XML 25 R15.htm IDEA: XBRL DOCUMENT
v3.23.2

Derivative Instruments and Hedging Activities | 6 Months Ended
--- | ---
Jun. 30, 2023
Summary of Derivative Instruments [Abstract] |
Derivative Instruments and Hedging Activities | 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.

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_SummaryOfDerivativeInstrumentsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration