SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended 1996 or
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[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ________ to _________
Commission file number 1-10312
SYNOVUS FINANCIAL CORP.
(Exact Name of Registrant as specified in its charter)
Georgia 58-1134883
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
One Arsenal Place, 901 Front Avenue
Suite 301, Columbus, Georgia 31901
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (706) 649-2387
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, $1.00 Par Value New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of February 12, 1997, 116,369,039 shares of the $1.00 par value common
stock of Synovus Financial Corp. were outstanding, and the aggregate market
value of the shares of $1.00 par value common stock of Synovus Financial Corp.
held by non-affiliates was approximately $2,681,624,314 (based upon the closing
per share price of such stock on said date).
Portions of the 1996 Annual Report to Shareholders of Registrant are
incorporated in Parts I, II and IV of this report. Portions of the Proxy
Statement of Registrant dated March 7, 1997 are incorporated in Part III of this
report.
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Registrant's Documents Incorporated by Reference
Part Number and Item
Document Incorporated Number of Form 10-K Into
by Reference Which Incorporated
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Pages F-10, F-21 through Part I, Item 1, Business
F-27, and F-30 through F-51
of Registrant's 1996 Annual Report
to Shareholders
Pages F-16, and F-21 through F-23 Part I, Item 2, Properties
of Registrant's 1996 Annual Report to
Shareholders
Pages F-21 through F 23 of Part I, Item 3, Legal
Registrant's 1996 Annual Report Proceedings
to Shareholders
Pages F-47 through F-49 Part II, Item 5, Market
of Registrant's 1996 Annual for Registrant's Common
Report to Shareholders Equity and Related
Stockholder Matters
Page F-30 of Registrant's Part II, Item 6,
1996 Annual Report to Selected
Shareholders Financial Data
Pages F-30 through F-50 Part II, Item 7,
of Registrant's Management's Discussion
1996 Annual Report to and Analysis of Financial
Shareholders Condition and Results of
Operations
Pages F-2 through F-28, and F-51 Part II, Item 8,
of Registrant's 1996 Financial Statements and
Annual Report to Shareholders Supplementary Data
Pages 3 through 6, 9 and 10, Part III, Item 10,
and 25 of Registrant's Proxy Directors and Executive
Statement in connection with Officers of the Registrant
its Annual Shareholders' Meeting
to be held April 17, 1997
Pages 10 through 14, and Part III, Item 11,
17 through 19 of Registrant's Proxy Executive Compensation
Statement in connection with its Annual
Shareholders' Meeting
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to be held April 17, 1997
Pages 6 through 8, and 20 through Part III, Item 12,
23 of Registrant's Proxy Statement Security Ownership of
in connection with its Annual Certain Beneficial
Shareholders' Meeting to be held Owners and Management
April 17, 1997
Pages 17 through 19, 22, 24, and 25 Part III, Item 13,
of Registrant's Proxy Statement in Certain Relationships
connection with its Annual Shareholders' and Related Transactions
Meeting to be held April 17, 1997
Pages F-2 through F-28 Part IV, Item 14,
of Registrant's 1996 Exhibits, Financial Statement
Annual Report to Shareholders Schedules and Reports on
Form 8-K
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Table of Contents
Item No. Caption Page No.
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Part I
1. Business
2. Properties
3. Legal Proceedings
4. Submission of Matters to a Vote of
Security Holders
Part II
5. Market for Registrant's Common Equity
and Related Stockholder Matters
6. Selected Financial Data
7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations
8. Financial Statements and Supplementary
Data
9. Changes In and Disagreements With
Accountants on Accounting and Financial Disclosure
Part III
10. Directors and Executive Officers of the Registrant
11. Executive Compensation
12. Security Ownership of Certain
Beneficial Owners and Management
13. Certain Relationships and Related
Transactions
Part IV
14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K
<PAGE>
Item 1. Business.
Business and Business Segments.
Synovus Financial Corp.(R) ("Synovus(R)") is an $8.6 billion asset
multi-financial services company which is a registered bank holding company as
defined under federal law in the bank Holding Company Act of 1956, as amended
(the "BHCA"), and under the bank holding company laws of the State of Georgia
(the "Georgia Act"). As a bank holding company, Synovus is subject to
supervision and regulation by the Board of Governors of the Federal Reserve
System ("Board") and the Department of Banking and Finance of the State of
Georgia ("Georgia Banking Department"). Synovus conducts a broad range of
financial services through its banking and bank-related subsidiaries and
affiliates.
Synovus is engaged in two principal business segments: banking (which
encompasses commercial banking, trust services, mortgage banking, credit card
banking and certain securities brokerage operations), and bankcard data
processing. While each of these activities is directly related to the provision
of financial services, their separation for financial reporting purposes is
appropriate under Statement of Financial Accounting Standards No. 14 and the
rules of the Securities and Exchange Commission ("SEC"). See Note 12 of Notes to
Consolidated Financial Statements on page F-23 of Synovus' 1996 Annual Report to
Shareholders which is specifically incorporated herein by reference.
Banking and Bank-Related Subsidiaries and Services.
Synovus currently has thirty-four wholly owned first and second tier
commercial banking subsidiaries located in four states. Of the 34 bank
subsidiaries, 21 are located in Georgia with approximately $5 billion in assets,
seven are located in Alabama with approximately $1.8 billion in assets, five are
located in Florida with approximately $603 million in assets and one is located
in South Carolina with approximately $1.3 billion in assets. Synovus' commercial
banking subsidiaries are hereinafter sometimes collectively referred to as the
"Banks."
The Banks offer a broad range of commercial banking services, including
accepting customary types of demand and savings deposits, making individual,
consumer, commercial, installment, first mortgage and second mortgage loans,
offering money transfers, safe deposit services, trust, investment, IRA, Keogh
and corporate employee benefit and other fiduciary services, correspondent
banking services, automated banking and electronic switch services, automated
fund transfers and bank credit card services, including MasterCard and Visa
services. All of the Banks' commercial banking activities are conducted within
the United States.
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Synovus Financial Corp., Synovus, Synovus Securities, Inc., Columbus Bank
and Trust Company and CB&T are federally registered service marks of Synovus
Financial Corp. TSYS and TS2 are federally registered service marks and Total
System Services, Inc. is a service mark of Total System Services, Inc.
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Synovus owns the federally registered service marks of Synovus Financial
Corp., Synovus, the stylized S logo and Synovus Securities, Inc. Synovus also
owns other service marks. In the opinion of management of Synovus, the loss of
the right to use such marks would not materially affect Synovus' business.
The bank-related subsidiaries of Synovus are: (1) Synovus Securities,
Inc.(R), Columbus, Georgia ("Synovus Securities"), which specializes in
professional portfolio management for fixed-income securities, the execution of
securities transactions as a broker/dealer and the provision of individual
investment advice on equity and other securities; (2) Synovus Trust Company,
Columbus, Georgia, one of the southeast's largest providers of trust services;
(3) Synovus Mortgage Corp., Birmingham, Alabama, which offers mortgage
servicing; and (4) Synovus Data Corp., Columbus, Georgia, which provides general
bank data processing services to Synovus and its banking subsidiaries.
Bankcard Data Processing and Other Affiliates and Services.
Business. Established in 1983 as an outgrowth of an on-line accounting and
bankcard data processing system developed for Synovus' wholly owned subsidiary,
Columbus Bank and Trust Company(R) ("CB&T(R)"), Total System Services, Inc.(sm)
("TSYS(R)") is now one of the world's largest credit, debit, commercial and
private-label card processing companies. Based in Columbus, Georgia, and traded
on the New York Stock Exchange under the symbol "TOTAL SYSTEM SERVICES, INC.,"
TSYS provides a comprehensive on-line system of data processing services
marketed as THE TOTAL SYSTEM(sm), servicing issuing institutions throughout the
United States, Puerto Rico, Canada and Mexico, representing more than 79 million
cardholder accounts. TSYS provides card production, domestic and international
clearing, statement preparation, customer service support, merchant accounting,
and management support. Synovus owns 80.7 percent of TSYS.
TSYS has four wholly owned subsidiaries: (1) Columbus Depot Equipment
Company(sm) ("CDEC(sm)"), which sells and leases computer related equipment
associated with TSYS' bankcard data processing services and Bank data processing
services provided by an affiliate; (2) Mailtek, Inc.(sm) ("Mailtek"), which
provides full-service direct mail production services and offers data
processing, list management, laser printing, computer output microfiche, card
embossing, encoding and mailing services; (3) Lincoln Marketing, Inc.(sm)
("LMI"), which provides correspondence, fulfillment, telemarketing, data
processing and mailing services; and (4) Columbus Productions, Inc.(sm) ("CPI"),
which provides full-service commercial printing and related services. TSYS also
holds a 49% equity interest in a joint venture company named Total System
Services de Mexico, S.A. de C.V., which provides credit card related processing
services to Mexican banks, and a 50% interest in Vital Processing Services
L.L.C., a joint venture with Visa U.S.A. that combines the front-end
authorization and back-end accounting and settlement processing of merchants.
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Service Marks. TSYS owns a family of service marks containing the name
Total System, and the federally registered service marks TSYS and TS2, to which
TSYS believes strong customer identification attaches. TSYS also owns service
marks associated with its subsidiaries. Management does not believe the loss of
such marks would have a material impact on the business of TSYS.
Major Customers. A significant amount of TSYS' revenues are derived from
certain major customers who are processed under long-term contracts. For the
year ended December 31, 1996, AT&T Universal Card Services Corp. and NationsBank
accounted for 17.6% and 11.9%, respectively, of TSYS' total revenues. As a
result, the loss of one of TSYS' major customers could have a material adverse
effect on TSYS' results of operations.
See "Non-Interest Income" under the "Financial Review" Section on pages
F-34 and F-35, "Non-Interest Expense" under the "Financial Review" Section on
pages F-35 and F-36, and Note 10 of Notes to Consolidated Financial Statements
on pages F-21 through F-23 of Synovus' 1996 Annual Report to Shareholders which
are specifically incorporated herein by reference.
Acquisitions Consummated During 1996.
See Note 1 of Notes to Consolidated Financial Statements on page F-10 and
"Acquisitions" under the "Financial Review" Section on page F-31 of Synovus'
1996 Annual Report to Shareholders which are specifically incorporated herein by
reference for a detailed description of the acquisitions consummated by Synovus
during 1996.
Supervision, Regulation and Other Factors.
Synovus is a registered multi-bank holding company, subject to supervision
and regulation by the Board under the BHCA, and by the Georgia Banking
Department under the Georgia Act. As a bank holding company, Synovus is required
to furnish the Board and the Georgia Banking Department with annual reports of
the financial condition, management and inter-company relationships of Synovus
and its subsidiaries and affiliates at the end of each fiscal year, and such
additional information as the Board and the Georgia Banking Department may
require from time to time. The Board and the Georgia Banking Department also
make examinations of Synovus and certain of its subsidiaries and affiliates.
The BHCA and the Georgia Act require each bank holding company to obtain
the prior approval of the Board and the Georgia Banking Department before: (i)
it may acquire direct or indirect ownership or control of any voting shares of
any bank, if, after such acquisition, such bank holding company will, directly
or indirectly, own or control more than 5% of the voting shares of such bank;
(ii) it or any of its subsidiaries, other than a bank, may acquire all or
substantially all of the assets of a bank; or (iii) it may merge or consolidate
with any other bank holding company. In addition, under the Georgia Act, it is
unlawful for any bank holding company to acquire, direct or indirect,
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ownership or control of more than 5% of the voting shares of any presently
operating bank, unless such bank has been in existence and continuously
operating as a bank for a period of five years or more prior to the date of
making application to the Georgia Banking Department for approval of said
acquisition.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 ("Interstate Banking Act"), effective September 29, 1995, bank holding
companies were permitted to acquire banks in any state. Under the Interstate
Banking Act, effective June 1, 1997, banks may merge or consolidate across state
lines, unless both of the states involved either authorize such merger or
consolidation at an earlier date or either of the states involved elect to
prohibit such merger or consolidation prior to May 31, 1997. Finally, under the
Interstate Banking Act, states may authorize banks from other states to engage
in branching across state lines.
In addition, a bank holding company is, with certain exceptions, prohibited
by the BHCA from engaging in, or acquiring or retaining direct or indirect
control of the voting shares of any company engaged in non-banking activities.
One of the principal exceptions to this prohibition is for activities found by
the Board to be so closely related to banking, or managing or controlling banks,
as to be a proper incident thereto.
The Board has issued guidelines for the implementation of risk-based
capital requirements by U.S. banks and Bank holding companies. See "Capital
Resources and Dividends" under the "Financial Review" Section on pages F-47
through F-49 and Note 13 of Notes to Consolidated Financial Statements on pages
F-24 through F-27 of Synovus' 1996 Annual Report to Shareholders which are
specifically incorporated herein by reference.
Under the Board's current policy, Synovus is expected to act as a source of
financial strength to its subsidiary banks and to commit resources to support
its subsidiary banks in circumstances when it might not do so absent such
policy. In addition, any capital loans by Synovus to any of its subsidiary banks
would also be subordinate in right of payment to depositors and to certain other
indebtedness of such Bank.
As a result of the enactment of the Financial Institutions Reform, Recovery
and Enforcement Act of 1989 ("FIRREA"), a depository institution insured by the
FDIC can be held liable for any loss incurred by, or reasonably expected to be
incurred by, the FDIC in connection with: (i) the default of a commonly
controlled FDIC insured depository institution; or (ii) any assistance provided
by the FDIC to a commonly controlled FDIC insured depository institution in
danger of default. "Default" is defined generally as the appointment of a
conservator or receiver and "in danger of default" is defined generally as the
existence of certain conditions indicating that a "default" is likely to occur
in the absence of regulatory assistance. All of Synovus' subsidiary banks are
FDIC insured depository institutions within the meaning of FIRREA.
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The principal source of funds for the payment of dividends by Synovus is
dividends paid to it by its subsidiary banks. Various federal and state
statutory provisions limit the assessment of dividends that may be paid to
Synovus by its subsidiary banks. See "Parent Company" under the "Financial
Review" Section on page F-50, and Note 13 of Notes to Consolidated Financial
Statements on pages F-24 through F-27 of Synovus' 1996 Annual Report to
Shareholders which are specifically incorporated herein by reference.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") requires the various federal banking regulatory agencies to issue
regulations on a broad range of issues including capital standards, non-capital
standards for safety and soundness relating generally to operations and
management, asset quality and executive compensation, additional disclosure
regarding loans and deposits to enhance consumer protection, limits on state
Bank powers, audit requirements and examination requirements. Various federal
regulatory agencies have adopted regulations which, among other matters,
implement provisions of FDICIA that require or permit the respective federal
regulatory agencies to take specific supervisory actions when FDIC-insured
institutions come within one of five specific capital categories. The five
capital categories are designated as (1) well capitalized, (2) adequately
capitalized, (3) undercapitalized, (4) significantly undercapitalized and (5)
critically undercapitalized. FDICIA defines well capitalized banks or bank
holding companies as entities having a total risk-based capital ratio of 10% or
higher, a Tier 1 risk-based capital ratio of 6% or higher and a leverage ratio
of 5% or higher. At December 31, 1996 Synovus and its significant bank
subsidiaries had adequate capital to be classified as well capitalized
institutions under the FDICIA regulations. See Note 13 of Notes to Consolidated
Financial Statements on pages F-24 through F-27 of Synovus' 1996 Annual Report
to Shareholders which is specifically incorporated herein by reference.
FIRREA and FDICIA provide the federal banking agencies with significantly
expanded powers to take enforcement action against institutions which fail to
comply with capital or other standards. Such action may include the termination
of deposit insurance by the FDIC.
Because Synovus is a registered multi-bank holding company, the Banks are
also subject to examination, supervision and regulation by the Board. The Banks
which are chartered under the banking laws of the States of Georgia, Florida and
Alabama are subject to examination, supervision and regulation by the Georgia
Banking Department, Florida Banking Department and the Alabama Banking
Department, respectively. The Banks which are chartered under the banking laws
of the United States are subject to examination, supervision and regulation by
the Office of the Comptroller of the Currency ("OCC"). In addition, the deposits
of the Banks are insured by the FDIC to the extent provided by law, and are
subject to examination, supervision and regulation by the FDIC.
The Georgia Banking Department, Florida Banking Department, Alabama Banking
Department, OCC and the FDIC regulate all areas of the Banks' banking and trust
operations,including, where appropriate,reserves,investments,loans, mergers, the
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issuance of securities, payment of dividends, interest rates, extension of
credit to officers and directors, establishment of branches, maintenance of
capital and other aspects of their operations.
Also, the payment of management fees by banking subsidiaries of a bank
holding company is subject to supervision and regulation by the Georgia Banking
Department, Florida Banking Department, Alabama Banking Department, the OCC, the
Board and the FDIC. The payment of management fees by non-banking subsidiaries
of a bank holding company is also subject to supervision and regulation by the
Board.
Numerous other federal and state laws, as well as regulations promulgated
by the Board, the Georgia Banking Department, Florida Banking Department,
Alabama Banking Department, the OCC and the FDIC govern almost all aspects of
the operations of the Banks.
Employees.
During 1996, the average number of employees of Synovus was 6,695, which
number includes 2,498 persons who are employees of TSYS.
Competition.
Banking. Synovus and the Banks encounter vigorous competition from other
commercial banks, savings and loan associations and other financial institutions
and intermediaries in their respective market areas. Certain of the Banks are
smaller than many of the financial institutions in their respective market
areas.
The Banks compete with other banks in their respective market areas in
obtaining new deposits and accounts, making loans, obtaining branch banking
locations and providing other banking services. The Banks also compete with
savings institutions and credit unions in their respective markets for savings
and transaction deposits, certificates of deposit and various types of loans.
Competition for loans is also offered by other financial intermediaries,
including savings institutions, mortgage banking firms and real estate
investment trusts, small loan and finance companies, insurance companies, credit
unions, leasing companies and certain government agencies. Competition for time
deposits and, to a more limited extent, demand and transaction deposits is also
offered by a number of other financial intermediaries and investment
alternatives, including "money-market" mutual funds, brokerage firms, government
and corporate bonds and other securities.
In the offering of fiduciary services, the Banks and Synovus Trust Company,
a wholly owned subsidiary of CB&T, compete with commercial banks and savings
institutions having trust powers, trust companies, and investment advisory and
brokerage firms and other individuals and firms that offer fiduciary, escrow, or
corporate trust services.
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Synovus Securities competes with full-service brokerage firms. In the
offering of investment advisory and securities brokerage services, Synovus
Securities competes with banking and brokerage concerns which provide investment
advisory and broker-dealer services for fixed income portfolios.
Bankcard Data Processing Subsidiary. TSYS encounters vigorous competition
in providing bankcard data processing services from several different sources.
The national market in third party bankcard data processors is presently being
provided by approximately five vendors. TSYS believes that it is the second
largest third party bankcard processor in the United States. In addition, TSYS
competes against software vendors which provide their products to institutions
which process in-house. TSYS is presently encountering, and in the future
anticipates continuing to encounter, substantial competition from bankcard
associations, data processing and bankcard computer service firms and other such
third party vendors located throughout the United States.
TSYS' major competitor in the bankcard data processing industry is First
Data Resources, Inc., which is headquartered in Omaha, Nebraska, and provides
bankcard data processing services, including authorization and data entry
services. The principal methods of competition between TSYS and First Data
Resources are price and the type and quality of services provided. In addition,
there are a number of other companies which have the necessary financial
resources and the technological ability to develop or acquire products and, in
the future, to provide services similar to those being offered by TSYS.
Selected Statistical Information.
The "Financial Review" Section, which is set forth on pages F-30 through
F-51 of Synovus' 1996 Annual Report to Shareholders, which includes the
information encompassed within "Selected Statistical Information", is
specifically incorporated herein by reference.
Item 2. Properties.
Synovus and its subsidiaries own, in some cases subject to mortgages or
other security interests, or lease all of the real property and/or buildings on
which it is located. All of such buildings are in a good state of repair and are
appropriately designed for the purposes for which they are used.
See Note 6 and Note 10 of Notes to Consolidated Financial Statements on
page F-16, and pages F-21 through F-23, of Synovus' 1996 Annual Report to
Shareholders which are specifically incorporated herein by reference.
CB&T occupies an approximately 225,000 square foot building known as the
Uptown Center in Columbus, Georgia which provides office space for most of its
operations.
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TSYS occupies a 252,000 square foot production center which is located on a
40.4 acre tract of land in north Columbus, Georgia. Primarily a production
center, this facility houses TSYS' primary data processing computer operations,
statement preparation, mail handling, microfiche production and purchasing, as
well as other related operations. Additional space will be added to this
facility in 1997 to house TSYS' card production services.
During 1995, TSYS purchased a 110,000 square foot building on a 23 acre
site in Columbus, Georgia to accommodate current and future space needs.
On March 7, 1996, TSYS announced its plans to purchase approximately 50
acres in downtown Columbus, Georgia, on which it will begin building a
campus-like complex for its corporate headquarters in 1997.
Item 3. Legal Proceedings.
See Note 10 of Notes to Consolidated Financial Statements on pages F-21
through F-23 of Synovus' 1996 Annual Report to Shareholders which is
specifically incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Shares of common stock of Synovus are traded on the New York Stock Exchange
under the symbol "SNV." See "Capital Resources and Dividends" under the
"Financial Review" Section which is set forth on pages F-47 through F-49 of
Synovus' 1996 Annual Report to Shareholders which is specifically incorporated
herein by reference.
On October 31, 1994, Synovus issued 823,319 shares of its $1.00 par value
common stock to the shareholders of State Bancshares, Inc., the parent company
of the $62 million asset Coffee County Bank, in exchange for all 53,000 of the
issued and outstanding shares of $.10 par value common stock of State
Bancshares, Inc. The securities were issued pursuant to the exemption from
registration set forth in Section 4(2) of the Securities Act of 1933 as they
were issued to a limited number of persons. The securities were subsequently
registered with a Form S-3 Registration Statement on November 21, 1994.
Item 6. Selected Financial Data.
See "Five Year Selected Financial Data" under the "Financial Review"
Section which is set forth on page F-30 of Synovus' 1996 Annual Report to
Shareholders which is specifically incorporated herein by reference.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The "Financial Review" Section which is set forth on pages F-30 through
F-50 of Synovus' 1996 Annual Report to Shareholders, which includes the
information encompassed by "Management's Discussion and Analysis of Financial
Condition and Results of Operations", is specifically incorporated herein by
reference.
Item 8. Financial Statements and Supplementary Data.
The "Summary of Quarterly Financial Data" Section which is set forth on
page F- 51, and the "Consolidated Statements of Condition, Consolidated
Statements of Income, Consolidated Statements of Changes in Shareholders'
Equity, Consolidated Statements of Cash Flows, Summary of Significant Accounting
Policies, Notes to Consolidated Financial Statements and Independent Auditors'
Report" Sections which are set forth on pages F-2 through F-28 of Synovus' 1996
Annual Report to Shareholders are specifically incorporated herein by reference.
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Item 10. Directors and Executive Officers of the Registrant.
The "ELECTION OF DIRECTORS - Information Concerning Directors and Nominees"
Section which is set forth on pages 3 and 4, the "ELECTION OF DIRECTORS
- -Information Concerning Directors and Nominees for Class III Directors General
Information" Section which is set forth on pages 4 through 6, the "ELECTION OF
DIRECTORS - Executive Officers" Section which is set forth on pages 9 and 10,
and the "SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE SECTION" which
is set forth on page 25 of Synovus' Proxy Statement in connection with its
Annual Shareholders' Meeting to be held on April 17, 1997 are specifically
incorporated herein by reference.
Item 11. Executive Compensation.
The "EXECUTIVE COMPENSATION - Summary Compensation Table; Stock Option
Exercises and Grants; Compensation of Directors; Employment Contracts and Change
in Control Arrangements; and Compensation Committee Interlocks and Insider
Participation" Sections which are set forth on pages 10 through 14 and pages 17
through 19 of Synovus' Proxy Statement in connection with its Annual
Shareholders' Meeting to be held on April 17, 1997 are specifically incorporated
herein by reference.
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Item 12. Security Ownership of Certain Beneficial Owners and Management.
The "ELECTION OF DIRECTORS - Information Concerning Directors and Nominees
for Class III Directors - Synovus Common Stock Ownership of Directors and
Management" Section which is set forth on pages 6 through 8, the "PRINCIPAL
SHAREHOLDERS" Section which is set forth on pages 20 and 21, and the
"RELATIONSHIPS BETWEEN SYNOVUS, COLUMBUS BANK, TSYS AND CERTAIN OF SYNOVUS'
SUBSIDIARIES AND AFFILIATES - TSYS Common Stock Ownership of Directors and
Management" Section which is set forth on pages 22 and 23 of Synovus' Proxy
Statement in connection with its Annual Shareholders' Meeting to be held on
April 17, 1997 are specifically incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The "EXECUTIVE COMPENSATION - Compensation Committee Interlocks and Insider
Participation Section" which is set forth on pages 17 through 19, "EXECUTIVE
COMPENSATION" -Transactions with Management" Section which is set forth on page
19, the "RELATIONSHIPS BETWEEN SYNOVUS, COLUMBUS BANK, TSYS AND CERTAIN OF
SYNOVUS' SUBSIDIARIES AND AFFILIATES - Beneficial Ownership of TSYS Common Stock
by Columbus Bank" Section which is set forth on page 22, the "RELATIONSHIPS
BETWEEN SYNOVUS, COLUMBUS BANK, TSYS AND CERTAIN OF SYNOVUS' SUBSIDIARIES AND
AFFILIATES - Interlocking Directorates of Synovus, Columbus Bank and TSYS"
Section which is set forth on page 22, and the "RELATIONSHIPS BETWEEN SYNOVUS,
COLUMBUS BANK, TSYS AND CERTAIN OF SYNOVUS' SUBSIDIARIES AND AFFILIATES -
Transactions and Agreements Between Synovus, Columbus Bank, TSYS and Certain of
Synovus' Subsidiaries" Section which is set forth on pages 24 and 25 of Synovus'
Proxy Statement in connection with its Annual Shareholders' Meeting to be held
on April 17, 1997 are specifically incorporated herein by reference.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial Statements
The following Consolidated Financial Statements of
Synovus Financial Corp. and its subsidiaries are
specifically incorporated by reference from pages F-2
through F-28 of Synovus' 1996 Annual Report to
Shareholders, in response to Item 8, Part II,
Financial Statements and Supplementary Data.
Consolidated Statements of Condition - December 31,
1996 and 1995
Consolidated Statements of Income - Years Ended
December 31, 1996, 1995 and 1994
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Consolidated Statements of Changes in Shareholders'
Equity - Years Ended December 31,1996, 1995 and 1994
Consolidated Statements of Cash Flows -
Years Ended December 31, 1996, 1995 and 1994
Summary of Significant Accounting Policies -
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements -
December 31, 1996, 1995 and 1994
Independent Auditors' Report
2. Financial Statement Schedules
Financial Statement Schedules - None applicable
because the required information has been
incorporated in the Consolidated Financial Statements
of Synovus Financial Corp. and its subsidiaries
incorporated by reference herein.
3. Exhibits
Exhibit
Number Description
3.1 Articles of Incorporation, as amended, of
Synovus Financial Corp. ("Synovus")
incorporated by reference to Exhibit 4(a)
of Synovus' Registration Statement on Form
S-8 filed with the Securities and
Exchange Commission on July 23, 1990 (File
No. 33-35926).
3.2 Bylaws, as amended, of Synovus.
4.1 Form of Rights Agreement incorporated by
reference to Exhibit 1 of Synovus'
Registration Statement on Form 8-A dated
May 3, 1989 pursuant to Section 12 of the
Securities Exchange Act of 1934, as
amended.
9.1 Voting Lease Agreement incorporated by
reference to Exhibit 9.1 of Synovus' Annual
Report on Form 10-K for the fiscal year
ended December 31, 1994, as filed with the
Commission on March 24, 1995.
10. EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
11
<PAGE>
10.1 Employment Agreements of James H. Blanchard
and James D. Yancey with Synovus
incorporated by reference to Exhibit 10.1
of Synovus' Registration Statement on Form
S-1 filed with the Commission on December
18, 1990 (File No. 33-38244).
10.2 Incentive Bonus Plan of Synovus
incorporated by reference to Exhibit 10.5
of Synovus' Registration Statement on Form
S-1 filed with the Commission on December
18, 1990 (File No. 33-38244).
10.3 Director Stock Purchase Plan of Synovus
incorporated by reference to Exhibit 10(a)
of Synovus' Registration Statement on Form
S-8 filed with the Commission on December
3, 1984 (File No. 2-94639).
10.4 Key Executive Restricted Stock Bonus Plan
of Synovus incorporated by reference to
Exhibit 10.6 of Synovus' Registration
Statement on Form S-1 filed with the
Commission on December 18, 1990 (File
No. 33-38244).
10.5 1989 Stock Option Plan of Synovus
incorporated by reference to Exhibit "A"
of Synovus' Registration Statement on Form
S-8 filed with the Commission on July 23,
1990 (File No.33-35926), which Option Plan
was amended on March 16, 1992 to
eliminate the stock appreciation rights
feature of the outstanding options under
the Plan and reduce the exercise price from
$16 5/8 per share to $9.70 per share.
10.6 Employment Agreements of John T. Oliver,
Jr. and Richard E. Anthony with Synovus and
Consulting Agreement of H. Lynn Page with
Synovus incorporated by reference to
Exhibit 10.6 of Synovus' Annual Report
on Form 10-K for the fiscal year ended
December 31, 1992, as filed with the
Commission on March 29, 1993.
10.7 Excess Benefit Agreement of Synovus
incorporated by reference to Exhibit 10.7
of Synovus' Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, as
filed with the Commission on March 24,
1995.
12
<PAGE>
10.8 Wage Continuation Agreement of Synovus
incorporated by reference to Exhibit 10.8
of Synovus' Annual Report on Form 10-K for
the fiscal year ended December 31, 1992, as
filed with the Commission on March 29,
1993.
10.9 1991 Stock Option Plan for Key Executives
of Synovus incorporated by reference to
Exhibit 10.9 of Synovus' Annual Report on
Form 10-K for the fiscal year ended
December 31, 1992, as filed with the
Commission on March 29, 1993.
10.10 Synovus Financial Corp. 1992 Long-Term
Incentive Plan incorporated by reference to
Exhibit 10.10 of Synovus' Annual Report on
Form 10-K for the fiscal year ended December
31, 1992, as filed with the Commission on
March 29, 1993.
10.11 Agreement in Connection with Use of Aircraft
incorporated by reference to Exhibit 10.11
of Synovus' Annual Report on Form 10-K for
the fiscal year ended December 31, 1992, as
filed with the Commission on March 29, 1993.
10.12 Life Insurance Trusts incorporated by
reference to Exhibit 10.12 of Synovus'
Annual Report on Form 10-K for the fiscal
year ended December 31, 1992, as filed with
the Commission on March 29, 1993.
10.13 Supplemental Compensation Agreement,
Incentive Compensation Agreements and
Performance Compensation Agreement with
Richard E. Anthony; which Agreements were
assumed by Synovus on December 31, 1992 as a
result of its acquisition of First
Commercial Bancshares, Inc.; and which stock
awards made pursuant to the Agreements were
converted at a ratio of 1.5 to 1, the
exchange ratio applicable to the merger
incorporated by reference to Exhibit 10.13
of Synovus' Annual Report on Form 10-K for
the fiscal year ended December 31, 1992, as
filed with the Commission on March 29, 1993.
10.14 1993 Split Dollar Insurance Agreement of
Synovus incorporated by reference to Exhibit
10.14 of Synovus' Annual Report on
Form 10-K for the fiscal year ended
13
<PAGE>
December 31, 1993, as filed with the
Commission on March 28, 1994.
10.15 1995 Split Dollar Insurance Agreement of
Synovus incorporated by reference to Exhibit
10.15 of Synovus' Annual Report on Form 10-K
for the fiscal year ended December 31, 1994,
as filed with the Commission on March 24,
1995.
10.16 Synovus Financial Corp. 1995 Long-Term
Incentive Plan incorporated by reference to
Exhibit 10.16 of Synovus' Annual Report on
Form 10-K for the fiscal year ended December
31, 1994, as filed with the Commission on
March 24, 1995.
10.17 Employment Agreement of Robert V. Royall,
Jr. and Employment and Retirement Agreements
of William L. Pherigo incorporated by
reference to Exhibit 10.17 of Synovus'
Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, as filed with
the Commission on March 25, 1996.
10.18 Synovus Financial Corp. Executive Bonus
Plan incorporated by reference to Exhibit
10.18 of Synovus' Annual Report on Form 10-K
for the fiscal year ended December 31, 1995,
as filed with the Commission on March 25,
1996.
10.19 Change of Control Agreements incorporated by
reference to Exhibit 10.19 of Synovus'
Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, as filed with
the Commission on March 25, 1996.
10.20 Consulting Agreement of Joe E. Beverly.
11.1 Statement of Computation of Net Income Per
Common Share.
13.1 Certain specified pages of Synovus' 1996
Annual Report to Shareholders which are
specifically incorporated herein by
reference.
20.1 Proxy Statement, for the Annual Meeting of
Shareholders of Synovus to be held on April
17, 1997,
14
<PAGE>
certain specified pages of which
are specifically incorporated herein by
reference.
21.1 Subsidiaries of Synovus Financial Corp.
23.1 Independent Auditors' Consents.
24.1 Powers of Attorney contained on the
signature pages of the 1996 Annual Report
on Form 10-K.
27.1 Financial Data Schedule (for SEC use only).
99.1 Annual Report on Form 11-K for the Synovus
Financial Corp. Employee Stock Purchase Plan
for the year ended December 31, 1996 (to be
filed as an amendment hereto within 120 days
of the end of the period covered by this
report).
99.2 Annual Report on Form 11-K for the Synovus
Financial Corp. Director Stock Purchase Plan
for the year ended December 31, 1996 (to be
filed as an amendment hereto within 120 days
of the end of the period covered by this
report).
Synovus agrees to furnish the Commission, upon request, a copy of each
instrument with respect to issues of long-term debt. The principal amount of any
individual instrument, which has not been previously filed, does not exceed ten
percent of the total assets of Synovus and its subsidiaries on a consolidated
basis.
(b) Reports on Form 8-K.
None.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Synovus Financial Corp. has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SYNOVUS FINANCIAL CORP.
(Registrant)
March 5, 1997 By:/s/James H. Blanchard
---------------------
James H. Blanchard,
Chairman of the Board and
Principal Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James H. Blanchard, James D. Yancey and
Stephen L. Burts, Jr., and each of them, his or her true and lawful
attorney(s)-in-fact and agent(s), with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any or all amendments to this report and to file the
same, with all exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney(s)-in-fact and agent(s) full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney(s)-in-fact and
agent(s), or their substitute(s), may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of Section 13 or 15(d) the Securities
Exchange Act of 1934, as amended, this report has been signed by the following
persons in the capacities and on the dates indicated.
/s/William B. Turner Date: March 5, 1997
- ------------------------------------
William B. Turner,
Director and Chairman of
the Executive Committee
/s/James H. Blanchard Date: March 5, 1997
- -----------------------------------
James H. Blanchard,
Chairman of the Board and
Principal Executive Officer
16
<PAGE>
/s/John T. Oliver, Jr. Date: March 5, 1997
- ------------------------------
John T. Oliver, Jr.,
Director and Vice Chairman
of the Executive Committee
/s/James D. Yancey Date: March 5, 1997
- ------------------------------
James D. Yancey,
Vice Chairman of the Board
/s/Richard E. Anthony Date: March 5, 1997
- -----------------------------
Richard E. Anthony,
Vice Chairman of the Board
/s/Walter M. Deriso, Jr. Date: March 5, 1997
- -----------------------------
Walter M. Deriso, Jr.,
Vice Chairman of the Board
/s/Stephen L. Burts, Jr. Date: March 5, 1997
- ----------------------------
Stephen L. Burts, Jr.,
President
/s/G. Sanders Griffith, III Date: March 5, 1997
- -----------------------------
G. Sanders Griffith, III,
Senior Executive Vice President,
General Counsel and Secretary
/s/Thomas J. Prescott Date: March 5, 1997
- ------------------------------
Thomas J. Prescott,
Executive Vice President, Treasurer,
Principal Accounting and Financial Officer
/s/Jay C. McClung Date: March 5, 1997
- ------------------------------
Jay C. McClung,
Executive Vice President
/s/Calvin Smyre Date: March 5, 1997
- -----------------------------
Calvin Smyre,
Executive Vice President
17
<PAGE>
- ---------------------------------- Date:
Daniel P. Amos,
Director
/s/Joe E. Beverly Date: March 5, 1997
- ----------------------------------
Joe E. Beverly,
Director
/s/Richard Y. Bradley Date: March 5, 1997
- ---------------------------------
Richard Y. Bradley,
Director
/s/C. Edward Floyd Date: March 5, 1997
- --------------------------------
C. Edward Floyd,
Director
/s/Gardiner W. Garrard, Jr. Date: March 5, 1997
- ---------------------------------
Gardiner W. Garrard, Jr.,
Director
/s/V. Nathaniel Hansford Date: March 5, 1997
- --------------------------------
V. Nathaniel Hansford,
Director
/s/John P. Illges, III Date: March 5, 1997
- --------------------------------
John P. Illges, III,
Director
/s/Mason H. Lampton Date: March 5, 1997
- -------------------------------
Mason H. Lampton,
Director
- ------------------------------- Date:
Elizabeth C. Ogie,
Director
18
<PAGE>
/s/H. Lynn Page Date: March 5, 1997
- ---------------------------
H. Lynn Page,
Director
/s/William L. Pherigo Date: March 5, 1997
- ----------------------------
William L. Pherigo,
Director
/s/Robert V. Royall, Jr. Date: March 5, 1997
- ----------------------------
Robert V. Royall, Jr.,
Director
/s/George C. Woodruff, Jr. Date: March 5, 1997
- ---------------------------
George C. Woodruff, Jr.,
Director
19
filings\SNV\nonconfo.sig
Exhibit 3.1
As Amended
Effective January 24, 1997
BYLAWS
OF
SYNOVUS FINANCIAL CORP.
ARTICLE I.
OFFICES
Section 1. Principal Office.
The principal office for the transaction of the business of
the corporation shall be located in Muscogee County, Georgia, at such place
within said County as may be fixed from time to time by the Board of Directors.
Section 2. Other Offices.
Branch offices and places of business may be established at
any time by the Board of Directors at any place or places where the corporation
is qualified to do business, whether within or without the State of Georgia.
ARTICLE II.
SHAREHOLDERS' MEETINGS
Section 1. Meetings, Where Held.
Any meeting of the shareholders of the corporation, whether an
annual meeting or a special meeting, may be held either at the principal office
of the corporation or at any place in the United States within or without the
State of Georgia.
Section 2. Annual Meeting.
The annual meeting of the shareholders of the corporation for the
election of Directors and for the transaction of such other business as may
properly come before the meeting shall be held on such date and at such time and
place as is determined by the Board of Directors of the corporation each year.
Provided, however, that if the Board of Directors shall fail to set a date for
the annual meeting of shareholders in any year, that the annual meeting of the
shareholders of the corporation shall be held on the fourth Thursday in April of
each year; provided, that if said day shall fall upon a legal holiday, then such
annual meeting shall be held on the next day thereafter ensuing which is not a
legal holiday. In addition to any other applicable requirements, for business to
properly come before the meeting, notice of any nominations of persons for
election to the Board of Directors or of any other business to be brought before
an annual meeting of shareholders by a shareholder must be provided in writing
to the Secretary of the corporation not later than the close of business on the
sixtieth (60th) day nor earlier than the close of business on the one hundred
twentieth (120th) day prior to the date of the meeting and such
1
<PAGE>
business must constitute a proper subject to be brought before such meeting.
Such shareholder's notice shall set forth (a) as to each person whom the
shareholder proposes to nominate for election as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(including such person's written consent to being named in the Proxy Statement
in connection with such annual meeting as a nominee and to serving as a director
if elected), and evidence reasonably satisfactory to the corporation that such
nominee has no interests that would limit such nominee's ability to fulfill his
or her duties of office; (b) as to any other business that the shareholder
proposes to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such business of such
shareholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the shareholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i) the name and
address of such shareholder, as they appear on the corporation's books, and of
such beneficial owner and (ii) the class and number of shares of the corporation
that are owned beneficially and held of record by such shareholder and such
beneficial owner. Notwithstanding anything in these bylaws to the contrary, no
business shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 2. The Chairman of the Board of Directors
shall, if the facts warrant, determine and declare to the meeting that business
has not been properly brought before the meeting in accordance with the
provisions of this Section 2, and if the Chairman should so determine, the
Chairman shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
Section 3. Special Meetings.
A special meeting of the shareholders of the corporation, for
any purpose or purposes whatsoever, may be called at any time by the Chairman of
the Board, any Vice Chairman of the Board, the President, any Vice President, a
majority of the Board of Directors, or one or more shareholders of the
corporation representing at least 66 2/3% of the votes entitled to be cast by
the holders of all of the issued and outstanding shares of common stock of the
corporation. Such a call for a special meeting must state the purpose of the
meeting. This section, as it relates to the call of a special meeting of the
shareholders of the corporation by one or more shareholders representing at
least 66 2/3% of the votes entitled to be cast by the holders of all of the
issued and outstanding shares of common stock of the corporation shall not be
altered, deleted or rescinded except upon the affirmative vote of the
shareholders of the corporation representing at least 66 2/3% of the votes
entitled to be cast by the holders of all of the issued and outstanding shares
of common stock of the corporation.
Section 4. Notice of Meetings.
Unless waived, written notice of each annual meeting and of
each special meeting of the shareholders of the corporation shall be given to
each shareholder of record entitled to vote, either personally or by first class
mail (postage prepaid) addressed to such shareholder at his last known address,
not less than ten (10) days nor more than seventy (70) days prior to said
meeting. Such written notice shall specify the place, day and hour of the
meeting; and in the case of a special meeting, it shall also
2
<PAGE>
specify the purpose or purposes for which the meeting is called.
Section 5. Waiver of Notice.
Notice of an annual or special meeting of the shareholders of
the corporation may be waived by any shareholder, either before or after the
meeting; and the attendance of a shareholder at a meeting, either in person or
by proxy, shall of itself constitute waiver of notice and waiver of any and all
objections to the place or time of the meeting, or to the manner in which it has
been called or convened, except when a shareholder attends solely for the
purpose of stating, at the beginning of the meeting, an objection or objections
to the transaction of business at such meeting.
Section 6. Quorum, Voting and Proxy.
Shareholders representing a majority of the votes entitled to
be cast by the holders of all of the issued and outstanding shares of common
stock of the corporation shall constitute a quorum at a shareholders' meeting.
Any shareholder may be represented and vote at any shareholders' meeting by
written proxy filed with the Secretary of the corporation on or before the date
of such meeting; provided, however, that no proxy shall be valid for more than
11 months after the date thereof unless otherwise specified in such proxy.
The common stock of the corporation shall have the following voting
rights:
(a) Except as otherwise provided in paragraph (b) below, every holder
of record of the common stock shall be entitled to one (1) vote in person or by
proxy on each matter submitted to a vote at a meeting of shareholders for each
share of the common stock held of record by such holder as of the record date of
such meeting.
