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, 1997
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 (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, 1997, 174,640,833 shares of the Registrant's
Common Stock, $1.00 par value, were outstanding.
SYNOVUS FINANCIAL CORP.
INDEX
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets (unaudited)
March 31, 1997 and December 31, 1996 3
Consolidated Statements of Income (unaudited)
Three Months Ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows (unaudited)
Three Months Ended March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II. Other Information
Item 6. (a) Exhibits 16
(b) Report on Form 8-K 16
Signature Page 17
Exhibit Index 18
(11) Statement re Computation of Per Share Earnings 19
(27) Financial Data Schedule (for SEC purposes only,
not enclosed herewith)
PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
SYNOVUS FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
March 31, December 31,
(In thousands, except share and per share data) 1997 1996
---------- ---------
<S> <C> <C>
ASSETS
Cash and due from banks $ 349,373 404,952
Interest earning deposits with banks 1,990 2,040
Federal funds sold 8,167 38,249
Investment securities available for sale 1,284,565 1,276,083
Investment securities held to maturity 351,963 363,008
Loans 6,192,441 6,075,465
Less unearned income (8,820) (10,235)
Less reserve for loan losses (97,837) (94,683)
- ----------------------------------------------------------------------------------------------------
Loans, net 6,085,784 5,970,547
- ----------------------------------------------------------------------------------------------------
Premises and equipment, net 255,776 247,191
Other assets 312,850 310,274
- ----------------------------------------------------------------------------------------------------
Total assets $8,650,468 8,612,344
====================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing $1,165,946 1,189,973
Interest bearing 6,022,176 6,013,062
- ----------------------------------------------------------------------------------------------------
Total deposits 7,188,122 7,203,035
Federal funds purchased and securities sold under
agreement to repurchase 386,885 339,200
Long-term debt 100,897 97,283
Other liabilities 142,173 154,641
- ----------------------------------------------------------------------------------------------------
Total liabilities 7,818,077 7,794,159
====================================================================================================
Minority interest in consolidated subsidiary 35,842 34,435
Shareholders' equity:
Common stock - $1.00 par value; Authorized 600,000,000
shares; issued 174,704,535 in 1997 and 174,635,319
in 1996; outstanding 174,587,691 in 1997 and 174,518,477
in 1996 174,705 174,635
Surplus 40,367 40,312
Less treasury stock - 116,844 and 116,842 shares in 1997
and 1996, respectively (1,285) (1,285)
Less unamortized restricted stock (4,415) (5,344)
Net unrealized loss on investment securities available for sale (8,469) (112)
Retained earnings 595,646 575,544
- ----------------------------------------------------------------------------------------------------
Total shareholders' equity 796,549 783,750
- ----------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $8,650,468 8,612,344
====================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
Three Months Ended
March 31,
--------------------------
(In thousands, except per share data) 1997 1996
-------- -------
<S> <C> <C>
Interest income:
Loans, including fees $146,023 135,631
Investment securities:
U.S. Treasury and U.S. Government agencies 19,640 17,146
Mortgage-backed securities 4,540 4,569
State and municipal 1,596 1,813
Other investments 312 324
Federal funds sold 276 698
Interest earning deposits with banks 27 15
- --------------------------------------------------------------------------------------------------
Total interest income 172,414 160,196
- --------------------------------------------------------------------------------------------------
Interest expense:
Deposits 67,855 66,281
Federal funds purchased and securities sold under
agreement to repurchase 4,908 3,218
Long-term debt 1,496 1,568
- --------------------------------------------------------------------------------------------------
Total interest expense 74,259 71,067
- --------------------------------------------------------------------------------------------------
Net interest income 98,155 89,129
Provision for losses on loans 7,001 6,433
- --------------------------------------------------------------------------------------------------
Net interest income after provision
for losses on loans 91,154 82,696
- --------------------------------------------------------------------------------------------------
Non-interest income:
Data processing services 78,952 67,294
Service charges on deposit accounts 13,145 12,420
Fees for trust services 3,231 2,739
Credit card fees 2,278 1,514
Securities gains (losses), net (32) 73
Other operating income 14,657 12,407
- --------------------------------------------------------------------------------------------------
Total non-interest income 112,231 96,447
- --------------------------------------------------------------------------------------------------
Non-interest expense:
Salaries and other personnel expense 84,115 72,627
Net occupancy and equipment expense 33,001 28,281
Other operating expenses 28,376 31,147
Minority interest in subsidiary's net income 1,639 1,149
- --------------------------------------------------------------------------------------------------
Total non-interest expense 147,131 133,204
- --------------------------------------------------------------------------------------------------
Income before income taxes 56,254 45,939
Income tax expense 20,447 16,312
- --------------------------------------------------------------------------------------------------
Net income $ 35,807 29,627
==================================================================================================
Net income per share $ 0.21 0.17
==================================================================================================
Weighted average shares outstanding 174,560 173,852
==================================================================================================
Dividends declared per share $ 0.0900 0.0733
==================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
Three Months Ended
March 31,
--------------------------
(In thousands) 1997 1996
-------- --------
<S> <C> <C>
Operating Activities
Net Income $ 35,807 29,627
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for losses on loans 7,001 6,433
Depreciation, amortization, and accretion, net 12,038 10,221
Deferred income tax (benefit) expense (641) 483
Increase in interest receivable (1,733) (1,386)
Increase (decrease) in interest payable 2,413 (189)
Minority interest in subsidiary's net income 1,639 1,149
Decrease (increase) in mortgage loans held for sale 8,939 (12,492)
Other, net 8,757 (181)
- ------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 74,220 33,665
- ------------------------------------------------------------------------------------------------------
Investing Activities
Net decrease in interest earning deposits with banks 50 186
Net decrease in federal funds sold 30,082 109,068
Proceeds from maturities and principal collections of investment
securities available for sale 49,085 113,988
Proceeds from sales of investment securities available for sale 33,747 40,594
Purchases of investment securities available for sale (105,188) (245,295)
Proceeds from maturities and principal collections of investment
securities held to maturity 23,351 25,477
Purchases of investment securities held to maturity (12,430) (30,456)
Net increase in loans (131,177) (119,679)
Purchase of premises and equipment (18,152) (15,901)
Disposal of premises and equipment 54 802
Proceeds from sale of other real estate 810 1,971
Additions to contract acquisition costs (14,614) (1,189)
Additions to computer software (6,472) (1,612)
- ------------------------------------------------------------------------------------------------------
Net cash used in investing activities (150,854) (122,046)
- ------------------------------------------------------------------------------------------------------
Financing Activities
Net increase (decrease) in demand and savings deposits 22,115 (17,962)
Net (decrease) increase in certificates of deposit (37,028) 66,316
Net increase in federal funds purchased and securities sold
under agreement to repurchase 47,685 12,214
Principal repayments on long-term debt (1,386) (6,259)
Proceeds from issuance of long-term debt 5,000 ---
Purchase of treasury stock --- (263)
Dividends paid to shareholders (15,705) (12,753)
Proceeds from issuance of common stock 374 575
- ------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 21,055 41,868
- ------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (55,579) (46,513)
Cash and cash equivalents at beginning of period 404,952 382,696
- ------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $349,373 336,183
======================================================================================================
</TABLE>
Continued on next page.
SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Supplemental cash flow information:
For the three months ended March 31, 1997 and 1996, Synovus Financial Corp.
(Synovus) paid income taxes of $4.8 million and $5.8 million, and interest of
$71.8 million and $71.3 million, respectively.
Supplemental information of noncash investing and financing activities:
Loans of approximately $1.4 million and $1.7 million were foreclosed and
transferred to other real estate during the three months ended March 31, 1997
and 1996, respectively.
Depreciation, amortization, and accretion, net, for the three months ended
March 31, 1997 and 1996 included amortization of internally developed computer
software of $.8 million, for both periods. Internally developed computer
software had a net carrying value of $27.4 million and $30.1 million at March
31, 1997 and 1996, respectively.
See accompanying notes to consolidated financial statements.
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.
On March 10, 1997, Synovus declared a three-for-two stock split which was
effected on April 8, 1997 in the form of a 50% stock dividend. All share and
shareholders' equity amounts for all periods presented in the accompanying
consolidated financial statements have been restated to give effect to the
stock split.
Note B - Recent Accounting Pronouncements
In June 1996, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities". SFAS No.
125 was amended by SFAS No. 127, which defers the effective date of certain
provisions of SFAS No. 125 until January 1, 1998. This statement provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities based on consistent application of a
financial-components approach that focuses on control. It distinguishes
transfers of financial assets that are sales from transfers that are secured
borrowings. Effective January 1, 1997, Synovus adopted the provisions of SFAS
No. 125 on a prospective basis. The impact of SFAS No. 125 on Synovus'
financial statements was not material.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share". SFAS No.
128 supersedes Accounting Principles Board Opinion No. 15 "Earnings Per Share"
and specifies the computation, presentation, and disclosure requirements for
earnings per share (EPS) for entities with publicly held common stock or
potential issuable common stock. SFAS No. 128 replaces the presentation of
primary EPS with a presentation of basic EPS and fully diluted EPS with
diluted EPS. It also requires dual presentation of basic and diluted EPS on
the face of the income statement for all entities with complex capital
structures and requires a reconciliation of the numerator and denominator for
the basic EPS computation to the numerator and denominator of the diluted EPS
computation. SFAS No. 128 is effective for financial statements for both
interim and annual periods ending after December 15, 1997. The expected impact
on Synovus' financial statements of the provisions of SFAS No. 128 is not
expected to be material.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure". SFAS No. 129 is effective for financial statements
for periods ending after December 15, 1997. Synovus does not expect that SFAS
No. 129 will require significant revision of prior disclosures since SFAS No.
129 lists required disclosures that had been included in a number of previously
existing separate statements or opinions.
Note C - Other
Certain amounts in 1996 have been reclassified to conform with the presentation
adopted in 1997.
ITEM 2 - MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Summary
Net income for the three months ended March 31, 1997, was $35.8 million, up
$6.2 million, or 20.9%, from the same period a year ago. Net income per share
increased to $.21 in the first three months of 1997 as compared to $.17 for
the same period in 1996. This performance resulted in a return on average
assets of 1.70% and a return on average equity of 18.23% for the three months
ended March 31, 1997. This compares to a return on average assets of 1.51% and
a return on average equity of 16.84% for the first three months of 1996.
On March 10, 1997, Synovus declared a three-for-two stock split which was
effected on April 8, 1997 in the form of a 50% stock dividend. All share, per
share data, and shareholders' equity account balances for all periods presented
in the accompanying consolidated financial statements have been restated to
give effect to the stock split.
Balance Sheet
During the first three months of 1997, total assets increased $38.1 million, or
0.4%, compared to December 31, 1996. Net loans increased $115.2 million, or
1.9%, which was partially offset by a $55.6 million decrease in cash and due
from banks. Federal funds purchased and securities sold under agreement to
repurchase increased $47.7 million and shareholders' equity increased $12.8
million, which provided the necessary funding for the balance sheet growth
during the first quarter of 1997. Deposits were relatively flat when compared
to December 31, 1996, decreasing $14.9 million.
Loans
Synovus continues to increase its loan portfolio through a constant focus on
meeting the needs of customers in the markets served while maintaining
adherence to sound lending practices. As a result of this continued focus,
loans have continued to grow throughout Synovus' affiliate markets, with the
most significant growth at five affiliates headquartered in Columbia,
South Carolina; Columbus, Georgia; Valparaiso, Florida; and Newnan, Georgia.
These five banks experienced significant loan growth of $31.9 million, $16.6
million, $9.4 million, and $8.3 million, respectively, during the three months
ended March 31, 1997. Indicative of the economic growth within the communities
Synovus serves, loan growth resulted from increases during the first three
months of 1997 in most loan categories as detailed below.
<TABLE>
March 31, December 31,
1997 1996
--------- ------------
<S> <C> <C>
(In thousands)
Commercial:
Commercial, financial, and agricultural $2,103,706 2,036,689
Real estate - construction 753,909 730,785
Real estate - mortgage 1,262,914 1,234,981
- ----------------------------------------------------------------------------
Total commercial 4,120,529 4,002,455
- ----------------------------------------------------------------------------
Retail:
Real estate - mortgage 979,512 977,432
Consumer loans - credit card 285,121 290,470
Consumer loans - other 779,182 768,072
Mortgage loans held for sale 28,097 37,036
- ----------------------------------------------------------------------------
Total retail 2,071,912 2,073,010
- ----------------------------------------------------------------------------
Total loans 6,192,441 6,075,465
Unearned income (8,820) (10,235)
- ----------------------------------------------------------------------------
Total loans, net of unearned income $6,183,621 6,065,230
============================================================================
</TABLE>
Asset Quality
Synovus continues to underwrite loans that provide further diversification
within the loan portfolios of the markets served while emphasizing customer
relationships in small and middle market businesses. Commercial credits are
routinely monitored for cash flows, liquidity, financial condition, and
collateral adequacy. Management continues to focus on maintaining a high
quality loan portfolio by knowing the markets served, as well as the individual
borrowers, and continuing emphasis on loan officer training. As measured by
general asset quality indicators, Synovus' asset quality remains strong.
