As filed with the Securities and Exchange Commission on October 13, 1998
Registration File No.____________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-----------------------------
FORM S-4
Registration Statement
Under
The Securities Act of 1933
Synovus Financial Corp.
(Exact Name of registrant as specified in its charter)
Georgia 6022 58-1134883
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification
incorporation of Classification Number)
organization) Code Number)
Suite 301, One Arsenal Place
901 Front Avenue
Columbus, Georgia 31901
(706) 649-2387
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------------------
Kathleen Moates, Senior Vice President and Deputy General Counsel
Synovus Financial Corp.
Suite 202, One Arsenal Place
901 Front Avenue
Columbus, Georgia 31901
(706) 649-4818
(Name, Address, including zip code, and Telephone Number of Agent for Service)
Approximate date of commencement of the proposed sale of the
securities to the public:
The date of mailing the Proxy Statement/Prospectus to the shareholders of
Georgia Bank & Trust.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. _____
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. ________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ______
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of Proposed Proposed
each class of Amount maximum maximum
securities to be offering aggregate Amount of
to be registered registered price per unit offering price registration fee
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 1,811,284 <F1> <F1> $41,560
$1.00 par value
Common Stock
Rights 1,811,284 <F2> <F2> <F2>
- ----------------------
<FN>
<F1> Determined pursuant to Rule 457(f)(2) under the Securities Act of 1933,
as amended, solely for the purpose of calculating the registration fee.
Based upon the book value of common stock of Georgia Bank & Trust at June
30, 1998, there being 523,311 shares of such stock issued and outstanding
on that date, having an aggregate book value on that date of
approximately $14,088,000.
<F2> The Common Stock Rights (the "Rights") are attached to and trade with the
common stock of Synovus Financial Corp. The value, if any, attributable
to the Rights is reflected in the market price of the common stock of
Synovus Financial Corp.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
GEORGIA BANK & TRUST
135 Bryant Parkway
Calhoun, Georgia 31707
MERGER PROPOSED - YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of Georgia Bank & Trust and Synovus Financial
Corp. have agreed on a merger which will result in Georgia Bank & Trust being
operated as a subsidiary of Synovus Financial Corp. Before we can complete this
merger, the agreement must be approved by Georgia Bank & Trust's shareholders.
We are sending you this Proxy Statement/Prospectus to ask to you to vote in
favor of the merger.
Georgia Bank & Trust's shareholders will receive 3.4612 shares of common
stock of Synovus Financial Corp. for each Georgia Bank & Trust share they own
just before the merger.
Your vote is very important. Whether or not you plan to attend the
special meeting, please take the time to vote by completing and mailing the
enclosed proxy card. If you sign, date and mail your proxy card without
indicating how you want to vote, we will vote your proxy in favor of the merger.
If you do not return your card, the effect will be a vote against the merger.
The special meeting of Georgia Bank & Trust shareholders will be held at
Georgia Bank & Trust's main office at 135 Bryant Parkway, Calhoun, Georgia at
4:15 p.m., local time, on ____________, 1998.
This Proxy Statement/Prospectus provides you with detailed information
about the proposed merger. We encourage you to read this entire document
carefully.
We are enthusiastic about this merger and join with all of the other
directors in our unanimous recommendation that you vote in favor of the merger.
James A. Franklin T. Larry Roye
Chairman of the Board President and Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved of the securities to be issued under this Proxy
Statement/Prospectus or determined if this Proxy Statement/Prospectus is
accurate or adequate. Any representation to the contrary is a criminal offense.
These securities are not savings or deposit accounts or other obligations of any
bank or non-bank subsidiary of any of the parties, and they are not insured by
the Federal Deposit Insurance Corporation, the Bank Insurance Fund or any other
governmental agency.
This Proxy Statement/Prospectus is dated ___________, 1998
and was first mailed to shareholders on or about ________, 1998.