(b) Notwithstanding paragraph (a) above, every holder of record of a
share of the common stock meeting any one of the following criteria, shall be
entitled to ten (10) votes in person or by proxy on each matter submitted to a
vote at a meeting of shareholders for each share of the common stock held of
record by such holder as of the record date of such meeting which:
(1) has had the same beneficial owner since April 24, 1986; or
(2) has had the same beneficial owner for a continuous period of
greater than 48 months prior to the record date of such meeting; or
(3) is held by the same beneficial owner to whom it was issued
by the corporation in or as a part of an acquisition of a banking or
non-banking company by the corporation where the resolutions adopted by
the corporation's Board of Directors approving said acquisition
specifically reference and grant such rights; or
(4) is held by the same beneficial owner to whom it was issued
by the corporation, or to whom it transferred by the corporation from
treasury shares held by the corporation, and the resolutions adopted by
the corporation's Board of
3
<PAGE>
Directors approving such issuance and/or transfer specifically
reference and grant such rights; or
(5) was acquired under any employee, officer and/or director
benefit plan maintained for one or more employees, officers and/or
directors of the corporation, and/or its subsidiaries, and is held by
the same beneficial owner for whom it was acquired under the terms and
provisions of such plan; or
(6) was acquired by reason of participation in a dividend
reinvestment plan approved by the corporation and is held by the same
beneficial owner for whom it was acquired under the terms and
provisions of such plan; or
(7) is owned by a holder who, in addition to shares which are
beneficially owned under the provisions of paragraph (b) (1)-(6) above,
is the beneficial owner of less than 100,000 shares of common stock of
the corporation, with such amount to be appropriately adjusted to
properly reflect any change in the shares of common stock of the
corporation by means of a stock split, a stock dividend, a
recapitalization or otherwise occurring after April 24, 1986.
(c)For purposes of paragraphs (b) above and (e) below:
(1) any transferee of a share of the common stock receiving such
stock:
(i) by gift; or
(ii) by bequest, devise or otherwise through the law of
inheritance, descent and distribution from a descendant's estate;
or
(iii) by distribution from a trust holding such stock for
the benefit of such transferee; or
(2) any corporate transferee receiving such common stock solely
in exchange for the capital stock of such corporate transferee
prior to December 31, 1986, provided that the transferor(s) of such
common stock and their respective donees, legatees and devises own all
of the issued and outstanding shares of capital stock of such corporate
transferee;
shall be deemed in each case to be the same beneficial owner as
the transferor.
Any transfer of any share of the capital stock of a corporate
transferee described in subparagraph c(2) above, other than by means
described in subparagraph c(l) above shall disqualify all shares of the
common stock held by such corporate transferee from the operation of
this paragraph c.
(d) For purposes of paragraph (b) above, shares of the common stock
acquired pursuant to a stock option shall be deemed to have been acquired on the
date the option
4
<PAGE>
was granted, and any shares of common stock acquired by the beneficial owner as
a direct result of a stock split, stock dividend or other type of distribution
of shares with respect to existing shares ("Dividend Shares") will be deemed to
have been acquired and held continuously from the date on which the shares with
regard to which the Dividend Shares were issued were acquired.
(e) For purposes of paragraph (b) above, any share of the common stock
held in "street" or "nominee" name shall be presumed to have been acquired by
the beneficial owner subsequent to April 24, 1986 and to have had the same
beneficial owner for a continuous period of less than 48 months prior to the
record date of the meeting in question. This presumption shall be rebuttable by
presentation to the corporation's Board of Directors by such beneficial owner of
evidence satisfactory to the corporation's Board of Directors that such share
has had the same beneficial owner continuously since April 24, 1986 or such
share has had the same beneficial owner for a period greater than 48 months
prior to the record date of the meeting in question.
(f) For purposes of this section, a beneficial owner of a share of
common stock is defined to include a person or group of persons who, directly or
indirectly, through any contract, arrangement, undertaking, relationship or
otherwise has or shares (1) voting power, which includes the power to vote, or
to direct the voting of such share of common stock, (2) investment power, which
includes the power to direct the sale or other disposition of such share of
common stock, (3) the right to receive, retain or direct the distribution of the
proceeds of any sale or other disposition of such share of common stock, or (4)
the right to receive or direct the disposition of any distributions, including
cash dividends, in respect of such share of common stock. For purposes of
paragraphs (a) through (e) above, all determinations concerning beneficial
ownership, changes therein, or the absence of any such change, shall be made by
the corporation's Board of Directors. Written procedures designed to facilitate
such determinations shall be established by the corporation's Board of Directors
and refined from time to time. Such procedures shall provide, among other
things, the manner of proof of facts that will be accepted and the frequency
with which such proof may be required to be renewed. The corporation's Board of
Directors shall be entitled to rely on all information concerning beneficial
ownership of the common stock coming to its attention from any source and in any
manner reasonably deemed by it to be reliable, but the corporation shall not be
charged with any other knowledge concerning the beneficial ownership of the
common stock. Any disputes arising concerning beneficial ownership, changes
therein, or the absence of any such changes, pursuant to this paragraph (f),
shall be definitively resolved by a determination of the corporation's Board of
Directors made in good faith.
Section 7. Voting Rights.
The voting rights of shares of common stock of the corporation
shall not be altered, deleted or rescinded except upon the affirmative vote of
the shareholders of the corporation representing at least 66 2/3% of the votes
entitled to be cast by the holders of all of the issued and outstanding shares
of common stock of the corporation.
Section 8. No Meeting Necessary When.
Any action required by law or permitted to be taken at any
shareholders'
5
<PAGE>
meeting may be taken without a meeting if, and only if, written consent, setting
forth the action so taken, shall be signed by all of the shareholders entitled
to vote with respect to the subject matter thereof. Such consent shall have the
same force and effect as a unanimous vote of the shareholders and shall be filed
with the Secretary and recorded in the Minute Book of the corporation.
ARTICLE III.
DIRECTORS
Section 1. Number.
The Board of Directors of the corporation shall consist of not
less than 8 nor more than 60 Directors. The number of Directors may vary between
said minimum and maximum, and within said limits, the shareholders representing
at least 66 2/3% of the votes entitled to be cast by the holders of all of the
issued and outstanding shares of common stock of the corporation may, from time
to time, by resolution fix the number of Directors to comprise said Board. This
section, as it relates to, from time to time, fixing the number of Directors of
the corporation by the shareholders of the corporation representing at least 66
2/3% of the votes entitled to be cast by the holders of all of the issued and
outstanding shares of common stock of the corporation, shall not be altered,
deleted or rescinded except upon the affirmative vote of the shareholders of the
corporation representing at least 66 2/3% of the votes entitled to be cast by
the holders of all of the issued and outstanding shares of common stock of the
corporation.
Section 2. Election and Tenure.
The Board of Directors of the corporation shall be divided
into three classes serving staggered 3-year terms, with each class to be as
nearly equal in number as possible. At the first annual meeting of the
shareholders of the corporation on or after the date of adoption of this
provision, all members of the Board of Directors shall be elected with the terms
of office of Directors comprising the first class to expire at the first annual
meeting of the shareholders of the corporation after their election, the terms
of office of Directors comprising the second class to expire at the second
annual meeting of the shareholders of the corporation after their election and
the terms of office of Directors comprising the third class to expire at the
third annual meeting of the shareholders of the corporation after their
election, and as their terms of office expire, the Directors of each class will
be elected to hold office until the third succeeding annual meeting of the
shareholders of the corporation after their election. In such elections, the
nominees receiving a plurality of votes shall be elected. This section, as it
relates to the division of the Board of Directors into three classes serving
staggered 3-year terms, shall not be altered, deleted or rescinded except upon
the affirmative vote of the shareholders of the corporation representing at
least 66 2/3% of the votes entitled to be cast by the holders of all of the
issued and outstanding shares of common stock of the corporation.
Section 3. Powers.
The Board of Directors shall have authority to manage the
affairs and exercise the powers, privileges and franchises of the corporation as
they may deem expedient for the interests of the corporation, subject to the
terms of the Articles of
6
<PAGE>
Incorporation, bylaws, any valid Shareholders' Agreement, and such policies and
directions as may be prescribed from time to time by the shareholders of the
corporation.
Section 4. Meetings.
The annual meeting of the Board of Directors shall be held
without notice immediately following the annual meeting of the shareholders of
the corporation, on the same date and at the same place as said annual meeting
of the shareholders. The Board by resolution may provide for regular meetings,
which may be held without notice as and when scheduled in such resolution.
Special meetings of the Board may be called at any time by the Chairman of the
Board, any Vice Chairman of the Board, the President, or by any two or more
Directors.
Section 5. Notice and Waiver; Quorum.
Notice of any special meeting of the Board of Directors shall
be given to each Director personally or by mail, telegram or cablegram addressed
to him at his last known address, at least one day prior to the meeting. Such
notice may be waived, either before or after the meeting; and the attendance of
a Director at any special meeting shall of itself constitute a waiver of notice
of such meeting and of any and all objections to the place or time of the
meeting, or to the manner in which it has been called or convened, except where
a Director states, at the beginning of the meeting, any such objection or
objections to the transaction of business. A majority of the Board of Directors
shall constitute a quorum at any Directors' meeting.
Section 6. No Meeting Necessary, When.
Any action required by law or permitted to be taken at any
meeting of the Board of Directors may be taken without a meeting if written
consent, setting forth the action so taken, shall be signed by all the
Directors. Such consent shall have the same force and effect as a unanimous vote
of the Board of Directors and shall be filed with the Secretary and recorded in
the Minute Book of the corporation.
Section 7. Voting.
At all meetings of the Board of Directors each Director shall
have one vote and, except as otherwise provided herein or provided by law, all
questions shall be determined by a majority vote of the Directors present.
Section 8. Removal.
Any one or more Directors or the entire Board of Directors may
be removed from office, with or without cause, by the affirmative vote of the
shareholders of the corporation representing at least 66 2/3% of the votes
entitled to be cast by the holders of all of the issued and outstanding shares
of common stock of the corporation at any shareholders' meeting with respect to
which notice of such purpose has been given. This section, as it relates to the
removal of Directors of the corporation by the shareholders of the corporation
representing at least 66 2/3% of the votes entitled to be cast by the holders of
all of the issued and outstanding shares of common stock of the corporation,
shall not be altered, deleted or rescinded except upon the affirmative vote of
the shareholders of the corporation representing at least 66 2/3% of the votes
entitled to be cast by the holders of all of the issued and outstanding shares
of common stock of the
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corporation.
Section 9. Vacancies.
Any vacancy occurring in the Board of Directors caused by an
increase in the number of Directors may be filled by the shareholders of the
corporation for a full classified 3-year term, or such vacancy may be filled by
the Board of Directors until the next annual meeting of the shareholders. Any
vacancy occurring in the Board of Directors caused by the removal of a Director
shall be filled by the shareholders, or if authorized by the shareholders, by
the Board of Directors, for the unexpired term of the Director so removed. Any
vacancy occurring in the Board of Directors caused by a reason other than an
increase in the number of Directors or removal of a Director may be filled by
the Board of Directors, or the shareholders, for the unexpired term of the
Director whose position is vacated. Vacancies in the Board of Directors filled
by the Board of Directors may be filled by the affirmative vote of a majority of
the remaining Directors, though less than a quorum, or the sole remaining
Director, as the case may be.
Section 10. Dividends.
The Board of Directors may declare dividends payable in cash
or other property out of the unreserved and unrestricted net earnings of the
current fiscal year, computed to the date of declaration of the dividend, or the
preceding fiscal year, or out of the unreserved and unrestricted earned surplus
of the corporation, as they may deem expedient.
Section 11. Committees.
In the discretion of the Board of Directors, said Board from
time to time may elect or appoint, from its own members, an Executive Committee,
an Audit Committee, a Nominating Committee, a Corporate Development Committee, a
Compensation Committee and such other committee or committees as said Board may
see fit to establish. Each such committee shall consist of two or more
Directors, and each shall possess such powers and be charged with such
responsibilities, subject to the limitations imposed herein these bylaws and by
applicable law, as the Board by resolution may from time to time prescribe.
Executive Committee
The Executive Committee shall, during the intervals between meetings of the
corporation's Board of Directors, possess and may exercise any and all powers of
the corporation's Board of Directors in the management and direction of the
business and affairs of the corporation in which specific direction has not been
given by the corporation's Board of Directors.
Nominating Committee
The Nominating Committee shall possess the power and be charged with the
responsibility of: (i) evaluating the performance of incumbent directors and
non-directors in determining whether or not they should be nominated for
re-election, or election in the
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first instance, by the shareholders to serve upon the Board of Directors of the
corporation; and (ii) recommending to the Board of Directors of the corporation
whether or not the Board should nominate such individuals for re-election or
election, as the case may be, by the shareholders to serve upon the Board of
Directors of the corporation.
Compensation Committee
The Compensation Committee shall possess the power and be charged with the
responsibility of: (i) evaluating the remuneration of senior management and
members of the Board of Directors of the corporation and the compensation and
fringe benefit plans in which officers, employees and directors of the
corporation are eligible to participate; and (ii) recommending to the Board of
Directors of the corporation whether or not it should modify or approve such
remuneration, compensation or fringe benefit plans.
Corporate Development Committee
The Corporate Development Committee shall possess the power and be charged with
the responsibility of reviewing with and assisting the management of the
corporation in the formalization of plans and strategies with regard to the
future expansion and growth of, and the overall operation of, the market areas
served by, and the services provided by the corporation and its subsidiaries,
including, but not limited to, plans and strategies in connection with
acquisitions by the corporation of control of organizations and firms engaged in
banking activities and activities determined by the Board of Governors of the
Federal Reserve System to be closely related to banking, the provision by the
corporation and its subsidiaries of additional services to the customers in the
market areas served by the corporation and its subsidiaries and the expansion of
the market areas served by the corporation and its subsidiaries.
Audit Committee
The Audit Committee shall possess the power and be charged with the
responsibility of: (i) reviewing and determining the independence of the
independent auditors to be engaged by the corporation to perform the annual
audit and interim reviews of the financial condition of the corporation and its
subsidiaries (hereinafter referred to as the "corporation's independent
auditors"); (ii) reviewing, determining and maintaining the independence of the
corporation's internal auditors by assisting management of the corporation in
the formulation of the job description of the head of the corporation's internal
audit division and providing for direct reporting by the corporation's internal
auditors to it in all matters relating to the audit function; (iii) instituting,
directing and supervising investigations in matters relating to the audit
function to be made by the corporation's internal auditors of the corporation
and/or its subsidiaries; (iv) reviewing and approving each professional service
to be provided by the corporation's independent auditors for the corporation
and/or its subsidiaries prior to the performance of such services; (v) reviewing
and approving the range of management advisory services provided by the
corporation's independent auditors; (vi) reviewing the adequacy by the
corporation's and its subsidiaries' systems of internal accounting controls;
(vii) reviewing the scope and results of the corporation's procedures for
internal auditing of the
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corporation and its subsidiaries; (viii) reviewing the results of regulatory
examination of the corporation and its subsidiaries; (ix) reviewing the
corporation's independent auditor's plan and results of its audit engagement;
(x) periodically reviewing with the corporation's independent auditors with the
assistance of management of the corporation the financial statement of the
corporation and consolidated financial statements of the corporation and its
subsidiaries with the primary goal of such review being to insure that such
financial statements fairly present the financial results of the corporation in
conformity with generally accepted accounting principles; (xi) reviewing and
recommending to the Board of Directors of the corporation any engagement or
termination of the corporation's independent auditors; and (xii) considering
such other matters with regard to the internal and independent audit of the
corporation and its subsidiaries as, in its discretion, it deems to be
desirable, periodically reporting to the Board of Directors of the corporation
as to the exercise of its duties and responsibilities and, where appropriate,
recommending to the Board of Directors matters in connection with the audit
function upon which it should consider taking action.
Section 12. Officers, Salaries and Bonds.
The Board of Directors shall elect all officers of the
corporation and fix their compensation. The fact that any officer is a Director
shall not preclude him from receiving a salary or from voting upon the
resolution providing the same. The Board of Directors may or may not, in their
discretion, require bonds from either or all of the officers and employees of
the corporation for the faithful performance of their duties and good conduct
while in office.
Section 13. Compensation of Directors.
Directors, as such shall be entitled to receive compensation
for their service as Directors and such fees and expenses, if any, for
attendance at each regular or special meeting of the Board and any adjournments
thereof, as may be fixed from time to time by resolution of the Board, and such
fees and expenses shall be payable even though an adjournment be had because of
the absence of a quorum; provided, however, that nothing herein contained shall
be construed to preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of either standing or
special committees may be allowed such compensation as may be provided from time
to time by resolution of the Board for serving upon and attending meetings of
such committees.
Section 14. Advisory Directors.
The Board of Directors of the corporation may at its annual
meeting, or from time to time thereafter, appoint any individual to serve as a
member of an Advisory Board of Directors of the corporation. Any individual
appointed to serve as a member of an Advisory Board of Directors of the
corporation shall be entitled to attend all meetings of the Board of Directors
and may participate in any discussion thereat, but such individual may not vote
at any meeting of the Board of Directors or be counted in determining a quorum
for such meeting. It shall be the duty of members of the Advisory Board of
Directors of the corporation to advise and provide general policy advice to the
Board of Directors of the corporation at such times and places and in such
groups and committees as may be determined from time to time by the Board of
Directors, but such
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individuals shall not have any responsibility or be subject to any liability
imposed upon a director or in any manner otherwise deemed a director. The same
compensation paid to directors for their services as directors shall be paid to
members of an Advisory Board of Directors of the corporation for their services
as advisory directors. Each member of the Advisory Board of Directors except in
the case of his earlier death, resignation, retirement, disqualification or
removal, shall serve until the next succeeding annual meeting of the Board of
Directors and thereafter until his successor shall have been appointed.
Section 15. Emeritus Directors.
When a member of the Board of Directors or the Advisory Board
of Directors of the corporation, as the case may be: (a) attains seventy (70)
years of age or, (b) prior to his attainment of seventy (70) years of age,
retires from his principal occupation, under the retirement policy and criteria
established from time to time by the Board of Directors of the corporation
(except for a member of the Board of Directors or the Advisory Board of
Directors of the corporation: (1) who is, upon the attainment of age seventy
(70), then serving as an executive officer of the corporation; or (2) who was
sixty (60) years of age on June 14, 1973), such director shall automatically, at
his option, either (i) retire from the Board of Directors or the Advisory Board
of Directors of the corporation, as the case may be; or (ii) be appointed as a
member of the Emeritus Board of Directors of the corporation. A member of the
Board of Directors or the Advisory Board of Directors of the corporation: (1)
who is, upon the attainment of age seventy (70), then serving as an executive
officer of the corporation; or (2) who was sixty (60) years of age on June 14,
1973, may, at his option, either: (a) continue his service as a member of the
Board of Directors or the Advisory Board of Directors of the corporation, as the
case may be; or (b) be appointed as a member of the Emeritus Board of Directors
of the corporation. Members of the Emeritus Board of Directors of the
corporation shall be appointed annually by the Chairman of the Board of
Directors of the corporation at the Annual Meeting of the Board of Directors of
the corporation, or from time to time thereafter. Each member of the Emeritus
Board of Directors of the corporation, except in the case of his earlier death,
resignation, retirement, disqualification or removal, shall serve until the next
succeeding Annual Meeting of the Board of Directors of the corporation. Any
individual appointed as a member of the Emeritus Board of Directors of the
corporation may, but shall not be required to, attend meetings of the Board of
Directors of the corporation and may participate in any discussions thereat, but
such individual may not vote at any meeting of the Board of Directors of the
corporation or be counted in determining a quorum at any meeting of the Board of
Directors of the corporation, as provided in Section 5 of Article III of the
bylaws of the corporation. It shall be the duty of the members of the Emeritus
Board of Directors of the corporation to serve as goodwill ambassadors of the
corporation, but such individuals shall not have any responsibility or be
subject to any liability imposed upon a member of the Board of Directors of the
corporation or in any manner otherwise be deemed to be a member of the Board of
Directors of the corporation. Each member of the Emeritus Board of Directors of
the corporation shall be paid such compensation as may be set from time to time
by the Chairman of the Board of Directors of the corporation and shall remain
eligible to participate in any Director Stock Purchase Plan maintained by, or
participated in, from time to time by the corporation according to the terms and
conditions thereof.
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ARTICLE IV.
OFFICERS
Section 1. Selection.
The Board of Directors at each annual meeting shall elect or
appoint a President (who shall be a Director), a Secretary and a Treasurer, each
to serve for the ensuing year and until his successor is elected and qualified,
or until his earlier resignation, removal from office, or death. The Board of
Directors, at such meeting, may or may not, in the discretion of the Board,
elect a Chairman of the Board, one or more Vice Chairmen of the Board, one or
more Chairmen of the Board-Emeritus and/or one or more Vice Presidents and, also
may elect or appoint one or more Assistant Vice Presidents and/or one or more
Assistant Secretaries and/or one or more Assistant Treasurers. When more than
one Vice President is elected, they may, in the discretion of the Board, be
designated Executive Vice President, First Vice President, Second Vice
President, etc., according to seniority or rank, and any person may hold two or
more offices, except that the President shall not also serve as the Secretary.
Section 2. Removal, Vacancies.
Any officers of the corporation may be removed from office at
any time by the Board of Directors, with or without cause. Any vacancy occurring
in any office of the corporation may be filled by the Board of Directors.
Section 3. Chairman of the Board.
The Chairman of the Board of Directors, when and if elected,
shall, whenever present, preside at all meetings of the Board of Directors and
at all meetings of the shareholders. The Chairman of the Board of Directors
shall have all the powers of the President in the event of his absence or
inability to act, or in the event of a vacancy in the office of the President.
The Chairman of the Board of Directors shall confer with the President on
matters of general policy affecting the business of the corporation and shall
have, in his discretion, power and authority to generally supervise all the
affairs of the corporation and the acts and conduct of all the officers of the
corporation, and shall have such other duties as may be conferred upon the
Chairman of the Board by the Board of Directors.
Section 4. President.
If there be no Chairman of the Board or Vice Chairman of the
Board elected, or in their absence, the President shall preside at all meetings
of the Board of Directors and at all meetings of the shareholders. The immediate
supervision of the affairs of the corporation shall be vested in the President.
It shall be his duty to attend constantly to the business of the corporation and
maintain strict supervision over all of its affairs and interests. He shall keep
the Board of Directors fully advised of the affairs and condition of the
corporation, and shall manage and operate the business of the corporation
pursuant to such policies as may be prescribed from time to time by the Board of
Directors. The President shall, subject to approval of the Board, hire and fix
the compensation of all employees and agents of the corporation, other than
officers, and any person thus hired shall be removable at his pleasure.
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Section 5. Vice President.
Any Vice President of the corporation may be designated by the
Board of Directors to act for and in the place of the President in the event of
sickness, disability or absence of said President or the failure of said
President to act for any reason, and when so designated, such Vice President
shall exercise all the powers of the President in accordance with such
designation. The Vice Presidents shall have such duties as may be required of,
or assigned to, them by the Board of Directors, the Chairman of the Board or the
President.
Section 6. Secretary.
It shall be the duty of the Secretary to keep a record of the
proceedings of all meetings of the shareholders and Board of Directors; to keep
the stock records of the corporation; to notify the shareholders and Directors
of meetings as provided by these bylaws; and to perform such other duties as may
be prescribed by the Chairman of the Board, President or Board of Directors. Any
Assistant Secretary, if elected, shall perform the duties of the Secretary
during the absence or disability of the Secretary and shall perform such other
duties as may be prescribed by the Chairman of the Board, President, Secretary
or Board of Directors.
Section 7. Treasurer.
The Treasurer shall keep, or cause to be kept, the financial
books and records of the corporation, and shall faithfully account for its
funds. He shall make such reports as may be necessary to keep the Chairman of
the Board, the President and Board of Directors fully informed at all times as
to the financial condition of the corporation, and shall perform such other
duties as may be prescribed by the Chairman of the Board, President or Board of
Directors. Any Assistant Treasurer, if elected, shall perform the duties of the
Treasurer during the absence or disability of the Treasurer, and shall perform
such other duties as may be prescribed by the Chairman of the Board, President,
Treasurer or Board of Directors.
ARTICLE V.
CONTRACTS, ETC.
Section 1. Contracts, Deeds and Loans.
All contracts, deeds, mortgages, pledges, promissory notes,
transfers and other written instruments binding upon the corporation shall be
executed on behalf of the corporation by the Chairman of the Board, if elected,
the President, or by such other officers or agents as the Board of Directors may
designate from time to time. Any such instrument required to be given under the
seal of the corporation may be attested by the Secretary or Assistant Secretary
of the corporation.
Section 2. Proxies.
The Chairman of the Board, any Vice Chairman of the Board, the
President, any Executive Vice President, Secretary or Treasurer of the
corporation shall have full power and authority, on behalf of the corporation,
to attend and to act and to vote at any meetings of the shareholders, bond
holders or other security holders of any corporation,
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trust or association in which the corporation may hold securities, and at and in
connection with any such meeting shall possess and may exercise any and all of
the rights and powers incident to the ownership of such securities and which as
owner thereof the corporation might have possessed and exercised if present,
including the power to execute proxies and written waivers and consents in
relation thereto. In the case of conflicting representation at any such meeting,
the corporation shall be represented by its highest ranking officer, in the
order first above stated. Notwithstanding the foregoing, the Board of Directors
may, by resolution, from time to time, confer like powers upon any other person
or persons.
ARTICLE VI.
CHECKS AND DRAFTS
Checks and drafts of the corporation shall be signed by such officer or officers
or such other employees or persons as the Board of Directors may from time to
time designate.
ARTICLE VII.
STOCK
Section 1. Certificates of Stock.
The certificates for shares of capital stock of the
corporation shall be in such form as shall be determined by the Board of
Directors. They shall be numbered consecutively and entered into the stock book
of the corporation as they are issued. Each certificate shall state on its face
the fact that the corporation is a Georgia corporation, the name of the person
to whom the shares are issued, the number and class of shares (and series, if
any) represented by the certificate and their par value, or a statement that
they are without par value. In addition, when and if more than one class of
shares shall be outstanding, all share certificates of whatever class shall
state that the corporation will furnish to any shareholder upon request and
without charge a full statement of the designations, relative rights,
preferences and limitations of the shares of each class authorized to be issued
by the corporation.
Section 2. Signature; Transfer Agent; Registrar.
Share certificates shall be signed by the President or Vice
President and by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the corporation, and shall bear the seal of the
corporation or a facsimile thereof. The Board of Directors may from time to time
appoint transfer agents and registrars for the shares of capital stock of the
corporation or any class thereof, and when any share certificate is
countersigned by a transfer agent or registered by a registrar, the signature of
any officer of the corporation appearing thereon may be a facsimile signature.
In case any officer who signed, or whose facsimile signature was placed upon,
any such certificate shall have died or ceased to be such officer before such
certificate is issued, it may nevertheless be issued with the same effect as if
he continued to be such officer on the date of issue.
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Section 3. Stock Book.
The corporation shall keep at its principal office, or at the
office of its transfer agent, wherever located, with a copy at the principal
office of the corporation, a book, to be known as the stock book of the
corporation, containing in alphabetical order the name of each shareholder of
record, together with his address, the number of shares of each kind, class or
series of stock held by him and his social security number. The stock book shall
be maintained in current condition. The stock book, including the share
register, or the duplicate copy thereof maintained at the principal office of
the corporation, shall be available for inspection by any shareholder at any
meeting of the shareholders upon request and shall also be made available for
inspection and copying upon the request of any shareholder owning in excess of
2% of the corporation's common stock, which request must be made in accordance
with the provisions of ss. 14-2- 1602 of the Official Code of Georgia Annotated,
as amended. The information contained in the stock book and share register may
be stored on punch cards, magnetic tape, or any other approved information
storage devices related to electronic data processing equipment, provided that
any such method, device, or system employed shall first be approved by the Board
of Directors, and provided further that the same is capable of reproducing all
information contained therein, in legible and understandable form, for
inspection by shareholders or for any other proper corporate purpose.
Section 4. Transfer of Stock; Registration of Transfer.
The stock of the corporation shall be transferred only by
surrender of the certificate and transfer upon the stock book of the
corporation. Upon surrender to the corporation, or to any transfer agent or
registrar for the class of shares represented by the certificate surrendered, of
a certificate properly endorsed for transfer, accompanied by such assurances as
the corporation, or such transfer agent or registrar, may require as to the
genuineness and effectiveness of each necessary endorsement and satisfactory
evidence of compliance with all applicable laws relating to securities transfers
and the collection of taxes, it shall be the duty of the corporation, or such
transfer agent or registrar, to issue a new certificate, cancel the old
certificate and record the transactions upon the stock book of the corporation.
Section 5. Registered Shareholders.
Except as otherwise required by law, the corporation shall be
entitled to treat the person registered on its stock book as the owner of the
shares of the capital stock of the corporation as the person exclusively
entitled to receive notification, dividends or other distributions, to vote and
to otherwise exercise all the rights and powers of ownership and shall not be
bound to recognize any adverse claim.
Section 6. Record Date.
For the purpose of determining shareholders entitled to notice
of or to vote at any meeting of shareholders or any adjournment thereof, or to
express consent to or dissent from any proposal without a meeting, or for the
purpose of determining shareholders entitled to receive payment of any dividend
or the allotment of any rights, or for the purpose of any other action affecting
the interests of shareholders, the Board of Directors may fix, in advance, a
record date. Such date shall not be more than seventy (70) nor less than ten
(10) days before the date of any such meeting nor more
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than seventy (70) days prior to any other action. In each case, except as
otherwise provided by law, only such persons as shall be shareholders of record
on the date so fixed shall be entitled to notice of and to vote at such meeting
and any adjournment thereof, to express such consent or dissent, or to receive
payment of such dividend or such allotment of rights, or otherwise be recognized
as shareholders for any other related purpose, notwithstanding any registration
of a transfer of shares on the stock book of the corporation after any such
record date so fixed.
Section 7. Lost Certificates.
When a person to whom a certificate of stock has been issued
alleges it to have been lost, destroyed or wrongfully taken, and if the
corporation, transfer agent or registrar is not on notice that such certificate
has been acquired by a bona fide purchaser, a new certificate may be issued upon
such owner's compliance with all of the following conditions, to-wit: (a) He
shall file with the Secretary of the corporation, and the transfer agent or the
registrar, his request for the issuance of a new certificate, with an affidavit
setting forth the time, place and circumstances of the loss; (b) He shall also
file with the Secretary, and the transfer agent or the registrar, a bond with
good and sufficient security acceptable to the corporation and the transfer
agent or the registrar, or other agreement of indemnity acceptable to the
corporation and the transfer agent or the registrar, conditioned to indemnify
and save harmless the corporation and the transfer agent or the registrar from
any and all damage, liability and expense of every nature whatsoever resulting
from the corporation's or the transfer agent's or the registrar's issuing a new
certificate in place of the one alleged to have been lost; and (c) He shall
comply with such other reasonable requirements as the Chairman of the Board, the
President or the Board of Directors of the corporation, and the transfer agent
or the registrar shall deem appropriate under the circumstances.
Section 8. Replacement of Mutilated Certificates.
A new certificate may be issued in lieu of any certificate
previously issued that may be defaced or mutilated upon surrender for
cancellation of a part of the old certificate sufficient in the opinion of the
Secretary and the transfer agent or the registrar to duly identify the defaced
or mutilated certificate and to protect the corporation and the transfer agent
or the registrar against loss or liability. Where sufficient identification is
lacking, a new certificate may be issued upon compliance with the conditions set
forth in Section 7 of this Article VII.
ARTICLE VIII.
INDEMNIFICATION AND REIMBURSEMENT
Subject to any express limitations imposed by applicable law, every
person now or hereafter serving as a director, officer, employee or agent of the
corporation and all former directors and officers, employees or agents shall be
indemnified and held harmless by the corporation from and against the obligation
to pay a judgement, settlement, penalty, fine (including an excise tax assessed
with respect to an employee benefit plan), and reasonable expenses (including
attorneys' fees and disbursements) that may be imposed upon or incurred by him
or her in connection with or resulting from
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any threatened, pending, or completed, action, suit, or proceeding, whether
civil, criminal, administrative, investigative, formal or informal, in which he
or she is, or is threatened to be made, a named defendant or respondent: (a)
because he or she is or was a director, officer, employee, or agent of the
corporation; (b) because he or she is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee, or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise; or (c) because he or she is or was serving as an employee of
the corporation who was employed to render professional services as a lawyer or
an accountant to the corporation; regardless of whether such person is acting in
such a capacity at the time such obligation shall have been imposed or incurred,
if (i) such person acted in a manner he or she believed in good faith to be in
or not opposed to the best interests of the corporation, and, with respect to
any criminal proceeding, if such person had no reasonable cause to believe his
or her conduct was unlawful or (ii), with respect to an employee benefit plan,
such person believed in good faith that his or her conduct was in the interests
of the participants in and beneficiaries of the plan.
Reasonable expenses incurred in any proceeding shall be paid by the
corporation in advance of the final disposition of such proceeding if authorized
by the Board of Directors in the specific case, or if authorized in accordance
with procedures adopted by the Board of Directors, upon receipt of a written
undertaking executed personally by or on behalf of the director, officer,
employee, or agent to repay such amount if it shall ultimately be determined
that he or she is not entitled to be indemnified by the corporation, and a
written affirmation of his or her good faith belief that he or she has met the
standard of conduct required for indemnification.
The foregoing rights of indemnification and advancement of expenses
shall not be deemed exclusive of any other right to which those indemnified may
be entitled, and the corporation may provide additional indemnity and rights to
its directors, officers, employees or agents to the extent they are consistent
with law.
The provisions of this Article VIII shall cover proceedings whether now
pending or hereafter commenced and shall be retroactive to cover acts or
omissions or alleged acts or omissions which heretofore have taken place. In the
event of death of any person having a right of indemnification or advancement of
expenses under the provisions of this Article VIII, such right shall inure to
the benefit of his or her heirs, executors, administrators and personal
representatives. If any part of this Article VIII should be found to be invalid
or ineffective in any proceeding, the validity and effect of the remaining
provisions shall not be affected.
ARTICLE IX.
MERGERS, CONSOLIDATIONS AND
OTHER DISPOSITIONS OF ASSETS
The affirmative vote of the shareholders of the corporation representing at
least 66 2/3% of the votes entitled to be cast by the holders of all of the
issued and outstanding shares of common stock of the corporation shall be
required to approve any merger or
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consolidation of the corporation with or into any corporation, and the sale,
lease, exchange or other disposition of all, or substantially all, of the assets
of the corporation to or with any other corporation, person or entity, with
respect to which the approval of the corporation's shareholders is required by
the provisions of the corporate laws of the State of Georgia. This Article shall
not be altered, deleted or rescinded except upon the affirmative vote of the
shareholders representing at least 66 2/3% of the votes entitled to be cast by
the holders of all of the issued and outstanding shares of common stock of the
corporation.
ARTICLE X.
CRITERIA FOR CONSIDERATION
OF TENDER OR OTHER OFFERS
Section 1. Factors to Consider.
The Board of Directors of the corporation may, if it deems it
advisable, oppose a tender or other offer for the corporation's securities,
whether the offer is in cash or in the securities of a corporation or otherwise.
When considering whether to oppose an offer, the Board of Directors may, but is
not legally obligated to, consider any pertinent issues; by way of illustration,
but not of limitation, the Board of Directors may, but shall not be legally
obligated to, consider any or all of the following:
(i) whether the offer price is acceptable based on the
historical and present operating results or financial condition of the
corporation;
(ii) whether a more favorable price could be obtained for the
corporation's securities in the future;
(iii) the impact which an acquisition of the corporation would
have on the employees, depositors and customers of the corporation and
its subsidiaries and the communities which they serve;
(iv) the reputation and business practices of the offeror and
its management and affiliates as they would affect the employees,
depositors and customers of the corporation and its subsidiaries and
the future value of the corporation's stock;
(v) the value of the securities, if any, that the offeror is
offering in exchange for the corporation's securities, based on an
analysis of the worth of the corporation as compared to the offeror or
any other entity whose securities are being offered; and
(vi) any antitrust or other legal or regulatory issues that
are raised by the offer.
Section 2. Appropriate Actions.
If the Board of Directors determines that an offer should be
rejected, it may
18
<PAGE>
take any lawful action to accomplish its purpose including, but not limited to,
any or all of the following: (i) advising shareholders not to accept the offer;
(ii) litigation against the offeror; (iii) filing complaints with governmental
and regulatory authorities; (iv) acquiring the corporation's securities; (v)
selling or otherwise issuing authorized but unissued securities of the
corporation or treasury stock or granting options or rights with respect
thereto; (vi) acquiring a company to create an antitrust or other regulatory
problem for the offeror; and (vii) soliciting a more favorable offer from
another individual or entity.
ARTICLE XI.
AMENDMENT
Except as otherwise specifically provided herein, the bylaws of the corporation
may be altered, amended or added to by the affirmative vote of the shareholders
of the corporation representing 66 2/3% of the votes entitled to be cast by the
holders of all of the issued and outstanding shares of common stock of the
corporation present and voting therefor at a shareholders' meeting or, subject
to such limitations as the shareholders may from time to time prescribe, by a
majority vote of all the Directors then holding office at any meeting of the
Board of Directors.
files\bylaws.snv
19
EXHIBIT 10.20
STATE OF GEORGIA
COUNTY OF MUSCOGEE
RETIREMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of the 1st day of
January 1997, by and among JOE E. BEVERLY, an individual resident of the State
of Georgia ("Beverly"), SYNOVUS FINANCIAL CORP., a business corporation
organized and existing under the laws of the State of Georgia ("Synovus"), and
COMMERCIAL BANK, a banking corporation organized and existing under the laws of
the State of Georgia ("Commercial Bank");
WITNESSETH:
WHEREAS, Beverly has decided to retire from his position as an employee
of Synovus, effective December 31, 1996; and
WHEREAS, Synovus and Commercial Bank desire to retain the services of
Beverly after such retirement;
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements set forth herein, Beverly, Synovus and Commercial Bank, intending to
be legally bound, do hereby agree as follows:
Section I
SERVICES TO BE PROVIDED
1.1 Beverly shall continue to serve as a director and Chairman of the
Board of Directors of Commercial Bank from the effective date of this Agreement
through January 1, 2002. While Chairman of Commercial Bank, Mr. Beverly will
continue to maintain and develop business relationships on behalf of Commercial
Bank and will continue his involvement in the community on behalf of Commercial
Bank. Synovus and Commercial Bank will re-evaluate Beverly's continued service
as a director and as Chairman of Commercial Bank at the expiration of this
five-year period. As of the date of this Agreement, it is Beverly's desire to
remain affiliated with Commercial Bank indefinitely.
1
<PAGE>
1.2 Beverly will remain as a member of the Board of Directors of
Synovus until the expiration of his current term, which will expire at the 1999
Synovus Annual Shareholder's Meeting. At the expiration of his current term,
Beverly's continued service as a member of the Board of Directors of Synovus
will be re-evaluated. During Beverly's tenure as a member of the Board of
Directors of Synovus, Beverly agrees to be available to provide such consulting
and advisory services as may be requested from time to time by the Chairman of
the Board of Directors of Synovus.
1.3 Beverly will serve as a member of the Boards of Directors of the
Tallahassee State Bank and the Quincy State Bank during his tenure as Chairman
of Commercial Bank. Beverly will resign from the Boards of Directors of
Tallahassee State Bank and Quincy State Bank if requested by Synovus upon its
determination that Beverly's continued service in such positions is inconsistent
with Synovus' management and/or ownership of such banks.
1.4 During Beverly's term as Chairman of Commercial Bank hereunder,
Beverly will not provide services of any sort to, or assist in any way, with or
without compensation, any financial institution (including, but not limited to,
a bank and/or a bank holding and/or a savings and loan association and/or a
savings and loan association holding company) that competes with Synovus,
Commercial Bank, or any affiliate or subsidiary of Synovus or Commercial Bank
without the prior written permission of the Chairman or President of Synovus,
which permission will not be unreasonably withheld. Beverly shall be free to
provide consulting or other services to any financial institution that does not
compete with Synovus, Commercial Bank or any affiliate or subsidiary of Synovus
or Commercial Bank. For purposes of this Agreement, the term "compete" means
providing consulting or other services to a financial institution having a place
of business in any county of any state in which county Synovus, Commercial Bank
or any affiliate or subsidiary of Synovus or Commercial Bank then has an office.
Section II
COMPENSATION
2.1 During Beverly's tenure as Chairman of Commercial Bank, Commercial
Bank agrees to pay Beverly an annual fee for his community involvement and
business development services. This fee will be equal to the FICA taxable base
($62,700 for 1996) for the year in which services are provided. This annual fee
will be payable on a monthly basis in twelve equal installments (would be
monthly
2
<PAGE>
installments of $5,225 for 1996) less any applicable state and federal
withholding taxes and less applicable employee FICA taxes (Commercial Bank will
pay applicable employer FICA taxes), unless otherwise agreed by Beverly and
Commercial Bank. If the FICA taxable wage base is subsequently repealed, the fee
will be capped at the FICA taxable wage base amount immediately prior to repeal.
2.2 Synovus agrees to reimburse Commercial Bank for $24,000 of the
annual fee paid to Beverly pursuant to Section 2.1 of this Agreement each year,
with such amount representing the services being provided by Beverly on behalf
of Synovus.
2.3 Commercial Bank will pay Beverly's and his spouse's premiums (both
employee and employer premiums) for coverage under the Synovus Retiree Health
Plan (Health Plan) as long as Beverly or his spouse is eligible for coverage
under the Health Plan. The premiums paid by Commercial Bank shall be tax-free to
Beverly and his spouse. In the event Commercial Bank is unable to pay Beverly's
premiums on a tax-free basis, Commercial Bank agrees to gross-up such premiums
for taxes so that Beverly would be in the same position as if the premiums were
paid on a tax-free basis. Beverly will not participate in other employee benefit
plans including, without limitation, profit sharing, pension, 401(k), stock
purchase and health and welfare plans.
2.4 As an employee of Synovus, Beverly will receive a long-term
incentive award (in the form of restricted stock and stock options) for 1996 in
accordance with the Synovus 1994 Long-Term Incentive Plan. Although Beverly will
not receive future grants of long-term incentive awards after 1996, Beverly will
continue to vest in all such awards made prior to 1997 during his tenure as
Chairman of Commercial Bank.
2.5 As a member of the Boards of Directors of Synovus, Commercial Bank,
Tallahassee State Bank and Quincy State Bank, Beverly will continue to receive
director's retainer fees, attendance fees and committee attendance fees in
addition to all other compensation set forth in this Agreement. Beverly will be
paid committee fees at Commercial Bank in accordance with present policies.
2.6 During his tenure as Chairman of Commercial Bank, Beverly will have
the use of an automobile and a cellular telephone at the expense of Commercial
Bank. Beverly agrees to reimburse Commercial Bank for personal telephone calls
and to pay
3
<PAGE>
taxes for the personal use of the automobile in accordance with Internal Revenue
Service rules and regulations.
2.7 During his tenure as Chairman of Commercial Bank, Beverly will be
reimbursed by Commercial Bank for all reasonable business development expenses
he incurs. Reasonable business development expenses includes, without
limitation, dues to the National Trust of Historic Preservation, Georgia Trust
for Historic Preservation, Thomasville Rod & Gun Club, Duck Haven Gun Club and
Glen Arven Country Club as well as unreimbursed expenses incurred by Mr. Beverly
in attending State of Georgia Department of Natural Resources meetings.
2.8 Synovus will reimburse Beverly the expenses of preparing Beverly's
1996 Federal and State income tax returns (that will be prepared in 1997) in
accordance with the past arrangements for such services.
2.9 During his tenure as Chairman of Commercial Bank, Beverly will
continue to maintain his present office in Thomasville, Georgia unless and until
needed by Synovus or Commercial Bank. In the event Synovus or Commercial Bank
needs Beverly's present office, Beverly will be provided another office in
Thomasville, Georgia for the remainder of his tenure as Chairman of Commercial
Bank. In addition, Beverly will be provided with access to (but not the
exclusive services of) a secretary by Commercial Bank during his tenure as
Chairman of Commercial Bank.