During the first three months of 1997, nonperforming assets, consisting of
nonaccrual loans, restructured loans, and other real estate, increased $1.8
million, while net loans increased $115.2 million. Synovus' nonperforming
assets ratio was .61% as of March 31, 1997, which increased two basis points
from December 31, 1996.
The reserve for loan losses is maintained, through periodic additions to the
reserve, at an appropriate level based on management's analysis of the
potential risk inherent within the loan portfolio. When determining the amount
of loan loss provision, several relevant factors are considered. These
relevant factors include the level of nonperforming loans, impaired loan
balances, historical loan loss experience, the amount of loan losses charged
against the reserve in the given period, and the current and anticipated
economic conditions. Synovus' reserve for loan losses increased $3.1 million, or
3.3%, from $94.7 million at December 31, 1996 to $97.8 million at March 31,
1997.
Loans 90 days past due and still accruing increased $1.4 million, from $15.8
million at December 31, 1996 to $17.2 million at March 31, 1997. Management
believes that the value of the underlying collateral securing commercial loans
is sufficient to cover the principal and interest payments on these loans and
management does not expect a material increase in nonperforming assets in
future periods as a result of the resolution of these delinquencies. Synovus,
as well as the overall industry, has experienced an increase in credit card
loan charge-offs; however, management does not consider these trends to be
significant to the overall credit quality of Synovus. Management continues to
resolve past dues either through collection or charge-off. Credit card loans
represent 4.6% of Synovus' total loan portfolio. After consideration of
the factors described above, management believes that the reserve for loan
losses adequately reflects the reserves needed for any charge-offs related to
the resolution of these loans.
The reserve to nonperforming loans and loans 90 days past due and still
accruing was 221.8% at March 31, 1997, compared to 230.5% at year-end 1996.
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.
<TABLE>
March 31, December 31,
1997 1996
--------- ------------
<S> <C> <C>
(In thousands)
Nonperforming loans $26,861 25,280
Other real estate 11,042 10,782
- -----------------------------------------------------------------------
Nonperforming assets $37,903 36,062
=======================================================================
Loans 90 days past due and still accruing $17,241 15,805
=======================================================================
Reserve for loan losses $97,837 94,683
=======================================================================
Reserve for loan losses as a % of loans 1.58% 1.56
=======================================================================
As a % of loans and other real estate:
Nonperforming loans 0.43% 0.42
Other real estate 0.18 0.17
- -----------------------------------------------------------------------
Nonperforming assets 0.61% 0.59
=======================================================================
Reserve to nonperforming loans 364.23% 374.54
=======================================================================
</TABLE>
Capital Resources and Liquidity
Synovus continues to maintain its capital at levels which exceed the minimum
regulatory guidelines. Additionally, based on internal calculations and
previous regulatory exams, each of Synovus' subsidiary banks is currently in
compliance with regulatory capital and liquidity guidelines. Synovus' total
risk-based capital was $888.7 million at March 31, 1997, compared to $863.3
million at December 31, 1996. The ratio of total risk-based capital to
risk-weighted assets was 13.05% at March 31, 1997 compared to 12.97% at
December 31, 1996. Synovus' leverage ratio at the end of the first quarter of
1997 was 9.43% compared to 9.36% at the end of 1996. Synovus' equity-to-assets
ratio increased eleven basis points to 9.21% at March 31, 1997, when compared
to year-end 1996.
Internal capital generation continues to support asset growth, as reflected in
the first quarter 1997 equity-to-asset ratio exclusive of net unrealized loss
on investment securities available for sale of 9.29%, compared to 9.10% at
year-end 1996.
Synovus' liquidity position and sources of funds have not changed materially
since December 31, 1996. Synovus' liquidity ratio at March 31, 1997 was 39.04%
compared to 39.29% at December 31, 1996. Synovus' maturity mix of investment
securities and loan portfolios have not changed significantly during the first
three months of 1997.
