Synovus Financial Corp.
Basel III Regulatory Capital Disclosures Report
December 31, 2023
TABLE OF CONTENTS
Defined Terms | 1 |
Background and Overview | 3 |
Scope of Application | 3 |
Capital Structure | 4 |
Capital Adequacy | 5 |
Capital Ratios and Capital Conservation Buffer | 6 |
Credit Risk: General Disclosures | 7 |
General Disclosure for Counterparty Credit Risk-Related Exposures | 13 |
Credit Risk Mitigation | 15 |
Securitization | 16 |
Equities Not Subject to the Market Risk Rule | 17 |
Interest Rate Risk for Non-Trading Activities | 18 |
Appendix 1: Basel III Regulatory Capital Disclosure Matrix | 19 |
DEFINED TERMS
ACL | Allowance for credit losses (applies to debt securities, loans, and unfunded loan |
commitments) | |
ALCO | Synovus' Asset Liability Management Committee |
ALL | Allowance for loan losses |
AOCI | Accumulated other comprehensive income (loss) |
ATM | Automatic teller machine |
Basel III | The third Basel Accord developed by the Basel Committee on Banking Supervision to |
strengthen existing regulatory capital requirements | |
Basel III Rules | Final capital rules adopting the Basel III capital framework approved by U.S. federal |
regulators in 2013 | |
BHC Act | Bank Holding Company Act of 1956, as amended |
Board | The Company's Board of Directors |
bp(s) | Basis point(s) |
C&I | Commercial and industrial |
CCB | Capital Conservation Buffer |
CECL | Current expected credit losses |
CET1 | Common Equity Tier 1 Capital defined by Basel III capital rules |
CME | Chicago Mercantile Exchange |
Company | Synovus Financial Corp. and its wholly-owned subsidiaries, except where the context |
requires otherwise | |
CRE | Commercial real estate |
CSA | Credit support annex |
DTL | Deferred tax liability |
EVE | Economic value of equity |
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 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 | The Federal Reserve Board, plus the 12 Federal Reserve Banks, with each one serving |
System or Federal | member banks in its own district; The Federal Reserve has broad regulatory powers over |
Reserve | the money supply and the credit structure of the economy |
FHLB | Federal Home Loan Bank |
FRB | Federal Reserve Bank |
GA DBF | Georgia Department of Banking and Finance |
GAAP | Generally Accepted Accounting Principles in the United States of America |
HVCRE | High volatility commercial real estate |
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ISDA | International Swaps and Derivatives Association, Inc. |
NAICS | North American Industry Classification System |
NRSRO | Nationally recognized statistical ratings organization |
OTC | Over the counter (derivatives which are not centrally cleared) |
Parent Company | Synovus Financial Corp. |
PSE | Public sector entity |
RPA | Risk participation agreement |
RWA | Risk-weighted assets |
SEC | U.S. Securities and Exchange Commission |
SPE | Special purpose entity |
SSFA | Simplified supervisory formula approach |
Synovus | Synovus Financial Corp. |
Synovus' 2023 Form | Synovus' Annual Report on Form 10-K for the year ended December 31, 2023, filed with |
10-K | the Securities and Exchange Commission by Synovus Financial Corp. |
Synovus Bank | A Georgia state-chartered bank and wholly-owned subsidiary of Synovus, through which |
Synovus conducts its banking operations | |
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 |
U.S. | United States |
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 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 |
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BACKGROUND AND OVERVIEW
Basel III is a set of international banking measures that established a framework to strengthen the regulation, supervision, and risk management of banks. Under the Basel III Rules, Synovus is designated as a standardized approach bank.
With respect to capital adequacy, Basel III Rules include a standardized approach for components of capital ratios including risk-weightings of assets and off-balance sheet exposures, as well as other adjustments, to derive the regulatory capital ratios. Synovus is currently not subject to the U.S. market risk capital rule, which applies only to banking institutions with significant trading activity.