Section III
CHANGE OF CONTROL AGREEMENT
3.1 The Change of Control Agreement by and between Synovus and Beverly
effective as of January 1, 1996 ("Control Agreement") is hereby terminated in
its entirety effective January 1, 1997 except that, in the event of a Change of
Control as defined in Section 2 of the Control Agreement, the definition of
which is incorporated herein by this reference, Company agrees that Company's
financial obligation to provide retiree health benefits under Section 2.3 of
this Agreement and to pay deferred compensation to Beverly pursuant to Section
IV of this Agreement will be paid to Beverly irrespective of whether Beverly
provides services after his initial term as Chairman of Commercial Bank and as a
Director of Synovus under Section I of this Agreement.
4
<PAGE>
Section IV
EMPLOYMENT AGREEMENT
4.1 Beverly's employment under that certain Employment Agreement
entered into on the 15th day of January 1979, by and among Beverly and Synovus,
as amended (the "Employment Agreement"), is hereby terminated as of December 31,
1996. The parties hereto agree that such termination shall be deemed a voluntary
termination so that the deferred compensation provisions of Paragraph
III(C)(iii) of the Employment Agreement shall apply in accordance with the terms
thereof. In consideration of the covenants and obligations set forth herein, the
parties hereto agree that the obligations and covenants of Beverly under
Paragraph VI of the Employment Agreement are hereby cancelled, except as set
forth in Section 7.6 of this Agreement.
Section V
DEATH OR DISABILITY
5.1 Beverly's engagement and all of Company's financial obligations
under this Agreement (excluding the deferred compensation provisions of
Paragraph III(C)(iii) of the Employment Agreement) shall terminate upon
Beverly's death or total and permanent disability, except that Company's
obligation to pay Beverly (or Beverly's surviving spouse's) retiree health
premiums under Section 2.3 of this Agreement shall continue notwithstanding
Beverly's death or total and permanent disability. For purposes of this
Agreement, the term "total and permanent disability" shall mean the substantial
physical or mental inability of Beverly to fulfill his duties under this
Agreement as certified to in writing by two (2) competent physicians practicing
in Thomasville, Georgia, one of whom shall be selected by the Chairman of
Synovus and the other of whom shall be selected by Beverly or his duly appointed
guardian or legal representative.
Section VI
CONFIDENTIALITY
6.1 Beverly agrees that during the term of his engagement under this
Agreement, and as long as he is receiving benefits or payments hereunder, he
will not disclose any secret or confidential information of Synovus, Commercial
Bank and
5
<PAGE>
any affiliate or subsidiary of Synovus or Commercial Bank, with such information
including, without limitation, existing or potential customers or accounts, and
the terms and provisions of the relationships of such customers and accounts, of
Synovus, Commercial Bank and their affiliates and subsidiaries. Beverly also
agrees not to solicit the business of any existing or potential customers or
accounts of Synovus, Commercial Bank and their affiliates and subsidiaries on
behalf of any financial institution (other than Synovus, Commercial Bank, and
their affiliates and subsidiaries) during the term of his engagement under this
Agreement and as long as he is receiving benefits or payments hereunder.
Section VII
MISCELLANEOUS
7.1 Governing Law. This Agreement shall be governed by and interpreted
under the laws of the State of Georgia without regard to its conflict or choice
of law provisions.
7.2 Notices. All notices or other communications required or permitted
hereunder or necessary and convenient in connection herewith shall be in writing
and delivered in person or by express delivery service or postage prepaid
first-class mail, return receipt requested, to the following addresses:
If to Beverly:
Mr. Joe E. Beverly
1132 Gordon Avenue
Thomasville, GA 31792
If to Synovus:
Synovus Financial Corp.
P. O. Box 120
Columbus, GA 31902
If to Commercial Bank:
Commercial Bank
P. O. Box 710
Thomasville, GA 31792
6
<PAGE>
or to such other addresses as Beverly, Synovus or Commercial Bank may designate
by notice to the other parties hereto in the manner set forth in this Section
VII.
7.3 Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto with respect to the subject matter hereof and may not be
changed or amended except upon written amendment executed by the parties hereto.
7.4 Assignment. All of the terms and provisions of this Agreement shall
be binding upon and inure to the benefit of and be enforceable by the respective
heirs, representatives, successors and assigns of the parties hereto, except
that the duties and responsibilities of Beverly hereunder shall not be
assignable in whole or in part by Beverly.
7.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which, when executed, shall be deemed an original
instrument.
7.6 Early Termination. Beverly shall have the right to terminate this
Agreement at any time by providing 30 days prior written notice of such
termination to Synovus and Commercial Bank. In the event of the early
termination of this Agreement, all of Beverly's obligations under Section I of
this Agreement shall terminate and all of the obligations of Synovus and
Commercial Bank to make payments and provide benefits to Beverly under Sections
II and III of this Agreement shall also terminate as of the effective date of
the Agreement's termination. Notwithstanding the foregoing, Company's obligation
to pay Beverly deferred compensation pursuant to Section IV of this Agreement
will continue in the event of the early termination of this Agreement; provided,
however, that Beverly agrees to abide by the covenant set forth in Paragraph
VI(a) of the Employment Agreement (provided that such covenant shall only apply
to any financial institution having a place of business in any county of any
state in which county Synovus, Commercial Bank or any affiliate or subsidiary of
Synovus or Commercial bank then has an office) during the period of time he
receives deferred compensation pursuant to the Employment Agreement, unless
Beverly receives the prior written permission of the Chairman or President of
Synovus to violate such covenant, which permission will not be unreasonably
withheld.
7.7 Amendment. This Agreement may be amended only in a written
agreement signed by each party hereto.
7
<PAGE>
IN WITNESS WHEREOF, Synovus and Commercial Bank have caused this
Agreement to be executed on their behalf and Beverly has hereunto set his hand
and seal, as of the day and year first above written.
SYNOVUS FINANCIAL CORP.
By: /s/G. Sanders Griffith, III
Name: G. Sanders Griffith, III
Title: Senior Executive Vice President
COMMERCIAL BANK
By: /s/Frederick D. Jefferson
Name: Frederick D. Jefferson
Title: President
/s/Joe E. Beverly (L.S.)
Joe E. Beverly
8
EXHIBIT 11.1
SYNOVUS FINANCIAL CORP.
<TABLE>
<CAPTION>
COMPUTATION OF NET INCOME
PER COMMON SHARE
(UNAUDITED)
Twelve Months Ended Three Months Ended
December 31, December 31,
- ------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Primary
Net income $ 139,604 114,583 41,661 33,634
==================================================================================================================
Weighted average common shares outstanding 116,133 114,954 116,332 115,823
Average common shares added, assuming
exercise of dilutive stock options 1,893 1,164 2,401 1,517
- ------------------------------------------------------------------------------------------------------------------
Weighted average common shares, as adjusted 118,026 116,118 118,733 117,340
==================================================================================================================
Primary net income per common share $ 1.18 0.99 0.35 0.29
==================================================================================================================
Fully Diluted
Net income $ 139,604 114,583 41,661 33,634
==================================================================================================================
Weighted average common shares outstanding 116,133 114,954 116,332 115,823
Average common shares added, assuming
exercise of dilutive stock options 2,488 1,583 2,488 1,583
- ------------------------------------------------------------------------------------------------------------------
Weighted average common shares, as adjusted 118,621 116,537 118,820 117,406
==================================================================================================================
Fully diluted net income per common share $ 1.18 0.98 0.35 0.29
==================================================================================================================
</TABLE>
All information presented in Exhibit 11.1 reflects the three-for-two stock split
declared by the Synovus Board of Directors on March 11, 1996, effective April 8,
1996, to shareholders of record on March 21, 1996.
EXHIBIT 13.1
LOGO(R)
SYNOVUS(R)
FINANCIAL CORP.
FINANCIAL APPENDIX
<TABLE>
<S> <C>
Consolidated Statements of Condition as of December 31, 1996 and 1995 ................................. F-2
Consolidated Statements of Income for the Years ended December 31, 1996, 1995, and 1994 ............... F-3
Consolidated Statements of Changes In Shareholders' Equity for the Years ended December 31,
1996, 1995, and 1994.............................................................................. F-4
Consolidated Statements of Cash Flows for the Years ended December 31, 1996, 1995, and 1994 ........... F-5
Summary of Significant Accounting Policies ............................................................ F-6
Notes to Consolidated Financial Statements ............................................................ F-10
Independent Auditors' Report .......................................................................... F-28
Financial Highlights .................................................................................. F-29
Financial Review ...................................................................................... F-30
Summary of Quarterly Financial Data, Unaudited ........................................................ F-51
</TABLE>
Envisioning. Exploring. Evolving. F-1
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CONDITION
(In thousands, except share data)
December 31, 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks, including cash deposits of $28,445 and $31,144 for 1996 and 1995, respectively,
on deposit to meet Federal Reserve requirements (note 9).............................................. $ 404,952 382,696
Interest earning deposits with banks (note 9).............................................................. 2,040 1,093
Federal funds sold (note 9)................................................................................ 38,249 123,832
Investment securities available for sale (notes 2 and 9)................................................... 1,276,083 1,106,298
Investment securities held to maturity (approximate market value of $364,694
and $386,579 for 1996 and 1995, respectively) (notes 2, 6, and 9)..................................... 363,008 380,918
Loans (notes 3, 6, and 9).................................................................................. 6,075,465 5,526,842
Less:
Unearned income ...................................................................................... (10,235) (14,812)
Reserve for loan losses .............................................................................. (94,683) (81,384)
- ------------------------------------------------------------------------------------------------------------------------------------
Loans, net ................................................................................. 5,970,547 5,430,646
- ------------------------------------------------------------------------------------------------------------------------------------
Premises and equipment, net (notes 6 and 9)................................................................ 247,191 220,197
Other assets (notes 4 and 9) .............................................................................. 310,274 281,915
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets ............................................................................... $8,612,344 7,927,595
====================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits (notes 5 and 9):
Non-interest bearing ............................................................................ $1,189,973 1,141,716
Interest bearing ................................................................................ 6,013,062 5,586,163
- ------------------------------------------------------------------------------------------------------------------------------------
Total deposits ............................................................................. 7,203,035 6,727,879
Federal funds purchased and securities sold under agreement to repurchase (note 9)................... 339,200 229,477
Long-term debt (notes 6 and 9)........................................................................ 97,283 106,815
Other liabilities (notes 7 and 8) .................................................................... 154,641 142,079
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities........................................................................... 7,794,159 7,206,250
- ------------------------------------------------------------------------------------------------------------------------------------
Minority interest in consolidated subsidiary .............................................................. 34,435 27,790
Shareholders' equity (notes 1, 2, 6, 8, and 13):
Common stock - $1.00 par value. Authorized 600,000,000 shares; issued 116,423,546 in 1996 and 115,921,043
in 1995; outstanding 116,345,651 in 1996 and 115,855,148 in 1995 ................................ 116,424 115,921
Surplus .............................................................................................. 98,523 88,381
Less treasury stock - 77,895 and 65,895 shares in 1996 and 1995, respectively ....................... (1,285) (1,022)
Less unamortized restricted stock .................................................................... (5,344) (2,663)
Net unrealized gain (loss) on investment securities available for sale ............................... (112) 5,774
Retained earnings .................................................................................... 575,544 487,164
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity ................................................................. 783,750 693,555
Commitments (note 10)...................................................................................... -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity ................................................. $8,612,344 7,927,595
====================================================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
F-2 S Y N O V U S F I N A N C I A L C O R P.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Years ended December 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Loans, including fees ........................................................................ $ 562,208 525,080 415,242
Investment securities:
U.S. Treasury and U.S. Government agencies .............................................. 73,167 59,866 53,479
Mortgage-backed securities .............................................................. 17,971 15,975 17,456
State and municipal ..................................................................... 6,766 7,397 7,772
Other investments ....................................................................... 1,266 1,357 1,611
Federal funds sold ........................................................................... 1,866 6,006 2,787
Interest earning deposits with banks ......................................................... 59 107 35
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest income ......................................................... 663,303 615,788 498,382
- ------------------------------------------------------------------------------------------------------------------------------------
Interest expense:
Deposits (note 5) ............................................................................ 267,349 253,761 176,919
Federal funds purchased and securities sold under agreement to repurchase .................... 14,973 12,092 10,021
Long-term debt ............................................................................... 6,107 8,060 10,211
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest expense ........................................................ 288,429 273,913 197,151
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income ........................................................... 374,874 341,875 301,231
Provision for losses on loans (note 3) ............................................................ 31,766 25,787 25,387
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for losses on loans ....................... 343,108 316,088 275,844
- ------------------------------------------------------------------------------------------------------------------------------------
Non-interest income:
Data processing services ..................................................................... 296,511 236,125 178,122
Service charges on deposit accounts .......................................................... 52,417 46,657 41,447
Fees for trust services ...................................................................... 11,438 9,649 8,796
Credit card fees ............................................................................. 9,105 7,288 7,703
Securities gains (losses), net (note 2) ...................................................... (176) 368 (721)
Other operating income ....................................................................... 56,083 40,747 38,985
- ------------------------------------------------------------------------------------------------------------------------------------
Total non-interest income ..................................................... 425,378 340,834 274,332
- ------------------------------------------------------------------------------------------------------------------------------------
Non-interest expense:
Salaries and other personnel expense (note 8) ................................................ 297,912 252,479 211,531
Net occupancy and equipment expense (notes 4 and 10).......................................... 121,141 99,629 83,419
Other operating expenses (note 11) ........................................................... 117,983 120,012 111,975
Special FDIC assessment ...................................................................... 4,546 -- --
Minority interest in subsidiary's net income ................................................. 7,592 5,333 4,325
- ------------------------------------------------------------------------------------------------------------------------------------
Total non-interest expense .................................................... 549,174 477,453 411,250
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes .................................................... 219,312 179,469 138,926
Income tax expense (note 7) ....................................................................... 79,708 64,886 49,474
- ------------------------------------------------------------------------------------------------------------------------------------
Net income .................................................................... $139,604 114,583 89,452
====================================================================================================================================
Net income per share .............................................................................. $ 1.20 1.00 .79
====================================================================================================================================
Weighted average shares outstanding ............................................................... 116,133 114,954 112,750
====================================================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
Envisioning. Exploring. Evolving. F-3
<TABLE>
<CAPTION>
Net
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY Unreal-
(In thousands, except per share data) ized
Gain/
Unamort- (Loss)on
ized Securities
Shares Common Treasury Restric- Avail. Retained
Years ended December 31, 1996, 1995, and 1994 Issued Stock Surplus Stock ted Stock for Sale Earnings Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 ......................... 112,352 $112,352 75,173 (2,974) (1,672) 11,643 352,475 546,997
Issuance of common stock for acquisitions (note 1) ... 1,646 1,646 3,107 -- -- -- 5,802 10,555
Net income ........................................... -- -- -- -- -- -- 89,452 89,452
Cash dividends declared - $.30 per share ............. -- -- -- -- -- -- (30,298) (30,298)
Cash dividends of pooled subsidiary prior to
acquisition ..................................... -- -- -- -- -- -- (2,708) (2,708)
Treasury shares purchased ............................ -- -- -- (6,013) -- -- -- (6,013)
Issuance of restricted stock (note 8) ................ 98 98 1,123 455 (1,676) -- -- --
Amortization of restricted stock issued under
restricted stock bonus plan (note 8) ............ -- -- -- -- 1,421 -- -- 1,421
Amortization of subsidiary restricted stock bonus
plan (note 8) ................................... -- -- 499 -- -- -- -- 499
Stock options exercised (note 8) ..................... 106 106 312 852 -- -- -- 1,270
Stock option tax benefit ............................. -- -- 692 -- -- -- -- 692
Repayment of obligation of employee stock ownership
plans at subsidiaries ........................... -- -- -- -- 389 -- (26) 363
Net unrealized gain (loss) on investment securities
available for sale (note 2)...................... -- -- -- -- -- (32,387) 229 (32,158)
Ownership change at majority-owned subsidiary ........ -- -- (192) -- -- -- -- (192)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 ......................... 114,202 114,202 80,714 (7,680) (1,538) (20,744) 414,926 579,880
Issuance of common stock for acquisitions (note 1) ... 793 793 4,228 6,078 -- 183 547 11,829
Net income ........................................... -- -- -- -- -- -- 114,583 114,583
Cash dividends declared - $.36 per share ............. -- -- -- -- -- -- (42,042) (42,042)
Treasury shares purchased ............................ -- -- -- (1,303) -- -- -- (1,303)
Issuance of restricted stock (note 8) ................ 135 135 1,919 -- (2,054) -- -- --
Amortization of restricted stock issued under
restricted stock bonus plan (note 8) ............ -- -- 493 -- 779 -- -- 1,272
Stock options exercised (note 8) ..................... 338 338 347 1,883 -- -- -- 2,568
Repayment of obligation of employee stock ownership
plan at subsidiary .............................. -- -- -- -- 150 -- -- 150
Net unrealized gain on investment securities available
for sale (note 2) ............................... -- -- -- -- -- 26,335 -- 26,335
Ownership change at majority-owned subsidiary ........ -- -- (4) -- -- -- -- (4)
Loss on foreign currency translation ................. -- -- -- -- -- -- (850) (850)
Conversion of subordinated debentures into common
stock (note 6) .................................. 453 453 684 -- -- -- -- 1,137
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 ......................... 115,921 115,921 88,381 (1,022) (2,663) 5,774 487,164 693,555
Net income ........................................... -- -- -- -- -- -- 139,604 139,604
Cash dividends declared - $.44 per share ............. -- -- -- -- -- -- (51,123) (51,123)
Treasury shares purchased ............................ -- -- -- (263) -- -- -- (263)
Issuance of restricted stock (note 8) ................ 151 151 3,570 -- (3,771) -- -- (50)
Amortization of restricted stock issued under restricted
stock bonus plan (note 8) ....................... -- -- 469 -- 1,090 -- -- 1,559
Stock options exercised (note 8) ..................... 354 354 2,513 -- -- -- -- 2,867
Stock option tax benefit ............................. -- -- 3,394 -- -- -- -- 3,394
Net unrealized loss on investment securities available
for sale (note 2) ............................... -- -- -- -- -- (5,886) -- (5,886)
Ownership change at majority-owned subsidiary ........ -- -- 234 -- -- -- -- 234
Loss on foreign currency translation ................. -- -- -- -- -- -- (101) (101)
Fractional shares for stock split .................... (2) (2) (38) -- -- -- -- (40)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 ......................... 116,424 $116,424 98,523 (1,285) (5,344) (112) 575,544 783,750
====================================================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
F-4 S Y N O V U S F I N A N C I A L C O R P.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years ended December 31, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income .......................................................................... $139,604 114,583 89,452
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for losses on loans ............................................... 31,766 25,787 25,387
Depreciation, amortization, and accretion, net .............................. 43,280 38,617 38,409
Deferred income tax benefit ................................................. (15,921) (4,171) (1,097)
Increase in interest receivable ............................................. (1,113) (9,973) (6,701)
Increase in interest payable ................................................ 791 14,680 7,316
Minority interest in subsidiary's net income ................................ 7,592 5,333 4,325
(Increase) decrease in mortgage loans held for sale ......................... (12,173) (15,398) 13,944
Other, net .................................................................. 6,788 (17,009) (3,122)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities ........................... 200,614 152,449 167,913
- -----------------------------------------------------------------------------------------------------------------------------
Investing Activities
Cash acquired from acquisitions ..................................................... 30,113 4,431 9,056
Net (increase) decrease in interest earning deposits with banks ..................... (947) 1,956 553
Net (increase) decrease in federal funds sold ....................................... 85,583 (70,770) 137,464
Proceeds from maturities and principal collections of investment securities
available for sale ............................................................... 327,897 173,109 192,186
Proceeds from sales of investment securities available for sale ..................... 106,207 136,502 182,972
Purchases of investment securities available for sale ............................... (614,952) (394,406) (347,177)
Proceeds from maturities and principal collections of investment securities
held to maturity ................................................................. 71,091 82,837 87,943
Purchases of investment securities held to maturity ................................. (53,833) (92,966) (141,153)
Net increase in loans ............................................................... (546,741) (385,228) (566,101)
Purchases of premises and equipment ................................................. (63,806) (48,212) (41,938)
Disposals of premises and equipment ................................................. 2,986 1,888 1,007
Proceeds from sales of other real estate ............................................ 6,852 12,032 9,078
Additions to purchased computer software ............................................ (9,018) -- --
Additions to internally developed computer software ................................. (178) (2,617) (10,624)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities ............................... (658,746) (581,444) (486,734)
- -----------------------------------------------------------------------------------------------------------------------------
Financing Activities
Net increase in demand and savings deposits ......................................... 320,638 193,870 87,229
Net increase in certificates of deposit ............................................. 108,078 528,690 135,539
Net increase (decrease) in federal funds purchased and securities
sold under agreement to repurchase ............................................... 109,723 (182,870) 142,125
Principal repayments on long-term debt .............................................. (20,872) (33,682) (36,204)
Proceeds from issuance of long-term debt ............................................ 11,340 1,823 17,006
Purchases of treasury stock ......................................................... (263) (1,303) (6,013)
Dividends paid to shareholders ...................................................... (51,123) (42,042) (33,006)
Proceeds from issuance of common stock .............................................. 2,867 2,568 1,270
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities ........................... 480,388 467,054 307,946
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents ............................................ 22,256 38,059 (10,875)
Cash and cash equivalents at beginning of period ............................................ 382,696 344,637 355,512
- -----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period ..................................................$ 404,952 382,696 344,637
=============================================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
Envisioning. Exploring. Evolving. F-5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Operations
The consolidated financial statements include the accounts of Synovus
Financial Corp. (Parent Company) and its consolidated subsidiaries, all but one
of which were wholly-owned at December 31, 1996. Synovus has 34 wholly-owned
bank subsidiaries predominantly involved in commercial banking activities, a
wholly-owned trust company, mortgage company, and broker/dealer company. Total
System Services, Inc. (TSYS), an 80.7% owned subsidiary, is a bankcard data
processing company. In addition, the financial statements include joint ventures
of TSYS accounted for using the equity method of accounting.
The consolidated revenues are primarily contributed from the banking
operations, with TSYS' revenues contributing over 25% of consolidated revenues.
The banking operation's revenues are earned in four southeastern states: Georgia
(59%), Alabama (20%), South Carolina (13%), and Florida (8%). TSYS has two major
customers which account for approximately 29% of their revenues. All of TSYS'
revenues are generated from customers located in North America.
Basis of Presentation
In preparing the consolidated financial statements in accordance with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities as of the
date of the balance sheet and revenues and expenses for the period. Actual
results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the reserve for loan losses; the valuation of
real estate acquired in connection with foreclosures or in satisfaction of
loans; and the disclosures for contingent assets and liabilities. In connection
with the determination of the reserve for loan losses and the valuation of other
real estate, management obtains independent appraisals for significant
properties and properties collateralizing impaired loans.
The accounting and reporting policies of Synovus Financial Corp. and
subsidiaries (Synovus) conform to generally accepted accounting principles and
to general practices within the banking and technology industries. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The following is a description of the more significant of those
policies.
Cash Flow Information
For the years ended December 31, 1996, 1995, and 1994, income taxes of $90
million, $68 million, and $48 million, and interest of $288 million, $259
million, and $190 million, respectively, were paid.
Loans receivable of approximately $7 million, $9 million, and $8 million
were transferred to other real estate during 1996, 1995, and 1994, respectively.
Investment securities held to maturity with an amortized cost of
approximately $161 million and $5 million were transferred during 1995 and 1994,
respectively, to investment securities available for sale. No transfers were
made in 1996.
Federal Funds Sold, Federal Funds Purchased, and Securities Sold Under Agreement
to Repurchase
Federal funds sold, federal funds purchased, and securities sold under
agreement to repurchase generally mature in one day.
Investment Securities
Synovus classifies its securities into three categories: trading, available
for sale, or held to maturity. An insignificant amount of trading securities at
the broker/dealer company are bought and held principally for the purpose of
selling them in the near term. Held to maturity securities are those securities
for which Synovus has the ability and intent to hold until maturity. All other
securities not included in trading or held to maturity are classified as
available for sale.
Trading and available for sale securities are recorded at fair value. Fair
value is determined at a specific point in time, based on quoted market prices.
Held to maturity securities are recorded at cost, adjusted for the amortization
or accretion of premiums or discounts. Unrealized gains and losses on trading
securities are included in earnings. Unrealized gains and losses, net of the
related tax effect, on securities available for sale are excluded from earnings
and are reported as a separate component of shareholders' equity until realized.
Transfers of securities between categories are recorded at fair value at the
date of transfer. Unrealized gains and losses are recognized in earnings for
transfers into trading securities. The unrealized gains or losses included in
the separate component of shareholders' equity for a security transferred from
available for sale to held to maturity are maintained and amortized into
earnings over the remaining life of the security as an adjustment to yield in a
manner consistent with the amortization or accretion of premium or discount on
the associated security.
A decline in the market value of any available for sale or held to maturity
security below cost that is deemed other than temporary results in a charge to
earnings resulting in the establishment of a new cost basis for the security.
Premiums and discounts are amortized or accreted over the life of the
related security as an adjustment to the yield using the effective interest
method and prepayment assumptions. Dividend and interest income are recognized
when earned. Realized gains and losses for securities classified as available
for sale and held to maturity are included in earnings and are derived using the
specific identification method for determining the amortized cost of securities
sold.
Gains and losses on sales of investment securities are recognized on the
settlement date, based on the amortized cost of the specific security. The
financial statement impact of settlement date accounting versus trade date
accounting was immaterial.
F-6 S Y N O V U S F I N A N C I A L C O R P.
Loans and Interest Income
Loans are reported at principal amounts outstanding, less unearned income
and the reserve for loan losses.
First mortgage loans held for sale are reported at the lower of aggregate
cost or fair value. Fair values are based upon quoted prices from secondary
market investors and forward commitments to sell. No valuation allowances were
required at December 31, 1996 or 1995.
Interest income on consumer loans, made on a discount basis, is recognized
in a manner which approximates the level yield method. Interest income on
substantially all other loans is recognized on a level yield basis.
Loan fees, net of certain direct origination costs, are deferred and
amortized over the terms of the loans using a method which approximates the
level yield method. Annual fees, net of costs, collected for credit cards are
recognized on a straight-line basis over the period the fee entitles the
cardholder to use the card.
Loans on which the accrual of interest has been discontinued are designated
as nonaccrual loans. Accrual of interest on loans is discontinued when
reasonable doubt exists as to the full collection of interest or principal or
when they become contractually in default for 90 days or more as to either
interest or principal, unless they are both well-secured and in the process of
collection. When a loan is placed on nonaccrual status, previously accrued and
uncollected interest for the fiscal year in which the loan is placed on
nonaccrual status is charged to interest income on loans, unless management
believes that the accrued interest is recoverable through the liquidation of
collateral. Interest payments received on nonaccrual loans are applied as a
reduction of principal. Loans are returned to accruing status when they are
brought fully current with respect to interest and principal and when, in the
judgment of management, the loans are estimated to be fully collectible as to
both principal and interest. Such interest, when ultimately collected, is
recorded as interest income in the period received. Interest on accruing
impaired loans is recognized as long as such loans do not meet the criteria for
nonaccrual classification.
Reserve for Loan Losses
The reserve for loan losses is established through provisions for loan
losses charged to operations. Loans are charged against the reserve for loan
losses when management believes that the collection of principal is unlikely.
Subsequent recoveries are added to the reserve. Management's evaluation of the
adequacy of the reserve for loan losses is based on a formal analysis which
assesses the risk within the loan portfolio. This analysis includes
consideration of historical performance, current economic conditions, level of
nonperforming loans, loan concentrations, and review of certain individual
loans.
Management believes that the reserve for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the reserve for loan losses may be necessary based on changes in
economic conditions. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review Synovus' subsidiary
banks' reserves for loan losses. Such agencies may require Synovus' subsidiary
banks to recognize additions to the reserve for loan losses based on their
judgments about information available to them at the time of their examination.
Synovus adopted the provisions of Statement of Financial Accounting
Standard (SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan" as
amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures", on January 1, 1995. Management, considering
current information and events regarding the borrowers' ability to repay their
obligations, considers a loan to be impaired when the ultimate collectibility of
all amounts due, according to the contractual terms of the loan agreement, is in
doubt. When a loan is considered to be impaired, the amount of impairment is
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate. If the loan is collateral-dependent, the
fair value of the collateral is used to determine the amount of impairment.
Impairment losses are included in the reserve for loan losses through a charge
to the provision for losses on loans. Subsequent recoveries are added to the
reserve for loan losses. The adoption of SFAS No. 114 did not have a material
effect on the consolidated financial statements and prior periods have not been
restated.
SFAS No. 114 applies to all loans, except for large pools of smaller
balance homogeneous loans that are collectively evaluated for impairment, loans
that are measured at fair value or at the lower of cost or fair value, and debt
securities. The reserve for loan losses for large pools of smaller balance
homogeneous loans is established through consideration of such factors as
changes in the nature and volume of the portfolio, overall portfolio quality,
adequacy of the underlying collateral, loan concentrations, historical
charge-off trends, and economic conditions that may affect the borrowers'
ability to pay.
Premises and Equipment
Premises and equipment, including leasehold improvements, are reported at
cost, less accumulated depreciation and amortization, which are computed using
straight-line or accelerated methods over the estimated useful life of the
related asset.
Other Assets
The following paragraphs describe some of the more significant amounts
included in other assets.
On January 1, 1996, Synovus adopted the provisions of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
disposed of." SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of the assets described below is measured by a
comparison of the carrying amount of the asset to future undiscounted cash flows
expected to be generated by the asset. If such assets are considered impaired,
the amount of impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell. Adoption of this statement did not have a material impact on
Synovus' consolidated financial statements or liquidity.
Envisioning. Exploring. Evolving. F-7
Other Real Estate:
Other real estate, consisting of properties obtained through foreclosure or
in satisfaction of loans, is reported at the lower of cost or fair value,
determined on the basis of current appraisals, comparable sales, and other
estimates of value obtained principally from independent sources, adjusted for
estimated selling costs. Any excess of the loan balance at the time of
foreclosure over the fair value of the real estate held as collateral is treated
as a loan charge-off. Gain or loss on sale and any subsequent adjustment to the
value are recorded as a component of non-interest expense.
Originated and Purchased Mortgage Servicing Rights:
Effective July 1, 1995, Synovus adopted SFAS No. 122, "Accounting for
Mortgage Servicing Rights", which requires that a mortgage banking enterprise
recognize as separate assets, rights to service mortgage loans for others
regardless of whether the servicing rights are acquired through either the
purchase or origination of mortgage loans. SFAS No. 122 also requires that
capitalized mortgage servicing rights be evaluated for impairment based upon the
fair value of those rights, including those rights purchased before adoption of
SFAS No. 122. Fair value is estimated by determining the present value of the
estimated future cash flows using discount rates commensurate with the risks
involved. In determining the present value, Synovus stratifies its mortgage
servicing rights based on risk characteristics including loan types, note rates,
and note terms.
Capitalized mortgage servicing rights are amortized in proportion to and
over the period of estimated net servicing income, using a method that
approximates level yield and taking into consideration prepayment of the
underlying loans. Management re-evaluates the terms used for amortization based
upon prepayment history and adjusts the terms as necessary.
Intangibles:
Goodwill, which represents the excess of cost over the fair value of net
assets acquired of purchased companies, is being amortized using the
straight-line method over periods of 15 to 40 years.
Core deposit premiums resulting from the valuation of core deposit
intangibles acquired in business combinations or in the purchase of branch
offices are amortized using accelerated methods over periods not exceeding the
estimated average remaining life of the existing customer deposit bases
acquired. Amortization periods range from 10 to 18 years.
Intangible amortization periods are monitored to determine if events and
circumstances require such periods to be reduced.
Computer Software:
Software development costs are capitalized from the time technological
feasibility of the software product or enhancement is established until the
software is ready for use in providing processing services to customers.
Research and development costs and other computer software maintenance costs
related to software development are expensed as incurred. Software development
costs related to the core of TS2 are amortized using the greater of the
straight-line method over the estimated useful life of ten years or the ratio of
current revenues to current and anticipated revenues. All other software
development costs and costs of purchased software are amortized using the
greater of the straight-line method over the estimated useful lives of three to
five years or the ratio of current revenues to current and anticipated revenues.
Investment in Joint Ventures:
TSYS' 49% investment in Total System Services de Mexico, S.A. de C.V.
("TSYS de Mexico"), a bankcard data processing operation located in Mexico, is
accounted for using the equity method of accounting, as is TSYS' 50% investment
in Vital Processing Services L.L.C. ("Vital"), a merchant processing operation
headquartered in Phoenix, Arizona.
Contract Acquisition Costs:
TSYS capitalizes certain contract acquisition costs related to signing a
long-term contract. These costs, which primarily consist of cash payments for
rights to provide processing services, incremental internal conversion and
software development costs, and third-party software development costs, are
amortized using the straight-line method over the contract term beginning when
the customer's cardholder accounts are converted to TSYS' processing system.
Derivative Financial Instruments:
Premiums paid for purchased interest rate floor and collar agreements are
amortized to interest income over the terms of the floors and collars.
Unamortized premiums are included in other assets in the consolidated statements
of condition. Amounts receivable or payable under collar and floor agreements
are accrued as an addition to or reduction of interest income.
Data Processing Services
TSYS' bankcard data processing revenues are derived from long-term
processing agreements with banks and nonbank institutions and are recognized as
revenues at the time the services are performed. TSYS' processing agreements
generally contain terms ranging from three to ten years.
Income Taxes
Synovus accounts for income taxes in accordance with the provisions of SFAS
No. 109, "Accounting for Income Taxes". Under the asset and liability method of
SFAS No. 109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS No. 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
F-8 S Y N O V U S F I N A N C I A L C O R P.
Stock - Based Compensation
Synovus accounts for its fixed stock-based compensation in accordance with
the provisions set forth in Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock issued to Employees," and related interpretations. In
accordance with APB Opinion No. 25, compensation expense is recorded on the
grant date only to the extent that the current market price of the underlying
stock exceeds the exercise price on the grant date.
On October 23, 1995, the Financial Accounting Standards Board (FASB) issued
SFAS No. 123, "Accounting for Stock-Based Compensation," which permits entities
to recognize as expense over the vesting period of the fair value of all
stock-based awards on the date of the grant. Alternatively, SFAS No. 123 also
allows entities to continue to apply the provisions of APB Opinion No. 25 and
provide pro forma net income and pro forma earnings per share disclosures for
employee stock-based grants made in 1995 and future years as if the
fair-value-based method had been applied as defined in SFAS No. 123. Synovus has
elected to continue to apply the provisions set forth in APB Opinion No. 25 and
follow the disclosure provisions of SFAS No. 123.
Postretirement Benefits
Synovus sponsors a defined benefit health care plan for substantially all
employees and early retirees. Synovus accounts for the cost of retiree health
care and other postretirement benefits in accordance with SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions." The
expected costs of such postretirement benefits are being expensed over the
period that employees provide service.
Net Income per Share
Net income per common share is based on the weighted average number of
shares outstanding. The effect of dilutive stock options on net income per share
is insignificant. All share and per share data has been restated to reflect the
April 1996 three-for-two stock split, which was effected on April 8, 1996, in
the form of a 50% stock dividend.
Disclosure About the Fair Value of Financial Instruments
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments,"
requires all entities to disclose the fair value of financial instruments, both
assets and liabilities (on- and off-balance sheet), for which it is practicable
to estimate fair value.
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale, at one time, Synovus' entire holdings of a particular
financial instrument. Because no market exists for a portion of Synovus'
financial instruments, fair value estimates are based on judgments regarding
future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. Significant assets and liabilities that are not
considered financial instruments include deferred tax accounts, premises and
equipment, and goodwill. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant effect on
fair value estimates and have not been considered in any of the estimates.
Recent Accounting Pronouncements
In June 1996, the FASB issued 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. SFAS No. 125 is to be applied
prospectively to transfers and servicing of financial assets and extinguishments
of liabilities after December 31, 1996. 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. Management does not expect that the adoption of SFAS No. 125 will
have a material impact on Synovus' financial position, results of operations, or
liquidity.
Other
Certain amounts in 1995 and 1994 have been reclassified to conform with the
presentation adopted in 1996.
Envisioning. Exploring. Evolving. F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1 Business Combinations
On October 24, 1996, Synovus completed the acquisition of two full-service
banking centers in Rome, Georgia. Synovus acquired approximately $49 million in
deposits and $12 million in loans from the two banking centers. The acquisition
was accounted for as a purchase.
On April 28, 1995, Synovus completed the acquisition of Citizens &
Merchants Corporation (CMC), the parent company of the $52 million asset,
Citizens & Merchants State Bank, Douglasville, Georgia. Synovus issued 939,704
shares of 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.
On February 28,1995, Synovus completed the acquisition of NBSC Corporation
(NBSC), the parent company of the $1.1 billion asset, The National Bank of South
Carolina, Columbia, South Carolina. Synovus issued 11,894,022 shares of 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. Synovus' financial
statements for the year ended December 31, 1994 have been restated for the NBSC
acquisition as follows:
<TABLE>
<CAPTION>
1994
-------------------------
Before
(In thousands, except per share data) Acquisition Restated
- --------------------------------------------------------------------------------
<S> <C> <C>
Net interest income ................................ $ 259,502 301,231
================================================================================
Net income ......................................... $ 86,448 89,452
================================================================================
Net income per share ............................... $ .86 .79
================================================================================
</TABLE>
On January 31, 1995, Synovus completed the acquisition of the $43 million
asset Peach State Bank (PSB), Riverdale, Georgia. Synovus issued 399,747
treasury shares for all of the issued and outstanding shares of PSB. This
acquisition was accounted for as a purchase.
Effective October 31, 1994, Synovus completed the acquisition of State
Bancshares, Inc. (SBI), the parent company of the $62 million asset, Coffee
County Bank, Enterprise, Alabama. Synovus issued 823,319 shares of common stock
for all of the issued and outstanding shares of SBI. This acquisition has been
accounted for as a pooling of interests, except that financial statements for
periods prior to the acquisition were not restated since the effect was not
material.
Effective May 31, 1994, Synovus completed the acquisition of PNB
Bankshares, Inc. (PNB), the parent company of the $78 million asset, Peachtree
National Bank, Peachtree City, Georgia. Synovus issued 822,320 shares of common
stock for all of the issued and outstanding shares of PNB. This acquisition 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.
- --------------------------------------------------------------------------------
F-10 S Y N O V U S F I N A N C I A L C O R P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Note 2 Investment Securities
The carrying and estimated fair values of investment securities are
summarized as follows:
December 31, 1996
------------------------------------------------
Investment Securities Available for Sale Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U. S. Treasury and U. S. Government agencies $1,132,122 5,262 (5,462) 1,131,922
Mortgage-backed securities ................. 131,313 652 (1,072) 130,893
State and municipal ........................ 965 57 (8) 1,014
Other investments .......................... 11,865 719 (330) 12,254
- -----------------------------------------------------------------------------------------------
Total .................................... $1,276,265 6,690 (6,872) 1,276,083
===============================================================================================
December 31, 1995
-----------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------
U. S. Treasury and U. S. Government agencies $ 996,129 10,466 (2,309) 1,004,286
Mortgage-backed securities ................. 87,741 758 (303) 88,196
State and municipal ........................ 1,251 72 (1) 1,322
Other investments .......................... 12,254 678 (438) 12,494
- ---------------------------------------------------------------------------------------------
Total .................................... $1,097,375 11,974 (3,051) 1,106,298
============================================================================================
December 31, 1996
-----------------------------------------------
Investment Securities Held to Maturity Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------
U. S. Treasury and U. S. Government agencies $ 84,366 381 (635) 84,112
Mortgage-backed securities ................. 156,319 16,685 (16,745) 156,259
State and municipal ........................ 114,883 2,521 (541) 116,863
Other investments .......................... 7,440 20 -- 7,460
- ----------------------------------------------------------------------------------------------
Total .................................... $ 363,008 19,607 (17,921) 364,694
==============================================================================================
December 31, 1995
-------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------
U. S. Treasury and U. S. Government agencies $ 81,772 1,415 (607) 82,580
Mortgage-backed securities ................. 171,275 1,629 (1,477) 171,427
State and municipal ........................ 121,761 4,779 (115) 126,425
Other investments .......................... 6,110 37 -- 6,147
- ---------------------------------------------------------------------------------------------
Total .................................... $ 380,918 7,860 (2,199) 386,579
=============================================================================================
</TABLE>
On December 21, 1995, Synovus exercised an option permitted by the "Special
Report - a Guide to Implementation of SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities - Questions and Answers" to make a one
time transfer of securities held to maturity to securities available for sale.
This transfer was made to add further liquidity and flexibility to the portfolio
which enabled Synovus to more effectively manage its interest rate risk
position. The amortized cost and estimated fair value of the securities
transferred was $133.7 million and $133.9 million, respectively.
On February 28, 1995, immediately following the acquisition, Synovus
transferred certain held to maturity securities of NBSC to the available for
sale portfolio to adhere to Synovus' existing asset-liability management policy
and interest rate risk strategy. This transfer consisted of investment
securities with an estimated fair value of $27.1 million and an amortized cost
of $27.4 million.
Envisioning. Exploring. Evolving. F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and estimated fair value of investment securities at
December 31, 1996 and 1995, are shown below by contractual maturity. Expected
maturities will differ from contractual maturities because borrowers have the
right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Investment Securities Investment Securities
Held to Maturity Available for Sale
December 31, 1996 December 31, 1996
----------------------- ---------------------
Amortized Estimated Amortized Estimated
(In thousands) Cost Fair Value Cost Fair Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U. S. Treasury and U. S. Government agencies:
Within 1 year ............................. $ 9,751 9,676 232,609 232,843
1 to 5 years .............................. 34,332 34,217 578,797 579,671
5 to 10 years ............................. 40,283 40,219 302,741 301,406
More than 10 years ........................ -- -- 17,975 18,002
- -----------------------------------------------------------------------------------------------
$ 84,366 84,112 1,132,122 1,131,922
===============================================================================================
Mortgage-backed securities:
Within 1 year ............................. $ 4,715 4,714 1,130 1,137
1 to 5 years .............................. 62,540 61,961 35,288 35,019
5 to 10 years ............................. 28,611 28,915 43,380 42,853
More than 10 years ........................ 60,453 60,669 51,515 51,884
- -----------------------------------------------------------------------------------------------
$ 156,319 156,259 131,313 130,893
===============================================================================================
State and municipal:
Within 1 year ............................. $ 18,290 18,392 30 30
1 to 5 years .............................. 42,253 43,269 -- --
5 to 10 years ............................. 33,536 34,131 411 420
More than 10 years ........................ 20,804 21,071 524 564
- -----------------------------------------------------------------------------------------------
$ 114,883 116,863 965 1,014
===============================================================================================
Other investments:
Within 1 year ............................. $ -- -- 516 526
1 to 5 years .............................. 1,832 1,852 2,482 2,699
5 to 10 years ............................. 265 265 1,025 1,093
More than 10 years ........................ 5,343 5,343 7,842 7,936
- -----------------------------------------------------------------------------------------------
$ 7,440 7,460 11,865 12,254
===============================================================================================
Total investment securities:
Within 1 year ............................. $ 32,756 32,782 234,285 234,536
1 to 5 years .............................. 140,957 141,299 616,567 617,389
5 to 10 years ............................. 102,695 103,530 347,557 345,772
More than 10 years ........................ 86,600 87,083 77,856 78,386
- -----------------------------------------------------------------------------------------------
$ 363,008 364,694 1,276,265 1,276,083
===============================================================================================
</TABLE>
A summary of sales transactions in the investment securities available for sale
portfolio for 1996, 1995, and 1994 is as follows:
Gross Gross
Realized Realized
(In thousands) Proceeds Gains Losses
- -------------------------------------------------------------------------------
1996 $106,207 514 (690)
1995 136,502 1,164 (796)
1994 182,972 957 (1,678)
There were no sales transactions in the investment securities held to
maturity portfolio during the three years ended December 31, 1996. Securities
with a carrying value of $968,431,000 and $879,232,000 at December 31, 1996 and
1995, respectively, were pledged to secure certain deposits as required by law.
- --------------------------------------------------------------------------------
F-12 S Y N O V U S F I N A N C I A L C O R P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Note 3 Loans
Loans outstanding, by classification, are summarized as follows:
(In thousands)
December 31, 1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C>
Commercial:
Commercial, financial, and agricultural ... $ 2,036,689 1,931,004
Real estate-construction .................. 730,785 578,712
Real estate-mortgage ...................... 1,234,981 1,160,089
- ----------------------------------------------------------------------------
Total commercial ........................ 4,002,455 3,669,805
- ----------------------------------------------------------------------------
Retail:
Real estate-mortgage ...................... 977,432 824,998
Consumer loans-credit card ................ 290,470 222,204
Consumer loans-other ...................... 768,072 784,972
Mortgage loans held for sale .............. 37,036 24,863
- ----------------------------------------------------------------------------
Total retail ............................ 2,073,010 1,857,037
- ----------------------------------------------------------------------------
Total loans ............................. $ 6,075,465 5,526,842
============================================================================
</TABLE>
Activity in the reserve for loan losses is summarized as follows:
<TABLE>
<CAPTION>
(In thousands)
December 31, 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year .............. $81,384 75,018 67,270
Loan loss reserves of acquired subsidiaries 188 1,001 1,535
Provision for losses on loans ............. 31,766 25,787 25,387
Recoveries of loans previously charged off 6,525 4,510 5,874
Loans charged off ......................... (25,180) (24,932) (25,048)
- ------------------------------------------------------------------------------
Balance at end of year .................... $94,683 81,384 75,018
==============================================================================
</TABLE>
As discussed in the Summary of Significant Accounting Policies, Synovus
adopted SFAS No. 114 and SFAS No. 118 effective January 1, 1995. No adjustment
to the loan loss reserve was needed upon adoption of SFAS No. 114 and SFAS No.
118. The table below illustrates the impaired loans and related amounts included
in the reserve for loan losses at December 31, 1996 and 1995.
<TABLE>
December 31, 1996 December 31, 1995
--------------------- ----------------------
Allocated Allocated
Loan Loan Loss Loan Loan Loss
(In thousands) Balance Reserve Balance Reserve
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Impaired loans, nonaccruing, with loan loss reserve .... $ 8,320 3,895 $13,083 5,619
Impaired loans, nonaccruing, with no loan loss reserve . 9,572 -- 7,151 --
Impaired loans, accruing, with loan loss reserve ....... 2,136 1,084 16,479 5,031
Impaired loans, accruing, with no loan loss reserve .... 10,365 -- 15,644 --
Impaired loans, accruing, partially charged off ........ 5,485 850 329 62
- --------------------------------------------------------------------------------------------------------
Total .............................................. $35,878 5,829 $52,686 10,712
========================================================================================================
</TABLE>
Envisioning. Exploring. Evolving. F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
These loan loss reserve amounts, for impaired loans, were primarily
determined using the fair value of the loans' collateral. The average recorded
investment in impaired loans was approximately $40,000,000 and $87,000,000 for
the years ended December 31, 1996 and 1995, respectively, and the related amount
of interest income recognized during the period that such loans were impaired
was approximately $1,702,000 and $5,695,000 in 1996 and 1995, respectively.
Loans on nonaccrual status amounted to approximately $23,655,000,
$21,469,000, and $26,497,000 at December 31, 1996, 1995, and 1994, respectively.
If nonaccruing loans had been on a full accruing basis, interest income on these
loans would have been increased by approximately $2,400,000, $2,606,000, and
$2,931,000 in 1996, 1995, and 1994, respectively.
A substantial portion of Synovus' loans are secured by real estate in
markets in which subsidiary banks are located throughout Georgia, Alabama, South
Carolina, and Northwest Florida. Accordingly, the ultimate collectibility of a
substantial portion of Synovus' loan portfolio and the recovery of a substantial
portion of the carrying amount of real estate owned are susceptible to changes
in market conditions in these areas.
At December 31, 1996, Synovus Mortgage Corp. serviced mortgage loans for
unaffiliated investors in the amount of $1,551,608,000. This company carries
errors and omissions insurance in the amount of $2,500,000.
The following table presents information for mortgage loans held for sale
as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Beginning balance ..................................... $ 24,863 9,465
Loans originated during the year ...................... 297,117 213,645
Loans sold during the year ............................ (284,944) (198,247)
- -------------------------------------------------------------------------------
Ending balance ........................................ $ 37,036 24,863
================================================================================
</TABLE>
In the ordinary course of business, Synovus has direct and indirect loans
outstanding to certain executive officers, directors, and principal holders of
equity securities (including their associates). Management believes that such
loans are made substantially on the same terms, including interest rate and
collateral, as those prevailing at the time for comparable transactions with
other customers. The following is a summary of such loans outstanding and the
activities in these loans for the year ended December 31, 1996.
(In thousands)
- ------------------------------------------------------------------
Balance at December 31, 1995 .......................... $ 127,418
Adjustment for executive officer and director changes . 595
- ------------------------------------------------------------------
Adjusted balance at December 31, 1995 ................. 128,013
New loans ............................................. 64,356
Repayments ............................................ (50,155)
- ------------------------------------------------------------------
Balance at December 31, 1996 .......................... $ 142,214
===================================================================
- --------------------------------------------------------------------------------
F-14 S Y N O V U S F I N A N C I A L C O R P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 4 Other Assets
Included in other assets are four significant balances: purchased and
originated mortgage servicing rights, computer software costs, contract
acquisition costs, net, and investment in joint ventures, net.
Synovus adopted SFAS No. 122 as of July 1, 1995, and has capitalized all
mortgage servicing rights since the adoption date. As of December 31, 1996 and
1995, Synovus had approximately $17,212,000 and $8,569,000, respectively, in
capitalized mortgage servicing rights. There was no valuation allowance as of
December 31, 1996 and 1995.
The following table summarizes TSYS' computer software at December 31, 1996
and 1995:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C>
TS2 .............................................................. $33,049 33,049
Other internally developed software, including enhancements to TS2 5,524 5,346
Purchased computer software ...................................... 25,865 17,138
- --------------------------------------------------------------------------------------
64,438 55,533
Less accumulated amortization .................................... 24,718 16,317
- --------------------------------------------------------------------------------------
Computer software, net ........................................... $39,720 39,216
======================================================================================
</TABLE>
Capitalized internal computer software development costs, related to the
bankcard data processing, for the years ended December 31, 1996, 1995, and 1994
were $178,000, $2,617,000, and $10,624,000, respectively. Amortization expense
related to computer software costs was $8,630,000, $7,358,000, and $3,669,000
for the years ended December 31, 1996, 1995, and 1994, respectively.
- --------------------------------------------------------------------------------
Contract acquisition costs, net, at TSYS were $19,646,000 and $17,628,000
at December 31, 1996 and 1995, respectively. Investment in joint ventures, net,
was $15,348,000 and $4,507,000 at December 31, 1996 and 1995, respectively.
Note 5 Deposits
The following table presents deposits as of December 31, 1996 and 1995:
(Balances in thousands) 1996 1995
- --------------------------------------------------------------
Non-interest bearing demand deposits $1,189,973 1,141,716
Interest bearing demand deposits ... 1,022,398 932,351
Money market accounts .............. 1,136,795 925,861
Savings accounts ................... 462,023 465,491
Time deposits under $100,000 ....... 2,268,942 2,238,560
Time deposits over $100,000 ........ 1,122,904 1,023,900
- --------------------------------------------------------------
$7,203,035 6,727,879
==============================================================
Interest expense for the years ended December 31, 1996, 1995, and 1994 on
time deposits over $100,000 was $62,074,000, $57,259,000 and $31,865,000,
respectively.
- --------------------------------------------------------------------------------
Envisioning. Exploring. Evolving. F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Note 6 Long-Term Debt
Long-term debt at December 31, 1996 and 1995 consists of the following:
(In thousands) 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Parent Company:
6.125% senior notes, due October 15, 2003, with semi-annual interest payments and principal to be paid at
maturity ............................................................................................ $75,000 75,000
8.75% debenture, due May 15, 2004, with annual principal payments of $120,000 and $1,360,000 at maturity . 2,200 2,440
- ----------------------------------------------------------------------------------------------------------------------------
Total Parent Company Debt ........................................................ 77,200 77,440
- ----------------------------------------------------------------------------------------------------------------------------
Subsidiaries:
Federal Home Loan Bank advances with monthly interest payments and principal payments due at various
maturity dates through 2004 and interest rates ranging from 5.03% to 5.81% at December 31, 1996 .. 15,960 26,300
9.23% note payable, due October 31, 2003, with annual principal and interest payments .................... 317 348
8.00% capital lease obligation payable, due in monthly principal and interest payments through 2002 ...... 244 274
Other notes payable and capital lease obligations payable, with a weighted average interest
rate of 5.36%, maturing at various dates through 2000 ............................................ 3,562 2,453
- ----------------------------------------------------------------------------------------------------------------------------
Total Subsidiaries Debt .......................................................... 20,083 29,375
- ----------------------------------------------------------------------------------------------------------------------------
Total Long-Term Debt ............................................................. $97,283 106,815
============================================================================================================================
</TABLE>
The more significant debt agreements held by the Parent Company provide for
certain limitations on: payments of cash dividends, issuance of additional debt,
creation of liens upon property, disposition of common stock or assets, and
investments in subsidiaries. As of December 31, 1996, the most restrictive of
these limit payment of cash dividends to a maximum of $139,604,000.
The Federal Home Loan Bank advances are secured by certain mortgage loans
receivable as well as all of the stock of the Federal Home Loan Bank owned by
Synovus.
Mandatory convertible subordinated debentures of $1,137,280 matured on
August 19, 1995. In accordance with the terms of these debentures, Synovus
issued 452,829 shares of common stock to extinguish the debentures.
The capital lease obligations payable and certain notes payable are secured
by land, buildings, and equipment with a net carrying value at December 31,
1996, of approximately $1,009,000.
Synovus has an unsecured line of credit, with an unaffiliated bank, for $20
million with an interest rate of 50 basis points above the "short-term index",
as defined. There were no advances on this line of credit outstanding at any
time in the years ended December 31, 1996 or 1995.
Required annual principal payments on long-term debt for the five years
subsequent to December 31, 1996, are as follows:
<TABLE>
<CAPTION>
Parent
(In thousands) Company Subsidiaries Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1997....................$120 11,307 11,427
1998.................... 120 7,079 7,199
1999.................... 120 382 502
2000.................... 120 307 427
2001.................... 120 289 409
</TABLE>
- --------------------------------------------------------------------------------
F-16 S Y N O V U S F I N A N C I A L C O R P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Note 7 Income Taxes
For the years ended December 31, 1996, 1995, and 1994, income tax expense
(benefit) consists of:
(In thousands) 1996 1995 1994
- --------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
Federal .......... $ 89,655 65,009 46,304
State ............ 5,974 4,048 4,267
- -------------------------------------------------------
95,629 69,057 50,571
- -------------------------------------------------------
Deferred:
Federal .......... (14,664) (3,792) (997)
State ............ (1,257) (379) (100)
- -------------------------------------------------------
(15,921) (4,171) (1,097)
- -------------------------------------------------------
Total income taxes $ 79,708 64,886 49,474
=======================================================
</TABLE>
Income tax expense as shown in the consolidated statements of income
differed from the amounts computed by applying the U.S. Federal income tax rate
of 35% to pretax income as a result of the following:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Taxes at statutory federal income tax rate .......... $76,759 62,814 48,624
Tax-exempt income ................................... (2,859) (2,956) (3,654)
State income taxes, net of federal income tax benefit 3,066 2,385 2,709
Minority interest ................................... 2,657 1,867 1,514
Other, net .......................................... 85 776 281
- ---------------------------------------------------------------------------------------------
Total income tax expense .......................... $79,708 64,886 49,474
=============================================================================================
Effective tax rate ................................ 36.34% 36.15% 35.61
=============================================================================================
</TABLE>
The significant components of deferred income tax benefit for the years
ended December 31, 1996, and 1995, and 1994 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease)in net tax benefit (exclusive of the components listed below) .............. $13,085 (9,065) 17,339
Adjustments to deferred income tax assets and liabilities for enacted tax rate change .......... -- -- 240
Change in valuation allowance .................................................................. (383) (418) 406
Change in deferred income tax assets and liabilities related to net unrealized gain (loss)
on securities available for sale ............................................................. 3,219 13,788 (16,555)
Deferred tax assets of acquired companies ...................................................... -- (134) (333)
- ------------------------------------------------------------------------------------------------------------------------------------
$15,921 4,171 1,097
====================================================================================================================================
</TABLE>
Envisioning. Exploring. Evolving. F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The tax effects of temporary differences that gave rise to significant
portions of the deferred income tax assets and liabilities at December 31, 1996
and 1995 are presented below:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred income tax assets:
Provision for losses on loans ........................................................... $38,226 32,244
Net unrealized loss on investment securities available for sale ......................... 69 --
Other ................................................................................... 12,400 11,610
- -----------------------------------------------------------------------------------------------------------------------------------
Total gross deferred income tax assets ................................................ 50,695 43,854
Less valuation allowance .............................................................. -- (383)
- -----------------------------------------------------------------------------------------------------------------------------------
Net deferred income tax assets ..................................................... 50,695 43,471
- -----------------------------------------------------------------------------------------------------------------------------------
Deferred income tax liabilities:
Differences in depreciation ............................................................. (5,612) (6,220)
Restricted stock awards ................................................................. (1,180) (1,206)
Computer software development costs ..................................................... (14,314) (14,958)
Net unrealized gain on investment securities available for sale ......................... -- (3,150)
Pension ................................................................................. -- (241)
Purchase accounting adjustments ......................................................... (1,571) (1,338)
Other, net .............................................................................. (6,366) (7,791)
- -----------------------------------------------------------------------------------------------------------------------------------
Total gross deferred income tax liabilities .......................................... (29,043) (34,904)
- -----------------------------------------------------------------------------------------------------------------------------------
Net deferred income tax assets .................................................... $21,652 8,567
===================================================================================================================================
</TABLE>
There was no valuation allowance for deferred tax assets as of December 31,
1996, compared to the December 31, 1995 allowance of $383,000. The net change in
the total valuation allowance for the years ended December 31, 1996 and 1995 was
a decrease of $383,000 and $418,000, respectively. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and tax planning
strategies in making this assessment. Based upon the level of historical taxable
income and projections for future taxable income over the periods in which the
deferred tax assets are deductible, management believes it is more likely than
not that Synovus will realize the benefits of these deductible differences, net
of the existing valuation allowances, at December 31, 1996.
- --------------------------------------------------------------------------------
Note 8 Employee Benefit Plans
Under various stock option plans, Synovus has granted options for 4,300,528
shares of common stock to officers of Synovus and its subsidiaries. Synovus has
expensed $813,000, $1,016,000 and $1,129,000 in 1996, 1995, and 1994,
respectively, related to the compensation element of these plans. At December
31, 1996, unamortized deferred compensation expense of $3,856,000 related to
these options remained and will be amortized over the vesting period through
1997. The options outstanding at December 31, 1996 had a weighted average
exercise price of $13.59.
The per share weighted-average fair value of stock options granted during
1996 and 1995 was $19.67 and $21.66, respectively, using the Black Scholes
option-pricing model with the following weighted-average assumptions: expected
life of 4 years, expected dividend yield of 1.4%, risk free interest rate of
6.5% and an expected volatility of 22%, for both years.
Synovus applies APB Opinion No. 25 in accounting for the stock option plans
and, accordingly, compensation costs for the 1996 and 1995 option plans have not
been recognized in the accompanying financial statements. However, Synovus
issued discounted options prior to 1995, the compensation cost of which has been
included in income as described above.
In addition to the stock options described above, Synovus has awarded
non-transferable, restricted shares of Synovus common stock to various key
executives under key executive restricted stock bonus plans. The market value of
the common stock at the date of issuance is included as a reduction of
shareholders' equity in the consolidated statements of condition and is
amortized as compensation expense using the straight-line method over the
vesting period of the awards. Aggregate compensation expense with respect to the
foregoing Synovus restricted stock awards was approximately $1,090,000, $779,000
and $1,421,000 in 1996, 1995 and 1994, respectively.
F-18 S Y N O V U S F I N A N C I A L C O R P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Summary information regarding outstanding restricted stock bonus plans at
December 31, 1996 is presented below:
<TABLE>
<CAPTION>
Year awards Market value
granted at award date Vesting period
- --------------------------------------------------------------------------------
<S> <C> <C>
1994 870,000 5 years
1995 2,054,000 5 years
1996 3,771,000 5 years
</TABLE>
In 1992, TSYS also awarded 959,200 non-transferable, restricted shares of
its common stock to various key executives under restricted stock bonus plans.
The aggregate market value of the awards issued was $3,134,050, and is being
amortized on a straight-line basis over the five to six year vesting periods of
the awards.
In accordance with APB Opinion No. 25, approximately $738,000 and $205,000
in compensation expense has been recorded in 1996 and 1995, respectively, for
the restricted stock awards granted in 1996 and 1995. Had Synovus determined
compensation cost based on the fair value at the grant date for its stock
options and restricted stock awards under SFAS No. 123, Synovus' net income
would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Years ended December 31,
(In thousands) 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Net income:
As reported ........ $139,604 114,583
Pro forma .......... 137,650 114,107
Earnings per share:
As reported ......... 1.20 1.00
Pro forma ........... 1.19 .99
</TABLE>
Pro forma net income reflects only options and awards granted in 1996 and
1995. The full impact of calculating compensation cost for stock options under
SFAS No. 123 is not reflected in the pro forma net income amounts presented
above. The pro forma net income amount above does not include compensation cost
that would be recorded over the options' vesting periods of 2 to 3 years or
compensation cost for options granted prior to January 1, 1995.
Stock option activity during the years ended December 31, 1996, 1995, and
1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at beginning of period .............. 3,384,396 2,815,332 2,376,516
Options granted ......................................... 1,296,349 1,237,686 813,266
Options exercised ....................................... (353,629) (654,615) (266,114)
Options cancelled ....................................... (26,588) (14,007) (108,336)
- -------------------------------------------------------------------------------------------------------------------
Options outstanding at end of period .................. 4,300,528 3,384,396 2,815,332
===================================================================================================================
Options exercisable at end of period .................. 1,167,925 1,112,034 883,713
===================================================================================================================
Options' prices per share:
Options granted during the period ..................... $ 19.63 to 21.63 6.49 to 15.17 4.76 to 12.75
Options exercised during the period ................... $ 3.03 to 15.70 3.03 to 7.80 2.75 to 7.22
Options outstanding at end of period .................. $ 3.03 to 21.63 3.03 to 15.17 3.03 to 12.75
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
In 1994, Synovus had noncontributory, trusteed pension plans (collectively
referred to as "Plan") covering substantially all employees over 20 1/2 years of
age. Total pension expense recorded in the accompanying financial statements was
approximately $652,000, $3,195,000, and $1,516,000 in 1996, 1995, and 1994,
respectively.
In 1995, Synovus terminated the Plan. During the years ended December 31,
1996 and 1995, Synovus settled the accumulated benefit obligation of
approximately $15,849,000. The expenses incurred in 1996 and 1995 primarily
relate to the loss on settlement of the terminated Plan.
Envisioning. Exploring. Evolving. F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In 1995, Synovus adopted a defined-contribution, money purchase plan to
replace the terminated pension plan referred to above. In addition, Synovus
generally provides noncontributory, trusteed, profit sharing and 401(k) plans
which cover all eligible employees. Annual discretionary contributions to these
profit sharing and 401(k) plans are set each year by the respective Boards of
Directors of each subsidiary, but cannot exceed amounts allowable as a deduction
for federal income tax purposes. Aggregate contributions to these money
purchase, profit sharing, and 401(k) plans for the years ended December 31,
1996, 1995 and 1994 were $30,125,000, $23,238,000, and $12,853,000,
respectively.
Synovus has stock purchase plans for directors and employees whereby
Synovus makes contributions equal to one-half of employee and director voluntary
contributions. The funds are used to purchase outstanding shares of Synovus
common stock. TSYS has established director and employee stock purchase plans,
modeled after Synovus' plans except that the funds are used to purchase
outstanding shares of TSYS common stock. Synovus and TSYS contributed
$3,069,000, $2,623,000 and $1,949,000 to these plans in 1996, 1995, and 1994,
respectively.
Synovus has also entered into employment agreements with certain executive
officers for past and future services which provide for current compensation in
addition to salary in the form of deferred compensation payable at retirement or
in the event of death, total disability, or termination of employment. The
aggregate cost of these salary continuation plans and employment agreements was
not material to the consolidated financial statements.
Synovus provides certain medical benefits to qualified retirees through a
postretirement medical benefits plan. The benefit expense and accrued benefit
cost was not material to Synovus' consolidated financial statements.
- --------------------------------------------------------------------------------
Note 9 Fair Value of Financial Instruments
The following table presents the carrying amounts and estimated fair values
of Synovus' on-balance sheet financial instruments at December 31, 1996 and
1995. The estimated fair value of a financial instrument is the amount at which
the instrument could be exchanged in a current transaction between willing
parties.
<TABLE>
<CAPTION>
1996 1995
---------------------------- -----------------------
Carrying Estimated Carrying Estimated
(In thousands) Value Value Fair Value Value Fair Value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks ................................... $ 404,952 404,952 382,696 382,696
Interest earning deposits with banks ...................... 2,040 2,040 1,093 1,093
Federal funds sold ........................................ 38,249 38,249 123,832 123,832
Investment securities available for sale .................. 1,276,083 1,276,083 1,106,298 1,106,298
Investment securities held to maturity .................... 363,008 364,694 380,918 386,579
Loans ..................................................... 5,970,547 5,848,317 5,430,646 5,393,786
Purchased and originated mortgage servicing rights ........ 17,212 20,499 8,569 9,844
Financial liabilities:
Non-interest bearing deposits ............................. $1,189,973 1,189,973 1,141,716 1,141,716
Interest bearing deposits ................................. 6,013,062 6,017,256 5,586,163 5,590,868
Federal funds purchased and securities sold under agreement
to repurchase ........................................ 339,200 339,200 229,477 229,477
Long-term debt ............................................ 97,283 94,818 106,815 105,874
</TABLE>
The carrying amounts and estimated fair values relating to off-balance
sheet financial instruments are summarized in Note 10.
Cash and due from banks, interest earning deposits with banks, and federal
funds sold are repriced on a short-term basis, as such, the carrying value
closely approximates market.
Fair value of loans is estimated for portfolios of loans with similar
financial characteristics. Loans are segregated by type, such as commercial,
mortgage, home equity, credit card, and other consumer loans. Fixed rate
commercial loans are further segmented into certain collateral code groupings.
Commercial and other consumer loans with adjustable interest rates are assumed
to be at fair value. Mortgage loans are further segmented into fixed and
adjustable rate interest terms. Home equity and credit card loans have
adjustable interest rates and are, therefore, assumed to be at fair value. The
fair value of loans, except mortgage loans, is calculated by discounting
contractual cash flows using estimated market discount rates which reflect the
credit and interest rate risk inherent in the loan. For mortgage loans, fair
value is estimated by discounting contractual cash flows adjusted for certain
prepayment assumptions, estimated using discount rates based on secondary market
sources adjusted to reflect differences in servicing and credit costs.
In accordance with SFAS No. 107, the fair value of deposits with no stated
maturity, such as non-interest bearing demand accounts, interest bearing demand
deposits, money market accounts, and savings accounts, is equal to the amount
payable on demand as of that respective date. The fair value of time deposits is
based on the discounted value of contractual cash flows. The discount rate is
estimated using the rates currently offered for deposits of similar remaining
maturities.
F-20 S Y N O V U S F I N A N C I A L C O R P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Short-term debt that matures within ten days is assumed to be at fair
value. The fair value of short-term and long-term debt with fixed interest rates
is calculated by discounting contractual cash flows using estimated market
discount rates.
- --------------------------------------------------------------------------------
Note 10 Commitments
Off-Balance Sheet Financial Instruments
Synovus is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers,
reduce its own exposure to fluctuations in interest rates, and to conduct
lending activities. These financial instruments include commitments to extend
credit, standby and commercial letters of credit, and interest rate swaps,
floors and collars. These instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amounts recognized in the
consolidated financial statements.
Synovus' exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit, and
standby and commercial letters of credit is represented by the contract amount
of those instruments. Synovus uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments. For interest rate swap, collar, and floor agreements held at year
end, Synovus had insignificant credit risk.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, total commitment amounts do not necessarily
represent future cash requirements.
Loan commitments and letters of credit at December 31, 1996 and 1995
include the following:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Standby letters of credit .................................................. $ 321,891 255,230
Undisbursed construction loans ............................................ 341,457 316,139
Unused credit card lines .................................................. 659,423 552,831
Other loan commitments ..................................................... 817,206 700,227
Commitments to sell mortgage loans.......................................... 23,000 36,000
- --------------------------------------------------------------------------------------------------------
Total .................................................................... $2,162,977 1,860,427
========================================================================================================
</TABLE>
Due to the short-term nature of the outstanding loan commitments, and the
likelihood that, when funded, these loans will be indexed to the then current
market rates, the off-balance sheet value closely approximates fair value.
Interest rate swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amounts. Entering into off-balance sheet interest rate
contracts involves not only interest rate risk but also, the risk of
counterparties' failure to fulfill their legal obligations. Notional principal
amounts often are used to express the volume of these transactions, but the
amounts potentially subject to credit risk are much smaller.
In October of 1995, Synovus and its subsidiary bank, Columbus Bank and
Trust Company, entered the interest rate swap market for interest rate risk
management purposes. In January of 1996, another subsidiary bank, The National
Bank of South Carolina, also entered the interest rate swap market. The
consolidated notional amount of interest rate swap, floor, and collar contracts
was $450,000,000 and $125,000,000 as of December 31, 1996 and 1995,
respectively, with a carrying amount of $410,000, primarily related to the
interest rate floor agreements in 1996, and no carrying amount in 1995. The
estimated net unrealized (loss) gain on these interest rate contracts was
($1,935,000) and $1,776,000 at December 31, 1996 and 1995, respectively.
These interest rate contracts are being utilized to hedge approximately
$585,000,000 in prime rate floating loans in Georgia and South Carolina.
Envisioning. Exploring. Evolving. F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Weighted Weighted Weighted
December 31, 1996 Notional Average Average Average Maturity Unrealized Unrealized Net Unrealized
(In thousands) Amount Receive Rate Pay Rate<F1> In Months Gains Losses Gains (Losses)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Receive Fixed Swaps -LIBOR $235,000 5.79 5.53 32 $ -- (2,200) (2,200)
Receive Fixed Swaps - Prime 70,000 9.12 8.25 43 630 -- 630
- -----------------------------------------------------------------------------------------------------------------------------------
Total Receive Fixed Swaps 305,000 6.55 6.15 35 630 (2,200) (1,570)
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------
<FN>
<F1>Variable pay rate based upon contract rates in effect at December 31, 1996
and 1995.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Notional Average Cap Average Average Maturity Unrealized Unrealized Net Unrealized
Amount Rate Floor Rate In Months Gains Losses Gains (Losses)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Collars 80,000 9.16 7.91 34 -- (445) (445)
</TABLE>
<TABLE>
<CAPTION>
Weighted Weighted
Notional Average Floor Average Maturity Unrealized Unrealized Net Unrealized
Amount Rate In Months Gains Losses Gains (Losses)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Rate Floors 65,000 7.83 48 80 -- 80
</TABLE>
<TABLE>
<CAPTION>
Weighted
Notional Average Maturity Unrealized Unrealized Net Unrealized
Amount In Months Gains Losses Gains (Losses)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total $450,000 37 $ 710 (2,645) (1,935)
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Weighted Weighted Weighted
December 31, 1995 Notional Average Average Average Maturity Unrealized Unrealized Net Unrealized
(In thousands) Amount Receive Rate Pay Rate<F1> In Months Gains Losses Gains (Losses)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Receive Fixed Swaps - LIBOR $125,000 5.98% 5.88 46 $1,776 -- $1,776
===================================================================================================================================
- -------
<FN>
<F1>Variable pay rate based upon contract rates in effect at December 31, 1996
and 1995.
</FN>
</TABLE>
Lease Commitments
Synovus has entered into long-term operating leases for various branch
locations, data processing equipment, and furniture. Management expects that, as
these leases expire, they will be renewed or replaced by other leases. At
December 31, 1996, minimum rental commitments under all such noncancelable
leases aggregated $118,647,000 of which the following approximate amounts are
due for the next five years:
<TABLE>
<CAPTION>
Equipment
Real and
(In thousands) Property Furniture Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1997....................... $5,909 26,888 32,797
1998....................... 5,617 25,221 30,838
1999....................... 4,996 19,264 24,260
2000....................... 4,765 8,038 12,803
2001....................... 3,613 88 3,701
</TABLE>
Rental expense on equipment, including cancelable leases, was $44,819,000,
$33,445,000, and $25,111,000 in 1996, 1995, and 1994, respectively. Rental
expense on facilities was $6,920,000, $6,144,000, and $5,586,000 in 1996, 1995,
and 1994, respectively.
Contract Commitments
In the normal course of its business, TSYS maintains processing and
conversion agreements with its customers. These agreements contain contractual
commitments, including, but not limited to, minimum standards and time frames
against which TSYS' performance is measured. In the event TSYS does not meet its
contractual commitments with its customers, TSYS may incur penalties and/or
certain customers may have the right to terminate their agreements with TSYS.
TSYS does not believe that it will fail to meet its contractual commitments to
an extent that will result in a material adverse effect on its financial
condition or results of operations.
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.
F-22 S Y N O V U S F I N A N C I A L C O R P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 on 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.
- --------------------------------------------------------------------------------
Note 11 Supplemental Financial Data
Components of other operating expenses in excess of 1% of total revenues
for any of the respective periods are as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Stationery, printing, and supplies............. $24,104 23,692 19,552
FDIC insurance ................................ 1,469 7,849 12,742
- --------------------------------------------------------------------------------
</TABLE>
Note 12 Industry Segments
Synovus operates principally in the banking industry through its subsidiary
banks, mortgage servicing company, trust company, and broker/dealer company.
Synovus also operates in the computerized data processing industry through its
majority-owned subsidiary, TSYS, which primarily provides bankcard data
processing for unaffiliated financial institutions and for Synovus. All,
inter-segment services provided are charged at the same rates as unaffiliated
customers, are included in the revenues and net income of the respective
segments, and are eliminated to arrive at consolidated totals.
Industry segment information for the years ended December 31, 1996, 1995,
and 1994 is presented below.
<TABLE>
<CAPTION>
General Total Banking Data
(In thousands) Banking Corporate Operations Processing Eliminations Consolidated
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.......................... 1996 $ 779,764 -- 779,764 311,648 (2,731)<F1> 1,088,681
1995 709,774 -- 709,774 249,708 (2,860)<F1> 956,622
1994 586,917 -- 586,917 187,571 (1,774)<F1> 772,714
Net income........................ 1996 121,808 (14,049) 107,759 39,437 (7,592)<F2> 139,604
1995 105,692 (13,506) 92,186 27,730 (5,333)<F2> 114,583
1994 83,983 (12,696) 71,287 22,490 (4,325)<F2> 89,452
Identifiable assets............... 1996 8,371,958 42,578 8,414,536 246,759 (48,951) 8,612,344
1995 7,719,615 51,478 7,771,093 199,000 (42,498) 7,927,595
1994 6,989,998 55,111 7,045,109 165,042 (34,072) 7,176,079
Capital expenditures<F3>......... 1996 34,508 676 35,184 28,622 -- 63,806
1995 22,835 269 23,104 25,108 -- 48,212
1994 19,117 320 19,437 22,501 -- 41,938
Depreciation and
amortization on premises,
equipment, and purchased
software ....................... 1996 16,344 360 16,704 19,108 -- 35,812
1995 13,999 332 14,331 17,126 -- 31,457
1994 12,871 365 13,236 13,472 -- 26,708
- ---------------------
<FN>
<F1> Principally, data processing service revenues provided to the banking segment.
<F2> Minority interest in the data processing segment.
<F3> Excludes expenditures related to data processing subsidiary's capitalization
of internal software development costs.
- --------------------------------------------------------------------------------------------------------------------
</FN>
</TABLE>
Envisioning. Exploring. Evolving. F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Note 13 Condensed Financial Information of Synovus Financial Corp.
(Parent Company only)
Condensed Statements of Condition
(In thousands)
December 31, 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash ........................................................................... $ 25 47
Investment in consolidated bank subsidiaries, at equity (including TSYS) ....... 836,466 736,379
Investment in consolidated nonbank subsidiaries, at equity ..................... 7,799 6,775
Notes receivable from subsidiaries ............................................. 25,613 27,853
Other assets ................................................................... 19,076 24,040
- -----------------------------------------------------------------------------------------------------------------------
Total assets ...................................................... $888,979 795,094
- -----------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders Equity
Long-term debt ................................................................. $ 77,200 77,440
Other liabilities .............................................................. 28,029 24,099
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities ................................................. 105,229 101,539
- -----------------------------------------------------------------------------------------------------------------------
Shareholders equity:
Common stock ........................................................... 116,424 115,921
Surplus ................................................................ 98,523 88,381
Less treasury stock .................................................... (1,285) (1,022)
Less unamortized restricted stock ...................................... (5,344) (2,663)
Net unrealized gain (loss) on investment securities available for sale . (112) 5,774
Retained earnings ...................................................... 575,544 487,164
- -----------------------------------------------------------------------------------------------------------------------
Total shareholders equity ......................................... 783,750 693,555
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders equity ......................... 888,979 795,094
=======================================================================================================================
</TABLE>
F-24 S Y N O V U S F I N A N C I A L C O R P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Condensed Statements of Income
(In thousands)
Years ended December 31, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Dividends received from bank subsidiaries (including TSYS) .......................... $ 61,925 76,464 72,800
Dividends received from nonbank subsidiaries ........................................ -- -- 300
Management fees ..................................................................... 1,642 2,511 3,586
Interest income ..................................................................... 1,678 2,149 1,425
Other income ........................................................................ 3,144 2,616 2,330
- ----------------------------------------------------------------------------------------------------------------------------
Total income ................................................................ 68,389 83,740 80,441
- ----------------------------------------------------------------------------------------------------------------------------
Expenses:
Interest expense .................................................................... 4,818 6,046 6,874
Other expenses ...................................................................... 25,129 23,904 19,758
- ----------------------------------------------------------------------------------------------------------------------------
Total expenses .............................................................. 29,947 29,950 26,632
- ----------------------------------------------------------------------------------------------------------------------------
Income before income taxes and equity in undistributed income of subsidiaries 38,442 53,790 53,809
Allocated income tax benefit ................................................................ (9,526) (9,246) (6,931)
- ----------------------------------------------------------------------------------------------------------------------------
Income before equity in undistributed income of subsidiaries ................ 47,968 63,036 60,740
Equity in undistributed income of subsidiaries .............................................. 91,636 51,547 28,712
- ----------------------------------------------------------------------------------------------------------------------------
Net income .................................................................. $139,604 114,583 89,452
============================================================================================================================
</TABLE>
Envisioning. Exploring. Evolving. F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows
(In thousands)
Years ended December 31, 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income .............................................................. $ 139,604 114,583 89,452
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed earnings of subsidiaries ........ (91,636) (51,547) (28,712)
Net income of equity method investment .................. (92) (78) (337)
Depreciation, amortization, and accretion, net .......... 768 739 1,312
Net increase in other liabilities ....................... 3,930 5,723 5,474
Net decrease (increase) in other assets ................. 4,142 8,799 (10,632)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities ....... 56,716 78,219 56,557
- ------------------------------------------------------------------------------------------------------------------------------------
Investing Activities
Net investment in subsidiaries .......................................... (9,821) (9,835) (11,005)
Cash from merged parent company operations .............................. -- 515 --
Net (increase) decrease in notes receivable from subsidiaries .......... (1,021) 1,200 1,700
Net decrease (increase) in short-term notes receivable from subsidiaries 3,261 (4,765) (6,907)
Purchase of premises and equipment, net ................................. (396) (266) (301)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities ........... (7,977) (13,151) (16,513)
- ------------------------------------------------------------------------------------------------------------------------------------
Financing Activities
Dividends paid to shareholders .......................................... (51,123) (42,042) (33,006)
Net decrease in short-term borrowings ................................... -- -- (5,404)
Principal repayments on long-term debt .................................. (240) (25,620) (2,166)
Proceeds from issuance of long-term debt ................................ -- -- 5,000
Purchase of treasury stock .............................................. (263) (1,303) (6,013)
Proceeds from issuance of common stock .................................. 2,865 3,705 1,270
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities ........... (48,761) (65,260) (40,319)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in cash ................................................................ (22) (192) (275)
Cash at beginning of period ..................................................... 47 239 514
- ------------------------------------------------------------------------------------------------------------------------------------
Cash at end of period ........................................................... $ 25 47 239
====================================================================================================================================
</TABLE>
Supplemental Information: For the years ended December 31, 1996, 1995, and
1994, the Parent Company paid income taxes of $90 million, $68 million, and $48
million, and interest in the amounts of $5 million, $6 million, and $7 million,
respectively.
The amount of dividends paid to the Parent Company from the subsidiary
banks is limited by various banking regulatory agencies. The amount of cash
dividends available from subsidiary banks for payment in 1997, without prior
approval from the banking regulatory agencies, is approximately $84,111,000. In
prior years, Synovus' banks have received permission and have paid cash
dividends to the Parent Company in excess of these regulatory limitations.
As a result of the regulatory limitations, at December 31, 1996,
approximately $752,355,000 of the Parent Company's investment in net assets of
subsidiary banks of $836,466,000, as shown in the accompanying condensed
statements of condition, was restricted from transfer by subsidiary banks to the
Parent Company in the form of cash dividends.
Synovus is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory, and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on Synovus'
consolidated financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, Synovus must meet specific
capital guidelines that involve quantitative measures of Synovus' assets,
liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. Synovus capital amounts and classification are also
subject to qualitative judgements by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require Synovus on a consolidated basis, and the Parent Company and subsidiary
banks, individually, to maintain minimum amounts and ratios of total and Tier I
capital to risk-weighted assets as defined, and of Tier I capital to average
assets, as defined. Management believes, as of December 31, 1996, that Synovus
meets all capital adequacy requirements to which it is subject.
F-26 S Y N O V U S F I N A N C I A L C O R P.
As of December 31, 1996, the most recent notification from The Federal
Reserve Bank of Atlanta categorized the significant Synovus subsidiaries as well
capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized Synovus and its subsidiaries must maintain
minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set
forth in the table below. Management is not aware of the existence of any
conditions or events occurring subsequent to December 31, 1996 which would
affect Synovus or its subsidiaries well capitalized classifications.
Actual capital amounts and ratios for Synovus are presented in the table
below on a consolidated basis and for each significant subsidiary, as defined.
<TABLE>
<CAPTION>
To be Well
Capitalized Under
For Capital Prompt Corrective
(In thousands) Actual Adequacy Purposes Action Provisions
-------------------- ------------------- ---------------------
December 31, 1996 1995 1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Synovus Financial Corp.
Tier I capital ...................... $777,708 674,165 266,279 239,157 399,418 358,735
Total risk-based capital ............ 863,261 751,423 532,557 478,313 665,697 597,891
Tier I capital ratio ................ 11.68% 11.28 4.00 4.00 6.00 6.00
Total risk-based capital ratio ...... 12.97 12.57 8.00 8.00 10.00 10.00
Leverage ratio ...................... 9.36 8.71 4.00 4,00 5.00 5.00
Columbus Bank and Trust Company
Tier I capital ...................... $298,610 251,561 65,598 57,078 98,397 85,617
Total risk-based capital ............ 316,045 267,303 131,196 114,156 163,994 142,696
Tier I capital ratio ................ 18.21% 17.63 4.00 4.00 6.00 6.00
Total risk-based capital ratio ...... 19.27 18.73 8.00 8.00 10.00 10.00
Leverage ratio ...................... 17.12 15.87 4.00 4.00 5.00 5.00
The National Bank of South Carolina
Tier I capital ...................... $ 94,373 84,324 38,455 34,836 57,682 52,254
Total risk-based capital ............ 106,396 94,583 76,909 69,672 96,137 87,090
Tier I capital ratio ................ 9.82% 9.68 4.00 4.00 6.00 6.00
Total risk-based capital ratio ...... 11.07 10.86 8.00 8.00 10.00 10.00
Leverage ratio ...................... 7.88 7.70 4.00 4.00 5.00 5.00
</TABLE>
Envisioning. Exploring. Evolving. F-27
[logo] KPMG Peat Marwick LLP
303 Peachtree Street, N.E.
Suite 2000
Atlanta, GA 30308
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Synovus Financial Corp.:
We have audited the accompanying consolidated statements of condition of
Synovus Financial Corp. and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of income, changes in shareholders equity
and cash flows for each of the years in the three-year period ended December 31,
1996. These consolidated financial statements are the responsibility of Synovus'
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Synovus
Financial Corp. and subsidiaries at December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/KPMG Peat Marwick LLP
January 21, 1997
Member Firm of
Klynveld Peat Marwick Goerdeler
F-28 S Y N O V U S F I N A N C I A L C O R P.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(In thousands, except per share data)
Percent
Years ended December 31, 1996 1995 Change
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statements of Condition
Assets ........................................................... 8,612,344 7,927,595 8.6%
Loans, net ....................................................... 5,970,547 5,430,646 9.9
Deposits ......................................................... 7,203,035 6,727,879 7.1
Shareholders' equity ............................................. 783,750 693,555 13.0
Book value per share ............................................. 6.74 5.99 12.5
Cash dividends declared per share ................................ .44 .36 22.2
Equity to assets ................................................. 9.10% 8.75
Reserve for loan losses to loans ................................. 1.56 1.48
- ---------------------------------------------------------------------------------------------------------------------------
Statements of Income
Net income before special FDIC assessment ........................ 142,400 114,583 24.3%
Net income after special FDIC assessment ......................... 139,604 114,583 21.8
Net income per share before special FDIC assessment .............. 1.23 1.00 23.0
Net income per share after special FDIC assessment ............... 1.20 1.00 20.6
- ---------------------------------------------------------------------------------------------------------------------------
Performance Ratios
Return on assets before special FDIC assessment .................. 1.75% 1.53
Return on assets after special FDIC assessment .................. 1.72 1.53
Return on equity before special FDIC assessment .................. 19.49 17.92
Return on equity after special FDIC assessment .................. 19.11 17.92
Net interest margin .............................................. 5.19 5.15
Net overhead ratio before special FDIC assessment ................ 1.37 1.75
Net overhead ratio after special FDIC assessment ................. 1.43 1.75
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Envisioning. Exploring. Evolving. F-29
FINANCIAL REVIEW
Summary
Synovus Financial Corp. (Synovus) has continued to improve performance with
the most successful year in its history. Net income for 1996 was $139.6 million,
increasing 21.8% over the $114.6 million earned in 1995. Net income per share
increased to $1.20 in 1996, up 20.6% from the $1.00 earned in 1995. Return on
assets continued to improve in 1996 increasing 19 basis points to 1.72%,
compared to 1.53% in 1995. Return on equity also improved to 19.11% in 1996,
compared to 17.92% in 1995.
These record results are attributable to significant improvements in
Synovus' banking operations and at Total System Services, Inc. (TSYS), Synovus'
majority owned bankcard processing subsidiary. During 1996, net interest income
and non-interest income grew 9.7% and 24.8%, respectively, over 1995, while
non-interest expense increased 15.0% and the provision for loan losses increased
23.2%.
Synovus' banking operations results, which exclude TSYS, also continued to
improve during 1996. Net income for Synovus banking operations increased 16.9%
to $107.8 million from $92.2 million in 1995. Return on assets for Synovus
banking operations improved in 1996 increasing 10 basis points to 1.36%,
compared to 1.26% in 1995. Return on equity allocated to Synovus banking
operations also improved to 17.88% in 1996, compared to 17.31% in 1995.
