losses

The provision for credit losses was $38.9 million and $71.0 million, respectively, for the three and six months ended June 30, 2023, compared to a provision of $12.7 million and $24.1 million, respectively, for the three and six months ended June 30, 2022. The increases were predominantly driven by changes in forecasted economic factors within the ACL model and increased net charge-offs. Net charge offs for the three and six months ended June 30, 2023 were $26.4 million and $44.9 million, respectively, as compared to $16.6 million and $35.2 million, respectively, for the three and six months ended June 30, 2022.

The ALL of $471.2 million and the reserve for unfunded commitments of $55.7 million, which is recorded in other liabilities, comprise the total ACL of $527.0 million at June 30, 2023. The ACL increased $26.1 million compared to the December 31, 2022 ACL of $500.9 million, which consisted of an ALL of $443.4 million and the reserve for unfunded commitments of $57.5 million. The ACL to loans coverage ratio of 1.19% at June 30, 2023 increased 4 bps as compared to December 31, 2022. The increase in the ACL from December 31, 2022 resulted primarily from deterioration in economic factors and increased specific reserves.

Capital Resources

Synovus and Synovus Bank are required to comply with capital adequacy standards established by our primary federal regulator, the Federal Reserve. Synovus and Synovus Bank measure capital adequacy using the standardized approach under Basel III. At June 30, 2023, Synovus and Synovus Bank's capital levels remained strong and exceeded well-capitalized

requirements currently in effect. The following table presents certain ratios used to measure Synovus and Synovus Bank's capitalization.


Table 10 - Capital Ratios
(dollars in thousands)	June 30, 2023			December 31, 2022
CET1 capital
Synovus Financial Corp.	$	5,133,546		$	4,926,194
Synovus Bank	5,632,300			5,446,703
Tier 1 risk-based capital
Synovus Financial Corp.	5,670,691			5,463,339
Synovus Bank	5,632,300			5,446,703
Total risk-based capital
Synovus Financial Corp.	6,664,033			6,415,681
Synovus Bank	6,308,581			6,079,152
CET1 capital ratio
Synovus Financial Corp.	9.86		%	9.63		%
Synovus Bank	10.83			10.66
Tier 1 risk-based capital ratio
Synovus Financial Corp.	10.89			10.68
Synovus Bank	10.83			10.66
Total risk-based capital to risk-weighted assets ratio
Synovus Financial Corp.	12.80			12.54
Synovus Bank	12.13			11.89
Leverage ratio
Synovus Financial Corp.	9.23			9.07
Synovus Bank	9.17			9.06

At June 30, 2023, Synovus' CET1 ratio of 9.86% improved 23 bps compared to December 31, 2022, as our organic earnings profile continues to support capital accretion, which along with a somewhat slower pace of loan growth, was more than sufficient to offset marginal headwinds from the Qualpay acquisition. See Note 1 - Basis of Presentation and Accounting Policies for additional discussion on Qualpay. As we look ahead, we remain focused on eclipsing the 10% CET1 ratio threshold, at which time we intend to re-assess the broader macro-economic environment and consider what actions, if any, may be prudent as we diligently manage our capital position. For additional information on regulatory capital requirements, see "Part II - Item 8. Financial Statements and Supplementary Data - Note 10 - Regulatory Capital" to the consolidated financial statements of Synovus' 2022 Form 10-K. Management reviews the Company's capital position on an on-going basis and believes, based on internal capital analyses and earnings projections, that Synovus is well positioned to meet relevant regulatory capital standards.

On January 18, 2023, Synovus announced that its Board of Directors approved a capital plan that included a $0.04 increase in the quarterly common stock dividend to $0.38 per share, beginning with the quarterly dividend payable in April 2023, and authorized share repurchases of up to $300 million in 2023. Synovus has not repurchased any shares in the first or second quarters of 2023, and in light of the uncertain economic environment, in the near-term, we will continue to focus on retaining and growing capital.

On August 26, 2020, the federal banking regulators issued a final rule that allowed electing banking organizations that adopted CECL during 2020 to mitigate the estimated effects of CECL on regulatory capital for two years, followed by a three-year phase-in transition period. Synovus adopted CECL on January 1, 2020 and the June 30, 2023 regulatory capital ratios reflect Synovus' election of the five-year transition provision. At June 30, 2023, $29.2 million, or a cumulative 6 bps benefit to CET1, was deferred.

Dividends

Synovus has historically paid a quarterly cash dividend to the holders of its common stock. Management and the Board of Directors closely monitor current and projected capital levels, liquidity (including dividends from subsidiaries), financial markets and other economic trends, as well as regulatory requirements regarding the payment of dividends.

Synovus' ability to pay dividends on its common stock and preferred stock is primarily dependent upon dividends and distributions that it receives from its bank and non-banking subsidiaries, which are restricted by various regulations administered by federal and state bank regulatory authorities.

Synovus declared common stock dividends of $111.0 million, or $0.76 per common share, for the six months ended June 30, 2023, compared to $98.9 million, or $0.68 per common share, for the six months ended June 30, 2022. In addition, Synovus declared dividends on its preferred stock of $16.6 million during both the six months ended June 30, 2023 and 2022.

