<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
Commission File Number 1-10312
(LOGO) SYNOVUS FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
GEORGIA 58-1134883
(State or other jurisdiction or (I.R.S. Employer
incorporation or organization) Identification No.)
901 FRONT AVENUE
P. O. BOX 120
COLUMBUS, GEORGIA 31902
(Address of principal executive offices)
(706) 649-2197
(Registrants' telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
YES X NO
----- -----
At April 30, 1995, 76,694,148 shares of the Registrant's Common Stock, $1.00
par value, were outstanding.
<PAGE> 2
SYNOVUS FINANCIAL CORP.
INDEX
<TABLE>
<CAPTION>
Page
Part I. Financial Information Number
------
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets (unaudited)
March 31, 1995 and December 31, 1994 3
Consolidated Statements of Income (unaudited)
Three Months Ended March 31, 1995 and 1994 4
Consolidated Statements of Cash Flows (unaudited)
Three Months Ended March 31, 1995 and 1994 5
Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II. Other Information
Item 6. (a) Exhibits 18
(b) Reports on Form 8-K 18
Signature Page 19
Exhibit Index 20
(11) Statement re Computation of Per Share Earnings 21
(27) Financial Data Schedule (for SEC use only) 22
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
SYNOVUS FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands except share data) 1995 1994
---------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 299,679 344,637
Interest earning deposits with banks 2,273 1,172
Federal funds sold 70,906 43,907
Investment securities available for sale 847,128 804,769
Investment securities held to maturity 497,514 532,933
Loans 5,227,983 5,089,567
Less unearned income (16,775) (14,691)
Less reserve for loan losses (78,954) (75,018)
---------- ---------
Loans, net 5,132,254 4,999,858
Premises and equipment 205,955 203,106
Other assets 253,142 245,697
---------- ---------
Total assets $7,308,851 7,176,079
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing $ 962,269 983,056
Interest bearing 5,325,487 4,941,547
---------- ---------
Total deposits 6,287,756 5,924,603
Short-term borrowings 152,144 412,082
Long-term debt 129,377 139,811
Other liabilities 104,435 97,220
---------- ---------
Total liabilities 6,673,712 6,573,716
---------- ---------
Minority interest in consolidated subsidiary 24,182 22,483
Shareholders' equity:
Common stock - $1.00 par value; Authorized 600,000,000
shares; issued 76,037,984 in 1995 and 76,134,451 in
1994; outstanding 76,011,008 in 1995 and 75,633,387
in 1994 76,038 76,134
Surplus 117,414 118,782
Less treasury stock (596) (7,680)
Less unamortized restricted stock (1,241) (1,538)
Net unrealized loss on investment securities available
for sale (8,781) (20,744)
Retained earnings 428,123 414,926
---------- ---------
Total shareholders' equity 610,957 579,880
---------- ---------
Total liabilities and shareholders' equity $7,308,851 7,176,079
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
(In thousands, except per share data) 1995 1994
-------- -------
<S> <C> <C>
Interest Income:
Loans, including fees $123,504 91,754
Investment securities:
U.S. Treasury and U.S. Government
agencies 13,898 13,035
Mortgage-backed securities 4,115 4,523
State and municipal 1,868 2,010
Other investments 362 419
Federal funds sold 570 866
Deposits with other banks 27 10
-------- -------
Total interest income 144,344 112,617
-------- -------
Interest expense:
Deposits 55,633 40,753
Short-term borrowings 3,618 1,611
Long-term debt 2,263 2,380
-------- -------
Total interest expense 61,514 44,744
-------- -------
Net interest income 82,830 67,873
Provision for losses on loans 5,245 6,000
-------- -------
Net interest income after provision
for losses on loans 77,585 61,873
-------- -------
Non-interest income:
Data processing services 50,437 38,649
Service charges on deposit accounts 10,880 9,645
Fees for trust services 2,438 2,142
Other operating income 9,964 13,490
Securities gains/(losses), net (243) 534
-------- -------
Total non-interest income 73,476 64,460
-------- -------
Non-interest expense:
Salaries and other personnel expense 60,185 48,891
Net occupancy and equipment expense 23,608 19,638
Other operating expenses 28,830 24,671
Minority interest in subsidiary's net
income 920 836
-------- -------
Total non-interest expense 113,543 94,036
-------- -------
Income before income taxes 37,518 32,297
Income tax expense 13,448 11,878
-------- -------
Net income $ 24,070 20,419
======== =======
Net income per share $ 0.32 0.27
======== =======
Weighted average shares outstanding 75,860 74,657
======== =======
Dividends declared per share $ 0.1350 0.1125
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
(In thousands) 1995 1994
--------- --------
<S> <C> <C>
Operating Activities
Net Income $ 24,070 20,419
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for losses on loans 5,245 6,000