On September 30, 1996, legislation was approved to recapitalize the Savings
Association Insurance Fund. Due to this recapitalization, Synovus paid a special
assessment to the Federal Deposit Insurance Corporation (FDIC) of approximately
$2.8 million on an after-tax basis, which represents approximately $.03 per
share for the year of 1996. Synovus' consolidated statement of income for 1996
includes this special assessment.
The following paragraph discusses the financial results for 1996, before
the FDIC special assessment. Net income for 1996 was $142.4, up $27.8 million,
or 24.3%, from the same period a year ago. Net income per share increased 23.0%
during the year, from $1.00 in 1995 to $1.23 in 1996. Synovus' core operations
strong performance resulted in a return on average assets of 1.75% and a return
on average equity of 19.49% for 1996. This compared to a return on average
assets and a return on average equity of 1.53% and 17.92%, respectively, in
1995.
Synovus' total assets ended the year at $8.6 billion, a growth rate of 8.6%
for 1996, resulting from net loan growth of $539.9 million, or 9.9%. This asset
growth was primarily funded by a $475.2 million increase, or 7.1%, in total
deposits. The increases in both loans and deposits reflect a strong Southeastern
economic environment as well as market share gains. Shareholders' equity grew
13.0% to $783.8 million, which represented 9.10% of total assets.
The following discussion reviews the results of operations and assesses the
financial condition of Synovus. This discussion should be read in conjunction
with the preceding consolidated financial statements and accompanying notes.
On March 11, 1996, Synovus declared a three-for-two stock split effected
April 8, 1996, to shareholders of record on March 21, 1996. Share and per share
data for all periods presented have been restated to reflect the additional
shares outstanding resulting from the stock split.
- --------------------------------------------------------------------------------
Table 1
<TABLE>
<CAPTION>
Five Year Selected Financial Data (In thousands, except per share data)
Years Ended December 31,
----------------------------------------------------------------------------
1996<F2> 1995 1994 1993 1992
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest income ................................... $ 374,874 341,875 301,231 263,213 241,203
Provision for losses on loans ......................... 31,766 25,787 25,387 24,924 33,302
Income before extraordinary item ...................... 139,604 114,583 89,452 80,379 66,685
Net income ............................................ 139,604 114,583 89,452 77,467 66,685
Per share data:
Income before extraordinary item .............. 1.20 1.00 .79 .74 .61
Net income .................................... 1.20 1.00 .79 .71 .61
Cash dividends declared ....................... .44 .36 .30 .25 .21
Long-term debt ........................................ 97,283 106,815 139,811 143,481 143,215
Average total equity .................................. 730,541 639,426 566,562 505,027 444,565
Average total assets .................................. 8,135,587 7,498,299 6,782,659 6,141,794 5,702,968
Ratios:
Return on assets before extraordinary item..... 1.72% 1.53 1.32 1.31 1.17
Return on assets after extraordinary item ..... 1.72 1.53 1.32 1.26 1.17
Return on equity before extraordinary item..... 19.11 17.92 15.79 15.92 15.00
Return on equity after extraordinary item ..... 19.11 17.92 15.79 15.34 15.00
Dividend payout ratio <F1>..................... 36.62 36.69 36.90 35.10 28.59
Average equity to average assets .............. 8.98 8.53 8.35 8.22 7.80
- ----------
<FN>
<F1> Determined by dividing dividends declared by net income, including pooled
subsidiaries.
<F2> 1996 selected financial data reflects the impact of the special FDIC
assessment. Without the special FDIC assessment, net income would have been
$142,400 and net income per share would have been $1.23.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
F-30 S Y N O V U S F I N A N C I A L C O R P.
Acquisitions
On October 24, 1996, Synovus completed the acquisition of two full-service
banking centers in Rome, Georgia. Synovus acquired approximately $49 million in
deposits and $12 million in loans from the two banking centers. The acquisition
was accounted for as a purchase.
The 1995 merger activity resulted in Synovus' entry into South Carolina and
an expanded presence in Georgia. The merger with NBSC Corporation of Columbia,
South Carolina, represents the largest in our history. NBSC brings a veteran
management team and an opportunity to provide products and services to the
growing markets in South Carolina.
In addition, the mergers with Douglasville, Georgia, based Citizens &
Merchants Corporation and Riverdale, Georgia, based Peach State Bank continue to
provide Synovus with access to the growth in the Atlanta suburbs.
A list of the bank acquisitions completed during the past three years
follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
Acquired Shares Financial
Company and Location Date Assets Issued Statement Presentation
- ----------------------------------------- ---------------- ----------- --------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Two branches October 24, 1996 $ 46,464 N/A Purchase
Rome, Georgia
Citizens & Merchants Corporation April 28, 1995 $ 52,000 939,704 Pooling (Non-restated)
Douglasville, Georgia
NBSC Corporation February 28, 1995 $1,100,000 11,894,022 Pooling (Restated)
Columbia, South Carolina
Peach State Bank January 31, 1995 $ 43,000 399,747 Purchase
Riverdale, Georgia
State Bancshares, Inc. October 31, 1994 $ 62,000 823,318 Pooling (Non-restated)
Enterprise, Alabama
PNB Bankshares, Inc. May 31, 1994 $ 78,000 822,319 Pooling (Non-restated)
Peachtree City, Georgia
</TABLE>
This information is discussed in further detail in Note 1 of the
financial statements.
- --------------------------------------------------------------------------------
Table 2
<TABLE>
<CAPTION>
Net Interest Income
(In thousands)
Years Ended December 31,
--------------------------------------
1996 1995 1994
--------------------------------------
<S> <C> <C> <C>
Interest income .............................................. $ 663,303 615,788 498,382
Taxable-equivalent adjustment ................................ 4,595 5,107 5,599
- ------------------------------------------------------------------------------------------------------
Interest income, taxable-equivalent ................ 667,898 620,895 503,981
Interest expense ............................................. 288,429 273,913 197,151
- ------------------------------------------------------------------------------------------------------
Net interest income, taxable-equivalent ............ $ 379,469 346,982 306,830
======================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Earning Assets, Sources of Funds, and Net Interest Income
Average total assets for 1996 were $8.1 billion, or 8.5% over 1995 average
total assets of $7.5 billion. Average earning assets for 1996 were $7.3 billion,
which represented 90% of average total assets. A $473.2 million, or 7.4%,
increase in average deposits for 1996 provided the funding for a $449.9 million,
or 8.6%, increase in average net loans. Average shareholders' equity for 1996
was $730.5 million.
For 1995, average total assets increased $715.6 million, or 10.6%. Average
earning assets for 1995 were $6.7 billion, which represented 90% of average
total assets. For more detailed information on Synovus' average statement of
condition for the years ended 1996, 1995, and 1994, refer to Table 3.
Net interest income (interest income less interest expense) is the largest
component of Synovus' net income. This major source of income represents the
earnings of Synovus' primary business of gathering funds from deposit sources
and investing those funds in loans and securities. Synovus' long term objective
is to manage those assets and liabilities to provide the largest possible amount
of income while balancing interest rate, credit, liquidity, and capital risks.
Envisioning. Exploring. Evolving. F-31
Net interest income is presented in this discussion on a tax-equivalent
basis, so that the income from assets exempt from federal income taxes is
adjusted based on a statutory marginal federal tax rate of 35% in all years (See
Table 2). The net interest margin is defined as taxable-equivalent net interest
income divided by average total interest earning assets and provides an
indication of the efficiency of the earnings from balance sheet activities. The
net interest margin is affected by changes in the spread between interest
earning asset yields and interest bearing costs (spread rate), and by the
percentage of interest earning assets funded by interest bearing liabilities.
Net interest income for 1996 was a record $374.9 million, up $33.0 million,
or 9.7%, from 1995. On a taxable-equivalent basis, net interest income was
$379.5 million, up $32.5 million, or 9.4%, over 1995. During 1996, average
interest earning assets increased $567.7 million, or 8.4%, with the majority of
this increase attributable to loan growth. Increases in the level of time
deposits were the main contributor to the $432.9 million, or 7.5%, growth in
average interest bearing liabilities.
The 5.19% net interest margin achieved in 1996 is a 4 basis point increase
over the 5.15% reported for 1995. This increase is the result of higher
investment yields, loan growth, lower cost of funds, increased loan fees, and
recovery of interest on loans. The reinvestment yield for securities was
relatively strong in 1996 due to higher market rates. The effective cost of
funds declined 21 basis points since January 1996 due to maturities of prior
year promotional CD's and general repricing during the current year. Another
influence impacting the net interest margin is the percentage of earning assets
funded by interest bearing liabilities. Funding for Synovus' earning assets
comes from interest bearing liabilities, non-interest bearing liabilities, and
shareholders' equity. Earning assets funded by non-interest bearing liabilities
continue to provide a positive impact on the net interest margin.
The 1996 net interest margin steadily increased in each quarter of 1996.
The first quarter net interest margin was 5.13% and increased 11 basis points,
during 1996, to the fourth quarter net interest margin of 5.24%.
During 1995, net interest income and tax-equivalent net interest income
increased 13.5% and 13.1%, respectively. Average interest earning assets grew
10.8% while interest bearing liabilities increased 9.9%. This growth, along with
a 10 basis point improvement in the net interest margin to 5.15% from 5.05%,
contributed to Synovus' earnings. The net interest margin also increased as a
result of a 10.5% increase in average non-interest bearing demand deposits. The
decrease in the spread rate of 8 basis points was the result of a 92 basis point
increase in the yield on earning assets offset by a 100 basis point increase in
the rate paid on interest bearing liabilities. The higher average prime rate
experienced during 1995 resulted in the repricing of interest earning assets
upward, while depositors moved funds temporarily held in transaction accounts to
higher paying time deposits which resulted in a higher interest-bearing cost of
funds.
Despite the growth in net interest income and the strong net interest
margin, the margin declined from a first quarter high of 5.25% to 5.10% in the
fourth quarter of 1995. This decline during 1995 primarily resulted from a shift
of transaction-oriented deposit accounts to time deposits and a decrease in the
prime rate during the second half of the year. Synovus sought to manage this
decline through the use of product and pricing management as well as hedging
opportunities using off-balance sheet derivatives. These activities are
discussed further in the "Off-Balance Sheet Derivatives for Interest Rate Risk
Management" section of this report.
F-32 S Y N O V U S F I N A N C I A L C O R P.
- --------------------------------------------------------------------------------
Table 3
<TABLE>
<CAPTION>
Consolidated Average Balances, Interest, and Yields
(In thousands)
1996 1995 1994
---------------------------------------------------------------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Interest earning assets:
Taxable loans, net<F1><F2> ...............$5,750,099 559,809 9.74% $5,288,863 522,258 9.87% $4,643,731 412,086 8.87%
Tax-exempt loans, net<F2><F3> ............ 33,719 3,589 10.64 38,044 4,230 11.12 45,755 4,747 10.37
Reserve for loan losses .................. (87,046) -- (80,034) -- (70,893) --
---------- ------- --------- ------- --------- -------
Loans, net ....................... 5,696,772 563,398 9.89 5,246,873 526,488 10.03 4,618,593 416,833 9.03
---------- ------- --------- ------- --------- -------
Taxable investment securities<F4> ........ 1,462,733 92,404 6.32 1,270,063 77,198 6.08 1,270,976 72,546 5.71
Tax-exempt investment securities<F3><F4>.. 111,886 10,171 9.09 120,064 11,096 9.24 123,437 11,780 9.54
---------- ------ --------- ------ --------- ------
Total investment securities ...... 1,574,619 102,575 6.51 1,390,127 88,294 6.35 1,394,413 84,326 6.05
---------- ------- --------- ------ --------- ------
Interest earning deposits with banks ..... 1,221 59 4.83 1,828 107 5.85 641 35 5.46
Federal funds sold ....................... 35,213 1,866 5.30 101,334 6,006 5.93 68,196 2,787 4.09
---------- ------- --------- ------ --------- ------
Total interest earning assets .... 7,307,825 667,898 9.14 6,740,162 620,895 9.21 6,081,843 503,981 8.29
---------- ------- --------- ------- --------- -------
Cash and due from banks .......................... 312,997 298,328 284,651
Premises and equipment, net ...................... 234,351 209,415 197,313
Other real estate ................................ 11,527 13,582 15,182
Other assets <F5>................................. 268,887 236,812 203,670
---------- ---------- ---------
Total assets .....................$8,135,587 $7,498,299 $6,782,659
========== ========== =========
Liabilities and Shareholders' Equity
Interest bearing liabilities:
Interest bearing demand deposits .........$ 940,303 23,440 2.49 $ 887,694 23,947 2.70 $ 873,992 22,614 2.59
Money market accounts .................... 1,034,336 41,011 3.96 915,710 36,817 4.02 863,081 26,126 3.03
Savings deposits ......................... 469,714 12,305 2.62 475,962 13,746 2.89 510,380 14,226 2.79
Time deposits ............................ 3,333,501 190,593 5.72 3,113,375 179,251 5.76 2,574,468 113,953 4.43
Federal funds purchased and
securities sold under agreement
to repurchase .................... 288,107 14,973 5.20 216,342 12,092 5.59 235,858 10,021 4.25
Other borrowed funds ..................... 101,289 6,107 6.03 125,317 8,060 6.43 159,900 10,211 6.39
--------- ------- --------- ------- --------- -------
Total interest bearing liabilities 6,167,250 288,429 4.67 5,734,400 273,913 4.78 5,217,679 197,151 3.78
--------- ------- ---- --------- ------- ---- --------- ------- ----
Spread rate ...................... 4.47% 4.43% 4.51%
==== ==== ====
Non-interest bearing demand deposits ............. 1,074,676 986,582 892,800
Other liabilities ................................ 163,120 137,891 105,618
Shareholders' equity ............................. 730,541 639,426 566,562
--------- ------- -------
Total liabilities and
shareholders' equity .....$8,135,587 $7,498,299 $6,782,659
========== ========= =========
Net interest income/margin ...................... 379,469 5.19% 346,982 5.15% 306,830 5.05%
==== ==== ====
Taxable-equivalent adjustment ................... (4,595) (5,107) (5,599)
-------- ------- -------
Net interest income, actual .....................$ $374,874 $341,875 $301,231
======= ======== ========
- ---------
<FN>
<F1> Average loans are shown net of unearned income. Nonperforming loans are
included.
<F2> Interest income includes loan fees as follows: 1996 - $23,929, 1995 -
$20,825, 1994 - $19,140.
<F3> Reflects taxable-equivalent adjustments, using the statutory federal income
tax rate of 35%, in adjusting interest on tax-exempt loans and investment
securities to a taxable-equivalent basis.
<F4> Includes certain investment securities available for sale, at their
respective average amortized cost. For the years ended December 31, 1996,
1995, and 1994, the average amortized cost of these securities amounted to
$1,206,522, $881,063, and $863,655, respectively.
<F5> In 1996, 1995, and 1994, there were $3,370, $7,674, and $8,293,
respectively, of average net unrealized losses on investment securities
available for sale.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
Envisioning. Exploring. Evolving. F-33
- --------------------------------------------------------------------------------
Table 4
<TABLE>
<CAPTION>
Rate/Volume Analysis
(In thousands)
1996 Compared to 1995 1995 Compared to 1994
------------------------------ ----------------------------------
Change Due to <F1> Change Due to <F1>
------------------------------ ----------------------------------
Yield/ Net Yield/ Net
Volume Rate Change Volume Rate Change
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Taxable loans, net .............................. $ 45,546 (7,995) 37,551 57,249 52,923 110,172
Tax-exempt loans, net <F2> ...................... (481) (160) (641) (800) 283 (517)
Taxable investment securities ................... 11,711 3,495 15,206 (52) 4,704 4,652
Tax-exempt investment securities <F2>............ (756) (169) (925) (322) (362) (684)
Interest earning deposits with banks ............ (36) (12) (48) 65 7 72
Federal funds sold .............................. (3,919) (221) (4,140) 1,354 1,865 3,219
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest income ................... 52,065 (5,062) 47,003 57,494 59,420 116,914
- -----------------------------------------------------------------------------------------------------------------------------------
Interest paid on:
Interest bearing demand deposits ................ 1,419 (1,926) (507) 355 978 1,333
Money market accounts ........................... 4,769 (575) 4,194 1,593 9,098 10,691
Savings deposits ................................ (180) (1,261) (1,441) (959) 479 (480)
Time deposits ................................... 12,674 (1,332) 11,342 23,853 41,445 65,298
Federal funds purchased and securities sold under
agreement to repurchase ................. 4,011 (1,130) 2,881 (829) 2,900 2,071
Other borrowed funds ............................ (1,545) (408) (1,953) (2,210) 59 (2,151)
- -----------------------------------------------------------------------------------------------------------------------------------
Total interest expense .................. 21,148 (6,632) 14,516 21,803 54,959 76,762
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income ..................... $ 30,917 1,570 32,487 35,691 4,461 40,152
===================================================================================================================================
<FN>
<F1> The change in interest due to both rate and volume has been allocated to
the rate component.
<F2> Reflects taxable-equivalent adjustments using the statutory federal income
tax rate of 35% in adjusting interest on tax-exempt loans and investment
securities to a taxable-equivalent basis.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
Non-Interest Income
Non-interest income consists of a wide variety of fee generating services
viewed as traditional banking services along with revenues earned by TSYS,
Synovus' bankcard data processing company. During 1996, total non-interest
income increased $84.5 million, or 24.8%. Revenues from bankcard data processing
services offered by TSYS were the largest contributor increasing $60.4 million,
or 25.6%, over 1995. Service charges on banking operations' deposit accounts
increased $5.8 million, or 12.3%. Fees for trust services increased $1.8
million, or 18.5%, over 1995. Other operating income increased $15.3 million, or
37.6%, in 1996 due to increased product revenues from securities sales, fees on
letters of credit, and public finance bond activities.
TSYS contributed approximately 70% of Synovus' total non-interest income in
1996 with the majority of this reported as data processing services income. Data
processing services income is derived principally from the servicing of
individual bankcard accounts for the card issuing customers of TSYS. The growth
in TSYS is evidenced by the average number of total cardholder accounts
processed by TSYS, which was approximately 72.0 million in 1996, compared to
53.1 million in 1995, and 39.5 million in 1994. TSYS currently processes 79.4
million cardholder accounts across the United States, Puerto Rico, Canada, and
Mexico.
During 1996, approximately 6.5 million cardholder accounts of new customers
were added to THE TOTAL SYSTEM. At December 31, 1996, cardholder accounts on
file included 3.4 million accounts of banks being processed for Total System
Services de Mexico, S.A. de C.V. ("TSYS de Mexico"), TSYS' Mexican joint
venture; the conversion of these accounts to THE TOTAL SYSTEM was completed in
July 1995. The remaining growth in cardholder accounts is primarily a result of
portfolio growth of existing customers.
On August 16, 1995, TSYS and Visa U.S.A. Inc. ("Visa") announced an
agreement in principle to merge their merchant and point-of-sale processing
operations. On May 1, 1996, the joint venture, known as Vital Processing
Services L.L.C. ("Vital"), became operational and began offering fully
integrated merchant transaction and related electronic information services to
financial and nonfinancial institutions and their merchant customers. Vital is
structured with its own management team and separate Board of Directors and has
its corporate headquarters in Phoenix, Arizona, with other locations in
Columbus, Georgia, and Atlanta, Georgia. TSYS and Visa are equal owners in the
joint venture.
Since 1994, TSYS has been servicing commercial cards which include
purchasing cards, corporate, and company business cards for employees. At
December 31, 1996, TSYS was processing approximately 3.1 million commercial card
accounts, a 42.5% increase over the approximately 2.0 million being processed at
year-end 1995, representing a 53.8% increase over the 1.3 million at year-end
1994. Commercial card revenue is included in revenues from bankcard processing.
F-34 S Y N O V U S F I N A N C I A L C O R P.
A significant amount of the TSYS' revenues are derived from certain major
customers who are processed under long-term contracts. For the years ended
December 31, 1996, 1995, and 1994, two customers accounted for approximately
29%, 34%, and 36% of 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.
During 1996, TSYS converted and began processing approximately 4.5 million
accounts for Bank of America. TSYS' conversion schedule for 1997 anticipates
conversion of all of Bank of America's remaining accounts. In addition, during
the second quarter of 1996, TSYS and Bank of America amended their processing
agreement to, among other things, eliminate the financial penalties and
termination rights associated with prior conversion delays. TSYS management
believes all of Bank of America's cardholder accounts will be successfully
converted to TS2.
Synovus continues to emphasize the importance of growth in non-interest
related sources of income in its banking operations via "The New Bank"
initiatives. Designed to identify and integrate the people, programs, and
systems Synovus will need for the 21st century, this vital strategy incorporates
new technologies, new products and services, and will position Synovus to
deliver even greater service to its customers and, ultimately, increased value
to our shareholders. Non-interest income reported by Synovus' banking operations
increased $15.5 million, or 16.4%, in 1996 and $5.1 million, or 5.7%, in 1995.
Service charges on deposit accounts have historically been one of the
primary sources of other income for Synovus' banking operations. In 1996,
service charges on deposit accounts increased $5.8 million, or 12.3%, as a
result of increases in the number of accounts serviced and increased volume
related to activity based fees.
On January 1, 1995, Synovus formed Synovus Trust Company, a new subsidiary
in which to consolidate all Synovus' Georgia trust operations. This new
subsidiary is expected to bring continued efficiencies and expertise to this
banking service. Trust fees for 1996 increased $1.8 million, or 18.5%, over
1995. Fees for trust services are derived from performing estate administration,
personal trust, corporate trust, and employee benefit plan administration. At
December 31, 1996 and 1995, total market value of assets administered by Synovus
Trust Company and subsidiary bank trust operations was approximately $4.8
billion and $3.5 billion, respectively.
Non-interest income in 1996 and 1995 has also been positively impacted by
increases in revenues from mortgage banking and related servicing. In June of
1994, Synovus Mortgage Corp. was formed to enhance the mortgage products offered
by the banking subsidiaries and to generate additional fee income through
mortgage servicing. Synovus Mortgage Corp. provides expertise in the areas of
products and pricing to the subsidiary banks and serves as an outlet for placing
these mortgage loans into the secondary market while retaining the related
servicing rights. The adoption of Statement of Financial Accounting Standards
(SFAS) No. 122, "Accounting for Mortgage Servicing Rights", in July of 1995, had
an immaterial favorable impact on non-interest income. Mortgage loan origination
volume and increased revenue from the growth in the portfolio of loans serviced
for others were the major factors driving the mortgage revenue increases.
In 1995, total non-interest income increased $66.5 million, or 24.2%.
Revenues from bankcard data processing services offered by TSYS were the largest
contributor increasing $58.0 million, or 32.6%, over 1994. Service charges on
banking operations' deposit accounts increased $5.2 million, or 12.6%, primarily
as a result of continued growth in the number of accounts serviced and increased
fee structure. Fees for trust services increased $.9 million, or 9.7%, over
1994. Other operating income increased $1.8 million, or 4.5%, in 1995 primarily
due to acquisitions in 1995, merchant fees on credit cards and gains on sales of
other real estate.
Non-Interest Expense
Non-interest expense increased $71.7 million, or 15.0%, in 1996 over 1995.
Management analyzes non-interest expense in two separate components: banking
operations and TSYS. The table below summarizes this data for the years ended
December 31, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------------------
(In thousands) Banking TSYS Banking TSYS Banking TSYS
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Salaries and other personnel expense $173,653 124,259 157,533 94,946 138,480 73,051
Net occupancy and equipment expense 39,023 82,118 35,080 64,549 32,136 51,283
Other operating expenses ........... 69,161 53,368 72,721 47,291 83,836 28,139
Minority interest .................. 7,592 -- 5,333 -- 4,325 --
- ------------------------------------------------------------------------------------------
Total non-interest expense .... $289,429 259,745 270,667 206,786 258,777 152,473
==========================================================================================
</TABLE>
Non-interest expense related to TSYS increased $53.0 million, or 25.6%, in
1996 over 1995 with a significant portion of this increase being employment
expenses. The average number of employees increased from 2,087 in 1995 to 2,498
in 1996. This growth in employees, along with salary increases, resulted in a
$29.3 million, or 30.9%, increase in employment expenses.
As a percentage of revenues, TSYS' operating expenses increased in 1996 to
83.3%, compared to 82.8% and 81.2% for 1995 and 1994, respectively. The
principal increases in operating expenses resulted from the addition of
personnel and equipment; the cost of materials associated with the services
provided by all companies, particularly the supplies related to processing the
increased number of accounts on THE TOTAL SYSTEM; certain processing provisions;
and certain costs associated with the conversion of customers to TS2 and the
start-up of TSYS de Mexico.
A significant portion of TSYS' operating expenses relates to salaries and
other personnel costs. During 1996, the average number of employees increased to
2,498, compared to 2,087 in 1995 and 1,874 in 1994. In addition to the growth in
number of employees, the increase in salaries and other personnel costs is
attributable to normal salary increases and related employee benefits. In 1996,
due to TSYS' excellent financial performance, employees were awarded the maximum
401(k) contribution of 5.0%, or $4.0 million, compared to 2.7%, or $1.6 million,
in 1995; there was no contribution in 1994 as the 401(k) plan was established in
1995. Nonemployee compensation, including contract programmers, also contributed
to the change in employment expenses. Nonemployee compensation increased $2.2
million, or 54.1%, in 1996 compared to 1995. However, nonemployee compensation
decreased $2.5 million, or 38.4%, in 1995 compared to 1994, primarily due to the
completion of core TS2 in late 1994, reducing the total number of contract
programmers utilized from
Envisioning. Exploring. Evolving. F-35
that point forward. Employment costs related to internally developed software
and contract acquisition costs capitalized in 1996 were $4.9 million, compared
to $8.4 million and $14.5 million in 1995 and 1994, respectively, the majority
of which related to the development of TS2. These decreases in capitalization
are a major component of the increases in employment expense, particularly in
comparing 1995 to 1994. Since the completion of core TS2, employment expenses
capitalized relate primarily to enhancements to TS2 and costs associated with
the conversion of customers under new long-term contracts to TS2.
In 1996, non-interest expense for Synovus' banking operations increased
$18.8 million, or 6.9%. The majority of increased expenses were in employment
expense and related primarily to additional employees hired in 1996. The average
number of employees in banking operations increased from 4,038 in 1995 to 4,197
in 1996. This growth was primarily due to growth within the banking
subsidiaries, as they continue to develop new products and provide additional
services to their customers. Other factors causing an increase in non-interest
expense include normal salary increases, training related to "The New Bank"
initiatives, and performance-based employee retirement plan expenses. The
banking operations efficiency ratio improved from 60.95% in 1995 to 58.36% in
1996. These improvements were primarily the result of increased revenues,
expense control, and a decrease in the FDIC insurance rate.
Increases in non-interest expense were partially offset by a $6.4 million
decrease in FDIC premium expense, prior to the special FDIC assessment, in 1996
compared to 1995 due to the lowering, in 1996, of the FDIC assessment rate on
deposits. FDIC premium expense decreased in 1996 even though a special
assessment of $4.5 million, $2.8 million after tax, was imposed by the FDIC to
recapitalize the Savings Association Insurance Fund. Synovus believes that the
current banking legislation will result in additional 1997 reductions in FDIC
insurance paid by the well-capitalized banks.
Quality service for Synovus' customers, provided in the most efficient
manner, continues to be a priority. During 1995, Synovus continued its
"modernization" effort, under which all banking support functions are being
reviewed for potential improvements. Synovus is investing in improved
technology, such as platform automation, and is standardizing certain support
processes. Synovus continues to reorganize and refocus its resources whenever it
can more effectively and efficiently deliver products and services to its
customers. Synovus believes that this effort will provide a greatly improved
product delivery mechanism and will increase the productivity of the support
functions.
In 1995, total non-interest expense increased $66.2 million, or 16.1%, over
1994. Expenses incurred at TSYS increased $54.3 million, or 35.6%, in 1995 over
1994 as TSYS prepared for expansion of its fee-generating services. In 1995, the
average number of employees at TSYS increased from 1,874 in 1994 to 2,087 in
1995. Employee additions were necessary to serve the growing cardholder base.
Remaining increases in employment expenses were due to normal salary increases,
related benefits and a new employee retirement plan. Increases in equipment and
occupancy expenses were also required in 1995, as compared to 1994, as TSYS
obtained substantial new, technologically-advanced equipment in order to meet
its business needs.
Non-interest expense for Synovus' banking operations increased $11.9
million, or 4.6%, in 1995 over 1994. New hires, salary increases and related
benefits, a new employee retirement plan, and a $3.2 million expense related to
the termination of the previous employee retirement plan account for most of
this increase. Increases in non-interest expense were partially offset by a $4.9
million decrease in FDIC premium expense.
Investment Securities
Synovus' investment securities portfolio consists of debt and equity
securities which are categorized as either available for sale or held to
maturity. Synovus Securities, Inc., Synovus' wholly-owned broker/dealer company,
has an insignificant balance of trading investment securities used to facilitate
business. Investment securities provide Synovus with a source of liquidity and a
relatively stable source of income. The investment securities portfolio also
provides management with a tool to balance interest rate risk and credit risk
related to the loans on the balance sheet. At December 31, 1996, approximately
$968.4 million of these investment securities were pledged as required
collateral for certain deposits. See Table 14 for maturity and average yield
information for the available for sale and held to maturity investment
securities.
Synovus' investment strategy focuses on the use of the investment
securities portfolio to manage the interest rate risk created by the natural
mismatch inherent in the loan and deposit portfolios. With the strong loan
demand at Synovus' subsidiary banks, there is little need for investment
securities solely to augment income or utilize uninvested deposits. As such,
Synovus' investment securities are primarily U.S. Treasuries, U.S. Government
agencies, and Government agency sponsored mortgage-backed securities, all of
which have a high degree of liquidity and limited credit risk. A mortgage-backed
security depends on the underlying pool of mortgage loans to provide a cash flow
"pass-through" of principal and interest. At December 31, 1996, substantially
all of the collateralized mortgage obligations and mortgage-backed pass-through
securities held by Synovus were issued or backed by Federal agencies.
As of December 31, 1996 and 1995, the estimated fair value of investment
securities as a percentage of their amortized cost was 100.1% and 101.0%,
respectively. The investment securities portfolio had gross unrealized gains of
$26.3 million and gross unrealized losses of $24.8 million, for a net unrealized
gain of $1.5 million as of December 31, 1996. As of December 31, 1995, the
investment securities portfolio had a net unrealized gain of $14.6 million. In
accordance with SFAS No. 115, shareholders' equity contained a net unrealized
loss of $.1 million and a net unrealized gain of $5.8 million recorded on the
available for sale portfolio as of December 31, 1996 and 1995, respectively.
During 1996, the average balance of investment securities increased to $1.6
billion, compared to $1.4 billion in 1995. Synovus earned a taxable-equivalent
rate of 6.51% and 6.35% for 1996 and 1995, respectively, on its investment
securities portfolio. As of December 31, 1996 and 1995, average investment
securities represented 21.5% and 20.6%, respectively, of average interest
earning assets. This increase in the percentage of average investment securities
to average interest earning assets is due to management's efforts to capitalize
on higher investment yields available in the market. Refer to Table 3 for more
information on average investment securities.
On December 21, 1995, Synovus exercised an option allowed by "Special
Report - a Guide to Implementation of FASB No. 115, Accounting for Certain
Investments in Debt and Equity Securities - Questions and Answers" to make a one
time transfer of investment securities held to maturity to investment securities
available for sale. This transfer was made to add further liquidity and
flexibility to the portfolio which enabled Synovus to more effectively manage
its interest rate risk position. The amortized cost and estimated fair value of
the investment securities transferred was $133.7 million and $133.9 million,
respectively.
Table 5 presents the carrying value of investment securities held to
maturity and investment securities available for sale at December 31, 1996,
1995, and 1994.
F-36 S Y N O V U S F I N A N C I A L C O R P.
- --------------------------------------------------------------------------------
Table 5
<TABLE>
<CAPTION>
Investment Securities
(In thousands)
December 31,
----------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Securities Held to Maturity:
U.S. Treasury and U.S. Government agencies ........................ $ 84,366 81,772 159,354
Mortgage-backed securities ........................................ 156,319 171,275 243,220
State and municipal ............................................... 114,883 121,761 121,834
Other investments ................................................. 7,440 6,110 8,525
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment securities held to maturity .................... $363,008 380,918 532,933
====================================================================================================================================
Investment Securities Available for Sale:
U.S. Treasury and U.S. Government agencies ........................ $1,131,922 1,004,286 767,544
Mortgage-backed securities ........................................ 130,893 88,196 24,413
State and municipal ............................................... 1,014 1,322 1,491
Other investments ................................................. 12,254 12,494 11,321
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment securities available for sale .................. $1,276,083 1,106,298 804,769
====================================================================================================================================
Total Investment Securities:
U.S. Treasury and U.S. Government agencies ........................ $1,216,288 1,086,058 926,898
Mortgage-backed securities ........................................ 287,212 259,471 267,633
State and municipal ............................................... 115,897 123,083 123,325
Other investments ................................................. 19,694 18,604 19,846
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment securities ..................................... $1,639,091 1,487,216 1,337,702
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Loans
Loans are the primary interest earning asset for Synovus. When analyzing
prospective loans, management assesses both interest rate objectives and credit
quality objectives in determining whether to extend a given loan and the
appropriate pricing for that loan. Operating under a decentralized structure,
management emphasizes lending in subsidiaries' respective communities. As
illustrated in Table 6, Synovus strives toward maintaining a diversified loan
portfolio to spread risk and reduce exposure to economic downturns that may
occur in different segments of the economy, geographic locations, or in
particular industries. Demonstration of that strategy results in the fact that
Synovus does not have any concentration of loans to any single industry or
borrower, no foreign loans, and has no highly leveraged transaction credits as
of the end of 1996.
Representing 78% of average earning assets and 70% of average total assets,
net loans increased $539.9 million, or 9.9%, during 1996. Continued market share
gains through successful business development and additional products and
services offered to the current customer base has afforded Synovus this loan
growth. 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' subsidiary markets, with the most
significant growth at four subsidiaries headquartered in Columbus, Georgia;
Columbia, South Carolina; Birmingham, Alabama; and Valparaiso, Florida. These
four banks experienced loan growth of $118.7 million, $90.2 million, $54.3
million, and $29.3 million, respectively for the year ended December 31, 1996
over the same period in 1995. Columbus Bank and Trust Company, the lead bank,
experienced an increase in credit card loan balances of $68.3 million which
included the purchase of a $34.1 million credit card portfolio in the first half
of 1996. The remainder of the loan growth was distributed throughout the
remaining subsidiary banks.
Synovus has enjoyed a relatively strong average loan-to-deposit ratio over
the past three years. The average loan-to-deposit ratio for 1996, 1995, and 1994
was 84.2%, 83.5%, and 82.1%, respectively.
The growth in commercial loans was primarily centered in the larger markets
in Alabama, South Carolina, and Georgia. These markets have experienced economic
growth in 1996, especially with respect to real estate and working capital
loans. Real estate construction and commercial real estate mortgage loans
increased in 1996 due to economic growth in many of the Southeastern communities
Synovus subsidiary banks serve. In addition to the purchase of the credit card
portfolio, credit card loan growth has been most dramatically impacted by the
increased number of customer accounts in several subsidiary banks. The growth in
mortgage loans held for sale is mostly attributable to underwriting mortgage
loans that are sold to third party investors, while retaining the servicing of
those loans at Synovus Mortgage Corp. Synovus' mortgage loans held for sale are
pre-committed extensions and are generally held less than thirty days, after
which the loans are sold in the market to an unaffiliated investor. The increase
in retail real estate mortgage loans from 1995 to 1996 results primarily from an
increased emphasis on the mortgage loan products offered by certain subsidiaries
as well as a favorable interest rate market for residential mortgage loans.
Synovus has reduced nonperforming assets as a percent of loans during 1996
as a result of constant attention and focus on loan quality while at the same
time meeting the customers' needs. Loan officers work with each customer to
determine which loan products will optimally meet their individual and specific
lending needs. This focus on underwriting loans that benefit the customer, while
maintaining credit quality standards, causes Synovus to be optimistic about the
future growth and quality of the loan portfolio.
Envisioning. Exploring. Evolving. F-37
- --------------------------------------------------------------------------------
Table 6 shows the composition of the loan portfolio at the end of the past
five years.
<TABLE>
<CAPTION>
Table 6
Loans by Type
(In thousands)
December 31,
---------------------------------------------------------------------------
1996 1995 1994 1993 1992
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial:
Commercial, financial, and agricultural ......... $ 2,036,689 1,931,004 1,783,928 1,567,310 1,423,124
Real estate-construction ........................ 730,785 578,712 472,131 414,801 376,641
Real estate-mortgage ............................ 1,234,981 1,160,089 1,030,524 890,297 817,905
- ------------------------------------------------------------------------------------------------------------------------------------
Total commercial ........................ 4,002,455 3,669,805 3,286,583 2,872,408 2,617,670
- ------------------------------------------------------------------------------------------------------------------------------------
Retail:
Real estate-mortgage ............................ 977,432 824,998 865,642 760,530 690,563
Consumer loans-credit card ...................... 290,470 222,204 171,475 150,653 136,794
Consumer loans-other ............................ 768,072 784,972 756,402 664,554 603,418
Mortgage loans held for sale .................... 37,036 24,863 9,465 23,409 11,744
- ------------------------------------------------------------------------------------------------------------------------------------
Total retail ............................ 2,073,010 1,857,037 1,802,984 1,599,146 1,442,519
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans ............................. 6,075,465 5,526,842 5,089,567 4,471,554 4,060,189
Unearned income ................................. (10,235) (14,812) (14,691) (18,148) (25,371)
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans, net of unearned income ..... $ 6,065,230 5,512,030 5,074,876 4,453,406 4,034,818
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Table 7
Loan Maturity Distribution and Interest Sensitivity
(In thousands)
December 31, 1996
---------------------------------------------
One Over One Year Over
Year Through Five Five
Or Less Years Years Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Selected loan categories:
Commercial, financial, and agricultural ......................... $1,262,025 661,886 112,778 2,036,689
Real estate-construction ........................................ 496,568 196,279 37,938 730,785
- -----------------------------------------------------------------------------------------------------------------------
Total ................................................... $1,758,593 858,165 150,716 2,767,474
=======================================================================================================================
Loans due after one year:
Having predetermined interest rates ............................................................... $ 560,852
Having floating interest rates .................................................................... 448,029
- -----------------------------------------------------------------------------------------------------------------------
Total ..................................................................................... $1,008,881
=======================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
F-38 S Y N O V U S F I N A N C I A L C O R P.
Commercial, financial, and agricultural loans include industrial revenue
bonds and other loans that are granted primarily on the strength of the
borrower's ability to generate repayment cash flows from income sources as well
as the borrower's general credit standing, even though such loans and bonds may
be secured by real estate or other assets. Real estate construction and mortgage
loans represent extensions of credit used as interim or permanent financing of
commercial properties that are secured by real estate as well as 1-4 family
first mortgage loans.
Generally, retail lending decisions are made based upon the cash flow or
earning power of the borrower which represents the primary source of repayment.
However, in many lending transactions collateral is taken to provide an
additional measure of security. Transactions secured by collateral result in a
secondary source of repayment in that the collateral may be liquidated. Synovus
determines the need for collateral on a case-by-case basis. Factors considered
include the current and prospective credit-worthiness of the customer, terms of
the loan, and economic conditions.
Provision for Losses on Loans and Net Charge-Offs
Despite Synovus' credit standards, internal controls, and continuous loan
review process, the inherent risk in the nature of lending results in periodic
charge-offs. The provision for loan losses is the charge to operating earnings
necessary to maintain an adequate reserve for loan losses. Through the provision
for loan losses, Synovus maintains a reserve for loan losses that management
believes is adequate to absorb losses within the loan portfolio. However, future
additions to the reserve may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination procedures, periodically review Synovus' subsidiary banks'
reserve for loan losses. Based on their judgments about information available to
them at the time of their examination, such agencies may require Synovus'
subsidiary banks to recognize additions to their reserve for loan losses.
In order to determine the adequacy of the reserve for loan losses and to
determine the need for potential charges to the reserve, a formal analysis is
completed quarterly to assess the risk within the loan portfolio. This
assessment, conducted by lending officers, as well as an independent loan
administration department, includes analysis of historical performance, the
level of nonperforming loans, specific analysis of certain problem loans, loan
activity since the last quarter, consideration of current economic conditions,
and other pertinent information. The resulting conclusions are reviewed and
approved by senior management.
In accordance with SFAS No. 114, "Accounting by Creditors for Impairment of
a Loan", management, considering current information and events regarding the
borrowers' ability to repay their obligations, considers a loan to be impaired
when the ultimate collectibility of all amounts due, according to the
contractual terms of the loan agreement, is in doubt. When a loan becomes
impaired, management calculates the impairment based on the present value of
expected future cash flows discounted at the loan's effective interest rate. If
the loan is collateral dependent, the fair value of the collateral is used to
measure the amount of impairment. The amount of impairment and any subsequent
changes are recorded, through a charge to earnings, as an adjustment to the
reserve for loan losses. When management considers a loan, or a portion thereof,
as uncollectible, it is charged against the reserve for loan losses.
Through improved underwriting standards and the resolution of certain
identified problem assets, Synovus' asset quality continued to improve during
1996 as measured by asset quality indicators. The most dramatic improvement,
with respect to charge offs experienced in 1996, was the significant reduction
in commercial, financial, and agricultural loan charge offs. This improvement
was driven by a closer monitoring of work out loans, improvement in several real
estate markets, and a more proactive identification of potential problem loans.
However, other consumer loan charge offs increased due to personal bankruptcies
and other consumer related issues currently plaguing the banking industry. In
response, Synovus management has increased collection efforts, tightened credit
scoring, and become more focused on past due monitoring.
Synovus' provision for loan losses during 1996 was $31.8 million, up 23.2%,
compared to $25.8 million in 1995. Nonperforming assets as a percent of loans
and other real estate are at their lowest level in more than ten years and the
reserve is 374.5% of nonperforming loans. The increase in the provision for loan
losses is primarily a result of managements ongoing assessment of the loan
portfolio and the potential for increased loan weaknesses in light of the
slowing economy. Synovus was able to reduce the nonperforming asset ratio to its
lowest level in over ten years to .59% as of December 31, 1996. Net charge-offs
of $18.7 million were 8.7% lower in 1996 compared to $20.4 million in 1995. As,
a percent of average net loans, the net charge-off ratio improved from .38% in
1995 to .32% in 1996. A summary, by loan category, of loans charged off,
recoveries of loans previously charged off, and additions to the reserve through
provision expense is presented in Table 8.