Synovus' management monitors liquidity in coordination with the appropriate
committees at each affiliate bank. Management must ensure that appropriate
liquidity, at a reasonable cost, is available to meet the cash flow needs of
depositors, borrowers, and creditors. Management constantly monitors and
maintains appropriate levels of assets and liabilities so that maturities
of assets can provide adequate funding to meet estimated customer withdrawals
and future loan requests. Additionally, Synovus and its affiliate banks have
access to short-term borrowings, such as federal funds, through correspondent
banking relationships and a $20 million line of credit held by Synovus.
Total System Services, Inc. (TSYS) formally unveiled the design plan for its
proposed corporate campus at a press conference following a preview of the
design at its annual shareholders' meeting on April 14, 1997. The campus will
serve as TSYS' corporate headquarters and will house administrative, client
contact, and programming team members and will allow for significant growth.
Construction of the first phase is scheduled to begin July 1, 1997, or at such
time as the land is available. Also, TSYS plans to expand its operations
center in 1997. This expansion, will include additional space for the card
production services now located in downtown Columbus, Georgia, as well as
additional space for statement printing and data processing functions.
Preliminary cost estimates for these construction projects, while not
finalized, are expected to be $50 million to $100 million. Financing for
these projects is expected to be through the internal generation of funds and
the use of funds from external sources, possibly through the issuance of
industrial revenue bonds. TSYS is a majority-owned, publicly traded
subsidiary of Synovus.
The consolidated statements of cash flows detail Synovus' cash flows from
operating, investing, and financing activities. Operating activities provided
net cash of $74.2 million during the first three months of 1997, while $21.1
million was provided by financing activities. Investing activities utilized
$150.9 million of this amount, resulting in a decrease in cash and cash
equivalents of $55.6 million.
Earning Assets, Sources of Funds, and Net Interest Income
Average total assets for the first quarter of 1997 were $8.5 billion, up 8.1%
over the first quarter of 1996 average of $7.9 billion. Average earning assets
were up 8.4% in the first quarter of 1997 over the same quarter a year ago and
represented 91% of average total assets. When compared to the same period
last year, average deposits, average federal funds purchased and securities
sold under agreement to repurchase, and average shareholders' equity increased
$418.6 million, $125.5 million, and $89.0 million, respectively. This growth
provided the funding for the $526.5 million growth in average net loans,
along with a $103.5 million increase in average investment securities.
Net interest income was $98.2 million for the first quarter of 1997, up $9.0
million, or 10.1%, over the $89.1 million reported for the first quarter of
1996. Net interest income, on a tax-equivalent basis, for the first quarter of
1997 increased $8.9 million, or 9.8%, over the first quarter of 1996.
The net interest margin was 5.21% for the current quarter, up eight basis
points from the same period last year. This increase resulted from a twelve
basis point decrease in the cost of interest bearing liabilities, offset by a
three basis point decrease in the yield on interest earning assets. The
decrease in the cost of interest bearing liabilities was primarily due to
higher cost certificates of deposit maturing and being reinvested in lower
yield deposit instruments. Approximately half of the loan portfolio floats
with changes in the prime rate. The average prime rate decreased seven basis
points from the first three months of 1996 to the first three months of 1997.
The negative impact of this decrease was mitigated by reinvesting maturing
securities into higher earning investments and fundamental loan growth in the
current year.
The tax-equivalent adjustment required 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 1997 and 1996.
<TABLE>
Three Months Ended
March 31,
-----------------------
1997 1996
-------- -------
<S> <C> <C>
(In thousands)
Interest income $172,414 160,196
Taxable-equivalent adjustment 1,149 1,316
- ----------------------------------------------------------------------
Interest income, taxable-equivalent 173,563 161,512
Interest expense 74,259 71,067
- ----------------------------------------------------------------------
Net interest income, taxable-equivalent $ 99,304 90,445
======================================================================
</TABLE>
Provision for Loan Losses
During the first three months of 1997, the provision for loan losses increased
$568,000, or 8.8%, over the same period in 1996. Net charge-offs to average
loans for the quarter ended March 31, 1997, were .25% compared to .29% during
the first three months of 1996.