Depreciation, amortization, and accretion, net 9,177 9,449
Deferred income tax expense (benefit) (1,357) 1,828
(Increase) decrease in interest receivable (1,611) 3,274
Increase in interest payable 5,288 3,815
Minority interest in subsidiary's net income 920 836
(Increase) decrease in mortgage loans held for sale (6,328) 10,722
Other, net (5,964) (7,887)
--------- --------
Net cash provided by operating activities 29,440 48,456
--------- --------
Investing Activities
Cash acquired from acquisitions 1,375 0
Net decrease in interest earning deposits with banks 686 1,500
Net (increase) decrease in federal funds sold (19,864) 33,947
Proceeds from maturities of investment securities available
for sale 23,422 61,479
Proceeds from sales of investment securities available for sale 40,104 39,996
Purchases of investment securities available for sale (53,518) (170,584)
Proceeds from maturities of investment securities held to
maturity 14,115 35,935
Purchases of investment securities held to maturity (7,703) (54,157)
Net increase in loans (108,395) (71,991)
Purchase of premises and equipment (9,731) (17,677)
Disposal of premises and equipment 122 298
Proceeds from sale of other real estate 2,057 2,401
Additions to computer software (2,627) (4,615)
--------- --------
Net cash used in investing activities (119,957) (143,468)
--------- --------
Financing Activities
Net (decrease) increase in demand and savings deposits (8,645) 24,985
Net increase in certificates of deposit 334,260 19,106
Net decrease in short-term borrowings (259,938) (38,188)
Principal repayments on long-term debt (12,672) (720)
Proceeds from long-term debt 2,238 7,000
Dividends paid to shareholders (10,263) (8,112)
Cash proceeds from sale of stock 579 387
--------- --------
Net cash provided by financing activities 45,559 4,458
--------- --------
Decrease in cash and cash equivalents (44,958) (90,554)
Cash and cash equivalents at beginning of period 344,637 355,512
--------- --------
Cash and cash equivalents at end of period $ 299,679 264,958
========= ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 6
SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
For the three months ended March 31, 1995 and 1994, Synovus Financial Corp.
(Synovus) paid income taxes of $4.2 million and $1.5 million, and interest of
$56.2 million and $40.9 million, respectively.
Supplemental information of noncash investing and financing activities:
Loans of approximately $1.3 million and $1.9 million were transferred to other
real estate during the three months ended March 31, 1995 and 1994,
respectively.
Investment securities with a fair value of $27.1 million and an amortized
cost of $27.7 million were transferred during the three months ended March 31,
1995 from investment securities held to maturity, to investment securities
available for sale. No investment securities were transferred during the three
months ended March 31, 1994. The securities transferred during the first three
months of 1995 were related to an acquisition completed during the first
quarter of 1995.
See accompanying notes to consolidated financial statements.
<PAGE> 7
SYNOVUS FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and therefore do not include
all information and footnotes necessary for a fair presentation of financial
position, results of operations, and cash flows in conformity with generally
accepted accounting principles. All adjustments consisting of normally
occurring accruals which, in the opinion of management, are necessary for a
fair presentation of the financial position and results of operations for the
periods covered by this report have been included.
Note B - Acquisitions
On January 31, 1995, Synovus completed the acquisition of the $43 million asset
Peach State Bank (PSB), a bank organized and existing under the state laws of
Georgia and headquartered in Riverdale, Georgia. Synovus issued approximately
266,726 shares of Synovus common stock for all the issued and outstanding
shares of PSB. The acquisition was accounted for using the purchase method of
accounting. As of January 31, 1995, PSB represented .71% of Synovus'
consolidated assets.
On February 28, 1995, Synovus completed the acquisition of the $1.1 billion
asset NBSC Corporation (NBSC), a bank holding company organized and existing
under the state laws of South Carolina and headquartered in Columbia, South
Carolina. Synovus issued approximately 7,930,236 shares of Synovus common
stock for all the issued and outstanding shares of NBSC. This acquisition has
been accounted for as a pooling of interests and, accordingly, the financial
statements for all periods presented have been restated to include the
financial condition and results of operations of this entity. As of February
28, 1995, NBSC represented 17.76% of Synovus' consolidated assets and 11.45% of
consolidated net income for the two months ended February 28, 1995.