Envisioning. Exploring. Evolving. F-39
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Table 8
Reserve for Loan Losses
(In thousands)
Years Ended December 31,
------------------------------------------------------------
1996 1995 1994 1993 1992
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reserve for loan losses at beginning of year .......................... $81,384 75,018 67,270 61,336 55,279
Reserve for loan losses of acquired subsidiaries ...................... 188 1,001 1,535 -- 8
Loans charged off during the year:
Commercial:
Commercial, financial, and agricultural ............... 7,790 13,746 13,809 13,097 17,761
Real estate-construction .............................. 217 239 240 228 309
Real estate-mortgage .................................. 2,356 1,840 1,849 1,753 2,378
- ------------------------------------------------------------------------------------------------------------------------------------
Total commercial .............................. 10,363 15,825 15,898 15,078 20,448
- ------------------------------------------------------------------------------------------------------------------------------------
Retail:
Real estate-mortgage .................................. 1,032 209 210 200 271
Consumer loans-credit card ............................ 7,798 6,627 6,658 6,315 8,563
Consumer loans-other .................................. 5,987 2,271 2,282 2,164 2,935
Mortgage loans held for sale -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total retail .................................. 14,817 9,107 9,150 8,679 11,769
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans charged off ....................... 25,180 24,932 25,048 23,757 32,217
- ------------------------------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged off during the year:
Commercial:
Commercial, financial, and agricultural ............... 1,699 1,217 1,585 1,287 1,339
Real estate-construction .............................. 173 50 65 52 55
Real estate-mortgage .................................. 1,312 92 120 97 101
- ------------------------------------------------------------------------------------------------------------------------------------
Total commercial .............................. 3,184 1,359 1,770 1,436 1,495
- ------------------------------------------------------------------------------------------------------------------------------------
Retail:
Real estate-mortgage .................................. 352 115 149 121 126
Consumer loans-credit card ............................ 776 1,237 1,611 1,308 1,362
Consumer loans-other .................................. 2,213 1,799 2,344 1,902 1,981
Mortgage loans held for sale -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total retail .................................. 3,341 3,151 4,104 3,331 3,469
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans recovered ......................... 6,525 4,510 5,874 4,767 4,964
- ------------------------------------------------------------------------------------------------------------------------------------
Net loans charged off during the year ................................. 18,655 20,422 19,174 18,990 27,253
- ------------------------------------------------------------------------------------------------------------------------------------
Additions to reserve through provision expense ........................ 31,766 25,787 25,387 24,924 33,302
- ------------------------------------------------------------------------------------------------------------------------------------
Reserve for loan losses at end of year ................................ $94,683 81,384 75,018 67,270 61,336
- ------------------------------------------------------------------------------------------------------------------------------------
Reserve for loan losses to loans ...................................... 1.56% 1.48 1.48 1.51 1.52
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net loans charged off during the year to average
net loans outstanding during the year ......................... .32% .38 .41 .45 .68
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
An allocation of the reserve for loan losses has been made according to the
respective amounts deemed necessary to provide for the possibility of incurred
losses within the various loan categories. Although other relevant factors are
considered, the allocation is primarily based on previous charge-off experience
adjusted for risk characteristic changes among each category. Additional reserve
amounts are allocated by evaluating the loss potential of individual loans that
management has considered impaired. The reserve for loan loss allocation is
based on subjective judgment and estimates, and therefore is not necessarily
indicative of the specific amounts or loan categories in which charge-offs may
ultimately occur. The adoption of SFAS No. 114 in 1995 did not have a material
effect on the consolidated financial statements and prior years have not been
restated. Refer to Table 9 for a five year comparison of the allocation of the
reserve for loan losses.
F-40 S Y N O V U S F I N A N C I A L C O R P.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Table 9
Allocation of Reserve for Loan Losses
(In thousands)
December 31,
------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------------------------------------------------------------------------------
Reserve %* Reserve %* Reserve %* Reserve %* Reserve %*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial:
Commercial, financial, and
agricultural ................ $38,171 34% $32,810 35% $32,343 36% $28,539 35% $28,427 35%
Real estate-construction ............ 1,163 12 570 10 562 9 496 9 494 9
Real estate-mortgage ................ 5,110 20 4,392 21 4,329 20 3,820 20 3,805 20
- ------------------------------------------------------------------------------------------------------------------------------------
Total commercial ............ 44,444 66 37,772 66 37,234 65 32,855 64 32,726 64
- ------------------------------------------------------------------------------------------------------------------------------------
Retail:
Real estate-mortgage ................ 581 16 499 15 492 17 434 17 432 17
Consumer loans-credit card .......... 11,619 5 6,627 4 6,658 3 6,315 3 8,563 3
Consumer loans-other ................ 15,088 13 14,610 14 14,277 15 12,159 15 9,838 15
Mortgage loans held for sale ........ -- -- -- 1 -- -- -- 1 -- 1
- ------------------------------------------------------------------------------------------------------------------------------------
Total retail ................ 27,288 34 21,736 34 21,427 35 18,908 36 18,833 36
- ------------------------------------------------------------------------------------------------------------------------------------
Unallocated ......................... 22,951 -- 21,876 -- 16,357 -- 15,507 -- 9,777 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total reserve for loan losses $94,683 100% $81,384 100% $75,018 100% $67,270 100% $61,336 100%
====================================================================================================================================
</TABLE>
* Loan balance in each category expressed as a percentage of total loans.
- --------------------------------------------------------------------------------
Nonperforming Assets
Nonperforming assets consist of nonaccrual loans, loans restructured due to
debtors' financial difficulties, and real estate acquired through foreclosure
and repossession. Nonaccrual loans consist of those loans on which recognition
of interest income has been discontinued. Loans may be restructured as to rate,
maturity, or other terms as determined on an individual credit basis. Demand and
time loans, whether secured or unsecured, are generally placed on nonaccrual
status when principal and/or interest is 90 days or more past due, or earlier if
it is known or expected that the collection of all principal and/or interest is
unlikely. Any loan past due 90 days or more, and based on a determination of
collectibility not classified as nonaccrual, is classified as a past due loan.
Nonaccrual loans are reduced by the direct application of interest receipts to
loan principal, for accounting purposes only. Any payments in excess of the
interest that would have been earned had the loan been an accruing loan, are
applied to the principal balance. In all circumstances, the determination of
when to place loans on nonaccrual status is also based on evaluation of the
individual characteristics of each particular loan, which may result in policy
deviations in some circumstances. Table 10 presents the amount of interest
income that would have been recorded on nonaccrual loans if the loans had been
current and performing in accordance with their original terms.
Synovus' nonperforming assets increased $.8 million to $36.1 million with a
corresponding nonperforming asset ratio improving to .59% as of December 31,
1996 compared to .64% as of year end 1995. Synovus incurred a small increase in
nonperforming assets while increasing loans $548.6 million, or 9.9%, during
1996. During 1996, the reserve for loan losses increased $13.3 million, or
16.3%, to $94.7 million. Based on managements analysis of potential risk within
the loan portfolio, additions are periodically made to maintain the reserve for
loan losses at an appropriate level. Loans 90 days past due and still accruing
increased $4.4 million during 1996. Management believes that sufficient
collateral value securing these loans exists to cover contractual interest and
principal payments on the loans and management further believes the resolution
of these delinquencies will not cause a material increase in nonperforming
assets.
Envisioning. Exploring. Evolving. F-41
- --------------------------------------------------------------------------------
Table 10
Nonperforming Assets
(In thousands)
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------
1996 1995 1994 1993 1992
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans ........................................ $23,655 21,469 26,497 30,296 45,812
Restructured loans ...................................... 1,625 1,733 1,900 224 135
- -------------------------------------------------------------------------------------------------------------
Nonperforming loans ..................... 25,280 23,202 28,397 30,520 45,947
90 days past due and still accruing loans ............... 15,805 11,417 7,383 9,870 11,106
- -------------------------------------------------------------------------------------------------------------
Total ................................... $41,085 34,619 35,780 40,390 57,053
=============================================================================================================
Nonperforming assets:
Nonperforming loans <F1>......................... $25,280 23,202 28,397 30,520 45,947
Other real estate ............................... 10,782 12,071 12,355 15,838 18,986
- -------------------------------------------------------------------------------------------------------------
Total ................................... $36,062 35,273 40,752 46,358 64,933
=============================================================================================================
Nonperforming assets to total loans and other real estate .59% .64 .80 1.04 1.60
=============================================================================================================
Reserve for loan losses to nonperforming loans .......... 374.54% 350.76 264.18 220.41 133.49
=============================================================================================================
- ---------
<FN>
<F1>Nonperforming assets exclude loans 90 days past due and still accruing.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Nonaccrual Restructured Total
Year ended December 31, 1996: ---------- ------------ -----
<S> <C> <C> <C>
Interest at contracted rates <F2>........................ $3,226 68 3,294
Interest recorded as income ............................. 826 52 878
- -------------------------------------------------------------------------------------------------------------
Reduction of interest income during 1996 $2,400 16 2,416
=============================================================================================================
- --------
<FN>
<F2>Interest income that would have been recorded if the loans had been current
and performing in accordance with their original terms.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
Each one of Synovus' loans is assigned a rating, either individually or as
part of a homogeneous pool, based on an internally developed grading system. An
organizationally independent department also reviews grade assignments on an
ongoing basis. Management continuously monitors nonperforming, impaired, and
past due loans, in order to prevent further deterioration regarding the
condition of these loans. Management is not aware of any material loans
classified for regulatory purposes as loss, doubtful, substandard, or special
mention that have been excluded from nonperforming assets or impaired loans.
Impaired loans at December 31, 1996 and 1995 are $35.9 million and $52.7
million, respectively. Management further believes nonperforming assets and
impaired loans include any material loans in which doubts exist as to the
collectibility of amounts due according to the contractual terms of the loan
agreement.
Deposits
Deposits provide the most significant funding source for Synovus interest
earning assets. Table 11 shows the relative composition of average deposits for
1996, 1995, and 1994. Refer to Table 12 for the maturity distribution of time
deposits of $100,000 or more. These larger deposits represented 15.6% and 15.2%
of total deposits at December 31, 1996 and 1995, respectively. Synovus' large
denomination time deposits are generally from customers within the local market
area, therefore, provide a greater degree of stability than is typically
associated with this source of funds. Time deposits over $100,000 at December
31, 1996, 1995, and 1994 were $1.1 billion, $1.0 billion, and $.8 billion,
respectively. Interest expense for the years ended December 31, 1996, 1995, and
1994 on these large denomination deposits was $62.1 million, $57.3 million, and
$31.9 million, respectively.
For 1996, Synovus' average deposits increased $473.2 million, or 7.4%, to
$6.9 billion from $6.4 billion in 1995. Average interest bearing deposits for
1996, which include interest bearing demand deposits, money market accounts,
saving deposits, and time deposits, increased $385.1 million, or 7.1%, from
1995. This strong deposit growth occurred throughout several of the Synovus
subsidiary banks who used targeted time and money market deposit programs to
increase their deposits during 1996. Additionally, the acquisition of two
branches in Rome, Georgia, provided an increase in deposits of $46.4 million.
Average non-interest bearing demand deposits increased $88.1 million, or 8.9%,
during 1996. Average interest bearing deposits increased $570.8 million, or
11.8%, from 1994 to 1995, while non-interest bearing demand deposits increased
$93.8 million, or 10.5%. See Table 3 for further information on average
deposits, including the average rates paid for 1996, 1995, and 1994.
F-42 S Y N O V U S F I N A N C I A L C O R P.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Table 11
Average Deposits
(In thousands)
Years Ended December 31,
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Non-interest bearing demand deposits $1,074,676 986,582 892,800
Interest bearing demand deposits ... 940,303 887,694 873,992
Money market accounts .............. 1,034,336 915,710 863,081
Savings deposits ................... 469,714 475,962 510,380
Time deposits ...................... 3,333,501 3,113,375 2,574,468
- --------------------------------------------------------------------------------
Total average deposits ..... $6,852,530 6,379,323 5,714,721
================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Table 12
Maturity Distribution of Time Deposits of $100,000 or More
(In thousands)
December 31, 1996
- --------------------------------------------------------------------------------
3 months or less ......................................... $ 528,310
Over 3 months through 6 months ........................... 209,794
Over 6 months through 12 months .......................... 204,242
Over 12 months ........................................... 180,558
- --------------------------------------------------------------------------------
Total outstanding ................................ $1,122,904
================================================================================
Interest Rate Risk Management
Managing interest rate risk is the primary goal of Synovus' asset/liability
management function. Synovus attempts to achieve consistent growth in net
interest income while limiting volatility arising from changes in interest
rates. Synovus seeks to accomplish this goal by balancing the maturity and
repricing characteristics of balance sheet assets and liabilities along with the
selective use of off-balance sheet financial instruments. 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.
Simulation modeling is the primary tool used by Synovus to measure its
interest rate sensitivity. On at least a quarterly basis, the remainder of the
current year and the next full fiscal year are simulated to determine the
sensitivity of net interest income to changes in interest rates. The magnitude
and velocity of rate changes among the various asset and liability groups
exhibit different characteristics for each possible interest rate scenario.
Simulation modeling enables Synovus to capture the effect of these differences
as well as the effect of changes in asset and liability volumes.
Synovus maintains policies designed to limit the maximum acceptable
negative impact on net interest income over a twelve month time horizon from a
ratable change in interest rates of 200 basis points. The current policy limits
this change to 8% of projected net interest income under a stable interest rate
environment. As of December 31, 1996, Synovus was well within its policy
guidelines with simulations indicating that Synovus is positioned such that its
net interest income will slightly increase in a rising rate environment and
decrease by no more than 4% in a declining rate environment.
Another tool utilized by Synovus' management is cumulative gap analysis,
which seeks to measure the repricing differentials, or gap, between rate
sensitive assets and liabilities over various time periods. Table 13 reflects
the gap positions of Synovus' consolidated balance sheet on December 31, 1996
and 1995, at various repricing intervals. The projected deposit repricing
volumes reflect adjustments based on managements assumptions of the expected
rate sensitivity relative to the prime rate for core deposits without
contractual maturity (i.e., interest bearing checking, savings, and money market
accounts). Management believes that these adjustments allow for a more accurate
profile of Synovus interest rate risk position. The projected investment
securities repricing reflects expected prepayments on mortgage-backed securities
and expected cash flows on securities subject to accelerated redemption options.
These assumptions are made based on the interest rate environment as of December
31, 1996 and are subject to change as the general level of interest rates
change. This gap analysis indicates that Synovus was moderately asset sensitive
at December 31, 1996, with a cumulative one-year gap of 2.6%. Management
believes that adjusted gap analysis is a useful tool for measuring interest rate
risk only when used in conjunction with its simulation model.
Envisioning. Exploring. Evolving. F-43
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Table 13
Interest Rate Sensitivity
(In millions)
December 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
0-3 4-12 1-5 Over 5
Months Months Years Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment securities <F1>...................................................... $ 102.3 327.6 929.4 280.0
Loans, net of unearned income .................................................. 3,108.9 1,016.2 1,628.9 311.2
Other .......................................................................... 40.3 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Interest sensitive assets .............................................. 3,251.5 1,343.8 2,558.3 591.2
- ------------------------------------------------------------------------------------------------------------------------------------
Deposits ....................................................................... 2,298.9 1,435.1 654.7 1,624.4
Other borrowings ............................................................... 352.4 .3 6.2 77.6
- ------------------------------------------------------------------------------------------------------------------------------------
Interest sensitive liablilities ........................................ 2,651.3 1,435.4 660.9 1,702.0
- ------------------------------------------------------------------------------------------------------------------------------------
Interest rate swaps .................................................... (305.0) -- 305.0 --
- ------------------------------------------------------------------------------------------------------------------------------------
Interest sensitivity gap ....................................... $ 295.2 (91.6) 2,202.4 (1,110.8)
====================================================================================================================================
Cumulative interest sensitivity gap ............................ $ 295.2 203.6 2,406.0 1,295.2
====================================================================================================================================
Cumulative interest sensitivity gap as a percentage of total
interest sensitive assets .................................. 3.8% 2.6 31.1 16.7
====================================================================================================================================
December 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
0-3 4-12 1-5 Over 5
Months Months Years Years
- ------------------------------------------------------------------------------------------------------------------------------------
Investment securities <F1>...................................................... $ 48.5 232.2 764.8 432.8
Loans, net of unearned income .................................................. 2,861.9 789.1 1,434.7 426.3
Other .......................................................................... 124.9 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Interest sensitive assets .............................................. 3,035.3 1,021.3 2,199.5 859.1
- ------------------------------------------------------------------------------------------------------------------------------------
Deposits ....................................................................... 2,012.2 1,450.3 801.8 1,321.9
Other borrowings ............................................................... 229.5 12.6 19.2 75.0
- ------------------------------------------------------------------------------------------------------------------------------------
Interest sensitive liabilities ......................................... 2,241.7 1,462.9 821.0 1,396.9
- -----------------------------------------------------------------------------------------------------------------------------------
Interest rate swaps .................................................... (125.0) -- 125.0 --
- ------------------------------------------------------------------------------------------------------------------------------------
Interest sensitivity gap ....................................... $ 668.6 (441.6) 1,503.50 (537.8)
====================================================================================================================================
Cumulative interest sensitivity gap ............................ $ 668.6 227.0 1,730.50 1,192.7
====================================================================================================================================
Cumulative interest sensitivity gap as a percentage of
total interest sensitive assets ............................ 9.4% 3.2 24.3 16.8
===================================================================================================================================
<FN>
<F1> Excludes the effect of SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities", consisting of net unrealized losses in the
amount of $.2 million in 1996 and net unrealized gains of $8.9 million in
1995.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
F-44 S Y N O V U S F I N A N C I A L C O R P.
<TABLE>
<CAPTION>
Table 14
Maturities of Investment Securities and Average Yields
(In thousands)
Investment Securities Investment Securities
Held to Maturity Available for Sale
December 31, 1996 December 31, 1996
- ---------------------------------------------------------------------------------------------------------------------
Amortized Average Estimated Average
Cost Yield Fair Value Yield
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government agencies:
Within 1 year ..................................... $ 9,751 6.06% $ 232,843 5.67%
1 to 5 years ...................................... 34,332 6.28 579,671 6.17
5 to 10 years ..................................... 40,283 7.21 301,406 7.08
More than 10 years ................................ -- -- 18,002 7.44
- --------------------------------------------------------------------------------------------------------------------
Total ............................. 84,366 6.70 1,131,922 6.37
- --------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities:
Within 1 year ..................................... 4,715 5.69 1,137 5.78
1 to 5 years ...................................... 62,540 5.88 35,019 5.93
5 to 10 years ..................................... 28,611 6.73 42,853 6.41
More than 10 years ................................ 60,453 6.95 51,884 6.72
- --------------------------------------------------------------------------------------------------------------------
Total ............................. 156,319 6.44 130,893 6.45
- --------------------------------------------------------------------------------------------------------------------
State and municipal:
Within 1 year ..................................... 18,290 8.82 30 9.81
1 to 5 years ...................................... 42,253 8.75 -- --
5 to 10 years ..................................... 33,536 8.34 420 6.73
More than 10 years ................................ 20,804 13.89 564 8.93
- -------------------------------------------------------------------------------------------------------------------
Total ............................. 114,883 9.57 1,014 8.02
- -------------------------------------------------------------------------------------------------------------------
Other investments:
Within 1 year ..................................... -- -- 526 5.95
1 to 5 years ...................................... 1,832 7.09 2,699 9.76
5 to 10 years ..................................... 265 7.83 1,093 6.24
More than 10 years ................................ 5,343 4.22 7,936 3.88
- -------------------------------------------------------------------------------------------------------------------
Total ............................. 7,440 5.06 12,254 5.40
- -------------------------------------------------------------------------------------------------------------------
Total investment securities:
Within 1 year ..................................... 32,756 7.55 234,536 5.67
1 to 5 years ...................................... 140,957 6.85 617,389 6.17
5 to 10 years ..................................... 102,695 7.45 345,772 6.99
More than 10 years ................................ 86,600 8.45 78,386 6.61
- -------------------------------------------------------------------------------------------------------------------
Total ............................. 363,008 7.46 $1,276,083 6.37%
===================================================================================================================
</TABLE>
The calculation of weighted average yields for securities is based on the
amortized cost and effective yields of each security weighted for the scheduled
maturity of each security. The yield on state and municipal securities is
computed on a taxable-equivalent basis using the statutory federal income tax
rate of 35% for 1996. Maturity information is calculated based upon scheduled
maturity or call dates, no prepayment assumptions have been utilized in making
these estimates.
- --------------------------------------------------------------------------------
Envisioning. Exploring. Evolving. F-45
Off-Balance Sheet Derivatives for Interest Rate Risk Management
As part of our overall interest rate risk management activities, Synovus
utilizes off-balance sheet derivatives to modify the repricing characteristics
of on-balance sheet assets and liabilities. The primary instruments utilized by
Synovus are interest rate swaps where Synovus receives a fixed rate of interest
and pays a floating rate tied to either the prime rate or 3 month LIBOR. These
swaps effectively convert on-balance sheet floating rate loans to fixed rate
assets, thereby reducing Synovus overall asset sensitivity.
The nature of these transactions is essentially the same as purchasing a
fixed-rate security funded with a floating-rate liability. All swaps utilized by
Synovus represent end-user activities designed as hedges, all of which are
linked to specific assets as part of overall interest rate risk management
practices. Management feels that the utilization of these instruments provides
greater financial flexibility and is a very efficient tool for managing interest
rate risk.
Synovus also utilizes interest rate floors and collars to manage its
overall interest rate risk position. Interest rate floors serve to effectively
convert floating-rate loans to fixed-rate when the prime rate falls below a
prespecified level. These instruments are utilized to reduce asset sensitivity
in falling rate environments but not in rising rate environments. Interest rate
collars convert floating-rate loans to fixed-rate when the prime rate moves
outside of a prespecified range. These instruments reduce overall asset
sensitivity in both falling and rising interest rate environments. All floors
and collars utilized by Synovus represent end-user activities for the purpose of
interest rate risk management.
The notional amount of off-balance sheet derivatives utilized by Synovus as
of December 31, 1996, was $450 million. The notional amounts represent the
amount on which calculations of interest payments to be exchanged are based.
Although Synovus is not exposed to credit risk equal to the notional amounts,
there is exposure to potential credit risks equal to the fair or replacement
values of the swaps if the counterparty fails to perform. This credit risk is
normally a very small percentage of the notional amount and fluctuates as
interest rates change. Synovus minimizes this risk by subjecting the transaction
to the same approval process as on-balance sheet credit activities, by dealing
with only highly-rated counterparties, and by obtaining collateral agreements
for exposure above certain predetermined limits.
<TABLE>
<CAPTION>
Weighted Weighted Weighted
December 31, 1996 Notional Average Average Average Maturity Unrealized Unrealized Net Unrealized
(In thousands) Amount Receive Rate Pay Rate<F1> In Months Gains Losses Gains (Losses)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Receive Fixed Swaps -LIBOR $235,000 5.79 5.53 32 $ -- (2,200) (2,200)
Receive Fixed Swaps - Prime 70,000 9.12 8.25 43 630 -- 630
- -----------------------------------------------------------------------------------------------------------------------------------
Total Receive Fixed Swaps 305,000 6.55 6.15 35 630 (2,200) (1,570)
- -----------------------------------------------------------------------------------------------------------------------------------
- ------
<FN>
<F1>Variable pay rate based upon contract rates in effect at December 31, 1996
and 1995.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Notional Average Cap Average Average Maturity Unrealized Unrealized Net Unrealized
Amount Rate Floor Rate In Months Gains Losses Gains (Losses)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Collars 80,000 9.16 7.91 34 -- (445) (445)
</TABLE>
<TABLE>
<CAPTION>
Weighted Weighted
Notional Average Floor Average Maturity Unrealized Unrealized Net Unrealized
Amount Rate In Months Gains Losses Gains (Losses)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Rate Floors 65,000 7.83 48 80 -- 80
</TABLE>
<TABLE>
<CAPTION>
Weighted
Notional Average Maturity Unrealized Unrealized Net Unrealized
Amount In Months Gains Losses Gains (Losses)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total $450,000 37 $ 710 (2,645) (1,935)
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Weighted Weighted Weighted
December 31, 1995 Notional Average Average Average Maturity Unrealized Unrealized Net Unrealized
(In thousands) Amount Receive Rate Pay Rate<F1> In Months Gains Losses Gains (Losses)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Receive Fixed Swaps - LIBOR $125,000 5.98% 5.88 46 $1,776 -- $1,776
===================================================================================================================================
- ------
<FN>
<F1>Variable pay rate based upon contract rates in effect at December 31, 1996
and 1995.
</FN>
</TABLE>
The above table represents the December 31, 1996 and 1995 status of all
off-balance sheet interest rate contracts. There were no maturities, offsets, or
terminations in 1996 or 1995. Off-balance sheet interest rate contracts
contributed additional net interest income of $719,000 and contributed one
basis point to the net interest margin for 1996. The impact of off-balance sheet
interest rate contracts for 1995 was immaterial
F-46 S Y N O V U S F I N A N C I A L C O R P.
Liquidity
Liquidity represents the availability of funding to meet the needs of
depositors, borrowers, and creditors at a reasonable cost, on a timely basis,
and without adverse consequences. Management actively analyzes and manages
Synovus' liquidity position in coordination with similar committees at each
subsidiary bank. These subsidiaries, with the help of management, maintain
liquidity in the form of cash on deposit, federal funds, securities available
for sale, and cash derived from prepayments and maturities of both their
investment and loan portfolios. Liquidity is also enhanced by the acquisition of
new deposits and the well established core deposits of Synovus' 216 banking
offices in four states. The subsidiary banks monitor deposit flow and evaluate
alternate pricing structures to retain and grow deposits. Certain Synovus
subsidiary banks maintain correspondent banking relationships with various
national and regional financial organizations. These relationships provide
access to short-term borrowings through federal funds which allows Synovus to
meet immediate liquidity needs if required.
Synovus serves a diversity of markets. Some of these are rapidly growing
areas where loan demand outpaces the generation of deposits. However, through
the loan participations between Synovus' subsidiary banks, these loans can be
funded by subsidiaries having lower local loan demand. Additionally, lending is
focused within the local markets served by Synovus, enabling the development of
comprehensive banking relationships.
Additionally, the Parent Company requires cash for various operating needs
including dividends to shareholders, business combinations, capital infusions
into subsidiaries, the servicing of debt, and the payment of general corporate
expenses. The primary source of liquidity for the Parent Company is dividends
from the subsidiary banks. In addition, the Parent Company has access to a $20
million line of credit. The Parent Company enjoys an excellent reputation and
credit standing in the market place and has the ability to raise substantial
amounts of funds in the form of either short or long-term borrowings. The Parent
Company's current principal debt, senior notes totaling $75 million at a rate of
6.125%, has been rated "A" by Standard and Poors Corp., "A3" by Moodys Investor
Service and "AA" by Thomson Bankwatch. For a complete description of these
borrowings and other borrowings by other Synovus subsidiaries, see Note 6 to
Synovus consolidated financial statements.
The consolidated statements of cash flows detail Synovus' cash flows from
operating, investing, and financing activities. Net cash provided by operating
activities was $200.6 million for the year ended December 31, 1996, while
financing activities provided $480.4 million. Investing activities used $658.7
million of this amount, resulting in a net increase in cash and cash equivalents
of $22.3 million.
Management is not aware of any trends, events, or uncertainties that will
have, or that are reasonably likely to have a material impact on Synovus'
liquidity, capital resources, or operations. Further, management is not aware of
any current recommendations by regulatory agencies which, if they were to be
implemented, would have such effect.
Capital Resources and Dividends
Synovus has always placed great emphasis on maintaining a strong capital
base and continues to exceed all minimum regulatory capital requirements.
Management is committed to maintaining a capital level sufficient to assure
shareholders, customers, and regulators that Synovus is financially sound, and
to enable Synovus to sustain an appropriate degree of leverage to provide a
desirable level of profitability. Synovus has the ability to generate internal
capital growth sufficient to support the asset growth it has experienced. Total
shareholders equity of $783.8 million represented 9.10% of total assets at
December 31, 1996.
Regulators use a risk-adjusted calculation to aid them in their
determination of capital adequacy by weighting assets based on the credit risk
associated with on- and off-balance sheet assets. The majority of these
risk-weighted assets are on-balance sheet assets for Synovus in the form of
loans. A small portion of risk-weighted assets are considered off-balance sheet
assets and are primarily made up of letters of credit, loan commitments, and to
a lesser extent interest rate contracts, that Synovus enters into in the normal
course of business. Capital is categorized into two types: Tier I and Tier II.
The capital guidelines used by regulators require an 8% total risk-based capital
ratio of which 4% must be Tier I capital. Additionally, the regulatory agencies
define a well-capitalized bank as one which has a leverage ratio of at least 5%,
a Tier I capital ratio of at least 6%, and a total risk-based capital ratio of
at least 10%. At the end of 1996, Synovus and all subsidiary banks were in
excess of the minimum capital requirements with a consolidated Tier I capital
ratio of 11.68% and a total risk-based capital ratio of 12.97%, compared to Tier
I and total risk-based capital ratios of 11.28% and 12.57%, respectively, in
1995 as shown in Table 15.
In addition to the risk-based capital standards, a minimum leverage ratio
of 4% is required for the highest-rated bank holding companies which are not
undertaking significant expansion programs. An additional 1% to 2% may be
required for other companies, depending upon their regulatory ratings and
expansion plans. The leverage ratio is defined as Tier I capital divided by
quarterly average assets, net of certain intangibles. As of December 31, 1996,
Synovus had a leverage ratio of 9.36%, which significantly exceeds the
regulatory requirements.
Synovus' capital level also exceeds all requirements under the Federal
Reserve Board's guidelines. The Federal Reserve Board requires a minimum primary
capital ratio of 5.50% and a total capital ratio of 6.00% for bank holding
companies and banks. At December 31, 1996, Synovus' primary and total capital
ratios as defined by the Federal Reserve Board were 10.07% and 10.09%,
respectively, compared to 9.49% and 9.52%, respectively, at year end 1995.
During the third quarter of 1994, Synovus announced its plan to acquire up
to 1,125,000 shares of Synovus common stock in the open market. Through December
31, 1996, 543,900 shares of Synovus common stock have been purchased under this
plan at an average price of $15.67. Of these shares, 399,747 shares were used in
1995 to acquire Peach State Bank. Approximately 78,000 shares were issued to
employees for vested stock option exercises. The remaining shares under this
plan along with other treasury shares acquired before this plan amount to 77,895
as of December 31, 1996. These shares will be used to fund incentive stock award
plans and other employee benefit plans.
Synovus' 80.7% ownership of TSYS is an important aspect of the market price
of Synovus common stock and should be considered in a comparison of the relative
market price of Synovus common stock to other financial service companies. As of
December 31, 1996, there were approximately 28,000 shareholders of record of
Synovus common stock, some of which are holders in nominee name for the benefit
of a number of different shareholders. Table 16 displays high and low quotations
of Synovus common stock which are based on actual transactions.
Envisioning. Exploring. Evolving. F-47
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Table 15
Capital Ratios <F1>
(In thousands)
December 31,
- --------------------------------------------------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tier I capital:
Shareholders' equity .................................................... $ 783,750 693,555
Adjustment for SFAS No. 115 ............................................. 112 (5,774)
Plus: Minority interest ................................................. 34,435 27,790
Less: Disallowed intangibles ............................................ (40,589) (41,406)
- --------------------------------------------------------------------------------------------------------------------------
Total Tier I capital ............................................ 777,708 674,165
- --------------------------------------------------------------------------------------------------------------------------
Tier II capital:
Eligible portion of the reserve for loan losses ......................... 83,353 74,818
Subordinated and other qualifying debt .................................. 2,200 2,440
- --------------------------------------------------------------------------------------------------------------------------
Total Tier II capital ........................................... 85,553 77,258
- --------------------------------------------------------------------------------------------------------------------------
Total risk-based capital ........................................................ $ 863,261 751,423
==========================================================================================================================
Total risk-adjusted assets ...................................................... $ 6,656,966 5,978,913
==========================================================================================================================
Tier I capital ratio ............................................................ 11.68% 11.28
Total risk-based capital ratio .................................................. 12.97 12.57
Leverage ratio .................................................................. 9.36 8.71
Regulatory minimums:
Tier I capital ratio .................................................... 4.00%
Total risk-based capital ratio .......................................... 8.00
Leverage ratio .......................................................... 4.00
- --------
<FN>
<F1>Risk-based capital ratios, for both years presented, were prepared using
risk-based capital rules finalized in November, 1994, which exclude the
impact of SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities".
- --------------------------------------------------------------------------------
</FN>
</TABLE>
<TABLE>
<CAPTION>
Table 16
Market and Stock Price Information
High Low
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
1996
Quarter ended December 31, 1996 ............................................ $ 33 3/8 26 1/8
Quarter ended September 30, 1996 ........................................... 27 1/4 21 7/8
Quarter ended June 30, 1996 ................................................ 24 21 1/8
Quarter ended March 31, 1996 ............................................... 22 7/8 17 1/2
1995
Quarter ended December 31, 1995 ............................................ $ 20 1/8 16 5/8
Quarter ended September 30, 1995 ........................................... 18 1/8 15
Quarter ended June 30, 1995 ................................................ 15 1/4 12 7/8
Quarter ended March 31, 1995 ............................................... 13 1/8 11 7/8
</TABLE>
- --------------------------------------------------------------------------------
Dividends
It is Synovus' objective to pay out approximately one-third of earnings to
shareholders in cash dividends. Synovus' dividend payout ratio in 1996, 1995,
and 1994 was 36.62%, 36.69%, and 36.9%, respectively. The total dollar amount of
dividends declared increased 21.6% in 1996 to $51.1 million, from $42.0 million
in 1995. Cash dividends have been paid on the common stock of Synovus (including
its predecessor companies) in every year since 1891. It is the present intention
of the Synovus Board of Directors to continue to pay cash dividends on its
common stock in accordance with the previously mentioned objective. Table 17
presents the declared and paid dates from recent dividends, as well as per share
dividend amounts.
F-48 S Y N O V U S F I N A N C I A L C O R P.
- --------------------------------------------------------------------------------
Table 17
<TABLE>
<CAPTION>
Dividends
Per Share
Date Declared Date Paid Amount
<S> <C> <C>
November 18, 1996 January 2, 1997 $ .11
September 9, 1996 October 1, 1996 .11
May 13, 1996 July 1, 1996 .11
March 11, 1996 April 1, 1996 .11
November 13, 1995 January 2, 1996 .09
September 11, 1995 October 2, 1995 .09
May 8, 1995 July 3, 1995 .09
February 14, 1995 April 3, 1995 .09
- --------------------------------------------------------------------------------
</TABLE>
Commitments
Synovus believes it has sufficient capital, liquidity, and future cash
flows from operations to meet operating needs over the next year. Table 18, Note
6, and Note 10 to Synovus' consolidated financial statements provide additional
information on Synovus short-term and long-term borrowings.
In the normal course of its business, TSYS maintains processing and
conversion agreements with its customers. These agreements contain contractual
commitments, including, but not limited to, minimum standards and time frames
against which TSYS' performance is measured. In the event TSYS does not meet its
contractual commitments with its customers, TSYS may incur penalties and/or
certain customers may have the right to terminate their agreements with TSYS.
TSYS does not believe that it will fail to meet its contractual commitments to
an extent that will result in a material adverse effect on its financial
condition or results of operations.
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 subsidiarys' 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 subsidiarys' 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.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Table 18
Short-Term Borrowings
(In thousands)
The following table sets forth certain information regarding federal funds
purchased and securities sold under agreement to repurchase, the principal
components of short-term borrowings.
1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Month end balance for year ended December 31, ........ $339,200 229,477 412,082
Weighted average interest rate at December 31,........ 6.22% 5.65 5.40
Maximum month end balance during the year ............ $421,672 362,035 412,082
Average amount outstanding during the year ........... $288,107 216,342 235,858
Weighted average interest rate during the year ....... 5.20% 5.59 4.25
</TABLE>
- --------------------------------------------------------------------------------
Envisioning. Exploring. Evolving. F-49
Income Tax Expense
As reported in the consolidated statements of income, Synovus' income tax
expense increased to $79.7 million in 1996, up from $64.9 million in 1995, and
$49.5 million in 1994. The effective tax rate was 36.3%, 36.2%, and 35.6% in
1996, 1995, and 1994 , respectively. The increases in both 1996 and 1995 were
primarily the result of increases in pre-tax income and in the relative
percentage of taxable income to total income. The increase in 1995 was affected
by a decrease in certain research and experimentation credits. See Note 7 to
Synovus' consolidated financial statements for a detailed analysis of income
taxes.
Inflation
Inflation has an important impact on the growth of total assets in the
banking industry and may create a need to increase equity capital at higher than
normal rates in order to maintain an appropriate equity to assets ratio. Synovus
has been able to maintain a high level of equity through retention of an
appropriate percentage of its net income. Synovus copes with the effects of
inflation by managing its interest rate sensitivity gap position through its
asset/liability management program and by periodically adjusting its pricing of
services and banking products to take into consideration current costs.
Parent Company
The Parent Companys assets, primarily its investment in subsidiaries, are
funded, for the most part, by shareholders' equity. It also utilizes short-term
and long-term debt. The Parent Company is responsible for providing the
necessary funds to strengthen the capital of its subsidiaries if necessary,
acquire new subsidiaries, pay corporate operating expenses, and pay dividends to
its shareholders. These operations are funded by dividends and fees received
from subsidiaries, and borrowings from outside sources.
In connection with dividend payments to the Parent Company from its
subsidiary banks, certain rules and regulations of the various state and federal
banking regulatory agencies limit the amount of dividends which may be paid.
Approximately $152.5 million in dividends, inclusive of 1997 net income, could
be paid in 1997 to the Parent Company from its subsidiary banks without prior
regulatory approval. Synovus anticipates receiving regulatory approval to allow
certain subsidiaries to pay dividends in excess of their respective regulatory
limits.
Forward-Looking Statements
The following appears in accordance with the Securities Litigation Reform
Act: These financial statements and financial review include forward-looking
statements that involve inherent risks and uncertainties. A number of important
factors could cause actual results to differ materially from those in the
forward-looking statements. Those factors include fluctuations in interest
rates, inflation, government regulations, loss of a major TSYS customer, and
economic conditions and competition in the geographic business areas in which
Synovus conducts its operations.
F-50 S Y N O V U S F I N A N C I A L C O R P.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Summary of Quarterly Financial Data (Unaudited)
(In thousands, except per share data)
Presented below is a summary of the unaudited consolidated quarterly financial
data for the years ended December 31, 1996 and 1995.
Fourth Third Second First
Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Interest income ........................................$170,603 168,609 163,895 160,196
==============================================================================================
Net interest income .................................... 97,426 95,632 92,687 89,129
==============================================================================================
Provision for losses on loans .......................... 9,089 8,011 8,233 6,433
==============================================================================================
Income before income taxes ............................. 66,132 55,528 51,713 45,939
==============================================================================================
Net income ............................................. 41,661 35,208 33,108 29,627
==============================================================================================
Net income per share ................................... .36 .30 .29 .26
==============================================================================================
1995
Interest income ........................................$160,683 157,443 153,318 144,344
==============================================================================================
Net interest income .................................... 88,274 86,262 84,509 82,830
==============================================================================================
Provision for losses on loans .......................... 8,589 6,214 5,739 5,245
==============================================================================================
Income before income taxes ............................. 52,966 47,197 41,788 37,518
==============================================================================================
Net income ............................................. 33,634 30,279 26,600 24,070
==============================================================================================
Net income per share ................................... .29 .26 .23 .21
==============================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Envisioning. Exploring. Evolving. F-51
EXHIBIT 20.1
[LOGO](R)
SYNOVUS(Registration Mark)
FINANCIAL CORP.
JAMES H. BLANCHARD
CHAIRMAN OF THE BOARD
March 7, 1997
Dear Shareholder:
The Annual Meeting of the Shareholders of Synovus Financial Corp. will be
held on April 17, 1997 in the South Hall of the Columbus, Georgia Convention &
Trade Center, beginning at 10:00 o'clock A.M., E.T., for the purposes set forth
in the accompanying Notice of Annual Meeting of Shareholders and Proxy
Statement.
We encourage you to attend the Annual Meeting of Shareholders and let us
give you a review of 1996. Whether you own a few or many shares of stock and
whether or not you plan to attend in person, it is important that your shares be
voted on matters that come before the meeting. To make sure your shares are
represented, we urge you to complete the enclosed Proxy Card, including the
Certificate of Beneficial Owner on the reverse side of the Proxy, and mail it to
us promptly.
Thank you for helping us make 1996 a good year. We look forward to your
continued support in 1997 and another good year.
Sincerely yours,
/s/James H. Blanchard
JAMES H. BLANCHARD
Synovus Financial Corp. Post Office Box 120 Columbus, Georgia 31902-0120
SYNOVUS(R)
FINANCIAL CORP.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 17, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
Synovus Financial Corp. ("Synovus") will be held in the South Hall of the
Columbus, Georgia Convention & Trade Center, on April 17, 1997, at 10:00 o'clock
A.M., E.T., for:
(1) The election of five nominees as Class III directors of Synovus to serve
until the 2000 Annual Meeting of Shareholders; and
(2) The transaction of such other business as may properly come before the
Annual Meeting.
Information relating to the above matters is set forth in the accompanying
Proxy Statement.
Only shareholders of record at the close of business on February 12, 1997
will be entitled to notice of and to vote at the Annual Meeting.
/s/G. Sanders Griffith, III
G. SANDERS GRIFFITH, III
Secretary
Columbus, Georgia
March 7, 1997
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING IN PERSON, PLEASE
VOTE, DATE AND SIGN THE ENCLOSED PROXY, COMPLETE AND SIGN THE CERTIFICATE OF
BENEFICIAL OWNER ON THE REVERSE SIDE OF THE ENCLOSED PROXY, AND RETURN THEM
PROMPTLY IN THE ENCLOSED RETURN ENVELOPE, WHICH DOES NOT REQUIRE ANY POSTAGE IF
MAILED IN THE UNITED STATES.
SYNOVUS(R)
FINANCIAL CORP.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 17, 1997
I. INTRODUCTION
A. Purposes of Solicitation -- Terms of Proxies.
The Annual Meeting of the Shareholders ("Annual Meeting") of Synovus
Financial Corp. ("Synovus") will be held on April 17, 1997 for the purposes set
forth in the accompanying Notice of Annual Meeting of Shareholders and in this
Proxy Statement. The enclosed Proxy is solicited BY AND ON BEHALF OF SYNOVUS'
BOARD OF DIRECTORS in connection with such Annual Meeting, or any adjournment
thereof. The costs of the solicitation of Proxies by Synovus' Board of Directors
will be paid by Synovus. Forms of Proxies and Proxy Statements will also be
distributed through brokers, banks, nominees, custodians and other like parties
to the beneficial owners of shares of the $1.00 par value common stock of
Synovus ("Synovus Common Stock"), and Synovus will reimburse such parties for
their reasonable out-of-pocket expenses therefor. Synovus' mailing address is
Post Office Box 120, Columbus, Georgia 31902-0120.
The shares represented by the Proxy in the accompanying form, which when
properly executed, returned to Synovus' Board of Directors and not revoked, will
be voted in accordance with the instructions specified in such Proxy. If a
choice is not specified in a Proxy, the shares represented by such Proxy will be
voted "FOR" the election of the five nominees for election as Class III
directors of Synovus named herein.
Each Proxy granted may be revoked in writing at any time before the
authority granted thereby is exercised. Attendance at the Annual Meeting will
constitute a revocation of the Proxy for such Annual Meeting if the maker
thereof elects to vote in person.
This Proxy Statement and the enclosed Proxy are being first mailed to
shareholders on or about March 7, 1997.
B. Shareholder Proposals.
From time to time, Synovus' shareholders may present proposals which may be
proper subjects for inclusion in Synovus' Proxy Statement for consideration at
Synovus' Annual Meeting. To be considered for inclusion, shareholder proposals
must be submitted on a timely basis. Proposals for Synovus' 1998 Annual Meeting
must be received by Synovus no later than November 7, 1997, and any such
proposals, as well as any questions related thereto, should be directed to
Secretary, Synovus Financial Corp., 901 Front Avenue, Suite 301, Columbus,
Georgia 31901.
1
C. Director Nominees or Other Business for Presentation at the Annual Meeting.
Shareholders who wish to present director nominations or other business at
the Annual Meeting are required to notify the Secretary of their intent at least
60 days but not more than 120 days before the meeting and the notice must
provide information as required in the bylaws. A copy of these bylaw
requirements will be provided upon request in writing to Secretary, Synovus
Financial Corp., 901 Front Avenue, Suite 301, Columbus, Georgia 31901. This
requirement does not affect the deadline for submitting shareholder proposals
for inclusion in the Proxy Statement nor does it preclude discussion by any
shareholder of any business properly brought before the Annual Meeting.