This document and certain of the Company's public filings present the Regulatory Capital Disclosures in compliance with Basel III as described in Section 63 of the final rule. Synovus' 2023 Form 10-K contains management's discussion and analysis of the overall risk profile of the Company and related management strategies. The information presented herein should be read in conjunction with our 2023 Form 10-K, as well as the Consolidated Financial Statements for Holding Companies - FR Y-9C dated December 31, 2023. A disclosure index is provided in Appendix 1 of this report, which specifies where all disclosures required by Basel III Rules are located.
SCOPE OF APPLICATION
General
Synovus Financial Corp. is a financial services company and a registered bank holding company headquartered in Columbus, Georgia. We provide commercial and consumer banking in addition to a full suite of specialized financial products and services including private banking, treasury management, wealth management, mortgage services, premium finance, asset-based lending, structured lending, capital markets, and international banking. At December 31, 2023, Synovus had total consolidated assets of $59.81 billion and consolidated deposits of $50.74 billion with 246 branches and 354 ATMs across our five state footprint in Alabama, Florida, Georgia, South Carolina, and Tennessee.
Throughout this report, 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 referenced herein, "Bank" or "Synovus Bank" refers to our wholly-owned bank subsidiary, Synovus Bank.
Additional information relating to our business and our subsidiaries, including a detailed description of our financial results for the years ended December 31, 2023 and 2022, is contained in "Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in Synovus' 2023 Form 10-K.
Non-bank Subsidiaries
In addition to our banking operations, we also provide various other financial services to our clients through the following direct and indirect wholly-ownednon-bank subsidiaries:
- Synovus Securities, headquartered in Columbus, Georgia, which specializes in professional portfolio management for fixed-income securities, investment banking, the execution of securities transactions as a broker/dealer, asset management and financial planning services, and the provision of individual investment advice on equity and other securities; and
- Synovus Trust, headquartered in Columbus, Georgia, which provides trust, asset management, and financial planning services.
Basis of Consolidation
The consolidated financial statements of Synovus include the accounts of the Parent Company and its consolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. 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. For additional information, refer to "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" in Synovus' 2023 Form 10-K.
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Regulation of the Company
We are registered as a bank holding company with the Federal Reserve under the BHC Act and have elected to be treated as a financial holding company. As such, we are subject to comprehensive supervision and regulation by the Federal Reserve and are subject to its regulatory reporting requirements. Federal regulations subject bank holding companies, such as Synovus, to restrictions on the types of activities in which they may engage, and to a range of supervisory requirements. In addition, the GA DBF regulates the banking activities of Georgia-chartered banks, such as us, under certain bank statutes of the State of Georgia. Various federal and state agencies regulate and supervise other of Synovus' activities including our brokerage, investment advisory, and insurance agency activities. Such agencies include, but are not limited to, the SEC, the Financial Industry Regulatory Authority, other federal and state banking regulators, and various state regulators of insurance and brokerage activities.
CAPITAL STRUCTURE
Summary of Capital
Synovus and Synovus Bank have issued a variety of capital instruments to maintain a robust and efficient capital position while also meeting various regulatory capital requirements. Currently, Synovus' capital structure primarily consists of the following elements:
- CET1 capital, which includes primarily common shareholders' equity, subject to certain regulatory adjustments and deductions;
- Additional Tier 1 capital, which includes perpetual preferred stock and certain qualifying capital instruments; and
- Tier 2 capital, which primarily includes qualifying subordinated and junior subordinated debt as well as qualifying ACL.
For further information on the Company's capital instruments and regulatory requirements, please refer to "Note 8 - Other Short-term Borrowings and Long-term Debt", "Note 9 - Shareholders Equity and Accumulated Other Comprehensive Income", and "Note 10 - Regulatory Capital" in "Part II - Item 8. Financial Statements and Supplementary Data" of our 2023 Form 10-K.
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The following table reflects Synovus' consolidated regulatory capital position as of December 31, 2023.