Liquidity

Liquidity represents the extent to which Synovus has readily available sources of funding to meet the needs of depositors, borrowers and creditors, to support asset growth, and to otherwise sustain operations of Synovus and its subsidiaries, at a reasonable cost, on a timely basis, and without adverse consequences. ALCO monitors Synovus' economic, competitive, and regulatory environment and is responsible for measuring, monitoring, and reporting on liquidity and funding risk as well as market risk.

In accordance with Synovus policies and regulatory guidance, ALCO evaluates contractual and anticipated cash flows under normal and stressed conditions to properly manage the Company’s liquidity profile. Synovus places an emphasis on maintaining numerous sources of current and contingent liquidity to meet its obligations to depositors, borrowers, and creditors on a timely basis. Liquidity is generated through various sources, including, but not limited to, maturities and repayments of loans by clients, maturities and sales of investment securities, and growth in core and wholesale deposits.

Synovus Bank also generates liquidity through the issuance of brokered certificates of deposit and money market accounts. Synovus Bank accesses funds from a broad geographic base to diversify its sources of funding and liquidity. Synovus Bank also has the capacity to access funding through its membership in the FHLB system and through the Federal Reserve discount window. Management continuously monitors and maintains appropriate levels of liquidity so as to provide adequate funding sources to manage client deposit withdrawals, loan requests, and other funding demands.

Synovus has maintained stable core deposit balances as compared to December 31, 2022. Time deposits increased $2.57 billion, partially offset by a $1.68 billion decline in money market accounts as consumers shifted between these two account types. A $1.63 billion decrease in non-interest bearing demand deposits was primarily impacted by seasonal cash deployment of excess funds and continued pressures from the rate environment. Synovus continues to proactively manage its liquidity position, which has included adding brokered deposits, and robust contingent liquidity is maintained across a diverse set of sources which include immediately available funds as well as funds we expect to be available within short notice. Contingent liquidity sources include primary sources such as FHLB borrowing capacity, FRB cash reserves, and third-party consumer loans, which includes our decision to sell loans from this portfolio and strategic runoff, while secondary sources consist of the Federal Reserve discount window, Fed Funds lines, and other sources like the FRB's Bank Term Funding Program. At June 30, 2023, contingent sources of liquidity totaled approximately $26 billion, and based on currently pledged collateral, Synovus Bank had access to FHLB funding of $5.93 billion, subject to FHLB credit policies.

In addition to bank level liquidity management, Synovus must manage liquidity at the Parent Company level for various operating needs, including the servicing of debt, the payment of dividends on our common stock and preferred stock, payment of general corporate expense, and potential capital infusions into subsidiaries. The primary source of liquidity for Synovus consists of dividends from Synovus Bank, which is governed by certain rules and regulations of the GA DBF and the Federal Reserve Bank. Synovus' ability to receive dividends from Synovus Bank in future periods will depend on a number of factors, including, without limitation, Synovus Bank's future profits, asset quality, liquidity, and overall condition. In addition, both the GA DBF and Federal Reserve Bank may require approval to pay dividends, based on certain regulatory statutes and limitations.

On February 15, 2023, Synovus Bank issued $500 million aggregate principal amount of 5.625% Senior Bank Notes due 2028, and the Notes will mature on February 15, 2028. The Notes will bear interest at 5.625% per annum, payable semiannually in arrears on each February 15 and August 15, beginning on August 15, 2023. Synovus Bank may not redeem the Notes prior to August 15, 2023. The redemption price for any redemption in whole or in part, at our option, on or after August 15, 2023, and prior to January 15, 2028, is equal to the greater of: (1) (a) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date (assuming the Notes matured on January 15, 2028) on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 30 basis points less (b) interest accrued to the date of redemption, and (2) 100% of the principal amount of the Notes to be redeemed, plus, in either case, accrued and unpaid interest thereon to the redemption date. The redemption price for any redemption after January 15, 2028 is 100% of the principal amount of the Notes, plus accrued and unpaid interest thereon to the redemption date. The Notes are not redeemable at the option or election of holders.

During the second quarter of 2023, Synovus Bank repurchased $4.6 million of its 5.90% Fixed-to-Floating Rate Subordinated Notes of $300 million par value on the open market and incurred a $377 thousand gain on early extinguishment of

debt. The Company may continue to redeem debt as it deems appropriate and as permitted per regulatory approvals if so required and compliance with laws.

Synovus presently believes that the sources of liquidity discussed above, including existing liquid funds on hand, are sufficient to meet its anticipated funding needs. See "Part II – Item 1A. Risk Factors - Recent negative developments in the banking industry could adversely affect our current and projected business operations and our financial condition and results of operations" of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 and "Part I – Item 1A. Risk Factors - Changes in the cost and availability of funding due to changes in the deposit market and credit market may adversely affect our capital resources, liquidity and financial results" of Synovus' 2022 Form 10-K. Furthermore, Synovus may, from time to time, take advantage of attractive market opportunities to refinance, retire, or repurchase its existing debt, redeem its preferred stock, or strengthen its liquidity or capital position.

Earning Assets and Sources of Funds

Average total assets for the six months ended June 30, 2023 increased $3.63 billion, or 6%, as compared to the first six months of 2022. Average earning assets increased $4.01 billion, or 8%, in the first six months of 2023 compared to the same period in 2022. The increase in average earning assets primarily resulted from a $3.97 billion, or 10%, increase in average total loans, net of unearned income, primarily attributable to growth in commercial loans from draws on existing commitments, increased line utilization, and low levels of pay-offs.