D. Securities Entitled to Vote and Record Date.
Only shareholders of record at the close of business on February 12, 1997
are entitled to vote at the Annual Meeting, or any adjournment thereof. As of
that date, there were 116,369,039 shares of Synovus Common Stock outstanding and
entitled to vote. Synovus owned 77,895 shares of Synovus Common Stock on
February 12, 1997 as treasury shares, which are not considered to be outstanding
and are not entitled to be voted at the Annual Meeting. In accordance with the
amendment to Synovus' Articles of Incorporation which was adopted by the
shareholders of Synovus and became effective on April 24, 1986 (the "Voting
Amendment"), a holder of Synovus Common Stock will be entitled to ten votes on
each matter submitted to a vote of shareholders for each share of Synovus Common
Stock beneficially owned on February 12, 1997 which: (1) has had the same
beneficial owner since February 12, 1993; (2) was acquired by reason of
participation in a dividend reinvestment plan offered by Synovus and is held by
the same beneficial owner for whom it was acquired under such plan; (3) is held
by the same beneficial owner to whom it was issued as a result of an acquisition
of a company or business by Synovus where the resolutions adopted by Synovus'
Board of Directors approving such issuance specifically reference and grant such
rights; (4) was acquired under any employee, officer and/or director benefit
plan maintained for one or more employees, officers and/or directors of Synovus
and/or its subsidiaries, and is held by the same beneficial owner for whom it
was acquired under any such plan; (5) is held by the same beneficial owner to
whom it was issued by Synovus, or to whom it was transferred by Synovus from
treasury shares, and the resolutions adopted by Synovus' Board of Directors
approving such issuance and/or transfer specifically reference and grant such
rights; (6) was acquired as a direct result of a stock split, stock dividend or
other type of share distribution if the share as to which it was distributed was
acquired prior to, and has been held by the same beneficial owner since,
February 12, 1993; (7) has been beneficially owned continuously by the same
shareholder for a period of 48 consecutive months prior to the record date of
any meeting of shareholders at which the share is eligible to be voted; or (8)
is owned by a holder who, in addition to shares which are beneficially owned
under the provisions of (1)-(7) above, is the beneficial owner of less than
506,250 shares of Synovus Common Stock (which amount has been appropriately
adjusted to reflect the three-for-two stock splits effected in the form of 50%
stock dividends paid on October 1, 1986, October 3, 1988, April 1, 1993 and
April 8, 1996, respectively, and with such amount to be appropriately adjusted
to properly reflect any other change in Synovus Common Stock by means of a stock
split, a stock dividend, a recapitalization or otherwise occurring after April
24, 1986). Shareholders of shares of Synovus Common Stock not described above
are entitled to one vote per share for each such share. The actual voting power
of each holder of shares of Synovus Common Stock will be based on information
possessed by Synovus at the time of the Annual Meeting.
As Synovus Common Stock is registered with the Securities and Exchange
Commission ("SEC") and is traded on the New York Stock Exchange ("NYSE"),
Synovus Common Stock is subject to the provisions of an NYSE rule which, in
general, prohibits a company's common stock and equity securities from being
authorized or remaining authorized for trading on the NYSE if the company issues
securities or takes other corporate action that would have the effect of
nullifying, restricting or disparately reducing the voting rights of
existing shareholders of the company. However, such rule
2
contains a "grandfather" provision, under which Synovus' Voting Amendment falls,
which, in general, permits grandfathered disparate voting rights plans to
continue to operate as adopted.
The number of votes that each shareholder will be entitled to exercise at
the Annual Meeting will depend upon whether each share held by the shareholder
meets the requirements which entitle one share of Synovus Common Stock to ten
votes on each matter submitted to a vote of shareholders. Shareholders of
Synovus Common Stock must complete the Certification on the reverse side of the
Proxy in order for any of the shares represented by the Proxy to be entitled to
ten votes per share.
SHAREHOLDERS AND BENEFICIAL OWNERS WHO DO NOT COMPLETE THE CERTIFICATIONS ON THE
REVERSE SIDES OF THEIR PROXY CARDS AND WHO WOULD, IF THEY HAD COMPLETED SUCH
CERTIFICATIONS, BE ENTITLED TO TEN VOTES PER SHARE, WILL BE ENTITLED TO ONLY ONE
VOTE PER SHARE.
E. Columbus Bank and Trust Company and Total System Services, Inc.
Synovus is the owner of all of the issued and outstanding shares of voting
common stock of Columbus Bank and Trust Company(R)("Columbus Bank"). Columbus
Bank owns individually 80.7% of the outstanding shares of Total System Services,
Inc.(SM) ("TSYS(R)"), a bankcard data processing company having 129,289,680
shares of $.10 par value voting common stock ("TSYS Common Stock") outstanding
on February 12, 1997.
II. ELECTION OF DIRECTORS
A. Information Concerning Directors and Nominees.
(1) Number and Classification of Directors.
In accordance with the vote of shareholders taken at Synovus' 1995 Annual
Meeting, the number of members of Synovus' Board of Directors was set at 20.
Synovus' Board of Directors is currently comprised of 20 members. The 20 members
who comprise Synovus' Board of Directors are divided into three classes of
directors: Class I directors, Class II directors and Class III directors, with
each of such Classes of directors serving staggered 3-year terms. At Synovus'
1995 Annual Meeting, Class I directors were elected to serve 3-year terms to
expire at Synovus' 1998 Annual Meeting and at Synovus' 1996 Annual Meeting,
Class II directors were elected to serve 3-year terms to expire at Synovus'
1999 Annual Meeting. The terms of office of the Class III directors expire at
Synovus' 1997 Annual Meeting. Given the division of Synovus' Board of Directors
into three classes, shareholders who do not favor the policies of Synovus' Board
of Directors would require at least two Annual Meetings of Shareholders to
replace a majority of the members of the Board.
(2) Nominees for Class III Directors and Vote Required.
Synovus' Board of Directors has selected five nominees which it proposes
for election to Synovus' Board as Class III directors. The nominees for Class
III directors of Synovus will be elected to serve 3-year terms that will expire
at Synovus' 2000 Annual Meeting. The five nominees for Class III directors of
Synovus are: Daniel P. Amos, Richard Y. Bradley, John P. Illges, III, William B.
Turner and George C. Woodruff, Jr. Proxies cannot be voted at the 1997 Annual
Meeting for a greater number of persons than the number of nominees named.
Under Georgia law, a majority of the issued and outstanding shares of
Synovus Common Stock entitled to vote must be represented at the 1997 Annual
Meeting to constitute a quorum. However, as is allowed by Georgia law, under
Synovus' bylaws and the Voting Amendment, a majority of the
3
votes entitled to be cast by the holders of all of the issued and outstanding
shares of Synovus Common Stock entitled to vote must be represented at the 1997
Annual Meeting in order to constitute a quorum. Under both Georgia law and
Synovus' bylaws, all shares represented at the meeting, including shares
abstaining and withholding authority, are counted for purposes of determining
whether a quorum exists. The nominees for election as directors at the Annual
Meeting who receive the greatest number of votes (a plurality), a quorum being
present, shall become directors at the conclusion of the tabulation of votes.
Thus, once a quorum has been established, abstentions and broker non-votes have
no effect upon the election of directors. The shares represented by Proxies
executed for Synovus' 1997 Annual Meeting in such manner as not to withhold
authority to vote for the election of any nominee for Synovus' Board of
Directors shall be voted "FOR" the election of the five nominees for Class III
directors on Synovus' Board named herein.
If any nominee for Class III director of Synovus becomes unavailable for
any reason before Synovus' 1997 Annual Meeting, the shares represented by
executed Proxies may be voted for such substitute nominee as may be determined
by the holders of such Proxies. It is not anticipated that any nominee will be
unavailable for election.
SYNOVUS' BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE
FIVE NOMINEES FOR ELECTION AS CLASS III DIRECTORS ON SYNOVUS' BOARD SET FORTH
HEREIN.
B. Information Concerning Directors and Nominees for Class III Directors.
(1) General Information.
The following table sets forth the name, age, principal occupation and
employment (which, except as noted, has been for the past five years) of each of
the five nominees for election as Class III directors of Synovus and the
remaining directors who will continue to serve on Synovus' Board of Directors,
his or her director classification, length of service as a director of Synovus,
any family relationships with other directors or executive officers of Synovus,
and any Board of Directors of which he or she is a member with respect to any
company with a class of securities registered with the SEC pursuant to Section
12 of the Securities Exchange Act of 1934, as amended ("Exchange Act"), or any
company which is subject to the requirements of Section 15(d) of that Act,
including TSYS, or any company registered with the SEC as an investment company
under the Investment Company Act of 1940 ("Public Company").
<TABLE>
<CAPTION>
Synovus Year
Director First Principal Occupation
Classifi- Elected and Other Directorships
Name Age cation Director of Public Companies
- ------------------------- ----- -------- ---------- ------------------------
<S> <C> <C> <C> <C>
Daniel P. Amos 45 III 1991 Chief Executive Officer and Director,
AFLAC Incorporated (Insurance
Holding Company)
Richard E. Anthony<F1> 50 II 1993 Vice Chairman of the Board, Synovus
Financial Corp.; Chairman of the
Board, First Commercial Bank of
Birmingham (Banking Subsidiary of
Synovus)
Joe E. Beverly 55 II 1983 Chairman of the Board, Commercial
Bank, Thomasville, Georgia (Banking
Subsidiary of Synovus); Director,
Flowers Industries, Inc.
James H. Blanchard<F2> 55 I 1972 Chairman of the Board and Chief
Executive Officer, Synovus Financial
Corp.; Chairman of the Executive
Committee, Total System Services,
Inc.; Director, BellSouth Corporation
4
Richard Y. Bradley<F3> 58 III 1991 Partner, Bradley & Hatcher (Law
Firm); Director, Total System
Services, Inc.
Stephen L. Burts, Jr.<F4> 44 I 1992 President, Synovus Financial Corp.
Walter M. Deriso, Jr.<F5> 50 II 1997 Vice Chairman of the Board, Synovus
Financial Corp.; Chairman of the
Board, Security Bank and Trust
Company, Albany, Georgia (Banking
Subsidiary of Synovus)
C. Edward Floyd, M.D. 62 I 1995 Vascular Surgeon
Gardiner W. Garrard, Jr. 56 I 1972 President, The Jordan Company
(Real Estate Development); Director,
Total System Services, Inc.
V. Nathaniel Hansford 53 I 1985 Professor and Dean Emeritus
--School of Law, University of
Alabama
John P. Illges, III <F6> 62 III 1997 Senior Vice President and Financial
Consultant, The Robinson-Humphrey
Company, Inc. (Stockbroker);
Director, Total System Services, Inc.
Mason H. Lampton 49 II 1993 President, The Hardaway Company
(Construction Company); Director,
Total System Services, Inc.
Elizabeth C. Ogie<F7> 46 II 1993 Director, W.C. Bradley Co. (Metal
Manufacturer and Real Estate)
John T. Oliver, Jr.<F8> 67 II 1993 Vice Chairman of the Executive
Committee, Synovus Financial Corp.;
Chairman of the Board, First National
Bank of Jasper (Banking Subsidiary
of Synovus)
H. Lynn Page 56 I 1978 Vice Chairman of the Board (Retired)
and Director, Synovus Financial
Corp., Columbus Bank and Trust
Company and Total System Services,
Inc.
William L. Pherigo<F9> 55 II 1995 President and Chief Executive Officer,
The National Bank of South Carolina
(Banking Subsidiary of Synovus)
Robert V. Royall, Jr. 62 I 1995 Chairman of the Board, The National
Bank of South Carolina (Banking
Subsidiary of Synovus); Director, Blue
Cross Blue Shield of South Carolina;
Secretary of Commerce, State of
South Carolina
William B. Turner<F7><F10> 74 III 1972 Chairman of the Executive
Committee, Columbus Bank and
Trust Company and Synovus
Financial Corp.; Advisory Director, W.
C. Bradley Co. (Metal Manufacturer
and Real Estate); Director,
Total System Services, Inc.
George C. Woodruff, Jr. 68 III 1972 Real Estate and Personal
Investments; Director, Total System
Services, Inc. and United Cities Gas
Company
James D. Yancey<F11> 55 I 1978 Vice Chairman of the Board, Synovus
Financial Corp. and Columbus Bank
and Trust Company; Director, Total
System Services, Inc.
5
<FN>
- -------------
<F1> Richard E. Anthony was elected Vice Chairman of Synovus in September, 1995.
Prior to 1995, Mr. Anthony served, and continues to serve, as President of
Synovus Financial Corp. of Alabama and Chairman of the Board of First
Commercial Bank of Birmingham, both of which companies are subsidiaries of
Synovus.
<F2> James H. Blanchard was elected Chairman of the Board of Synovus in April,
1986. Prior to 1986, Mr. Blanchard served in various capacities with
Synovus, Columbus Bank and/or TSYS, including President of Synovus.
<F3> Richard Y. Bradley formed Bradley & Hatcher in September, 1995. From 1991
until 1995, Mr. Bradley served as President of Bickerstaff Clay Products
Company, Inc.
<F4> Stephen L. Burts, Jr. was elected President of Synovus in March, 1992.
Prior to 1992, Mr. Burts served in various capacities with Synovus and/or
Columbus Bank, including Executive Vice President and Treasurer.
<F5> Walter M. Deriso, Jr. was elected Vice Chairman of Synovus in January,
1997. Prior to 1997, Mr. Deriso served as President of Security Bank and
Trust Company. Mr. Deriso was elected as a director of Synovus in January,
1997 by Synovus' Board of Directors to fill the unexpired term of a vacant
Class II board seat.
<F6> John P. Illges, III was elected as a director of Synovus in January, 1997
by Synovus' Board of Directors to fill the unexpired term of a vacant Class
III board seat. Mr. Illges previously served as an Advisory Director of
Synovus.
<F7> Elizabeth C. Ogie is William B. Turner's niece.
<F8> John T. Oliver, Jr. was elected Vice Chairman of the Executive Committee of
Synovus in September, 1995. Prior to 1995, Mr. Oliver served, and continues
to serve, as Chairman of the Board of Synovus Financial Corp. of Alabama
and First National Bank of Jasper, both of which companies are subsidiaries
of Synovus.
<F9> William L. Pherigo was elected President and Chief Executive Officer of The
National Bank of South Carolina effective January, 1996. Prior to 1996, Mr.
Pherigo served as President and Chief Operating Officer of The National
Bank of South Carolina.
<F10>William B. Turner was elected Chairman of the Executive Committee of
Synovus in April, 1986. Prior to 1986, Mr. Turner served in various
capacities with Synovus and/or Columbus Bank, including Chairman of the
Board of both Synovus and Columbus Bank.
<F11>James D. Yancey was elected Vice Chairman of the Board of Synovus in March,
1992. Prior to 1992, Mr. Yancey served in various capacities with Synovus
and/or Columbus Bank, including Vice Chairman of the Board and President of
both Synovus and Columbus Bank.
</FN>
</TABLE>
(2) Synovus Common Stock Ownership of Directors and Management.
The following table sets forth, as of December 31, 1996, the number of
shares of Synovus Common Stock beneficially owned by each of Synovus' directors
and Synovus' five most highly compensated executive officers. To the best of
Synovus' knowledge, all shares of Synovus Common Stock beneficially owned by
such persons qualify for ten votes per share, subject to the completion by such
persons of the Certifications contained on the reverse side of their Proxy
Cards. Information relating to beneficial ownership of Synovus Common Stock is
based upon information furnished by each person or entity using "beneficial
ownership" concepts set forth in the rules of the SEC under Section 13(d) of the
Exchange Act.
6
<TABLE>
<CAPTION>
Shares of Shares of
Synovus Shares of Synovus
Common Synovus Common Percentage of
Stock Common Stock Stock Total Shares Outstanding
Beneficially Beneficially Beneficially of Synovus Shares of
Owned with Owned with Owned with Common Synovus
Sole Voting Shared Voting Sole Voting Stock Common Stock
and Invest- and Invest- but no Invest- Beneficially Beneficially
ment Power ment Power ment Power Owned as of Owned as of
Name as of 12/31/96 as of 12/31/96 as of 12/31/96 12/31/96 12/31/96
- ---------------------- ------------------ -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Daniel P. Amos 30,435 203,868<F1> --- 237,918 .20%
Richard E. Anthony 231,505<F2> 30,754 17,786 280,045 .24
Joe E. Beverly 240,507<F3> 2,025 22,602 265,134 .23
James H. Blanchard 720,749<F4> 4,460 164,598 889,807 .76
Richard Y. Bradley 8,133 56,221 --- 64,354 .06
Stephen L. Burts, Jr. 107,579<F5> --- 21,212 128,791 .11
Walter M. Deriso, Jr. 13,987 1,663 --- 15,650 .01
C. Edward Floyd, M.D. 485,903 67,498 --- 553,401 .48
Gardiner W. Garrard, Jr. 88,481 635,938 --- 724,419 .62
V. Nathaniel Hansford 90,729 145,895 --- 236,624 .20
John P. Illges, III 247,356 116,445<F6> --- 363,801 .31
Mason H. Lampton 77,462 128,693<F7> --- 206,155 .18
Elizabeth C. Ogie 15,610 13,557,182<F8><F9> --- 13,572,792 11.67
John T. Oliver, Jr. 345,304<F10> 41,302<F11> 20,827 407,433 .35
H. Lynn Page 373,688 5,118 --- 378,806 .33
William L. Pherigo 184,395<F12> --- 7,676 192,071 .16
Robert V. Royall, Jr. 235,223<F13> 75,087 --- 310,310 .27
William B. Turner 41,649 13,503,372<F9> --- 13,545,021 11.64
George C. Woodruff, Jr. 56,605 30,000<F14> --- 86,605 .07
James D. Yancey 453,585<F15> 27,412 34,615 515,612 .44
<FN>
- ---------------------------
<F1> Includes 34,050 shares of Synovus Common Stock held by a charitable
foundation of which Mr. Amos is a trustee.
<F2> Includes 14,675 shares of Synovus Common Stock with respect to which Mr.
Anthony has options to acquire.
<F3> Includes 18,783 shares of Synovus Common Stock with respect to which Mr.
Beverly has options to acquire.
<F4> Includes 38,151 shares of Synovus Common Stock with respect to which Mr.
Blanchard has options to acquire.
<F5> Includes 24,800 shares of Synovus Common Stock with respect to which Mr.
Burts has options to acquire.
<F6> Includes 27,852 shares of Synovus Common Stock held by a charitable
foundation of which Mr. Illges is trustee.
<F7> Includes 117,639 shares of Synovus Common Stock held in a trust for which
Mr. Lampton is not the trustee. Mr. Lampton disclaims beneficial ownership
of such shares.
<F8> Includes 52,869 shares of Synovus Common Stock held by a charitable
foundation of which Mrs. Ogie is a trustee.
7
<F9> Includes 1,141,425 shares of Synovus Common Stock held by a charitable
foundation of which Mrs. Ogie and Mr. Turner are among the trustees, and
12,353,139 shares of Synovus Common Stock beneficially owned by TB&C
Bancshares, Inc., of which Mrs. Ogie and Mr. Turner are officers, directors
and shareholders.
<F10>Includes 18,468 shares of Synovus Common Stock with respect to which Mr.
Oliver has options to acquire.
<F11>Includes 45,427 shares of Synovus Common Stock held by a charitable
foundation of which Mr. Oliver is trustee.
<F12>Includes 84,055 shares of Synovus Common Stock with respect to which Mr.
Pherigo has options to acquire.
<F13>Includes 92,969 shares of Synovus Common Stock with respect to which Mr.
Royall has options to acquire.
<F14>Includes 30,000 shares of Synovus Common Stock held by a charitable
foundation of which Mr. Woodruff is a trustee.
<F15>Includes 24,588 shares of Synovus Common Stock with respect to which Mr.
Yancey has options to acquire.
</FN>
</TABLE>
The following table sets forth information, as of December 31, 1996, with
respect to the beneficial ownership of Synovus Common Stock by all directors and
executive officers of Synovus as a group. To the best of Synovus' knowledge, all
shares of Synovus Common Stock beneficially owned by all directors and executive
officers of Synovus qualify for ten votes per share, subject to the completion
by such persons of the Certifications contained on the reverse sides of their
Proxy Cards.
<TABLE>
<CAPTION>
Percentage of
Shares of Outstanding Shares of
Synovus Common Stock Synovus Common Stock
Name of Beneficially Owned Beneficially Owned
Beneficial Owner as of 12/31/96 as of 12/31/96
- ----------------------- ------------------------ ----------------------------
<S> <C> <C>
All directors
and executive
officers of Synovus
as a group 19,658,540 16.84%
(includes
24 persons)
</TABLE>
For a detailed discussion of the beneficial ownership of TSYS Common Stock
by Synovus' named executive officers and directors and by all directors and
executive officers of Synovus as a group, see Section V(C) hereof captioned
"TSYS Common Stock Ownership of Directors and Management."
C. Board Committees and Attendance.
The business and affairs of Synovus are under the direction of Synovus'
Board of Directors. During 1996, Synovus' Board of Directors held six regular
meetings and two special meetings. During 1996, each of Synovus' incumbent
directors attended at least 75% of the aggregate meetings of Synovus' Board of
Directors and the Committees thereof on which he or she sat.
Synovus' Board of Directors has three principal committees -- an Audit
Committee, a Compensation Committee and an Executive Committee. There is no
Nominating Committee of Synovus' Board of Directors.
Audit Committee. The members of the Audit Committee of Synovus' Board of
Directors are: Gardiner W. Garrard, Jr., Chairman, and George C. Woodruff, Jr.
The primary functions engaged in by Synovus' Audit Committee include: (i)
annually recommending to Synovus' Board the independent certified public
accountants ("Independent Auditors") to be engaged by Synovus for the next
fiscal year; (ii) reviewing the plan and results of the annual audit by Synovus'
Independent Auditors; (iii) reviewing and approving the range of management
advisory services provided by Synovus' Independent Auditors; (iv) reviewing
Synovus' internal audit function and the adequacy of the
8
internal accounting control systems of Synovus and its subsidiaries; (v)
reviewing the results of regulatory examinations of Synovus and its
subsidiaries; (vi) periodically reviewing the financial statements of Synovus
and the consolidated financial statements of Synovus and its subsidiaries; and
(vii) considering such other matters with regard to the internal and independent
audit of Synovus and its subsidiaries as, in its discretion, it deems to be
necessary or desirable, periodically reporting to Synovus' Board as to the
exercise of its duties and responsibilities and, where appropriate, recommending
matters in connection with the audit function with respect to which Synovus'
Board should consider taking action. During 1996, Synovus' Audit Committee held
one meeting.
Compensation Committee. The members of the Compensation Committee of
Synovus' Board of Directors are: Gardiner W. Garrard, Jr., Chairman, and Mason
H. Lampton. The primary functions engaged in by Synovus' Compensation Committee
include: (i) evaluating the remuneration of senior management and board members
of Synovus and its subsidiaries and the compensation and fringe benefit plans in
which officers, employees and directors of Synovus and its subsidiaries are
eligible to participate; and (ii) recommending to Synovus' Board whether or not
it should modify, alter, amend, terminate or approve such remuneration,
compensation or fringe benefit plans. During 1996, Synovus' Compensation
Committee held five meetings.
Executive Committee. The members of Synovus' Executive Committee are:
William B. Turner, Chairman, James H. Blanchard, Gardiner W. Garrard, Jr.,
George C. Woodruff, Jr., James D. Yancey, John T. Oliver, Jr. and Richard Y.
Bradley. During the intervals between meetings of Synovus' Board of Directors,
Synovus' Executive Committee possesses and may exercise any and all the powers
of Synovus' Board of Directors in the management and direction of the business
and affairs of Synovus with respect to which specific direction has not been
previously given by Synovus' Board of Directors. During 1996, Synovus' Executive
Committee held three meetings.
D. Executive Officers.
The following table sets forth the name, age and position with Synovus
of each present executive officer of Synovus.
<TABLE>
<CAPTION>
Name Age Position with Synovus
- ---------------------------- ------- ------------------------------------
<S> <C> <C>
James H. Blanchard 55 Chairman of the Board and Chief Executive Officer
William B. Turner 74 Chairman of the Executive Committee
John T. Oliver, Jr. 67 Vice Chairman of the Executive Committee
James D. Yancey 55 Vice Chairman of the Board
Richard E. Anthony 50 Vice Chairman of the Board
Walter M. Deriso, Jr. 50 Vice Chairman of the Board
Stephen L. Burts, Jr. 44 President
G. Sanders Griffith, III 43 Senior Executive Vice President, General
Counsel and Secretary
Thomas J. Prescott 42 Executive Vice President and
Chief Financial Officer
Jay C. McClung 48 Executive Vice President, Credit Administration
Calvin Smyre 49 Executive Vice President, Corporate Affairs
</TABLE>
Synovus' executive officers serve at the pleasure of Synovus' Board of
Directors. All of the executive officers of Synovus are members of Synovus'
Board of Directors, except G. Sanders Griffith, III, Thomas J. Prescott, Jay C.
McClung and Calvin Smyre.
9
G. Sanders Griffith, III serves as Senior Executive Vice President, General
Counsel and Secretary of Synovus, positions he has held since October, 1995.
From 1988 until 1995, Mr. Griffith served in various capacities with Synovus,
including Executive Vice President, General Counsel and Secretary. Thomas J.
Prescott was elected Executive Vice President and Chief Financial Officer of
Synovus in December, 1996. From 1987 until 1996, Mr. Prescott served in various
capacities with Synovus, including Executive Vice President and Treasurer. Jay
C. McClung was elected Executive Vice President of Synovus in January, 1995.
From 1986 until 1995, Mr. McClung served in various capacities with Columbus
Bank, including Senior Vice President. Calvin Smyre was elected Executive Vice
President of Synovus in November, 1996. From 1976 until 1996, Mr. Smyre served
in various capacities with Columbus Bank and/or Synovus, including Senior Vice
President of Synovus.
III. EXECUTIVE COMPENSATION
(1) Summary Compensation Table.
The following table summarizes the cash and noncash compensation for each
of the last three fiscal years for the chief executive officer of Synovus and
for the other four most highly compensated executive officers of Synovus.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation Awards
-------------------------------------------------------- --------------------------------
Other Restricted Securities All
Annual Stock Underlying Other
Name and Compen- Award(s) Options/ Compen-
Principal Position Year Salary Bonus sation <F1> <F2> SARs sation <F3>
- --------------------- ------ ------------- ------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
James H. Blanchard 1996 $589,375 $442,031 $2,000 $350,622 130,987 $322,527
Chairman of the 1995 475,000 356,250 2,000 454,664 79,844 240,351
Board and Chief 1994 337,650 253,238 2,000 146,246 38,151 146,943
Executive Officer
James D. Yancey 1996 410,000 266,500 2,000 375,367 52,063 264,256
Vice Chairman 1995 345,000 224,250 2,000 263,579 46,286 201,192
of the Board 1994 273,310 177,652 2,000 94,254 24,588 133,817
Stephen L. Burts, Jr. 1996 328,000 196,800 2,000 231,008 32,039 130,106
President and Chief 1995 272,500 168,500 1,833 162,206 28,484 110,172
Financial Officer 1994 208,050 129,830 -0- 56,252 14,675 61,360
Joe E. Beverly 1996 281,875 169,125 2,000 238,211 33,040 148,261
Vice Chairman 1995 257,500 154,500 2,000 167,254 29,373 125,699
of the Board 1994 234,660 140,796 2,000 72,002 18,783 95,406
Richard E. Anthony 1996 267,625 159,500 2,000 187,684 26,032 101,004
Vice Chairman of the 1995<F4> -- -- -- -- -- --
Board 1994<F4> -- -- -- -- -- --
<FN>
- ---------------------
<F1> Amount for 1996 includes matching contributions under the Director Stock
Purchase Plan of $2,000 each for Messrs. Blanchard, Yancey, Beverly, Burts
and Anthony. Perquisites and other personal benefits are excluded because
the aggregate amount does not exceed the lesser of $50,000 or 10% of annual
salary and bonus for the named executives.
10
<F2> Amount consists of value of award, net of consideration paid by the
executive. As of December 31, 1996, Messrs. Blanchard, Yancey, Burts,
Beverly and Anthony held 45,133, 34,615, 21,212, 22,602 and 17,786
restricted shares, respectively, with a value of $1,449,898, $1,112,007,
$681,436, $726,089 and $571,375, respectively. On July 1, 1996, restricted
stock was awarded in the amount of 16,210, 17,354, 10,680, 11,013 and 8,677
shares to Messrs. Blanchard, Yancey, Burts, Beverly and Anthony,
respectively, with the following vesting schedule: 20% on July 1, 1997;
20% on July 1, 1998; 20% on July 1, 1999; 20% on July 1, 2000; and 20% on
July 1, 2001. On September 5, 1995, restricted stock was awarded in the
amount of 26,615, 15,429, 9,495, 9,791 and 7,715 shares to Messrs.
Blanchard, Yancey, Burts, Beverly and Anthony, respectively, with the
following vesting schedule: 20% on September 4, 1996; 20% on September 4,
1997; 20% on September 4, 1998; 20% on September 4, 1999; and 20% on
September 4, 2000. On June 29, 1994, restricted stock was awarded in the
amount of 12,717, 8,196, 4,892, 6,261 and 4,892 shares to Messrs.
Blanchard, Yancey, Burts, Beverly and Anthony, respectively, with the
following vesting schedule: 20% on June 28, 1995; 20% on June 28, 1996; 20%
on June 28, 1997; 20% on June 1998; and 20% on June 28, 1999. Dividends are
paid on all restricted shares.
<F3> The 1996 amount includes director fees of $56,700, $57,900, $29,000,
$43,600 and $20,600 for Messrs. Blanchard, Yancey, Burts, Beverly and
Anthony, respectively, in connection with their service as directors of
Synovus and certain of its subsidiaries; contributions or other allocations
to defined contribution plans of $28,932 for each executive; allocations
pursuant to defined contribution excess benefit agreements of $184,532,
$129,192, $65,869, $55,236 and $50,752 for each of Messrs. Blanchard,
Yancey, Burts, Beverly and Anthony, respectively; premiums paid for group
term life insurance coverage of $720 for each executive; the economic
benefit of life insurance coverage related to split-dollar life insurance
policies of $1,339, $846, $39 and $529 for each of Messrs. Blanchard,
Yancey, Burts and Beverly, respectively; and the dollar value of the
benefit of premiums paid for split-dollar life insurance policies
(unrelated to term life insurance coverage) projected on an actuarial basis
of $50,304, $46,666, $5,546 and $19,244 for each of Messrs. Blanchard,
Yancey, Burts and Beverly, respectively.
<F4> Disclosure is not required for 1995 and 1994.
</FN>
</TABLE>
(2) Stock Option Exercises and Grants.
The following tables provide certain information regarding stock options
granted and exercised in the last fiscal year and the number and value of
unexercised options at the end of the fiscal year.
<TABLE>
<CAPTION>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
- -----------------------------------------------------------------------------------------
% of Total Potential
Options/ Realized Value at
SARs Exercise Assumed Annual Rates of
Options/ Granted to or Stock Price Appreciation
SARs Employees Base For Option Term <F2>
Granted in Fiscal Price Expiration ---------------------
Name (#)<F1> Year ($/Share) Date 5%($) 10% ($)
- ------------------------------ ------------ -------------- -------------- --------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
James H. Blanchard 130,987 10.26% $21.63 06/30/04 $1,353,096 $3,240,618
James D. Yancey 52,063 4.08% 21.63 06/30/04 537,811 1,288,039
Stephen L. Burts, Jr. 32,039 2.51% 21.63 06/30/04 330,963 792,645
Joe E. Beverly 33,040 2.59% 21.63 06/30/04 341,303 817,410
Richard E. Anthony 26,032 2.04% 21.63 06/30/04 268,911 644,032
<FN>
- -----------
<F1> Options granted on July 1, 1996 at fair market value to executives in
tandem with restricted stock awards as part of the Synovus 1994 Long-Term
Incentive Plan. Options become exercisable on July 1, 1998.
11
<F2> The dollar gains under these columns result from calculations using the
identified growth rates and are not intended to forecast future price
appreciation of Synovus Common Stock.
</FN>
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
Number of Securities Value of
Underlying Unexercised Unexercised In-the-Money
Shares Value Options/SARs at FY-End (#) Options/SARs at FY-End ($)<F1>
Acquired on Realized -------------------------- -------------------------------
Name Exercise (#) ($) <F1> Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------------ ------------ --------- --------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
James H. Blanchard -0- -0- 38,151 / 210,831 $786,864 / $2,728,464
James D. Yancey -0- -0- 24,588 / 98,349 507,128 / 1,331,180
Stephen L. Burts, Jr. -0- -0- 24,800 / 60,523 590,635 / 819,196
Joe E. Beverly -0- -0- 18,783 / 62,413 387,399 / 844,774
Richard E. Anthony -0- -0- 14,675 / 82,926 302,672 / 1,407,269
<FN>
- ----------
<F1> Market value of underlying securities at exercise or year-end, minus the
exercise or base price.
</FN>
</TABLE>
(3) Compensation of Directors.
Compensation. During 1996, each of Synovus' directors received a $15,000
annual retainer, and fees of $800 for each meeting of Synovus' Board of
Directors and each Executive Committee meeting they personally attended. Members
of the Committees of Synovus' Board of Directors (other than the Executive
Committee) received fees of $500, with the Chairmen of such Committees receiving
fees of $750, for each Committee meeting they personally attended. In addition,
directors of Synovus received an $800 fee for each board meeting from which
their absence was excused and an $800 fee for one meeting without regard to the
reason for their absence.
Director Stock Purchase Plan. Synovus' Director Stock Purchase Plan
("DSPP") is a non-tax-qualified, contributory stock purchase plan pursuant to
which qualifying directors can purchase, with the assistance of contributions
from Synovus, presently issued and outstanding shares of Synovus Common Stock.
Under the terms of the DSPP, qualifying directors can elect to contribute up to
$1,000 per calendar quarter to make purchases of Synovus Common Stock, and
Synovus contributes an additional amount equal to 50% of the director's cash
contribution. Participants in the DSPP are fully vested in, and may request the
issuance to them of, all shares of Synovus Common Stock purchased for their
benefit thereunder.
Consulting Agreement. H. Lynn Page, a director and the former Vice Chairman
of the Board of Synovus, and Synovus are parties to a Consulting Agreement
pursuant to which Mr. Page was paid $24,000 by Synovus during 1996 for providing
consulting and advisory services to Synovus in connection with portfolio
management and potential opportunities for business expansion.
(4) Employment Contracts and Change in Control Arrangements.
Blanchard Employment Agreement. On October 13, 1977, Synovus entered into
an Employment Agreement with James H. Blanchard ("Blanchard"), Chairman of the
Board of Synovus, whereunder Synovus paid Blanchard a salary of $589,375 during
1996. The base salary paid to Blanchard is determined by the Compensation
Committee of the Board of Directors of Synovus on an annual basis. The Blanchard
Employment Agreement provides that Synovus shall pay deferred compensation of
$468,000 to Blanchard or his beneficiaries over a 10 to 15 year period in the
event of Blanchard's death, total disability or termination of
employment, subject to certain conditions of forfeiture in the
12
event Synovus terminates Blanchard's employment "for cause" (as defined), in the
event of his violation of his 2-year Covenant Not to Compete, or in the event of
his death by suicide. The Blanchard Employment Agreement is automatically
renewable annually and is subject to termination on 30 days written notice.
Yancey Employment Agreement. On December 8, 1977, effective January 1,
1977, Synovus entered into an Employment Agreement with James D. Yancey
("Yancey"), Vice Chairman of the Board of Synovus and Columbus Bank, whereunder
Synovus paid Yancey a salary of $410,000 during 1996. The base salary paid to
Yancey is determined by the Compensation Committee of the Board of Directors of
Synovus on an annual basis. The Yancey Employment Agreement provides that
Synovus shall pay deferred compensation of $375,000 to Yancey or his
beneficiaries over a 10 to 15 year period in the event of the death, total
disability or termination of employment of Yancey, subject to certain conditions
of forfeiture in the event Synovus terminates Yancey's employment "for cause"
(as defined), in the event of his violation of his 2-year Covenant Not to
Compete, or in the event of his death by suicide. The Yancey Employment
Agreement is automatically renewable annually and is subject to termination on
30 days written notice.
Beverly Employment Agreement. On January 15, 1979, Synovus entered into an
Employment Agreement with Joe E. Beverly ("Beverly"), Vice Chairman of the Board
of Synovus, whereunder Beverly was paid a salary of $281,875 during 1996. The
base salary paid to Beverly is determined by the Compensation Committee of the
Board of Directors of Synovus on an annual basis. The Beverly Employment
Agreement provides that Synovus shall pay deferred compensation of $375,000 to
Beverly or his beneficiaries over a 10 to 15 year period in the event of
Beverly's death, total disability or termination of employment, subject to
certain conditions of forfeiture in the event Synovus terminates Beverly's
employment "for cause" (as defined), in the event of his violation of his 2-year
Covenant Not to Compete, or in the event of his death by suicide. The Beverly
Employment Agreement was terminated effective December 31, 1996 in connection
with Mr. Beverly's retirement as Vice Chairman of Synovus. Under a consulting
arrangement between Synovus and Mr. Beverly, Mr. Beverly will be paid $24,000
annually for a five year period beginning in 1997 for providing consulting and
advisory services to Synovus.
Anthony Employment Agreement. On December 31, 1992, Synovus entered into an
Employment Agreement with Richard E. Anthony ("Anthony"), Vice Chairman of the
Board of Synovus, whereunder Anthony was paid a salary of $267,625 during 1996.
The base salary paid to Anthony is determined by the Compensation Committee of
the Board of Directors of Synovus on an annual basis. The Anthony Employment
Agreement is for a five year term.
Long-Term Incentive Plans. Messrs. Blanchard, Yancey, Burts, Beverly and
Anthony each hold shares of restricted stock of Synovus and options to purchase
stock of Synovus which were issued pursuant to the Synovus Financial Corp. 1992
and 1994 Long-Term Incentive Plans. Under the terms of the Synovus Financial
Corp. 1992 and 1994 Long-Term Incentive Plans, in the event of a change in
control of Synovus, the vesting of any stock options, stock appreciation and
other similar rights, restricted stock and performance awards will be
accelerated so that all awards not previously exercisable and vested will become
fully exercisable and vested.
Change of Control Agreements. Effective January 1, 1996, Synovus entered
into Change of Control Agreements ("Agreements") with Messrs. Blanchard, Yancey,
Burts, Beverly and Anthony and certain other executive officers. The Change of
Control Agreements provide severance pay and continuation of certain benefits in
the event of a Change of Control. In order to receive benefits under the
Agreements, the executive's employment must be terminated involuntarily, without
cause, whether actual or "constructive" within one year following a Change of
Control or the executive may voluntarily or involuntarily terminate employment
during the thirteenth month following a Change of Control. Generally, a "Change
of Control" is deemed to occur in any of the following circumstances: (1) the
acquisition by any person of 20% or more of the "beneficial ownership" of
Synovus'
13
outstanding voting stock, with certain exceptions for Turner family members; (2)
the persons serving as directors of Synovus as of January 1, 1996 and those
replacements or additions subsequently approved by a two-thirds (2/3) vote of
the Board ceasing to comprise at least two-thirds (2/3) of the Board; (3) a
merger, consolidation, reorganization or sale of Synovus' assets unless (a) the
previous beneficial owners of Synovus own more than two-thirds (2/3) of the new
company, (b) no person owns more than 20% of the new company, and (c) two-thirds
(2/3) of the new company's Board were members of the incumbent Board which
approved the business combination; or (4) a "triggering event" occurs as defined
in the Synovus Rights Agreement.
Under the Agreements, severance pay would equal three times current base
salary and bonus, with bonus being defined as the average of the previous three
years measured as a percentage of base salary multiplied by current base salary.
Medical, life, disability and other welfare benefits will be provided at the
expense of Synovus for three years with the level of coverage being determined
by the amount elected by the executive during the open enrollment period
immediately preceding the Change of Control. Executives would also receive a
short-year bonus for the year of separation based on the greater of a half
year's maximum bonus or pro rata maximum bonus to the date of termination and a
cash amount in lieu of a long-term incentive award for the year of separation.
If the executive has already received a long-term incentive award in the
separation year, the amount would equal 1.5 times the market grant and if the
executive has not, the amount would equal 2.5 times the market grant.
Executives who are impacted by the Internal Revenue Service excise tax that
applies to certain change of control agreements would receive additional gross
up payments so that they are in the same position as if there were no excise
tax. The Agreements do not provide for retirement benefits or perquisites.
Notwithstanding anything to the contrary set forth in any of Synovus'
previous filings under the Securities Act of 1933, as amended, or the Exchange
Act that might incorporate future filings, including this Proxy Statement, in
whole or in part, the following Performance Graph and Compensation Committee
Report on Executive Compensation shall not be incorporated by reference into any
such filings.
(5) Stock Performance Graph.
The following graph compares the yearly percentage change in cumulative
shareholder return on Synovus Common Stock with the cumulative total return of
the Standard & Poor's 500 Index and the Keefe, Bruyette & Woods 50 Bank Index
for the last five fiscal years (assuming a $100 investment on December 31, 1991
and reinvestment of all dividends).
14
[Omitted Stock Performance Graph is represented by the following table.]
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
SYNOVUS FINANCIAL CORP., S&P 500 AND KBW 50 BANK INDEX
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Synovus $100 $131 $162 $161 $260 $447
S&P 500 $100 $108 $118 $120 $165 $203
KBW 50 $100 $128 $135 $128 $205 $288
</TABLE>
(6) Compensation Committee Report on Executive Compensation.
The Compensation Committee (the "Committee") of the Board of Directors of
Synovus is responsible for evaluating the remuneration of senior management and
board members of Synovus and its subsidiaries and the compensation and fringe
benefit plans in which officers, employees and directors of Synovus and its
subsidiaries are eligible to participate. Because Synovus' mission is to create
superior shareholder value by retaining and attracting well-trained and
highly-motivated people who deliver the very best quality customer service, the
Committee's executive compensation policies are designed to attract and retain
highly-motivated and well-trained executives in order to create superior
shareholder value.
Elements of Executive Compensation. The four elements of executive
compensation at Synovus are:
o Base Salary
o Annual Bonus
o Long-Term Incentives
o Other Benefits
The Committee believes that a substantial portion, though not a majority,
of an executive's compensation should be "at-risk" based upon Synovus'
short-term performance (through the annual bonus and the Synovus/TSYS Profit
Sharing Plan and the Synovus/TSYS 401(k) Savings Plan) and long-term performance
(through long-term incentives including stock options and restricted stock
awards). The remainder of each executive's compensation is primarily based upon
the competitive practices of a select group of approximately 18 banks that had
similar "market value added" as Synovus during the previous
ten years ("similar companies"). "Market value added," or
15
"MVA," as used by the Committee in this context, equals stock price increase
during the ten-year period, plus dividends for the ten-year period, minus
increases to paid-in capital during such period. This subtraction eliminates
value added through acquisitions. The Committee believes the MVA approach
accurately reflects Synovus' competitors and represents the most appropriate
market data for the compensation of Synovus executives. The companies used for
comparison under the "MVA" approach are not the same companies included in the
peer group index appearing in the Stock Performance Graph above.
A description of each element of executive compensation and the factors and
criteria used by the Committee in determining these elements is discussed below:
Base Salary. Base salary is an executive's annual rate of pay without
regard to any other elements of compensation. The primary consideration in
determining an executive's base salary is a market comparison of the base
salaries at similar companies for similar positions based upon the executive's
level of responsibility and experience. Base salaries are targeted at the median
level of the similar companies used in the comparison. In addition to market
comparisons, individual performance (measured by the quality of Synovus'
strategic plan, the executive's management responsibilities and development, and
the executive's industry and civic involvement) is also considered in
determining an executive's base salary, although these factors do not weigh
heavily in determining base salary. Based solely upon market comparisons, the
Committee increased Mr. Blanchard's base salary in 1996. The Committee also
increased the base salaries of Synovus' other executive officers in 1996 based
solely upon market comparisons.