On April 28, 1995, Synovus completed the acquisition of the $52 million asset
Citizens & Merchants Corporation (CMC), a bank holding company organized and
existing under the state laws of Georgia and headquartered in Douglasville,
Georgia. Synovus issued approximately 626,481 shares of Synovus common stock
for all the issued and outstanding shares of CMC. This transaction has been
accounted for as a pooling of interests, except that the financial statements
for periods prior to the acquisition were not restated since the effect was not
material. As of April 30, 1995, CMC represented .71% of Synovus' consolidated
assets and 1.00% of Synovus' consolidated net income for the four months ended
April 30, 1995.
Note C - Business Combination Consummated During the First Quarter of 1995
<PAGE> 8
The financial condition and results of operations previously reported
separately by Synovus and NBSC and the combined amounts presented in the
accompanying consolidated financial statements are summarized below.
<TABLE>
<CAPTION>
December 31, 1994 SYNOVUS NBSC RESTATED
------- ---- --------
(In thousands)
<S> <C> <C> <C>
Cash and Deposits with Banks 291,840 53,969 345,809
Federal Funds Sold 32,430 11,477 43,907
Investment Securities 1,146,933 190,769 1,337,702
Loans, net of unearned income 4,315,786 759,090 5,074,876
Reserve for Loan Losses (66,291) (8,727) (75,018)
Other Assets 394,686 54,117 448,803
--------- --------- ---------
Total Assets 6,115,384 1,060,695 7,176,079
========= ========= =========
Deposits 5,027,455 897,148 5,924,603
Borrowings 467,419 84,474 551,893
Other Liabilities 89,950 7,270 97,220
Minority Interest 22,483 0 22,483
Shareholders' Equity 508,077 71,803 579,880
--------- --------- ---------
Total Liabilities and
Shareholders' Equity 6,115,384 1,060,695 7,176,079
========= ========= =========
Three months ended March 31, 1994 SYNOVUS(a) NBSC RESTATED
------- ---- --------
(In thousands, except per share data)
Interest income 97,129 15,488 112,617
Interest expense 38,723 6,021 44,744
--------- --------- ---------
Net interest income 58,406 9,467 67,873
Provision expense 5,550 450 6,000
Non-interest income 61,490 2,970 64,460
Non-interest expense 84,348 9,688 94,036
--------- --------- ---------
Income before taxes 29,998 2,299 32,297
Income tax expense 11,154 724 11,878
--------- --------- ---------
Net Income 18,844 1,575 20,419
========= ========= =========
Net income per share 0.28 0.27
========= =========
Weighted average shares outstanding 66,746 74,657
========= =========
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
Three months ended March 31, 1995 SYNOVUS(a) NBSC(b) RESTATED
------- ---- --------
(In thousands except per share data)
<S> <C> <C> <C>
Interest income 131,355 12,989 144,344
Interest expense 56,014 5,500 61,514
------- ------ -------
Net interest income 75,341 7,489 82,830
Provision expense 4,875 370 5,245
Non-interest income 71,770 1,706 73,476
Non-interest expense 107,142 6,401 113,543
------- ------ -------
Income before taxes 35,094 2,424 37,518
Income tax expense 12,634 814 13,448
------- ------ -------
Net Income 22,460 1,610 24,070
======= ====== =======
Net income per share 0.32 0.32
======= =======
Weighted average shares outstanding 70,662 75,860
======= =======
</TABLE>
(a) Synovus balances include Peachtree National Bank and State Bancshares Inc.
only for the periods subsequent to their respective acquisitions as financial
statements prior to these business combinations were not restated due to
materiality.
(b) NBSC balances reflect only the results from operations from January 1,
1995 up to the effective merger date of February 28, 1995. Results from
operations for the month ended March 31, 1995, are included in the Synovus
balances.
Note D - Other
Certain amounts in 1994 have been reclassified to conform with presentation
adopted in 1995.
<PAGE> 10
ITEM 2 - MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is a discussion of the financial condition of Synovus at March
31, 1995, compared to December 31, 1994, and results of operations for the three
month period ended March 31, 1995, compared to the three month period ended
March 31, 1994. All periods have been restated for the acquisition of NBSC,
accounted for as a pooling of interests. These comments should be read in
conjunction with Synovus' unaudited consolidated financial statements and
accompanying notes appearing in this report.
BALANCE SHEET
During the first three months of 1995, total assets increased $132.8 million,
or 1.9%, when compared to December 31, 1994. Net loans increased $132.4
million, or 2.6%, and investment securities increased $6.9 million, or .5%.