Average interest-bearing liabilities increased $5.75 billion, or 17%, for the first six months of 2023 compared to the same period in 2022. The increase in average interest-bearing liabilities largely resulted from a $3.12 billion increase in brokered deposits, a $2.56 billion increase in long-term debt, a $1.32 billion increase in time deposits, and a $818.7 million increase in other short-term borrowings, partially offset by a $1.76 billion decrease in money market accounts. The increase in brokered deposits, long-term debt and other short-term borrowings, from FHLB advances, was largely due to the ongoing management of our liquidity position which also included the February 2023 issuance of $500.0 million par value 2028 Synovus Bank Senior Notes. The increase in time deposits and decrease in money market accounts were correlated as consumers have shifted between these two account types. Average non-interest-bearing deposits decreased $2.29 billion, or 14%, for the first six months of 2023 compared to the same period in 2022 primarily due to the continued pressures from the rate environment and client deployment of excess funds.

On a sequential quarter basis, net interest income was down $25.2 million, or 5%, impacted by higher deposit costs. Net interest margin for the second quarter was 3.20%, down 23 bps compared to the first quarter of 2023, as the asset side of our balance sheet continued to benefit from higher balances and rates, but higher deposit pricing combined with remixing within our non-interest-bearing deposits resulted in margin compression. We expect net interest margin in the third quarter of 2023 to continue to contract at a pace similar to or less than that experienced in the second quarter of 2023, followed by some relative stabilization thereafter as deposit pricing lags and non-interest-bearing deposits remixing slows. Against those diminishing headwinds should be the gradual benefit which accrues to the net interest margin from fixed rate repricing, which has a compounding effect and should support the net interest margin through time assuming this higher rate environment remains.

Net Interest Income and Rate/Volume Analysis

The following tables set forth the major components of net interest income and the related annualized yields and rates for the three and six months ended June 30, 2023 and 2022, as well as the variances between the periods caused by changes in interest rates versus changes in volume.




Table 11 - Quarter-to-Date Net Interest Income and Rate/Volume Analysis
	Three Months Ended June 30,												2023 Compared to 2022
	2023						2022						Change due to (1)
(dollars in thousands)	Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate		Volume		Yield/ Rate		Increase (Decrease)
Assets
Interest earning assets:
Commercial loans (2) (3)	$	35,628,637	$	566,823	6.38	%	$	31,870,387	$	308,442	3.88	%	$	36,355	$	222,026	$	258,381
Consumer loans (2)	8,470,478		104,545		4.94		8,720,488		83,826		3.86		(2,406)		23,125		20,719
Less: Allowance for loan losses	(466,700)		—		—		(415,372)		—		—		—		—		—
Loans, net	43,632,415		671,368		6.17		40,175,503		392,268		3.92		33,949		245,151		279,100
Investment securities available for sale	11,200,717		60,421		2.16		11,153,091		50,312		1.81		215		9,894		10,109
Trading account assets	21,328		309		5.80		11,987		73		2.44		57		179		236
Other earning assets(4)	1,446,425		18,081		4.95		813,028		1,660		0.81		1,263		15,158		16,421
FHLB and Federal Reserve Bank stock	280,248		4,301		6.14		179,837		1,820		4.05		1,014		1,467		2,481
Mortgage loans held for sale	54,603		852		6.24		85,299		921		4.32		(331)		262		(69)
Other loans held for sale	546,224		4,949		3.58		725,762		7,678		4.19		(1,876)		(853)		(2,729)
Total interest earning assets	57,181,960		$	760,281	5.33	%	53,144,507		$	454,732	3.43	%	34,291		271,258		305,549
Cash and due from banks	646,066						538,647
Premises and equipment	369,039						385,457
Other real estate	—						11,439
Cash surrender value of bank-owned life insurance	1,095,866						1,077,231
Other assets(5)	1,222,146						1,379,659
Total assets	$	60,515,077					$	56,536,940
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits	$	9,891,375	$	41,803	1.70	%	$	9,513,334	$	3,598	0.15	%	$	141	$	38,064	$	38,205
Money market accounts	13,468,210		85,397		2.54		15,328,395		6,850		0.18		(835)		79,382		78,547
Savings deposits	1,276,040		281		0.09		1,506,195		72		0.02		(11)		220		209
Time deposits	4,866,221		39,551		3.26		2,829,684		1,688		0.24		1,219		36,644		37,863
Brokered deposits	6,342,751		74,748		4.73		2,878,536		6,293		0.88		7,600		60,855		68,455
Federal funds purchased and securities sold under repurchase agreements	88,591		351		1.57		246,737		219		0.35		(138)		270		132
Other short-term borrowings	455,050		5,566		4.84		480,999		896		0.74		(48)		4,718		4,670
Long-term debt	3,821,126		55,915		5.82		878,413		8,768		3.99		29,273		17,874		47,147
Total interest-bearing liabilities	40,209,364		$	303,612	3.03	%	33,662,293		$	28,384	0.33	%	$	37,201	$	238,027	$	275,228
Non-interest-bearing demand deposits	13,874,482						16,959,850
Other liabilities	1,556,863						1,245,116
Total equity	4,874,368						4,669,681
Total liabilities and shareholders' equity	$	60,515,077					$	56,536,940
Net interest income and net interest margin, taxable equivalent (6)			$	456,669	3.20	%			$	426,348	3.22	%	$	(2,910)	$	33,231	$	30,321
Less: taxable-equivalent adjustment			1,138						960
Net interest income			$	455,531					$	425,388

(1) Changes in rate/volume will equal the increase/ (decrease) in interest income/expense.