Annual Bonus. Annual bonuses are awarded pursuant to the terms of Synovus'
Executive Bonus Plan and Synovus' Incentive Bonus Plan (collectively the
"plans"). The Committee has the discretion from year-to-year to select
participants in the Executive Bonus Plan, which was approved by the shareholders
of Synovus in 1996. For 1996, the Committee selected Mr. Blanchard and Mr.
Yancey to participate in the Executive Bonus Plan, while the Committee selected
Messrs. Burts, Beverly and Anthony to participate in the Incentive Bonus Plan.
Under the terms of the plans, bonus amounts are paid as a percentage of base pay
based on the achievement of previously established performance goals. The
performance measures for such goals may be chosen by the Committee from among
the following for Synovus, any of its business segments and/or any of its
business units: (i) return on assets; (ii) net income; (iii) operating income;
(iv) nonperforming assets and/or loans as a percentage of total assets and/or
loans; (v) return on capital compared to cost of capital; (vi) earnings per
share and/or earnings per share growth; (vii) return on equity; (viii)
noninterest expense as a percentage of total expense; (ix) loan charge-offs as a
percentage of total loans; (x) productivity and expense control; (xi) number of
cardholder, merchant and/or other customer accounts processed and/or converted
by TSYS; (xii) successful negotiation or renewal of contracts with new and/or
existing customers by TSYS; (xiii) stock price; and (xiv) asset growth. For Mr.
Blanchard and Synovus' other executive officers, the Committee established a
payout matrix based upon the attainment of net income targets during 1996.
Synovus' financial performance and individual performance, separate from the
performance goals established at the beginning of the year, can reduce bonus
awards determined by the attainment of the established goals, although this was
not the case for any of Synovus' executive officers. The maximum percentage
payouts under the plans for 1996 were 75% for Mr. Blanchard, 65% for Mr. Yancey
and 60% for Messrs. Burts, Beverly and Anthony. Because the maximum net income
target for 1996 under the plans was exceeded and the overall financial results
of Synovus were favorable, Mr. Blanchard and Synovus' other executive officers
were awarded the maximum bonus amount for which each executive was eligible
under the plans.
Long-Term Incentives. The two types of long-term incentives awarded to
executives to date are stock options and restricted stock awards. Restricted
stock awards are designed to focus executives on the long-term performance of
Synovus. Stock options provide executives with the opportunity to buy and
maintain an equity interest in Synovus and to share in the appreciation
of the value of Synovus Common Stock. Executives are encouraged
to hold the shares received upon the lapse of
16
restrictions on restricted stock awards and upon the exercise of stock options,
linking their interests to those of Synovus' shareholders. In 1994, the
Committee established a payout matrix for future long-term incentive grants that
uses total shareholder return as measured by Synovus' performance (stock price
increases plus dividends) and how Synovus' total shareholder return compares to
the return of the peer group of companies appearing in the Stock Performance
Graph above. For the long-term incentive awards made in 1996, total shareholder
return and peer comparisons were measured during the 1993 through 1995
performance period. Applying the results of the 1993 through 1995 performance
period to the payout matrix, the Committee granted Mr. Blanchard and Synovus'
other executive officers restricted stock awards and stock options in 1996.
Benefits. Benefits offered to executives serve a different purpose than the
other elements of total compensation. In general, these benefits provide either
retirement income or protection against catastrophic events such as illness,
disability and death. Executives generally receive the same benefits offered to
the general employee population, with the only exceptions designed to promote
tax efficiency or to replace other benefits lost due to regulatory limits. The
Synovus/TSYS Profit Sharing Plan and the Synovus/TSYS 401(k) Savings Plan,
including an excess benefit arrangement designed to replace benefits lost due to
regulatory limits (collectively the "Plan"), is the largest component of
Synovus' benefits package for executives. The Plan is directly related to
corporate performance because the amount of contributions to the Plan (to a
maximum of 14% of an executive's compensation) is a function of Synovus'
profitability. For 1996, Mr. Blanchard and Synovus' other executive officers
received a Plan contribution of 12% of their compensation based upon the
profitability formula under the Plan. The remaining benefits provided to
executives are primarily based upon the competitive practices of similar
companies.
In 1993, the Internal Revenue Code of 1986, as amended (the "Code"), was
amended to limit the deductibility for federal income tax purposes of annual
compensation paid by a publicly held corporation to its chief executive officer
and four other highest paid executives for amounts greater than $1 million
unless certain conditions are met. Because the Committee seeks to maximize
shareholder value, the Committee has taken steps to ensure the deductibility of
compensation in excess of $1 million. For 1996, Messrs. Blanchard and Yancey
would have been affected by this provision but for the steps taken by the
Committee. However, the Committee reserves the ability to make awards which do
not qualify for full deductibility under Section 162(m) of the Code if the
Committee determines that the benefits of so doing outweigh full deductibility.
The Committee believes that the executive compensation policies serve the
best interests of the shareholders and of Synovus. A substantial portion of the
compensation of Synovus' executives is directly related to and commensurate with
Synovus' performance. The Committee believes that the performance of Synovus to
date validates the Committee's compensation philosophy.
Gardiner W. Garrard, Jr.
Mason H. Lampton
(7) Compensation Committee Interlocks and Insider Participation.
William B. Turner, Gardiner W. Garrard, Jr., George C. Woodruff, Jr. and
Mason H. Lampton served as members of Synovus' Compensation Committee during
1996. Messrs. Garrard, Woodruff and Lampton are not current or former officers
or employees of Synovus or its subsidiaries.
Mr. Turner is Chairman of the Executive Committee of Synovus and Columbus
Bank, a director of TSYS and, during 1996, was Chairman of the Executive
Committee of W.C. Bradley Co. James H. Blanchard, Chairman of the Board of
Synovus and Chairman of the Executive Committee of TSYS, serves as a director of
Columbus Bank and W.C. Bradley Co. James D. Yancey is Vice Chairman of the Board
of Synovus and Columbus Bank and is a director of TSYS.
During 1996, Synovus and its subsidiaries, including Columbus
Bank, paid to W.C. Bradley Co. an aggregate of $17,395, which
17
payments were primarily for printing services and marketing materials provided
by W.C. Bradley Co. These payments were made in the ordinary course of business
on substantially the same terms as those prevailing at the time for comparable
transactions with unrelated third parties. Synovus' wholly owned subsidiary,
Synovus Service Corp., and TSYS lease various properties in Columbus, Georgia,
from W.C. Bradley Co. for office space and storage. The rent paid for the space
in 1996 by Synovus Service Corp., which is approximately 35,400 square feet, is
approximately $83,230. The rent paid for the space in 1996 by TSYS, which is
approximately 71,915 square feet, is approximately $688,403. The lease
agreements were made on substantially the same terms as those prevailing at the
time for comparable leases for similar facilities with an unrelated third party
in Columbus, Georgia.
Columbus Bank and W.C. Bradley Co. are equal partners in B&C Company, a
Georgia general partnership formed to acquire, own and operate aircraft for
their mutual benefit and the benefit of their affiliated corporations and their
employees. Columbus Bank and W.C. Bradley Co. have each agreed to remit to B&C
Company fixed fees for each hour they fly the aircraft owned and/or leased by
B&C Company, plus certain other amounts for engine startup and reserves and
other items, and have agreed to fly such aircraft for a fixed number of hours
each per year. For use of such aircraft during 1996, Columbus Bank paid to B&C
Company an aggregate sum of $1,394,014. This amount represents the charges
incurred by Columbus Bank and its affiliated corporations for use of B&C Company
aircraft, and includes $600,953 for TSYS' use of such aircraft, for which
Columbus Bank was reimbursed by TSYS.
CGK Investment Company is a Georgia general partnership formed by: (1)
Grove Investment Co., a family partnership comprised of William B. Turner and
certain of his descendants; (2) Kidoga Investment Company, a family partnership
comprised of Sarah T. Butler (the sister of William B. Turner) and certain of
her descendants; and (3) Cornfield Investment Company, a family partnership
comprised of Elizabeth T. Corn (the sister of William B. Turner) and certain of
her descendants. During 1996, Columbus Bank purchased 4.03 acres of land in
Columbus, Georgia from CGK Investment Company for $953,000 on which it is
constructing a residential lending facility. The purchase price represents the
fair market value of the property as determined by independent appraisers.
TB&C Bancshares, Inc. is a principal shareholder of Synovus. TB&C
Bancshares, Inc. is a "family bank holding company" organized by William B.
Turner, and his sisters, Sarah T. Butler and Elizabeth T. Corn. TB&C Bancshares,
Inc. is a party to a lease agreement pursuant to which it leases voting and
certain other rights in a total of 5,916,378 shares of Synovus Common Stock held
in trust by Synovus Trust Company, a subsidiary of Columbus Bank, as Trustee of
three trusts for the benefit of Mr. Turner, Mrs. Butler and Mrs. Corn and their
respective descendants. During 1996, TB&C Bancshares, Inc. paid Synovus Trust
Company, as Trustee, $523,008 pursuant to the terms of the lease agreement,
which amount represents the fair market value of the voting rights as determined
by an independent appraiser. William B. Turner, Chairman of the Executive
Committee of Synovus and Columbus Bank and a director of TSYS, was an officer,
director and shareholder of W.C. Bradley Co. during 1996 and is an officer,
director and shareholder of TB&C Bancshares, Inc. James H. Blanchard, Chairman
of the Board of Synovus, Chairman of the Executive Committee of TSYS and a
director of Columbus Bank, is a director of W.C. Bradley Co. Elizabeth C. Ogie,
the niece of William B. Turner, is a director of W.C. Bradley Co., Columbus Bank
and Synovus and is an officer, director and shareholder of TB&C Bancshares, Inc.
W. Walter Miller, Jr., the brother-in-law of Elizabeth C. Ogie, is a director of
W.C. Bradley Co. and Senior Vice President and a director of TSYS. Stephen T.
Butler, the nephew of William B. Turner, is an officer and director of W.C.
Bradley Co., an officer, director and shareholder of TB&C Bancshares, Inc. and
is a director of Columbus Bank. Samuel M. Wellborn, III, Chairman of the Board
of Columbus Bank, is a director of W.C. Bradley Co. W.B. Turner, Jr., the son of
William B. Turner, is an officer and director of W. C. Bradley
Co., an officer, director and shareholder of TB&C Bancshares,
Inc. and a director of Columbus Bank. John T.
18
Turner, the son of William B. Turner, is an officer and director of W.C. Bradley
Co., a shareholder of TB&C Bancshares, Inc. and a director of Columbus Bank.
Sarah T. Butler and Elizabeth T. Corn, the sisters of William B. Turner, are
shareholders of W.C. Bradley Co., are officers, directors and shareholders of
TB&C Bancshares, Inc. and may be deemed to be principal shareholders of Synovus
as a result of their relationship with TB&C Bancshares, Inc.
Gardiner W. Garrard, Jr. is President of The Jordan Company. TSYS leases
from The Jordan Company approximately 10,000 square feet of office space in
Columbus, Georgia for $5,900 per month, which lease expires on September 30,
1999. The lease was made on substantially the same terms as those prevailing at
the time for leases of comparable property between unrelated third parties.
During 1996, The Jordan Company received payments from a third party lessor of
$116,440 in connection with its representation of TSYS as leasing agent in
securing office space in Atlanta, Georgia. The payments were made in the
ordinary course of business on substantially the same terms as those prevailing
at the time for comparable transactions with unrelated third parties. Gardiner
W. Garrard, Jr., a director of TSYS, Columbus Bank and Synovus, is an officer,
director and shareholder of The Jordan Company. Richard M. Olnick, the
brother-in-law of Gardiner W. Garrard, Jr. and a director of Columbus Bank, is
an officer, director and shareholder of The Jordan Company.
George C. Woodruff, Jr. is a shareholder of George C. Woodruff Co. During
1996, George C. Woodruff Co. received payments of $4,019, $39,157 and $39,087 in
connection with office space leased by, and landscaping services provided for,
Synovus, Columbus Bank and TSYS, respectively. These payments were made in the
ordinary course of business on substantially the same terms as those prevailing
at the time for comparable transactions with unrelated third parties. George C.
Woodruff, Jr. is a director of Synovus, Columbus Bank and TSYS.
(8) Transactions with Management.
During 1996, the subsidiary banks of Synovus had outstanding loans directly
to or indirectly accruing to the benefit of certain of the then directors and
executive officers of Synovus, and their related interests. These loans were
made in the ordinary course of business and were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with others. In the opinion of Synovus' management,
such loans do not involve more than normal risks of collectibility or present
other unfavorable features. In the future, the subsidiary banks of Synovus
expect to have banking transactions in the ordinary course of business with
Synovus' directors, executive officers and their related interests.
During 1996, Synovus and its wholly owned subsidiaries and TSYS paid to
Communicorp, Inc. an aggregate of $487,081 and $504,389, respectively. These
payments were made in the ordinary course of business on substantially the same
terms as those prevailing at the time for comparable transactions with unrelated
third parties, and were primarily for various printing and business
communication services provided by Communicorp, Inc. to Synovus and its
wholly owned subsidiaries and TSYS. Communicorp, Inc. is a wholly owned
subsidiary of AFLAC Incorporated. Daniel P. Amos, a director of Synovus and
Columbus Bank, is Chief Executive Officer and a director of AFLAC Incorporated.
Bradley & Hatcher, a law firm located in Columbus, Georgia, performed legal
services on behalf of Synovus Trust Company during 1996 and was retained by TSYS
in 1996 to perform legal services on its behalf. Richard Y. Bradley, a director
of Synovus, Columbus Bank and TSYS, is a partner of Bradley & Hatcher.
For information about transactions with companies that are affiliates of
William B. Turner, Gardiner W. Garrard, Jr. and George C. Woodruff, Jr.,
directors of Synovus, See Section III (7) hereof captioned "Compensation
Committee Interlocks and Insider Participation."
19
IV. PRINCIPAL SHAREHOLDERS
The following table sets forth the number of shares of Synovus Common Stock
held by the only known holders of more than 5% of the outstanding shares of
Synovus Common Stock.
<TABLE>
<CAPTION>
Percentage of
Shares of Outstanding Shares of
Synovus Common Stock Synovus Common Stock
Name and Address of Beneficially Owned Beneficially Owned
Beneficial Owner as of 12/31/96 as of 12/31/96
- ----------------------- ------------------------- ---------------------------
<S> <C> <C>
Synovus Trust Company 16,259,195<F1> 13.97%
1148 Broadway
Columbus, Georgia 31901
TB&C Bancshares, Inc.<F2> 12,353,139 10.62
1017 Front Avenue
Columbus, Georgia 31901
William B. Turner<F2> 13,545,021<F3><F4> 11.64
P.O. Box 120
Columbus, Georgia 31902
Sarah T. Butler <F2> 13,563,087<F3><F5> 11.66
P.O. Box 120
Columbus, Georgia 31902
Elizabeth T. Corn<F2> 13,734,924<F3><F6> 11.81
P.O. Box 120
Columbus, Georgia 31902
W.B. Turner, Jr.<F2> 13,516,173<F3><F7> 11.62
P.O. Box 120
Columbus, Georgia 31902
Stephen T. Butler<F2> 13,532,736<F3><F8> 11.63
P.O. Box 120
Columbus, Georgia 31902
Elizabeth C. Ogie<F2> 13,572,792<F3><F9> 11.67
P.O. Box 120
Columbus, Georgia 31902
<FN>
- -----------------------------------
<F1> As of December 31, 1996, the banking and trust company subsidiaries of
Synovus, including Columbus Bank through its wholly owned subsidiary
Synovus Trust Company ("Synovus Trust"), held in various fiduciary
capacities a total of 16,662,012 shares of Synovus Common Stock as to which
they possessed sole or shared voting or investment power. Of this total,
Synovus Trust held 9,930,911 shares as to which it possessed sole
investment power, 8,796,482 shares as to which it possessed sole voting
power, 292,441 shares as to which it possessed shared voting power and
6,328,284 shares as to which it possessed shared investment power. The
other banking subsidiaries of Synovus held 377,345 shares as to which they
possessed sole voting or investment power and 25,472 shares as to which
they possessed shared voting and investment power. In addition, as of
December 31, 1996, Synovus Trust and the banking subsidiaries of Synovus
held in various agency capacities an additional 9,981,359 shares of Synovus
Common Stock as to which they possessed no voting or investment power. Of
this additional amount as to which no voting or investment power was
possessed, Synovus Trust and the banking subsidiaries of Synovus held
9,784,999 and 196,360 shares, respectively. Synovus and its subsidiaries
disclaim beneficial ownership of all shares of Synovus Common Stock which
are held by them in various fiduciary and agency capacities.
20
<F2> TB&C Bancshares, Inc. ("TB&C") is a "family bank holding company" organized
by William B. Turner (the Chairman of Synovus' Executive Committee) and his
sisters, Sarah T. Butler and Elizabeth T. Corn. The six directors of TB&C,
Mr. Turner, Mmes. Butler and Corn, Elizabeth C. Ogie (the daughter of Mrs.
Corn), Stephen T. Butler (the son of Mrs. Butler), and William B. Turner,
Jr. (the son of Mr. Turner), are each construed to be the beneficial owners
of the 12,353,139 shares of Synovus Common Stock beneficially owned by
TB&C. As TB&C owns 10.62% of the outstanding shares of Synovus Common
Stock, TB&C is registered as a bank holding company. To the best of
Synovus' knowledge, the shares of Synovus Common Stock beneficially owned
by TB&C qualify for ten votes per share, subject to the completion by TB&C
of the Certification contained on the reverse side of its Proxy Card.
<F3> Includes 6,436,761 shares of Synovus Common Stock individually owned by
TB&C; 1,141,425 shares held by a charitable foundation of which each of the
directors of TB&C is a trustee; in the case of Mrs. Corn and Mrs. Ogie,
52,869 shares of Synovus Common Stock held by a charitable foundation of
which Mrs. Corn and Mrs. Ogie are trustees; and 5,916,378 shares of Synovus
Common Stock benefically owned by TB&C pursuant to a lease agreement
between TB&C and Synovus Trust as Trustee of three trusts for the benefit
of Mr. Turner, Mrs. Butler and Mrs. Corn and their respective descendants.
Pursuant to the agreement, TB&C leases from Synovus Trust as Trustee of
such trusts voting and certain other rights with respect to the shares of
Synovus Common Stock held in such trusts.
<F4> In addition to the shares of Synovus Common Stock described in footnote 3
above, Mr. Turner possessed sole voting and investment power with respect
to 41,649 shares and shared voting or investment power with respect to
8,808 shares of Synovus Common Stock.
<F5> In addition to the shares of Synovus Common Stock described in footnote 3
above, Mrs. Butler possessed sole voting and investment power with respect
to 29,080 shares and shared voting or investment power with respect to
39,443 shares of Synovus Common Stock.
<F6> In addition to the shares of Synovus Common Stock described in footnote 3
above, Mrs. Corn possessed sole voting and investment power with respect to
2,769 shares and shared voting or investment power with respect to 184,722
shares of Synovus Common Stock.
<F7> In addition to the shares of Synovus Common Stock described in footnote 3
above, Mr. Turner possessed sole voting and investment power with respect
to 16,341 shares and shared voting or investment power with respect to
5,268 shares of Synovus Common Stock.
<F8> In addition to the shares of Synovus Common Stock described in footnote 3
above, Mr. Butler possesssed sole voting and investment power with respect
to 35,974 shares and shared voting or investment power with respect to
2,198 shares of Synovus Common Stock.
<F9> In addition to the shares of Synovus Common Stock described in footnote 3
above, Mrs. Ogie possessed sole voting and investment power with respect to
15,610 shares and shared voting or investment power with respect to 9,749
shares of Synovus Common Stock.
</FN>
</TABLE>
21
V. RELATIONSHIPS BETWEEN SYNOVUS, COLUMBUS BANK, TSYS AND CERTAIN OF
SYNOVUS' SUBSIDIARIES AND AFFILIATES
A. Beneficial Ownership of TSYS Common Stock by Columbus Bank.
The following table sets forth, as of December 31, 1996, the number of
shares of TSYS Common Stock beneficially owned by Columbus Bank, the only known
beneficial owner of more than 5% of the issued and outstanding shares of TSYS
Common Stock.
<TABLE>
<CAPTION>
Percentage of
Shares of Outstanding Shares of
TSYS Common Stock TSYS Common Stock
Name and Address Beneficially Owned Beneficially Owned
Beneficial Owner as of 12/31/96 as of 12/31/96
- ----------------------- ------------------------ ------------------------
<S> <C> <C>
Columbus Bank
and Trust Company 104,401,292<F1><F2> 80.7%
1148 Broadway
Columbus, Georgia 31901
<FN>
- -----------------
<F1> Columbus Bank individually owns these shares.
<F2> As of December 31, 1996, Synovus Trust held in various fiduciary capacities
a total of 743,852 shares (.57%) of TSYS Common Stock. Of this total,
Synovus Trust held 569,414 shares as to which it possessed sole voting
power, 580,570 shares as to which it possessed sole investment power and
163,282 shares as to which it possessed shared voting and investment power.
In addition, as of December 31, 1996, Synovus Trust held in various agency
capacities an additional 1,291,408 shares of TSYS Common Stock as to which
it possessed no voting or investment power. Synovus and Synovus Trust
disclaim beneficial ownership of all shares of TSYS Common Stock which are
held by Synovus Trust in various fiduciary and agency capacities.
</FN>
</TABLE>
Columbus Bank, by virtue of its ownership of 104,401,292 shares, or 80.7%
of the outstanding shares of TSYS Common Stock on December 31, 1996, presently
controls TSYS. Synovus presently controls Columbus Bank.
B. Interlocking Directorates of Synovus, Columbus Bank and TSYS.
Eight of the members of and nominees to serve on Synovus' Board of
Directors also serve as members of the Boards of Directors of TSYS and Columbus
Bank. They are James H. Blanchard, Richard Y. Bradley, Gardiner W. Garrard, Jr.,
John P. Illges, III, H. Lynn Page, William B. Turner, George C. Woodruff, Jr.
and James D. Yancey. Daniel P. Amos and Elizabeth C. Ogie serve as members of
the Board of Directors of Columbus Bank but do not serve as members of the Board
of Directors of TSYS. Mason H. Lampton serves on the Board of Directors of TSYS
and as an Advisory Director of Columbus Bank.
C. TSYS Common Stock Ownership of Directors and Management.
The following table sets forth, as of December 31, 1996, the number of
shares of TSYS Common Stock beneficially owned by each of Synovus' directors and
Synovus' five most highly compensated executive officers.
22
<TABLE>
<CAPTION>
Shares of TSYS Shares of TSYS Percentage of
Common Stock Common Stock Total Outstanding
Beneficially Beneficially Shares Shares of
Owned with Owned with of TSYS TSYS Common
Sole Voting Shared Voting Common Stock Stock
and Investment and Investment Beneficially Beneficially
Power as of Power as of Owned as of Owned as of
Name 12/31/96 12/31/96 12/31/96 12/31/96
- --------------------------- ------------------- --------------------- ------------------- -------------
<S> <C> <C> <C> <C>
Daniel P. Amos ----- 547,200 547,200 .42%
Richard E. Anthony ----- ----- ----- ---
Joe E. Beverly ----- ----- ----- ---
James H. Blanchard 520,800 240,902 761,702 .59
Richard Y. Bradley 13,770 ----- 13,770 .01
Stephen L. Burts,Jr. ----- ----- ----- ---
Walter M. Deriso, Jr. 2,512 2,512 5,024 .004
C. Edward Floyd, M.D. ----- ----- ----- ---
Gardiner W. Garrard, Jr. 6,022 ----- 6,022 .005
V. Nathaniel Hansford ----- 1,000 1,000 .001
John P. Illges, III 122,294 ----- 122,294 .09
Mason H. Lampton 17,521 68,440<F1> 85,961 .07
Elizabeth C. Ogie 6,800 19,280<F2> 26,080 .02
John T. Oliver, Jr. ----- ----- ----- ---
H. Lynn Page 421,589 63,764 485,353 .38
William L. Pherigo 1,000 ----- 1,000 .001
Robert V. Royall, Jr. 10,000 ----- 10,000 .01
William B. Turner 101,886 384,000 485,886 .38
George C. Woodruff, Jr. 76,092 ----- 76,092 .06
James D. Yancey 533,510 16,000 549,510 .43
<FN>
- --------------
<F1> Includes 19,200 shares of TSYS Common Stock held in a trust for which Mr.
Lampton is not the trustee. Mr. Lampton disclaims beneficial ownership of
such shares.
<F2> Includes 52,869 shares of TSYS Common Stock held by a charitable foundation
of which Mrs. Ogie is a trustee.
</FN>
</TABLE>
The following table sets forth information, as of December 31, 1996, with
respect to the beneficial ownership of TSYS Common Stock by all directors and
executive officers of Synovus as a group.
<TABLE>
<CAPTION>
Percentage of
Shares of Outstanding Shares of
TSYS Common Stock TSYS Common Stock
Name of Beneficially Owned Beneficially Owned
Beneficial Owner as of 12/31/96 as of 12/31/96
- ------------------------------ ----------------------- ----------------------
<S> <C> <C>
All directors
and executive
officers of Synovus as a
group 3,192,380 2.47%
(includes 24 persons)
</TABLE>
23
D. Transactions and Agreements Between Synovus, Columbus Bank, TSYS and
Certain of Synovus' Subsidiaries.
During 1996, Columbus Bank and 29 of Synovus' other banking subsidiaries
received bankcard data processing services from TSYS. The bankcard data
processing agreement between Columbus Bank and TSYS can be terminated by
Columbus Bank upon 60 days prior written notice to TSYS or terminated by TSYS
upon 180 days prior written notice to Columbus Bank. During 1996, TSYS derived
$1,809,847 in revenues from Columbus Bank and 29 of Synovus' other banking
subsidiaries from the performance of bankcard data processing services and
$128,411 in revenues from Synovus and its subsidiaries from the performance of
other data processing services. TSYS' charges to Columbus Bank and Synovus'
other subsidiaries for bankcard and other data processing services are
comparable to, and are determined on the same basis as, charges by TSYS to
similarly situated unrelated third parties.
Synovus Service Corp. ("SSC"), a wholly owned subsidiary of Synovus,
provides various services to Synovus' subsidiary companies, including TSYS. TSYS
and SSC are parties to Lease Agreements pursuant to which SSC leased from TSYS
office space for lease payments aggregating $107,449 during 1996, and TSYS
leased from SSC office space for lease payments aggregating $34,472 during 1996.
The terms of these transactions are comparable to those which could have been
obtained in transactions with unaffiliated third parties.
Synovus and TSYS and SSC and TSYS are parties to Management Agreements
(having one year, automatically renewable, unless terminated, terms), pursuant
to which Synovus and SSC provide certain management services to TSYS. During
1996, these services included human resource services, maintenance services,
security services, communication services, corporate education services, travel
services, investor relations services, corporate governance services, legal
services, regulatory and statutory compliance services, executive management
services performed on behalf of TSYS by certain of Synovus' officers and
financial services. As compensation for management services provided during
1996, TSYS paid Synovus and SSC management fees of $1,079,706 and $8,583,648,
respectively. Management fees are subject to future adjustments based upon
charges at the time by unrelated third parties for comparable services.
During 1996, Synovus Trust Company served as trustee of various employee
benefit plans of TSYS. During 1996, TSYS paid Synovus Trust Company trustee's
fees under these plans of $151,525.
During 1996, Columbus Depot Equipment Company ("CDEC"), a wholly owned
subsidiary of TSYS, and Columbus Bank and 25 of Synovus' other subsidiaries were
parties to Lease Agreements pursuant to which Columbus Bank and 25 of Synovus'
other subsidiaries leased from CDEC computer related equipment for bankcard and
bank data processing services for lease payments aggregating $152,262. During
1996, CDEC sold Columbus Bank and certain of Synovus' other subsidiaries
computer related equipment for bankcard and bank data processing services for
payments aggregating $23,073. In addition, CDEC was paid $15,375 by Columbus
Bank and certain of Synovus' other subsidiaries for monitoring such equipment.
The terms, conditions, rental rates and/or sales prices provided for in these
Agreements are comparable to corresponding terms, conditions and rates provided
for in leases and sales of similar equipment offered by unrelated third parties.
During 1996, Synovus Data Corp., a wholly owned subsidiary of Synovus, paid
TSYS $303,554 for data links, network services and other miscellaneous items
related to the data processing services which Synovus Data Corp. provides to its
customers, which amount was reimbursed to Synovus Data Corp. by its customers.
During 1996, Synovus Data Corp. paid TSYS $31,825 primarily for computer
processing services. During 1996, TSYS and Synovus Data Corp. were parties to a
Lease Agreement pursuant to which TSYS leased from Synovus
Data Corp. portions of its office building for lease
24
payments aggregating $240,000. The charges for processing and other services,
and the terms of the Lease Agreement, are comparable to those between unrelated
third parties.
During 1996, TSYS and Columbus Bank were parties to Lease Agreements
pursuant to which Columbus Bank leased from TSYS portions of its maintenance and
warehouse facilities for lease payments aggregating $11,628. During 1996, TSYS
and Columbus Bank were also parties to a Lease Agreement pursuant to which TSYS
leased office space from Columbus Bank for lease payments of $4,483 per month.
The terms, conditions and rental rates provided for in these Lease Agreements
are comparable to corresponding terms, conditions and rates provided for in
leases of similar facilities offered by unrelated third parties in the Columbus,
Georgia area.
During 1996, Synovus, Columbus Bank and other Synovus subsidiaries paid to
Columbus Productions, Inc. and Lincoln Marketing, Inc., wholly owned
subsidiaries of TSYS, an aggregate of $753,065 for printing and correspondence
services. The charges for these services are comparable to those between
unrelated third parties.
During 1996, TSYS purchased 35,349 shares of Synovus Common Stock from
Synovus for $764,422 and simultaneously granted the shares to certain executive
officers of TSYS as restricted stock awards. The per share purchase price of
such shares was equal to the fair market value of a share of Synovus Common
Stock on the date of purchase.
During 1996, TSYS and its subsidiaries were paid $1,392,543 of interest by
Columbus Bank in connection with deposit accounts with, and commercial paper
purchased from, Columbus Bank. These interest rates are comparable to those in
transactions between unrelated third parties.
TSYS has entered into an agreement with Columbus Bank with respect to the
use of aircraft owned or leased by B&C Company, a Georgia general partnership in
which Columbus Bank and W.C. Bradley Co. are equal partners. TSYS paid Columbus
Bank $600,953 for its use of the B&C Company aircraft during 1996. The charges
payable by TSYS to Columbus Bank in connection with its use of this aircraft
approximate charges available to unrelated third parties in the State of Georgia
for use of comparable aircraft for commercial purposes.
VI. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Synovus' officers and directors,
and persons who own more than ten percent of Synovus Common Stock, to file
reports of ownership and changes in ownership on Forms 3,4 and 5 with the SEC
and the New York Stock Exchange. Officers, directors and greater than ten
percent shareholders are required by SEC regulations to furnish Synovus with
copies of all Section 16(a) forms they file.
To Synovus' knowledge, based solely on its review of the copies of such
forms received by it, and written representations from certain reporting persons
that no Forms 5 were required for those persons, Synovus believes that during
the fiscal year ended December 31, 1996 all Section 16(a) filing requirements
applicable to its officers, directors, and greater than ten percent beneficial
owners were complied with, except that Dr. Floyd filed one amended Form 4
reporting one transaction late; Mr. Royall filed three amended Forms 4 reporting
three transactions late, and filed one amended Form 3 to correctly report the
amount of shares of Synovus Common Stock held in his ESOP account; Mr. Garrard
filed a Form 5 reporting eight transactions late and one amended Form 4
reporting three transactions late; Mr. Pherigo filed one amended Form 4
reporting one transaction late; Mr. Smyre filed one amended Form 3 to correctly
report derivative securities benefically owned by him; Mr. Blanchard reported
three transactions late on a Form 5; and Mr. Woodruff reported three
transactions late on a Form 5.
25
VII. INDEPENDENT AUDITORS
On February 28, 1997, Synovus' Board of Directors appointed KPMG Peat
Marwick LLP, Certified Public Accountants, as the independent auditors to audit
the consolidated financial statements of Synovus and its subsidiaries for the
fiscal year ending December 31, 1997. The Board of Directors knows of no direct
or material indirect financial interest by KPMG Peat Marwick LLP in Synovus or
any of its subsidiaries, or of any connection between KPMG Peat Marwick LLP and
Synovus or any of its subsidiaries, in any capacity as promoter, underwriter,
voting trustee, director, officer, shareholder or employee.
Representatives of KPMG Peat Marwick LLP, Certified Public Accountants,
will be present at Synovus' 1997 Annual Meeting with the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
VIII. FINANCIAL INFORMATION WITH REFERENCE TO SYNOVUS AND ITS SUBSIDIARIES
CONTAINED IN SYNOVUS' 1996 ANNUAL REPORT
Detailed financial information for Synovus and its subsidiaries for their
1996 fiscal year is included in Synovus' 1996 Annual Report that is being mailed
to Synovus' shareholders together with this Proxy Statement.
IX. OTHER MATTERS
As of the time of the preparation of this Proxy Statement, Synovus' Board
of Directors has not been informed of any matters to be presented by or on
behalf of Synovus' Board of Directors or its management for action at Synovus'
1997 Annual Meeting which are not referred to herein. If any other matters come
before the Annual Meeting or any adjournment thereof, it is the intention of the
persons named in the accompanying Proxy to vote thereon in accordance with their
best judgment.
Synovus' shareholders are urged to vote, date and sign the enclosed Proxy
solicited on behalf of Synovus' Board of Directors and return it at once in the
envelope which is enclosed for that purpose. This should be done whether or not
the shareholder plans to attend Synovus' 1997 Annual Meeting.
By Order of the Board of Directors
/s/James H. Blanchard
JAMES H. BLANCHARD
Chairman of the Board, Synovus Financial Corp.
Columbus, Georgia
March 7, 1997
26
EXHIBIT 21.1
SUBSIDIARIES OF SYNOVUS FINANCIAL CORP.
<TABLE>
<CAPTION>
Georgia Corporations Stock Ownership
- --------------------------------------------------------------------------------
<S> <C>
Columbus Bank and Trust Company<F1> 100%
Commercial Bank 100%
Commercial Bank and Trust Company of Troup County 100%
Security Bank and Trust Company of Albany 100%
Sumter Bank and Trust Company 100%
The Coastal Bank of Georgia 100%
First State Bank and Trust Company of Valdosta 100%
Bank of Hazlehurst 100%
Synovus Securities, Inc. 100%
The Cohutta Banking Company 100%
Bank of Coweta 100%
Citizens Bank and Trust of West Georgia 100%
First Community Bank of Tifton 100%
Synovus Data Corp. 100%
CB&T Bank of Middle Georgia 100%
Sea Island Bank 100%
1
<PAGE>
Citizens First Bank<F2> 100%
The Citizens Bank 100%
The Citizens Bank of Cochran 100%
Athens First Bank & Trust Company<F3> 100%
Citizens & Merchants State Bank 100%
Synovus Service Corp. 100%
Alabama Corporations
- --------------------
Synovus Financial Corp. of Alabama 100%
Community Bank and Trust of Southeast Alabama 100%
First Commercial Bank of Huntsville 100%
The Bank of Tuscaloosa 100%
Sterling Bank 100%
First Commercial Bank of Birmingham<F4> 100%
CB&T Bank of Russell County 100%
Florida Corporations
- --------------------
Quincy State Bank 100%
The Tallahassee State Bank 100%
Bank of Pensacola 100%
2
<PAGE>
Vanguard Bank and Trust Company 100%
First Coast Community Bank 100%
Arizona Corporations
- --------------------
Sumbank Life Insurance Company 100%
National Banking Associations
- -----------------------------
The National Bank of Walton County (GA) 100%
Peachtree National Bank (GA) 100%
First National Bank of Jasper (AL) 100%
National Bank of South Carolina (SC) 100%
<FN>
- --------
<F1> Columbus Bank and Trust Company has one majority-owned subsidiary, Total
System Services, Inc., a Georgia corporation, and one wholly-owned
subsidiary, Synovus Trust Company, a Georgia corporation. Total System
Services, Inc. has four wholly-owned subsidiaries, Columbus Depot Equipment
Company, Mailtek, Inc., Lincoln Marketing, Inc. and Columbus Productions,
Inc., all of which are Georgia corporations.
<F2> Citizens First Bank has one wholly-owned subsidiary, Citizens Service
Company, a Georgia corporation.
<F3> Athens First Bank & Trust Company has one wholly-owned subsidiary, Athena
Service Corporation, a Georgia corporation.
<F4> First Commercial Bank of Birmingham has three wholly-owned subsidiaries,
First Commercial Mortgage Corporation, First Commercial Credit Corporation
and Synvous Mortgage Corp., all of which are Alabama corporations.
</FN>
</TABLE>
filings\subsid2.snv
3
EXHIBIT 23.1
Accountants' Consent
The Board of Directors
Synovus Financial Corp.:
We consent to the incorporation by reference in the Registration Statements (No.
33-35926, No. 33-56614, No. 33-40738, No. 33-39845, No. 2-93472, No. 2-94639,
No. 33-77900, No. 33-77980, No. 33-79518, No. 33-89782, No. 33-90630, No.
33-90632, No. 33-91690, No. 33-60473, and No. 33-60475) on Form S-8 of Synovus
Financial Corp. of our report dated January 21, 1997, relating to the
consolidated statements of condition of Synovus Financial Corp. and subsidiaries
as of December 31, 1996 and 1995, and the related consolidated statements of
income, changes in shareholders' equity, and cash flows for each of the years in
the three- year period ended December 31, 1996, which report appears in the
December 31, 1996 annual report on Form 10-K of Synovus Financial Corp.
KPMG PEAT MARWICK LLP
Atlanta, Georgia
March 5, 1997
Accountants' Consent
The Board of Directors
Synovus Financial Corp.:
We consent to the incorporation by reference in the Registration Statements (No.
33-85948 and No. 333-2611) on Form S-3 of Synovus Financial Corp. of our report
dated January 21, 1997, relating to the consolidated statements of condition of
Synovus Financial Corp. and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of income, changes in shareholders' equity,
and cash flows for each of the years in the three-year period ended December 31,
1996, which report appears in the December 31, 1996 annual report on Form 10-K
of Synovus Financial Corp.
KPMG PEAT MARWICK LLP
Atlanta, Georgia
March 5, 1997
EXHIBIT 24.1
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Synovus Financial Corp. has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SYNOVUS FINANCIAL CORP.
(Registrant)
March 5, 1997 By:/s/James H. Blanchard
---------------------
James H. Blanchard,
Chairman of the Board and
Principal Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James H. Blanchard, James D. Yancey and
Stephen L. Burts, Jr., and each of them, his or her true and lawful
attorney(s)-in-fact and agent(s), with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any or all amendments to this report and to file the
same, with all exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney(s)-in-fact and agent(s) full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney(s)-in-fact and
agent(s), or their substitute(s), may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of Section 13 or 15(d) the Securities
Exchange Act of 1934, as amended, this report has been signed by the following
persons in the capacities and on the dates indicated.
/s/William B. Turner Date: March 5, 1997
- ------------------------------------
William B. Turner,
Director and Chairman of
the Executive Committee
/s/James H. Blanchard Date: March 5, 1997
- -----------------------------------
James H. Blanchard,
Chairman of the Board and
Principal Executive Officer
<PAGE>
/s/John T. Oliver, Jr. Date: March 5, 1997
- ------------------------------
John T. Oliver, Jr.,
Director and Vice Chairman
of the Executive Committee
/s/James D. Yancey Date: March 5, 1997
- ------------------------------
James D. Yancey,
Vice Chairman of the Board
/s/Richard E. Anthony Date: March 5, 1997
- -----------------------------
Richard E. Anthony,
Vice Chairman of the Board
/s/Walter M. Deriso, Jr. Date: March 5, 1997
- -----------------------------
Walter M. Deriso, Jr.,
Vice Chairman of the Board
/s/Stephen L. Burts, Jr. Date: March 5, 1997
- ----------------------------
Stephen L. Burts, Jr.,
President
/s/G. Sanders Griffith, III Date: March 5, 1997
- -----------------------------
G. Sanders Griffith, III,
Senior Executive Vice President,
General Counsel and Secretary
/s/Thomas J. Prescott Date: March 5, 1997
- ------------------------------
Thomas J. Prescott,
Executive Vice President, Treasurer,
Principal Accounting and Financial Officer
/s/Jay C. McClung Date: March 5, 1997
- ------------------------------
Jay C. McClung,
Executive Vice President
/s/Calvin Smyre Date: March 5, 1997
- -----------------------------
Calvin Smyre,
Executive Vice President
<PAGE>
- ---------------------------------- Date:
Daniel P. Amos,
Director
/s/Joe E. Beverly Date: March 5, 1997
- ----------------------------------
Joe E. Beverly,
Director
/s/Richard Y. Bradley Date: March 5, 1997
- ---------------------------------
Richard Y. Bradley,
Director
/s/C. Edward Floyd Date: March 5, 1997
- --------------------------------
C. Edward Floyd,
Director
/s/Gardiner W. Garrard, Jr. Date: March 5, 1997
- ---------------------------------
Gardiner W. Garrard, Jr.,
Director
/s/V. Nathaniel Hansford Date: March 5, 1997
- --------------------------------
V. Nathaniel Hansford,
Director
/s/John P. Illges, III Date: March 5, 1997
- --------------------------------
John P. Illges, III,
Director
/s/Mason H. Lampton Date: March 5, 1997
- -------------------------------
Mason H. Lampton,
Director
- ------------------------------- Date:
Elizabeth C. Ogie,
Director
<PAGE>
/s/H. Lynn Page Date: March 5, 1997
- ---------------------------
H. Lynn Page,
Director
/s/William L. Pherigo Date: March 5, 1997
- ----------------------------
William L. Pherigo,
Director
/s/Robert V. Royall, Jr. Date: March 5, 1997
- ----------------------------
Robert V. Royall, Jr.,
Director
/s/George C. Woodruff, Jr. Date: March 5, 1997
- ---------------------------
George C. Woodruff, Jr.,
Director
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SYNOVUS FINANCIAL CORP. FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 404,952
<INT-BEARING-DEPOSITS> 2,040
<FED-FUNDS-SOLD> 38,249
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,276,083
<INVESTMENTS-CARRYING> 363,008
<INVESTMENTS-MARKET> 364,694
<LOANS> 6,065,230
<ALLOWANCE> 94,683
<TOTAL-ASSETS> 8,612,344
<DEPOSITS> 7,203,035
<SHORT-TERM> 339,200
<LIABILITIES-OTHER> 154,641
<LONG-TERM> 97,283
0
0
<COMMON> 116,424
<OTHER-SE> 667,326
<TOTAL-LIABILITIES-AND-EQUITY> 8,612,344
<INTEREST-LOAN> 562,208
<INTEREST-INVEST> 99,170
<INTEREST-OTHER> 1,925
<INTEREST-TOTAL> 663,303
<INTEREST-DEPOSIT> 267,349
<INTEREST-EXPENSE> 288,429
<INTEREST-INCOME-NET> 374,874
<LOAN-LOSSES> 31,766
<SECURITIES-GAINS> (176)
<EXPENSE-OTHER> 549,174
<INCOME-PRETAX> 219,312
<INCOME-PRE-EXTRAORDINARY> 139,604
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 139,604
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 1.20
<YIELD-ACTUAL> 5.19
<LOANS-NON> 25,280
<LOANS-PAST> 15,805
<LOANS-TROUBLED> 25,280
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 81,384
<CHARGE-OFFS> 25,180
<RECOVERIES> 6,525
<ALLOWANCE-CLOSE> 94,683
<ALLOWANCE-DOMESTIC> 94,683
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 22,951
</TABLE>