Also contributing to the increase in total assets was a $27.0 million increase
in federal funds sold. This growth in the balance sheet was primarily funded
by a $363.2 million, or 6.1%, increase in deposits. The increase in deposits
was mostly offset by a $260.0 million decrease in short-term borrowings. The
balance sheet growth is attributable to internal growth and the acquisition of
State Bancshares Inc. and Peach State Bank completed in the fourth quarter of
1994 and the first quarter of 1995, respectively, for which prior year financial
statements were not restated. NBSC's growth from December to March was
consistent with their history of strong asset growth.
The investment portfolio consists of debt securities which provide Synovus with
a source of liquidity and a long-term, relatively stable source of income.
Additionally, the investment portfolio provides a balance to interest rate and
credit risk in other categories of the balance sheet while providing a vehicle
for the investment of available funds, furnishing liquidity, and supplying
securities to pledge as required collateral for certain deposits.
The net unrealized loss on securities available for sale, net of income taxes,
amounted to $8.8 million at March 31, 1995, compared to a net unrealized loss
of $20.7 million at December 31, 1994. The decrease in unrealized losses was
primarily due to a general increase in bond prices during the quarter. On
March 31, 1995, the estimated fair value of investment securities as a
percentage of their amortized cost was 98.3%.
ASSET QUALITY
Synovus' asset quality continued to improve during the first quarter as
measured by general asset quality indications. These improvements were the
result of improved underwriting, the resolution of certain problem assets, and
the general improvement in economic conditions.
Nonperforming assets consist of nonaccrual loans, restructured loans, and other
real estate. The nonperforming asset ratio as a percentage of loans and other
real estate has improved to .75% as of March 31, 1995, compared to .80% as of
December 31, 1994. During the first three months of
<PAGE> 11
1995, nonperforming assets decreased $1.6 million, or 3.8%, while net loans
increased $132.4 million, or 2.6%. The reserve for loan losses increased $3.9
million, or 5.2%, to $79.0 million. Additions to the reserve for loan losses
are made periodically to maintain the reserve at an appropriate level based on
management's analysis of potential risk in the loan portfolio. The amount of
the loan loss provision is a function of the level of loans outstanding, the
level of nonperforming loans, historical loan loss experience, the amount of
loan loss actually charged against the reserve in the given period, and the
current and anticipated economic conditions.
Loans 90 days past due and still accruing increased $3.5 million, or 46.9%,
since December 31, 1994, but increased only $1.4 million, or 14.6% over March
31, 1994. In the next quarter management expects this past due loan balance
to drop to a level more consistent with that of the prior year. Management
believes that the value of the collateral securing these loans is sufficient to
cover principal and interest payments on the loans and management does not
expect a material increase in nonperforming assets in future periods as a
result of the resolution of these delinquencies.
Management continues to focus on asset quality with an emphasis on proactive
management of problem assets, early detection of potential problem assets, and
timely charge-offs. The Synovus asset quality program adequately identifies
problem loans in a timely manner and management believes that current loan loss
reserves will adequately provide for potential future loan charge-offs.
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
--------- ------------
(in thousands)
<S> <C> <C>
Nonperforming Loans $26,614 28,397
Other Real Estate 12,579 12,356
------- ------
Nonperforming Assets $39,193 40,753
======= ======
Loans 90 Days Past Due and Still Accruing $10,847 7,383
======= ======
Reserve for Loan Losses $78,954 75,018
======= ======
Reserve for Loan Losses as a % of Loans 1.52% 1.48
======= ======
As a % of Loans and Other Real Estate:
Nonperforming Loans 0.51% 0.56
Other Real Estate 0.24% 0.24
------- ------
Nonperforming Assets 0.75% 0.80
======= ======
Reserve to Nonperforming Loans 296.66% 264.17
======= ======
</TABLE>
CAPITAL RESOURCES AND LIQUIDITY
Synovus continues to maintain its capital at levels which significantly exceed
the minimum regulatory guidelines. Additionally, based on internal
calculations and previous regulatory exams, each of Synovus' subsidiary banks
appear to be in compliance with minimum regulatory
<PAGE> 12
capital and liquidity guidelines. Synovus' total risk-based capital was $671.9
million at March 31, 1995, compared to $660.9 million at December 31, 1994.
The ratio of total risk-based capital to risk-weighted assets was 12.17% at
March 31, 1995, compared to 12.36% at year-end 1994. At March 31, 1995,
Synovus' leverage ratio was 8.36%, compared to 8.45% at December 31, 1994.
Synovus' equity-to-assets ratio was 8.36% at March 31, 1995, compared to 8.08%
at December 31, 1994.