(2) Average loans are shown net of unearned income. NPLs are included. Interest income includes fees as follows: 2023 - $11.3 million, 2022 - $13.0 million.

(3) Reflects taxable-equivalent adjustments, using the statutory federal income tax rate of 21%, in adjusting interest on tax-exempt loans to a taxable-equivalent basis.

(4) Includes interest-bearing funds with Federal Reserve Bank, interest earning deposits with banks, and federal funds sold and securities purchased under resale agreements.

(5) Includes average net unrealized gains (losses) on investment securities available for sale of $(1.46) billion and $(923.1) million for the three months ended June 30, 2023 and 2022, respectively.

(6) The net interest margin is calculated by dividing annualized net interest income - TE by average total interest earnings assets.




Table 12 - Year-to-Date Net Interest Income and Rate/Volume Analysis
	Six Months Ended June 30,												2023 Compared to 2022
	2023						2022						Change due to (1)
(dollars in thousands)	Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate		Volume		Rate		Increase (Decrease)
Assets
Interest earning assets:
Commercial loans (2) (3)	$	35,331,375	$	1,093,352	6.24	%	$	31,316,646	$	589,029	3.79	%	$	75,454	$	428,869	$	504,323
Consumer loans (2)	8,615,748		208,693		4.87		8,657,598		165,194		3.83		(795)		44,294		43,499
Less: Allowance for loan losses	(456,005)		—		—		(419,639)		—		—		—		—		—
Loans, net	43,491,118		1,302,045		6.03		39,554,605		754,223		3.84		74,659		473,163		547,822
Investment securities available for sale	11,247,080		121,475		2.16		11,206,150		97,562		1.74		353		23,560		23,913
Trading account assets	16,360		434		5.30		10,540		112		2.13		61		261		322
Other earning assets(4)	1,479,926		35,292		4.74		1,363,223		2,475		0.36		202		32,615		32,817
FHLB and Federal Reserve Bank stock	293,518		7,656		5.22		170,006		2,505		2.95		1,807		3,344		5,151
Mortgage loans held for sale	45,600		1,418		6.22		94,542		1,803		3.81		(925)		540		(385)
Other loans held for sale	495,240		9,960		4.00		661,768		12,978		3.90		(3,221)		203		(3,018)
Total interest earning assets	57,068,842		$	1,478,280	5.22	%	53,060,834		$	871,658	3.31	%	72,936		533,686		606,622
Cash and due from banks	644,791						543,638
Premises and equipment	369,654						392,079
Other real estate	—						11,598
Cash surrender value of bank-owned life insurance	1,093,486						1,074,076
Other assets(5)	1,148,600						1,613,313
Total assets	$	60,325,373					$	56,695,538
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits	$	9,493,481	$	65,024	1.38	%	$	9,531,330	$	5,970	0.13	%	$	(24)	$	59,078	$	59,054
Money market accounts	13,929,069		158,012		2.29		15,685,030		12,199		0.16		(1,393)		147,206		145,813
Savings deposits	1,322,846		491		0.07		1,483,547		139		0.02		(16)		368		352
Time deposits	4,237,249		61,047		2.91		2,919,242		3,826		0.26		1,699		55,522		57,221
Brokered deposits	5,950,539		131,141		4.44		2,833,580		10,026		0.71		10,974		110,141		121,115
Federal funds purchased and securities sold under repurchase agreements	110,852		1,021		1.83		220,689		230		0.21		(115)		906		791
Other short-term borrowings	1,062,908		24,559		4.60		244,202		896		0.73		2,964		20,699		23,663
Long-term debt	3,486,453		98,444		5.63		930,131		18,913		4.07		51,593		27,938		79,531
Total interest-bearing liabilities	39,593,397		$	539,739	2.75	%	33,847,751		$	52,199	0.31	%	$	65,682	$	421,858	$	487,540
Non-interest-bearing demand deposits	14,441,205						16,727,040
Other liabilities	1,539,939						1,195,043
Total equity	4,750,832						4,925,704
Total liabilities and shareholders' equity	$	60,325,373					$	56,695,538
Net interest income and net interest margin, taxable equivalent (6)			$	938,541	3.32	%			$	819,459	3.11	%	$	7,254	$	111,828	$	119,082
Less: taxable-equivalent adjustment			2,258						1,824
Net interest income			$	936,283					$	817,635

(1) Changes in rate/volume will equal the increase/ (decrease) in interest income/expense.

(2) Average loans are shown net of unearned income. NPLs are included. Interest income includes fees as follows: 2023 - $22.8 million, 2022 - $33.7 million.

(3) Reflects taxable-equivalent adjustments, using the statutory federal income tax rate of 21%, in adjusting interest on tax-exempt loans to a taxable-equivalent basis.

