Columbus, Ga.-based Synovus Financial Corp. is expecting a 40% to 60% increase in its loan-loss reserves upon implementation of the current expected credit loss standard on Jan. 1, 2020.
There is less than one quarter until CECL will require large banks to estimate the potential losses over their loans' lifetimes and record those losses at origination. During Synovus' third-quarter earnings conference call, CEO Kessel Stelling Jr. highlighted CECL's potential day one impact on the bank's loan loss reserves and acquisition of FCB Financial Holdings Inc.
Synovus' acquisition of FCB Financial closed on Jan. 1, but the bank will avoid CECL's potential "double-count" impact on most of the acquired loans due to an accounting election made at the time of the acquisition, Stelling said. The bank will record a balance sheet gross up to loans and allowance on those loans, avoiding a more significant hit to equity and capital ratios, he said.
Two-thirds of the projected 40% to 60% increase comes from acquired loans, Stelling said. Excluding the impact of the acquired loans, the overall impact is estimated to be 10% to 20%.
Stelling said the bank is confident about its CECL preparation, but the estimates could change based on its loan portfolio and economic factors at the time of adoption.