Table 1 Regulatory Capital Tiers
(dollars in thousands)
CET1 Capital
Common stock, $1.00 par value
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss), net
Treasury stock
Total common shareholders' equity
Effect of CECL transition impact on retained earnings (1) Noncontrolling interest in subsidiary
Common equity tier 1 before adjustments and deductions
Less: Effect of certain items in AOCI excluded from CET1 Capital
Less: Goodwill, net of associated DTLs
Less: Intangible assets, net of associated DTLs
Less: Deferred tax assets arising from net operating loss and tax credit carryforwards, net of any related valuation allowances and net of DTLs
Less: All other deductions
CET1 Capital
Preferred stock
Tier 1 Capital
Qualifying Tier 2 Capital instruments
Qualifying adjusted allowance for credit losses (1)(2)
Tier 2 Capital
Total Capital
December 31, 2023
$171,360 3,955,819 2,517,226 (1,117,073)
(944,484)
4,582,848
29,151
24,155
4,636,154
(1,117,073)
480,440
47,793
18,360
113
5,206,521
537,145
5,743,666
412,967
497,591
910,558
- 6,654,224
- Reflects the CECL transition impact based on the Revised CECL Transition Rule.
- ACL included in Tier 2 Capital is limited to 1.25% of risk-weighted assets and includes the ALL and the allowance for credit losses on off- balance sheet credit exposures (i.e., unfunded lending commitments) recorded in other liabilities.
CAPITAL ADEQUACY
Synovus believes that prudent capital management is at the center of ensuring that we can sustainably fulfill our corporate objectives and mission, which includes bettering our clients, our communities, and our broader set of stakeholders. Capital management at Synovus is facilitated by a multi-faceted approach that leverages our Board approved risk appetite framework along with baseline and stressed scenario modeling which, collectively, informs the on-going assessment and management of our capital position.
This framework is effectuated and governed at a management-level within our ALCO process and is further reported and governed within Board-level committees. Synovus' capital position and risk appetite are reviewed on an on-going basis through that framework to ensure that the Company appropriately considers a range of potential risks and factors in developing its strategic approach to capital management.
The following table outlines Synovus' standardized approach risk-weighted assets as of December 31, 2023, using the categorization based on the standardized definitions.
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Table 2 Standardized Approach Risk-Weighted Assets
(dollars in thousands)
December 31, 2023 | ||
Risk-Weighted Asset | ||
Amount | ||
Exposures to U.S. Government sponsored enterprises and agencies | $ | 1,903,158 |
Exposures to PSEs | 659,848 | |
Corporate exposures | 34,763,557 | |
Residential mortgages exposures | 4,507,060 | |
HVCRE loans | 51,858 | |
Past due and non-accrual loans | 346,848 | |
Other loans | 1,274,994 | |
Allowance for loan losses | - | |
Other assets | 1,764,052 | |
Equity exposures | 110,536 | |
Trading assets | 9,496 | |
Securitization exposures | - | |
Total on-balance sheet assets | 45,391,407 | |
Letters of credit | 121,768 | |
Loan commitments with original maturity within 1 year | 105,693 | |
Loan commitments with original maturity over 1 year | 5,185,097 | |
Other off-balance sheet items | 119,419 | |
Total off-balance sheet items | 5,531,977 | |
Less: Excess of ACL | - | |
Total risk-weighted assets | $ | 50,923,384 |
For further details about the Company's risk-weighted assets, refer to the Schedule HC-R in the Consolidated Financial Statements for Holding Companies - Form FR Y-9C for December 31, 2023.
CAPITAL RATIOS AND CAPITAL CONSERVATION BUFFER
Regulatory Capital Ratios
Under the Basel III standardized approach, Synovus and Synovus Bank are subject to minimum capital ratios for CET1 capital, Tier 1 capital, and Total Risk-Based capital of 4.5%, 6.0%, and 8.0%, respectively. The Basel III Rules also provide for a minimum CCB of 2.5% in addition to the minimum capital to RWA ratios. The CCB is designed to provide an additional buffer against losses during periods of economic stress, thereby guarding against banks falling below the minimum regulatory capital levels.