(4) Includes interest-bearing funds with Federal Reserve Bank, interest earning deposits with banks, and federal funds sold and securities purchased under resale agreements.

(5) Includes average net unrealized gains (losses) on investment securities available for sale of $(1.49) billion and $(587.1) million for the six months ended June 30, 2023 and 2022, respectively.

(6) The net interest margin is calculated by dividing annualized net interest income - TE by average total interest earnings assets.

Market Risk Analysis

Interest rate risk is the primary market risk to which Synovus is potentially exposed. Synovus measures the sensitivity of net interest income to changes in market interest rates through the use of simulation modeling, which incorporates all of Synovus’ earning assets and liabilities. These simulations are used to determine a baseline net interest income projection and the sensitivity of the income profile based on changes in interest rates. These simulations incorporate assumptions and factors, including, but not limited to, changes in market rates, in the size or composition of the balance sheet, and in repricing characteristics as well as client behaviors. This includes estimates for deposit repricing characteristics which, for purposes of the sensitivity estimates provided below, relies upon a constant, through-the-cycle total deposit cost beta of approximately 40% as of the most recently reported period. This process is reviewed and updated on an on-going basis in a manner consistent with Synovus’ ALCO governance framework.

Synovus has modeled its baseline net interest income forecast assuming a relatively flat interest rate environment, with the federal funds rate at the Federal Reserve’s targeted range of 5.00% to 5.25% as of June 30, 2023 and the prime rate of 8.25% as of June 30, 2023. Synovus has modeled the impact of an immediate change in market interest rates across the yield curve of 100 and 200 bps to determine the sensitivity of net interest income for the next twelve months. As illustrated in the table below, the net interest income sensitivity derived from this simulation suggests that net interest income is projected to increase by 5.2% and 2.6% if interest rates increased by 200 and 100 bps, respectively. Net interest income is projected to decrease by 2.9% and 6.3% if interest rates decreased by 100 and 200 bps, respectively.

The following table represents the estimated sensitivity of net interest income at June 30, 2023, with comparable information for December 31, 2022.


Table 13 - Twelve Month Net Interest Income Sensitivity
	Estimated % Change in Net Interest Income as Compared to Unchanged Rates (for the next twelve months)

Change in Interest Rates (in bps)	June 30, 2023	December 31, 2022
+200	5.2%	6.4%
+100	2.6	3.1
-100	(2.9)	(3.5)
-200	(6.3)	(7.5)

While all of the above estimates are reflective of the general interest rate sensitivity of Synovus, local market conditions, the realized growth and remixing of the balance sheet, as well as the broader macroeconomic environment could all have a significant impact on both the sensitivity and realized level of net interest income. Additionally, should there be differences between realized deposit betas for a given level of rates as compared to the Company's estimates for through-the-cycle betas, this may also have a significant impact on our reported sensitivity and the realized level of net interest income.

The net interest income simulation model is the primary tool utilized to evaluate potential interest rate risks over a shorter-term time horizon. Synovus also evaluates potential longer-term interest rate risk through modeling and evaluation of the sensitivity of the Company's EVE. The EVE measurement process estimates the net fair value of assets, liabilities, and off-balance sheet financial instruments under various interest rate scenarios. Management uses EVE sensitivity analyses as an additional means of measuring interest rate risk and incorporates this form of analysis within its governance and limits framework.

Synovus is also subject to market risk in certain of its fee income business lines. Financial management services revenue, which include trust, brokerage, and asset management fees, can be affected by risk in the securities markets, primarily the equity securities market. A significant portion of the fees in this unit are determined based upon a percentage of asset values. Weaker securities markets and lower equity values have an adverse impact on the fees generated by these operations. Trading account assets, maintained to facilitate brokerage client activity, are also subject to market risk; however, trading activities are limited and subject to risk policy limits. Additionally, Synovus utilizes various tools to measure and manage price risk in its trading portfolio.

Mortgage banking income is also subject to market risk. Mortgage loan originations are sensitive to levels of mortgage interest rates and therefore, mortgage banking income can be negatively impacted during a period of rising interest rates as we have experienced in the past year. The extension of commitments to clients to fund mortgage loans also subjects Synovus to market risk. This risk is primarily created by the time periods between making the commitment, closing, and delivering the loan. Synovus seeks to minimize its exposure by utilizing various risk management tools, including forward sales commitments and other hedges.

Derivative Instruments for Interest Rate Risk Management

Synovus utilizes derivative instruments to manage its exposure to various types of structural interest rate risks by executing end-user derivative transactions designated as hedges. Hedging relationships may be designated as either a cash flow hedge, which mitigates risk exposure to the variability of future cash flows or other forecasted transactions, or a fair value hedge, which mitigates risk exposure to adverse changes in the fair market value of a fixed rate asset or liability due to changes in market interest rates.

As of June 30, 2023 and December 31, 2022, Synovus had $8.90 billion and $5.25 billion, respectively, in notional amounts outstanding of both effective and forward-starting interest rate swaps designated as cash flow hedging instruments to hedge its exposure to contractually specified interest rate risk associated with floating rate loans.

As of June 30, 2023 and December 31, 2022, Synovus had $3.51 billion and $2.23 billion, respectively, in notional amounts outstanding of receive-fixed, pay-variable interest rate swaps designated as fair value hedging instruments to hedge its exposure to the change in the fair value due to fluctuations in market interest rates for outstanding fixed-rate long-term debt and fixed-rate interest-bearing deposits.