During the third quarter of 1994, Synovus announced its plan to acquire up to
750,000 shares of Synovus common stock. Approximately 266,700 and 29,900 of
these shares were used to acquire PSB and NBSC, respectively. The remaining
shares will be used to fund an incentive stock award plan, implemented in July
1994, and other employee benefit plans. These shares will be purchased based
on market conditions over the next three years. As of April 30, 1995, 316,600
shares of Synovus common stock have been purchased under this plan at an
average price of $18.99.
Synovus' liquidity position and sources of funds are generally the same as they
were at December 31, 1994. Factors affecting liquidity, including the maturity
structure of Synovus' investment securities portfolio, loan portfolio, time
deposits, and borrowed funds, have not changed significantly since that time.
One of the primary functions of asset/liability management is to assure
adequate liquidity and maintain an appropriate balance between interest earning
assets and interest bearing liabilities. Liquidity management involves the
matching of the cash flow requirements of customers, either depositors
withdrawing funds or borrowers needing loans, and the ability of Synovus to
meet those requirements. Management monitors and maintains appropriate levels
of assets and liabilities so that maturities of assets will provide adequate
funds to meet estimated customer withdrawals and loan requests.
The consolidated statements of cash flows detail Synovus' cash flows from
operating, investing, and financing activities. Net cash provided by operating
activities was $29.4 million for the first three months of 1995, while
financing activities provided $45.6 million. Investing activities used $120.0
million of this amount, resulting in a net decrease in cash and cash
equivalents of $45.0 million. Synovus' loan growth is primarily funded by its
growth in deposits. Added liquidity is available through federal funds
purchased and a $20 million line of credit held by Synovus. Currently there is
no outstanding balance on the line of credit.
INTEREST RATE RISK MANAGEMENT
Managing interest rate risk is of primary importance to Synovus, and
management utilizes numerous tools to minimize interest rate risk and its
impact on Synovus' operations. Synovus manages portfolio assets by matching
them with funding sources that have similar repricing characteristics. The
Synovus asset/liability management strategies emphasize balancing loans,
investments, federal funds, and deposits to ensure that exposure to interest
rate risk is limited within acceptable levels. Synovus' asset\liability mix is
sufficiently balanced so that the effect of interest rates moving in either
direction is not expected to be significant over time.
<PAGE> 13
Synovus determines sensitivity of earnings to changes in interest rates by
assessing the impact on net interest income of multiple rising and falling rate
scenarios through the use of a simulation model. The simulation model is
designed to look at the remainder of the current year and another full fiscal
year and is updated quarterly, or more often if determined appropriate by
Synovus management. This simulation model, combined with historical
experience, indicates that Synovus' balance sheet is positioned so that its net
interest income will generally increase slightly in the near term
(approximately one quarter) during a rising rate environment and will decrease
slightly in the near term during a declining rate environment. Synovus' net
interest margin remained relatively flat during the first quarter of 1995, up
slightly from 5.23% for the three months ended December 31, 1994, to 5.25% for
the three months ended March 31, 1995. The duration of the effect on net
interest income of changes in interest rates is impacted by market conditions
regarding funding sources at the time of the rate changes.
Another tool available to Synovus' management is the cumulative gap analysis.
The cumulative gap represents the net position of assets and liabilities
subject to repricing in specified time periods. At March 31, 1995, the under
one year cumulative gap was a $918 million (13% of total assets) net liability
position. Generally, a liability sensitive gap indicates that there would be a
net negative impact on net interest income in an increasing rate environment,
however since all interest rates and yields do not adjust at the same velocity,
the interest rate sensitivity gap is only a general indicator of the potential
effects of interest rate changes on net income. Management believes that
simulation modeling provides a more complete analysis of its interest rate risk
position and therefore, places a lesser reliance on information derived from gap
analysis.
NET INTEREST INCOME
For the three months ended March 31, 1995, net interest income, on a
taxable-equivalent basis, increased $14.9 million, or 21.4%, over the three
months ended March 31, 1994. This increase was due to increased levels of
earning assets, an increase in the net interest margin and the impact of
non-restated acquisitions. The net interest margin for the first three months
of 1995 was 5.25%, up 50 basis points from the same period of 1994. The
increase in the net interest margin is primarily attributed to increases in the
yield of earning assets, mostly in the loan category, due to the rising prime
rate environment partially offset by an increase in cost of funds.
The taxable-equivalent adjustment required in order to make yields on
tax-exempt loans and investment securities comparable to taxable loans and
investment securities is shown in the following table. The taxable-equivalent
adjustment is based on a 35% federal income tax rate in both 1995 and 1994.