The CCB of a given institution is calculated as the lowest of the: (i) CET1 ratio less the CET1 stated minimum requirement, (ii) Tier 1 ratio less the Tier 1 stated minimum requirement, and (iii) Total Capital ratio less the Total Capital stated minimum requirement. At December 31, 2023, the CCB for Synovus and Synovus Bank was 5.07% and 4.29%, respectively, which were in excess of the mandatory 2.5% minimum CCB. As such, Synovus is not currently subject to any limitations as a result of failing to maintain capital levels above the CCB minimum threshold.
Basel III requires a calculation of eligible retained income. Eligible retained income is the greater of (i) the banking organization's net income for the four preceding calendar quarters, net of any distributions and associated tax effects not already reflected in net income, and (ii) the average of the banking organization's net income over the preceding four quarters. Synovus' eligible retained earnings at December 31, 2023 was $285.4 million.
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The following table summarizes regulatory capital information at December 31, 2023, for Synovus and Synovus Bank.
Table 3 Regulatory Capital Ratios
December 31, 2023 | ||||
Stated | Capital | Minimum | ||
Capital | ||||
Actual | Minimum | Conservation | Conservation | |
Ratios | Buffer | Buffer | ||
Synovus Financial Corp. | 5.72% | |||
CET1 capital | 10.22% | 4.50% | 2.50% | |
Tier 1 capital | 11.28% | 6.00% | 5.28% | 2.50% |
Total capital | 13.07% | 8.00% | 5.07% | 2.50% |
Synovus Bank | ||||
CET1 capital | 10.93% | 4.50% | 6.43% | 2.50% |
Tier 1 capital | 10.93% | 6.00% | 4.93% | 2.50% |
Total capital | 12.29% | 8.00% | 4.29% | 2.50% |
CREDIT RISK: GENERAL DISCLOSURES
Credit Risk
Credit risk is the risk of losses if our borrowers do not fully repay their loans or if our counterparties fail to perform according to the terms of their contracts. Synovus takes a comprehensive approach to credit risk management that includes multiple lines of defense, a robust centralized credit process, strong underwriting standards, a credit risk appetite framework, a closely monitored concentration policy, and the use of market and portfolio analysis to continuously monitor the credit portfolio by industry, property type, and geography. Additionally, our risk grading process is well-defined and is subject to independent review.
Credit Risk Exposures
The following table provides the distribution of credit exposure by geography as of December 31, 2023.
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Table 4 Credit Exposure by Geography
(dollars in thousands)
December 31, 2023 | |||||||||
C&I | CRE | Consumer | Total | Percent of | |||||
Total Funded | |||||||||
Florida | $ | 5,442,731 | $ | 4,882,997 | $ | 2,550,684 | $ | 12,876,412 | 29.7 % |
Georgia | 4,318,092 | 2,751,552 | 2,874,463 | 9,944,107 | 22.9 | ||||
South Carolina | 1,520,637 | 1,228,003 | 805,814 | 3,554,454 | 8.2 | ||||
Alabama | 1,731,687 | 752,382 | 770,319 | 3,254,388 | 7.5 | ||||
Tennessee | 483,177 | 536,666 | 505,704 | 1,525,547 | 3.5 | ||||
Other (1) | 9,102,169 | 2,165,158 | 982,255 | 12,249,582 | 28.2 | ||||
Total Funded | $ | 22,598,493 | $ | 12,316,758 | $ | 8,489,239 | $ | 43,404,490 | 100.0 % |
Total Unfunded | 10,514,149 | 2,496,656 | 3,242,819 | 16,253,624 | |||||
Total | $ | 33,112,642 | $ | 14,813,414 | $ | 11,732,058 | $ | 59,658,114 | |
- Includes states outside our footprint and no single state is over 5%.
For purposes of the following table, "industry" is defined as two-digit NAICS industry code for the C&I loan portfolio, property type for the commercial real estate portfolio, and product type for the consumer portfolio.
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Synovus Financial Corporation published this content on 20 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 March 2024 17:09:01 UTC.