LIBOR Transition

On March 5, 2021, the FCA confirmed that all LIBOR settings would either cease to be provided by any administrator or would no longer be representative immediately after June 30, 2023 for all remaining US dollar settings. Consistent with this guidance and that of various U.S. regulatory bodies, Synovus has made a concerted effort to eliminate LIBOR-based exposures in accordance with the June 30, 2023 deadline. This was a multi-faceted effort that included, but was not limited to, discontinuing the use of LIBOR in new business, which Synovus did as of January 1, 2022, as well as amending LIBOR-based contracts for legacy exposures to transition to other acceptable indexes. Through these efforts, we believe that we have remediated our material exposures where possible and/or received guidance on an appropriate transition for those exposures which were at the discretion of third parties. As of June 30, 2023, there was approximately $2.9 billion of loan exposures which were still accruing on LIBOR but which will transition to SOFR upon their next index reset period. Additionally, there are various other exposures, most notably derivatives, which will transition to SOFR upon the next reset period in a manner that is consistent with industry practice. Synovus does not believe that significant further actions will be required as part of the effort to adhere to the industry LIBOR transition.

Critical Accounting Policies

The accounting and financial reporting policies of Synovus are in accordance with GAAP and conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. Synovus has identified certain of its accounting policies as “critical accounting policies,” consisting of those related to the allowance for credit losses and income taxes. In determining which accounting policies are critical in nature, Synovus has identified the policies that require significant judgment or involve complex estimates. It is management's practice to discuss critical accounting policies with the Board of Directors' Audit Committee on a periodic basis, including the development, selection, implementation, and disclosure of the critical accounting policies. The application of these policies has a significant impact on Synovus’ unaudited interim consolidated financial statements. Synovus’ financial results could differ significantly if different judgments or estimates are used in the application of these policies. All accounting policies described in "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" in Synovus' 2022 Form 10-K should be reviewed for a greater understanding of how we record and report our financial performance. There have been no significant changes to the accounting policies, estimates, and assumptions, or the judgments affecting the application of these estimates and assumptions from those disclosed in Synovus' 2022 Form 10-K.

Non-GAAP Financial Measures

The measures entitled adjusted non-interest revenue, adjusted non-interest expense, adjusted revenue, adjusted tangible efficiency ratio, adjusted net income available to common shareholders, adjusted net income per common share, diluted, adjusted return on average assets, adjusted return on average common equity, return on average tangible common equity, adjusted return on average tangible common equity, and tangible common equity ratio, are not measures recognized under GAAP and therefore are considered non-GAAP financial measures. The most comparable GAAP measures to these measures are total non-interest revenue, total non-interest expense, total revenue, efficiency ratio-TE, net income available to common shareholders, net income per common share, diluted, return on average assets, return on average common equity, and the ratio of total shareholders' equity to total assets, respectively.

Management believes that these non-GAAP financial measures provide meaningful additional information about Synovus to assist management and investors in evaluating Synovus’ operating results, financial strength, the performance of its business, and the strength of its capital position. However, these non-GAAP financial measures have inherent limitations as analytical

tools and should not be considered in isolation or as a substitute for analyses of operating results or capital position as reported under GAAP. The non-GAAP financial measures should be considered as additional views of the way our financial measures are affected by significant items and other factors, and since they are not required to be uniformly applied, they may not be comparable to other similarly titled measures at other companies. Adjusted revenue and adjusted non-interest revenue are measures used by management to evaluate total revenue and non-interest revenue exclusive of net investment securities gains (losses), and fair value adjustments on non-qualified deferred compensation, and other items not indicative of ongoing operations that could impact period-to-period comparisons. Adjusted non-interest expense and the adjusted tangible efficiency ratio are measures utilized by management to measure the success of expense management initiatives focused on reducing recurring controllable operating costs. Adjusted net income available to common shareholders, adjusted net income per common share, diluted, adjusted return on average assets, and adjusted return on average common equity are measurements used by management to evaluate operating results exclusive of items that management believes are not indicative of ongoing operations and impact period-to-period comparisons. Return on average tangible common equity and adjusted return on average tangible common equity is a measure used by management to compare Synovus' performance with other financial institutions because it calculates the return available to common shareholders without the impact of intangible assets and their related amortization, thereby allowing management to evaluate the performance of the business consistently. The tangible common equity ratio is used by management to assess the strength of our capital position. The computations of these measures are set forth in the tables below.

Management does not provide a reconciliation for forward-looking non-GAAP financial measures where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the occurrence and the financial impact of various items that have not yet occurred, are out of Synovus’ control, or cannot be reasonably predicted. For the same reasons, Synovus’ management is unable to address the probable significance of the unavailable information. Forward-looking non-GAAP financial measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.



Table 14 - Reconciliation of Non-GAAP Financial Measures
	Three Months Ended				Six Months Ended
(in thousands, except per share data)	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Adjusted non-interest revenue
Total non-interest revenue	$	112,276	$	97,266	$	245,402	$	202,600
Investment securities (gains) losses, net	—		—		(1,030)		—
Recovery of NPA	—		—		(13,126)		—
Fair value adjustment on non-qualified deferred compensation	(1,598)		3,240		(2,969)		4,535
Adjusted non-interest revenue	$	110,678	$	100,506	$	228,277	$	207,135

Adjusted non-interest expense
Total non-interest expense	$	307,181	$	282,051	$	629,034	$	554,501
(Loss) gain on other loans held for sale	(2,360)		—		(19,110)		—

Restructuring charges (reversals)	110		1,850		843		8,274
Valuation adjustment to Visa derivative	(3,027)		(3,500)		(3,027)		(3,500)
Gain (loss) on early extinguishment of debt	377		—		377		(677)
Fair value adjustment on non-qualified deferred compensation	(1,598)		3,240		(2,969)		4,535
Adjusted non-interest expense	$	300,683	$	283,641	$	605,148	$	563,133


Table 14 - Reconciliation of Non-GAAP Financial Measures, continued
	Three Months Ended						Six Months Ended
(in thousands, except per share data)	June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022
Adjusted revenue and adjusted tangible efficiency ratio
Adjusted non-interest expense	$	300,683		$	283,641		$	605,148		$	563,133
Amortization of intangibles	(2,420)			(2,118)			(4,277)			(4,236)
Adjusted tangible non-interest expense	$	298,263		$	281,523		$	600,871		$	558,897

Net interest income	$	455,531		$	425,388		$	936,283		$	817,635
Total non-interest revenue	112,276			97,266			245,402			202,600
Total revenue	$	567,807		$	522,654		$	1,181,685		$	1,020,235
Tax equivalent adjustment	1,138			960			2,258			1,824
Total TE revenue	568,945			523,614			1,183,943			1,022,059
Recovery of NPA	—			—			(13,126)			—
Investment securities (gains) losses, net	—			—			(1,030)			—
Fair value adjustment on non-qualified deferred compensation	(1,598)			3,240			(2,969)			4,535
Adjusted revenue	$	567,347		$	526,854		$	1,166,818		$	1,026,594
Efficiency ratio-TE	53.99		%	53.87		%	53.13		%	54.25		%
Adjusted tangible efficiency ratio	52.57			53.43			51.50			54.44

Adjusted net income available to common shareholders and adjusted diluted earnings per share
Net income available to common shareholders	$	165,819		$	169,761		$	359,688		$	332,507
Recovery of NPA	—			—			(13,126)			—
Loss (gain) on other loans held for sale	2,360			—			19,110			—

Restructuring charges (reversals)	(110)			(1,850)			(843)			(8,274)
Valuation adjustment to Visa derivative	3,027			3,500			3,027			3,500
(Gain) loss on early extinguishment of debt	(377)			—			(377)			677
Investment securities (gains) losses, net	—			—			(1,030)			—
Tax effect of adjustments (1)	(1,193)			(393)			(1,646)			976
Adjusted net income available to common shareholders	$	169,526		$	171,018		$	364,803		$	329,386
Weighted average common shares outstanding, diluted	146,550			146,315			146,644			146,489
Net income per common share, diluted	$	1.13		$	1.16		$	2.45		$	2.27
Adjusted net income per common share, diluted	1.16			1.17			2.49			2.25




	Three Months Ended						Six Months Ended
(dollars in thousands)	June 30, 2023			June 30, 2022			June 30, 2023		June 30, 2022
Adjusted return on average assets (annualized)
Net income	$	173,944		$	178,052		$	376,103	$	349,088
Recovery of NPA	—			—			(13,126)		—
Loss (gain) on other loans held for sale	2,360			—			19,110		—

Restructuring charges (reversals)	(110)			(1,850)			(843)		(8,274)
Add: Valuation adjustment to Visa derivative	3,027			3,500			3,027		3,500
(Gain) loss on early extinguishment of debt	(377)			—			(377)		677
Investment securities (gains) losses, net	—			—			(1,030)		—
Tax effect of adjustments (1)	(1,193)			(393)			(1,646)		976
Adjusted net income	$	177,651		$	179,309		$	381,218	$	345,967
Net income annualized	$	697,687		$	714,165		758,440		703,962
Adjusted net income annualized	$	712,556		$	719,206		768,755		697,668
Total average assets	$	60,515,077		$	56,536,940		60,325,373		56,695,538
Return on average assets (annualized)	1.15		%	1.26		%	1.26		1.24
Adjusted return on average assets (annualized)	1.18			1.27			1.27		1.23


Table 14 - Reconciliation of Non-GAAP Financial Measures, continued
	Three Months Ended
(dollars in thousands)	June 30, 2023			March 31, 2023			June 30, 2022
Adjusted return on average common equity, return on average tangible common equity, and adjusted return on average tangible common equity (annualized)
Net income available to common shareholders	$	165,819		$	193,868		$	169,761
Recovery of NPA	—			(13,126)			—
Loss (gain) on other loans held for sale	2,360			16,750			—

Restructuring charges (reversals)	(110)			(733)			(1,850)
Valuation adjustment to Visa derivative	3,027			—			3,500
(Gain) loss on early extinguishment of debt	(377)			—			—
Investment securities (gains) losses, net	—			(1,030)			—
Tax effect of adjustments (1)	(1,193)			(453)			(393)
Adjusted net income available to common shareholders	$	169,526		$	195,276		$	171,018