Non-Interest Income
Total non-interest income during the first three months of 1997 increased $15.8
million, or 16.4%, over the same period in 1996. This increase in non-interest
income resulted primarily from higher data processing revenues, which increased
$11.7 million, or 17.3%, during the three months ended March 31, 1997, over the
same period in 1996. The increase in other operating income was primarily due
to increases in revenues from mortgage banking and related servicing fees and
income from TSYS joint ventures.
Data processing services revenue is derived principally from the servicing of
individual bankcard accounts for the card issuing customers of TSYS. TSYS'
revenues from bankcard data processing services increased $11.8 million, or
18.7%, in the first quarter of 1997, compared to the first quarter of 1996.
Increased revenues from bankcard data processing are attributable to the
conversion of cardholder accounts of new customers and growth in the card
portfolios of existing customers. Increases in the volume of authorizations
and transactions associated with the additional cardholder accounts, as well
as growth in new services offered, also contributed to the increased revenues.
During the first quarter of 1997, TSYS successfully completed the conversions
of all of Bank of America's cardholder accounts to TS2. Near the end of the
first quarter of 1997, TSYS announced an extension of its long-term processing
contract with NationsBank, a major customer, to the year 2005.
A significant amount of TSYS' revenues is derived from certain major customers
who are processed under long-term contracts. For the quarters ended March 31,
1997 and 1996, two customers accounted for approximately 27% and 32% of TSYS'
total revenues, respectively. As a result, the loss of one of TSYS' major
customers could have a material adverse effect on TSYS' financial condition
and results of operations.
Non-Interest Expense
Total non-interest expense for the three months ended March 31, 1997, increased
$13.9 million, or 10.5%, over the same period in 1996. Management analyzes
non-interest expense in two separate components: banking operations and TSYS.
The following table summarizes this data for the first three months of 1997 and
1996.
<TABLE>
1997 1996
----------------- ----------------
(In thousands) Banking TSYS Banking TSYS
------- ------ ------- ------
<S> <C> <C> <C> <C>
Salaries and other personnel expenses $47,176 36,939 43,534 29,093
Net occupancy and equipment expense 10,161 22,840 9,335 18,946
Other operating expenses 15,843 12,533 15,953 15,194
Minority interest in subsidiary's net
income 1,639 --- 1,149 ---
- ------------------------------------------------------------------------------
Total non-interest expense $74,819 72,312 69,971 63,233
==============================================================================
</TABLE>
In the first three months of 1997, non-interest expense for Synovus' banking
operations increased $4.8 million, or 6.9%. The primary reasons for this
increase relate to normal salary increases and additional employees. The
number of employees related to Synovus' banking operations as of March 31, 1997
increased to 4,393 compared to 4,148 as of March 31, 1996.
Non-interest expense related to TSYS increased 14.4% for the first quarter of
1997, compared to the same period in 1996. TSYS' increase in non-interest
expense is also attributable to the addition of personnel. As of March 31,
1997, the number of employees was 2,787, up 12.7% from 2,473 employees as of
March 31, 1996.
Income Tax Expense
Income tax expense for the three months ended March 31, 1997, was $20.4 million
compared to $16.3 million for the same period a year ago. The effective tax
rate was 36.3% and 35.5% in 1997 and 1996, respectively.
Legal Proceedings
Synovus is subject to various legal proceedings and claims which arise in the
ordinary course of its business. Any litigation is vigorously defended by
Synovus and, in the opinion of management, based on consultation with external
legal counsel, any outcome of such litigation would not materially affect
Synovus' consolidated financial position or results of operations.
Currently, multiple lawsuits, some seeking class action treatment, are pending
against one of Synovus' Alabama banking subsidiaries that involve: (1) the
sale of credit life insurance made in connection with consumer credit
transactions; (2) payments of service fees or interest rebates to automobile
dealers in connection with the assignment of automobile credit sales contracts
to that Synovus subsidiary; and (3) the forced placement of insurance to
protect that Synovus subsidiary's interest in collateral for which consumer
credit customers have failed to obtain or maintain insurance. These lawsuits
seek unspecified damages, including punitive damages, and purport to be class
actions which, if certified, may involve many of such subsidiary's consumer
credit transactions in Alabama for a number of years. Synovus intends to
vigorously contest these lawsuits and all other litigation to which Synovus 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.