<PAGE> 14
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1995
1995 1994
-------- -------
(in thousands)
<S> <C> <C>
Interest income $144,344 112,617
Taxable-equivalent adjustment 1,408 1,488
-------- -------
Interest income, taxable equivalent 145,752 114,105
Interest expense 61,514 44,744
-------- -------
Net interest income, taxable-equivalent $ 84,238 69,361
======== =======
</TABLE>
PROVISION FOR LOAN LOSSES
During the first three months of 1995, the provision for loan losses decreased
$.8 million, or 12.6% over the same period in 1994. Net charge-offs to average
net loans as of March 31, 1995, were .13% compared to .42% during the first
three months of 1994. NBSC's net charge-offs to average net loans was .03% and
.07% for March 31, 1995 and 1994, respectively. The reserve for loan losses to
loans was 1.52% as of March 31, 1995, and 1.48% at December 31, 1994. The
primary reason for the decrease in the provision for loan losses was due to the
overall improvement in credit quality. This improvement can be seen in
Synovus' decrease in net charge-offs as a percentage of average loans and in
Synovus' lower nonperforming asset ratio as a percentage of loans and other
real estate.
NON-INTEREST INCOME
Total non-interest income during the first three months of 1995 increased $9.0
million, or 14.0%, over the same period in 1994. The rise in non-interest
income resulted largely from higher data processing services revenue, which
increased $11.8 million, or 30.5%, during the three months ended March 31,
1995, over the same period in 1994. Other increases in non-interest income for
the period include a $1.2 million, or 12.8%, increase in service charges on
deposit accounts, principally as a result of increased volume and higher fee
structures on deposit accounts. The decrease in other operating income was due
to a gain of $2.9 million on the sale of a credit card portfolio in the first
quarter of 1994.
Data processing services revenue is derived principally from the servicing of
individual bankcard accounts for the card issuing customers of Total System
Services, Inc. (TSYS), Synovus' majority-owned, publicly traded subsidiary.
AT&T continues to be a major customer of TSYS, accounting for 22.4% and 23.2%
of total revenues for the first three months of 1995 and 1994, respectively.
Due to delays in software systems development, the conversion of AT&T's
cardholder accounts to a customized version of the new cardholder processing
system, TS(2), provided for in AT&T's 1993 agreement with TSYS, will be delayed
beyond the contractually specified May 31, 1995 conversion date. Alternative
dates for conversion, additional services and other changes in system
requirements continue to be discussed between AT&T and TSYS. If these
discussions do not result in amendments to the present arrangement, AT&T will
be
<PAGE> 15
entitled to receive a discount of 5% on its monthly fees for processing
services from June 1995 until such time as conversion of its accounts to TS(2)
occurs.
NationsBank accounted for 12.5% and 12.2% of TSYS' total revenues for the first
quarter of 1995 and 1994, respectively. TSYS' existing agreement with
NationsBank expires in September of 1995, and TSYS and NationsBank continue
their negotiations to extend their processing relationship. Although failure
to extend this processing relationship would have a material impact on TSYS'
future revenues and results of operations, management believes these
negotiations will result in a new, extended processing agreement.
In March of 1994, TSYS announced the signing of a long-term credit card
processing agreement with Bank of America. Due to delays in software systems
development, on January 5, 1995, TSYS announced that it had reached an
agreement in principle with Bank of America regarding amendments to their
credit card processing agreement under which, among other things, the
conversions of Bank of America's credit card accounts will be deferred beyond
their contractually specified completion dates. On March 15, 1995, TSYS and
Bank of America executed a definitive amendment to the credit card processing
agreement reflecting the terms of the agreement in principle. The completion
of the conversions of Bank of America's credit card accounts, previously
scheduled for 1995, is scheduled to be accomplished in 1996. The processing
agreement with Bank of America, including definitive amendments and related
payments by TSYS, is not expected to be material to TSYS' 1995 results of
operations. TSYS' processing agreement with Bank of America will extend for 10
years, subject to its terms and conditions, from the date of the complete
conversions of Bank of America's accounts to TS(2).
NON-INTEREST EXPENSE
Total non-interest expense for the three months ended March 31, 1995, increased
$19.5 million, or 20.7%, over the same period in 1994. Of this increase, $7.9
million related to banking operations. Salaries and other personnel expense
increased $11.3 million, or 23.1%, net occupancy and equipment expense
increased $4.0 million, or 20.2%, and other operating expenses increased $4.2
million, or 16.9%. The increase in non-interest expense is in large part due
to the expansion of fee-generating services of TSYS, which is principally
related to additional personnel and added depreciation and amortization expense
for the acquisition of facilities, equipment, and computer software. These
expenses are the result of TSYS' efforts to build operating capacities for
future business opportunities, while providing additional services to existing
customers. Expenses related to the growth of Synovus' banking operations also
contributed to the increase in non-interest expense.
The project to develop the core TS(2) bankcard processing and support software
concluded in late September 1994 with the successful conversion of First Omni
Bank's 750,000 cardholder accounts. Costs associated with this project were
capitalized, and amortization of the capitalized software development costs
began in October 1994, over a useful life of ten years. Amortization expense
associated with core TS(2) will be approximately $3.3 million in 1995. The
estimated useful life was determined by management based upon such factors as
the life of the original Total System, the average life of its present customer
base, the contractual terms of its customers
<PAGE> 16
processing agreements, and the credit card processing marketplace, including
the projected rate of technological change. Costs associated with the
development of additional features of TS(2) will continue to be capitalized upon
establishing technological feasibility and amortized when they become available
for general customer use. Costs associated with the conversion of customers
under new long-term contracts to TS(2) will be capitalized as contract
acquisition costs and amortized over the life of new processing contracts.
Costs associated with conversions to TS(2), as well as the timing of individual
bank conversions, have not been determined. Management believes that the
amortization of these increased software development and contract acquisition
costs in 1995 and future years will be substantially offset by increases in
revenue from existing customers and new customers attributable to the expanded
product offerings of TS(2) and its relative technological superiority as
compared to alternatives currently available in the marketplace.
INCOME TAX EXPENSE
Income tax expense for the three months ended March 31, 1995, was $13.4 million
compared to $11.9 million for the same period last year. This increase was
primarily the result of an increase in pre-tax income and an increase in the
relative percentage of taxable income to total income. This resulted in an
effective income tax rate of 35.8% for the first three months of 1995 compared
to 36.8% for the first three months of 1994. The decrease in the effective tax
rate was primarily the result of the realization of certain tax planning
strategies, including the recognition of research and experimentation credits
for ongoing development activities and a reduction in effective state income
tax rates.
NET INCOME
The combination of the above factors resulted in net income for the first three
months of 1995 of $24.1 million. This is an increase of $3.7 million, or
17.9%, over the first three months of 1994. This performance resulted in a
return on average assets of 1.36% and a return on average equity of 16.33% for
the three month period ended March 31, 1995. This compares to a return on
average assets of 1.26% and a return on average equity of 14.89% for the first
three months of 1994 and also compares to a return on average assets of 1.23%
and a return on average equity of 14.83% for the three months ended December
31, 1994.
ACCOUNTING AND REGULATORY MATTERS
During May 1993, the Financial Accounting Standards Board issued SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan." The income recognition
requirement of SFAS No. 114 has been amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures". SFAS
No. 114 requires impaired loans to be measured based on the present value of
expected future cash flows, discounted at the loan's effective interest rate,
or at the loan's observable market price, or the fair value of the collateral
if the loan is collateral dependent, beginning in the first quarter of 1995.
SFAS No. 118 eliminates certain income recognition provisions previously
included in SFAS No. 114. Creditors are permitted to use existing methods for
recognizing interest income on impaired loans. Synovus began to implement SFAS
No. 114 and SFAS No. 118 prospectively in the first quarter of 1995 with no
significant impact on the financial statements.
<PAGE> 17
LEGAL PROCEEDINGS
Synovus and its subsidiaries are subject to lawsuits in the ordinary course of
business. Currently, multiple lawsuits are pending that involve the sale of
credit life insurance by one of Synovus' Alabama affiliates. These lawsuits
seek unspecified damages, including punitive damages, and purport to be a class
action which, if certified, may involve virtually all of such subsidiary's
credit life transactions in Alabama for a number of years. Synovus intends to
vigorously resist all aspects of these lawsuits and all other litigation to
which it and its subsidiaries are parties. Based upon information presently
available, and in light of legal and other defenses available to Synovus and
its subsidiaries, contingent liabilities arising from the threatened and
pending litigation are not considered material. It should be noted, however,
that large punitive damage awards bearing little relation to the actual damages
sustained by plaintiffs have been awarded in Alabama.
<PAGE> 18
PART II - OTHER INFORMATION
ITEM 6 - REPORTS ON FORM 8-K
(a) Exhibits
(11) Statement re Computation of Per Share Earnings
(27) Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
The following reports on Form 8-K were filed during or subsequent to
the first quarter of 1995.
(1) The report filed on January 5, 1995, included the following
events:
On January 5, 1995, Total System Services, Inc. (TSYS), an
80.8% owned subsidiary of Synovus announced: (a) earnings for
the year ended December 31, 1994; (b) an agreement in
principle with Bank of America regarding expected amendments
to TSYS' and Bank of America's credit card processing
agreement which will defer the completion of conversions of
Bank of America's credit card accounts from 1995 until 1996;
and (c) the execution of a letter of intent to provide credit,
debit and merchant processing services for First Tennessee
Bank, N.A.