Adjusted net income available to common shareholders annualized	$	679,967		$	791,953		$	685,951
Amortization of intangibles, annualized net of tax	7,344			5,699			6,471
Adjusted net income available to common shareholders excluding amortization of intangibles annualized	$	687,311		$	797,652		$	692,422

Net income available to common shareholders annualized	$	665,098		$	786,242		$	680,910
Amortization of intangibles, annualized net of tax	7,344			5,699			6,471
Net income available to common shareholders excluding amortization of intangibles	$	672,442		$	791,941		$	687,381

Total average Synovus Financial Corp. shareholders' equity less preferred stock	$	4,303,722		$	4,088,777		$	4,132,536
Average goodwill	(460,118)			(452,390)			(452,390)
Average other intangible assets, net	(36,738)			(26,245)			(32,387)
Total average Synovus Financial Corp. tangible shareholders' equity less preferred stock	$	3,806,866		$	3,610,142		$	3,647,759
Return on average common equity (annualized)	15.5		%	19.2		%	16.5		%
Adjusted return on average common equity (annualized)	15.8			19.4			16.6
Return on average tangible common equity (annualized)	17.7			21.9			18.8
Adjusted return on average tangible common equity (annualized)	18.1			22.1			19.0




(dollars in thousands)	June 30, 2023			December 31, 2022			June 30, 2022
Tangible common equity ratio
Total assets	$	60,655,591		$	59,731,378		$	57,382,745
Goodwill	(475,573)			(452,390)			(452,390)
Other intangible assets, net	(61,538)			(27,124)			(31,360)
Tangible assets	$	60,118,480		$	59,251,864		$	56,898,995

Total Synovus Financial Corp. shareholders' equity	$	4,782,528		$	4,475,801		$	4,584,438
Goodwill	(475,573)			(452,390)			(452,390)
Other intangible assets, net	(61,538)			(27,124)			(31,360)
Preferred stock, no par value	(537,145)			(537,145)			(537,145)
Tangible common equity	$	3,708,272		$	3,459,142		$	3,563,543
Total Synovus Financial Corp. shareholders' equity to total assets ratio	7.88		%	7.49		%	7.99		%
Tangible common equity ratio	6.17			5.84			6.26

(1) An assumed marginal tax rate of 24.3% for 2Q23, 1Q23, and 4Q22 and 23.8% for 2Q22 was applied.

ITEM 3. – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information presented in the Market Risk Analysis section of the Management's Discussion and Analysis of Financial Condition and Results of Operations section of this Report is incorporated herein by reference.

ITEM 4. – CONTROLS AND PROCEDURES

In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by Synovus' management, with the participation of Synovus' Chief Executive Officer and Chief Financial Officer, of the effectiveness of Synovus' disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on that evaluation, Synovus' Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2023, Synovus' disclosure controls and procedures were effective.

There have been no material changes in Synovus' internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, Synovus' internal control over financial reporting.

PART II. – OTHER INFORMATION

ITEM 1. – LEGAL PROCEEDINGS

See "Part I - Item 1. Financial Statements and Supplementary Data - Note 9 - Commitments and Contingencies" of this Report.

ITEM 1A. – RISK FACTORS

In addition to the other information set forth in this Report, in evaluating an investment in the Company's securities, investors should consider carefully, among other things, the risk factors previously disclosed in "Part I - Item IA - Risk Factors” of Synovus' 2022 Form 10-K and "Part II - Item 1A - Risk Factors” of Synovus' Form 10-Q for the quarter ended March 31, 2023 which could materially affect the Company's business, financial position, results of operations, cash flows, or future results. Please be aware that these risks may change over time and other risks may prove to be important in the future. New risks may emerge at any time, and we cannot predict such risks or estimate the extent to which they may affect our business, financial condition or results of operations, or the trading price of our securities.

There are no material changes during the period covered by this Report to the risk factors previously disclosed in our 2022 Form 10-K or our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023.

ITEM 2. – UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS

(a) None.

(b) None.

(c) Issuer Purchases of Equity Securities: Synovus did not complete any share repurchases during the three months ended June 30, 2023. The Company announced on January 18, 2023 that its Board of Directors authorized share repurchases of up to $300 million in 2023.

ITEM 3. – DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. – MINE SAFETY DISCLOSURES

None.

ITEM 5. – OTHER INFORMATION

Pursuant to Item 408(a) of Regulation S-K, none of the Company's directors or executive officers adopted, terminated or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2023.

ITEM 6. – EXHIBITS



Exhibit Number						Description

3.1						Restated Articles of Incorporation of Synovus, incorporated by reference to Exhibit 3.1 of Synovus’ Current Report on Form 8-K dated April 22, 2020, as filed with the SEC on April 24, 2020.

3.2						Restated Bylaws of Synovus, incorporated by reference to Exhibit 3.2 of Synovus' Current Report on Form 8-K dated April 22, 2020, as filed with the SEC on April 24, 2020.

31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32						Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101						Interactive Data File

104						Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.


	SYNOVUS FINANCIAL CORP.

August 4, 2023	By:	/s/ Andrew J. Gregory, Jr.
Date		Andrew J. Gregory, Jr.
		Executive Vice President and Chief Financial Officer
		(Duly Authorized Officer and Principal Financial Officer)