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORT ON FORM 8-K
(a) Exhibits
(11) Statement re Computation of Per Share Earnings
(27) Financial Data Schedule (for SEC purposes only, not
enclosed herewith)
(b) Report on Form 8-K
The following report on Form 8-K was filed during or subsequent
to the first quarter of 1997.
(1) The report filed on March 10, 1997, included the
following event:
On March 10, 1997, Synovus announced a three-for-two stock
split to be issued on April 8, 1997 to shareholders of record
as of March 21, 1997. Synovus also announced a 22.7%
increase in its quarterly dividend. On a pre-split basis,
the quarterly dividend was increased to $.1350 from $.1100
and was paid on April 1, 1997 to shareholders of record as
of March 21, 1997.
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 14, 1997 BY: /s/ Thomas J. Prescott
Thomas J. Prescott
Executive Vice President and
Chief Financial Officer
INDEX TO EXHIBITS
Sequentially
Exhibit Number Description Numbered Page
11 Statement re Computation of 19
Per Share Earnings.
27 Financial Data Schedule
(for SEC purposes only, not
enclosed herewith)
EXHIBIT 11
SYNOVUS FINANCIAL CORP.
COMPUTATION OF NET INCOME
PER COMMON SHARE
(In thousands, except per share data)
(Unaudited)
<TABLE>
Three Months Ended
March 31,
----------------------
1997 1996
---- ----
<S> <C> <C>
Primary
Net income $ 35,807 29,627
=================================================================================
Weighted average common shares outstanding 174,560 173,852
Average common shares added, assuming
exercise of dilutive stock options 3,928 2,373
- ---------------------------------------------------------------------------------
Weighted average common shares, as adjusted 178,488 176,225
=================================================================================
Primary net income per common share $ 0.20 0.17
=================================================================================
Fully Diluted
Net income $ 35,807 29,627
=================================================================================
Weighted average common shares outstanding 174,560 173,852
Average common shares added, assuming
exercise of dilutive stock options 3,928 2,713
- ---------------------------------------------------------------------------------
Weighted average common shares, as adjusted 178,488 176,565
=================================================================================
Fully diluted net income per common share $ 0.20 0.17
=================================================================================
</TABLE>
All information presented in Exhibit 11 reflects the three-for-two stock split
declared by the Synovus Board of Directors on March 10, 1997, effective
April 8, 1997, to shareholders of record on March 21, 1997.
<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, 1997, 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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 349,373
<INT-BEARING-DEPOSITS> 1,990
<FED-FUNDS-SOLD> 8,167
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,284,565
<INVESTMENTS-CARRYING> 351,963
<INVESTMENTS-MARKET> 351,121
<LOANS> 6,183,621
<ALLOWANCE> 97,837
<TOTAL-ASSETS> 8,650,468
<DEPOSITS> 7,188,122
<SHORT-TERM> 386,885
<LIABILITIES-OTHER> 142,173
<LONG-TERM> 100,897
0
0
<COMMON> 174,705
<OTHER-SE> 621,844
<TOTAL-LIABILITIES-AND-EQUITY> 8,650,468
<INTEREST-LOAN> 146,023
<INTEREST-INVEST> 26,088
<INTEREST-OTHER> 303
<INTEREST-TOTAL> 172,414
<INTEREST-DEPOSIT> 67,855
<INTEREST-EXPENSE> 74,259
<INTEREST-INCOME-NET> 98,155
<LOAN-LOSSES> 7,001
<SECURITIES-GAINS> (32)
<EXPENSE-OTHER> 147,131
<INCOME-PRETAX> 56,254
<INCOME-PRE-EXTRAORDINARY> 35,807
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,807
<EPS-PRIMARY> .20
<EPS-DILUTED> .20 <FN>
<FN> On March 10, 1997, Synovus announced a three-for-two
stock split to be issued on April 8, 1997, to shareholders
of record as of March 21, 1997. Financial data schedules
have not been restated for prior periods for this recapitalization.
<YIELD-ACTUAL> 5.21
<LOANS-NON> 26,861
<LOANS-PAST> 17,241
<LOANS-TROUBLED> 26,861
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 94,683
<CHARGE-OFFS> 5,587
<RECOVERIES> 1,740
<ALLOWANCE-CLOSE> 97,837
<ALLOWANCE-DOMESTIC> 97,837
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 22,951
</TABLE>