(2) The report filed on January 31, 1995, included the following
event:
On January 31, 1995, Synovus announced it had completed the
acquisition of Peach State Bank, Riverdale, Georgia.
(3) The report filed on February 28, 1995, included the following
event:
On February 28, 1995, Synovus announced it had completed its
previously announced merger with the $1.1 billion asset NBSC
Corporation (NBSC) of Columbia, South Carolina, with Synovus
as the surviving corporation of the merger. NBSC owns The
National Bank of South Carolina which has 41 banking offices
throughout South Carolina. The National Bank of South
Carolina will operate as a wholly-owned subsidiary of Synovus.
(4) The report filed on March 15, 1995, included the following
event:
On March 15, 1995, Total System Services, Inc. announced the
execution of a definitive amendment to the credit card
processing agreement with Bank of America reflecting the terms
of the agreement in principle.
(5) The report filed on April 28, 1995, included the following
event:
On April 28, 1995, Synovus announced that it had completed its
acquisition of Citizens & Merchants Corporation, Douglasville,
Georgia.
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities and 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.
Date: May 10, 1995 BY:/s/ Stephen L. Burts, Jr.
----------------------------
Stephen L. Burts, Jr.
President and Chief Financial Officer
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Number Description Numbered Page
- -------------- ----------- -------------
<S> <C> <C>
11 Statement re Computation of 21
Per Share Earnings.
27 Financial Data Schedule (for SEC use only) 22
</TABLE>
<PAGE> 1
EXHIBIT 11
SYNOVUS FINANCIAL CORP.
COMPUTATION OF NET INCOME
PER COMMON SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1995 1994
----------- ----------
<S> <C> <C>
Primary
Net income $24,069,831 20,418,837
=========== ==========
Average common shares outstanding 75,860,425 74,657,413
Average common shares added, assuming
exercise of dilutive stock options 854,297 768,831
----------- ----------
Average common shares, as adjusted 76,714,722 75,426,244
=========== ==========
Net income per common share $ 0.31 0.27
=========== ==========
Assuming Full Dilution
Net income $24,069,831 20,418,837
Adjustments:
Interest expense on subordinated debentures 34,119 34,119
Income tax effect on such interest expense (11,942) (11,942)
----------- ----------
Net Income, as adjusted $24,092,008 20,441,014
=========== ==========
Average common shares outstanding 75,860,425 74,657,413
Average common shares added, assuming
exercise of dilutive stock options 882,959 768,831
Average common shares to be issued, assuming
conversion of subordinated debentures 301,947 301,947
----------- ----------
Average common shares, as adjusted 77,045,331 75,728,191
=========== ==========
Net income per common share, assuming
full dilution $ 0.31 0.27
=========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SYNOVUS FINANCIAL CORP. FOR THE THREE MONTHS ENDED
MARCH 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 299,679
<INT-BEARING-DEPOSITS> 2,273
<FED-FUNDS-SOLD> 70,906
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 497,514
<INVESTMENTS-CARRYING> 860,645
<INVESTMENTS-MARKET> 847,128
<LOANS> 5,211,208
<ALLOWANCE> 78,954
<TOTAL-ASSETS> 7,308,851
<DEPOSITS> 6,287,756
<SHORT-TERM> 152,144
<LIABILITIES-OTHER> 104,435
<LONG-TERM> 129,377
<COMMON> 76,038
0
0
<OTHER-SE> 534,919
<TOTAL-LIABILITIES-AND-EQUITY> 7,308,851
<INTEREST-LOAN> 123,504
<INTEREST-INVEST> 20,243
<INTEREST-OTHER> 597
<INTEREST-TOTAL> 144,344
<INTEREST-DEPOSIT> 55,633
<INTEREST-EXPENSE> 5,881
<INTEREST-INCOME-NET> 61,514
<LOAN-LOSSES> 5,245
<SECURITIES-GAINS> (243)
<EXPENSE-OTHER> 113,543
<INCOME-PRETAX> 37,518
<INCOME-PRE-EXTRAORDINARY> 37,518
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,070
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
<YIELD-ACTUAL> 5.25
<LOANS-NON> 24,609
<LOANS-PAST> 10,847
<LOANS-TROUBLED> 2,006
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 75,018
<CHARGE-OFFS> 2,840
<RECOVERIES> 1,203
<ALLOWANCE-CLOSE> 78,954
<ALLOWANCE-DOMESTIC> 63,030
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 15,924
</TABLE>