We have not authorized anyone to give any information or make any
representations about the merger or our companies that differs from, or adds to,
the information in this Proxy Statement/Prospectus or in the documents that are
publicly filed by Synovus Financial Corp. with the Securities and Exchange
Commission. Therefore, if anyone does give you different or additional
information, you should not rely on it.
This Proxy Statement/Prospectus does not relate to any resale of
Synovus Financial Corp. common stock received by any person upon consummation of
the merger, and no person is authorized to make any use of this Proxy
Statement/Prospectus in connection with any such resale.
If you are in a jurisdiction where it is unlawful to offer to exchange
or sell, or to ask for offers to exchange or buy, the securities offered by this
Proxy Statement/Prospectus or to ask for proxies, or if you are a person to whom
it is unlawful to direct such activities, then the offer presented by this Proxy
Statement/Prospectus does not extend to you.
The information contained in this Proxy Statement/Prospectus speaks
only as of its date unless the information specifically indicates that another
date applies.
Information in this Proxy Statement/Prospectus about Synovus Financial
Corp. has been supplied by Synovus Financial Corp. and information about Georgia
Bank & Trust has been supplied by Georgia Bank & Trust. This Proxy
Statement/Prospectus incorporates important business and financial information
about Synovus Financial Corp. that is not included in or delivered with it.
Documents incorporated by reference are available from Synovus without charge,
excluding all exhibits, except that if Synovus has specifically incorporated by
reference an exhibit in this Proxy Statement/Prospectus, the exhibit will also
be available without charge. You may obtain documents incorporated by reference
in this Proxy Statement/Prospectus by requesting them in writing or by telephone
from:
Synovus Financial Corp.
901 Front Avenue
Suite 301
Columbus, Georgia 31901
Attn: G. Sanders Griffith, III
Senior Executive Vice President,
General Counsel & Secretary
Telephone: (706)649-2267
GEORGIA BANK & TRUST
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Georgia Bank & Trust will hold a special meeting of its shareholders at
Georgia Bank & Trust's main office at 135 Bryant Parkway, Calhoun, Georgia, at
4:15 p.m., local time, on _________, 1998 to vote on:
1. An Agreement and Plan of Merger, dated September 15, 1998, among Georgia
Bank & Trust, Synovus Financial Corp., and Interim Synovus Corp., which
is a new wholly-owned subsidiary of Synovus Financial Corp., and the
transactions contemplated by the Agreement and Plan of Merger. These
transactions include the merger of Georgia Bank & Trust with Interim
Synovus Corp., with Georgia Bank & Trust being the survivor of the
merger, and all matters necessary or incidental to the merger; and
2. Any other matters that may properly come before the special meeting or
any adjournment thereof.
Only shareholders of record at the close of business on ____________,
1998 will be entitled to receive notice of and to vote at the special meeting or
any adjournment thereof.
Georgia Bank & Trust shareholders will have the right to dissent to the
merger and receive payment in cash for the fair value of their shares of Georgia
Bank & Trust common stock by following the procedures set forth in sections
14-2-1301 et. seq. of the Official Code of Georgia Annotated, as amended. A copy
of these sections is attached as Appendix "B" to the enclosed Proxy
Statement/Prospectus.
Calhoun, Georgia T. Larry Roye
____________, 1998 President and Chief Executive Officer
Please complete, sign, date, and promptly return the accompanying proxy in the
enclosed envelope, whether or not you plan to attend the special meeting. The
enclosed envelope requires no postage if you mail it in the United States.
--------------------
The Board of Directors of Georgia Bank & Trust unanimously recommends that you
vote FOR approval of the Agreement and Plan of Merger and authorization of the
merger.
TABLE OF CONTENTS
Caption Page
SUMMARY..............................................................1
The Companies and Their Businesses...........................1
The Merger...................................................1
What Georgia Bank Shareholders Will Receive..................1
Our Reasons for the Merger...................................2
Opinion of Financial Advisor.................................2
Georgia Bank Special Shareholders' Meeting...................3
Recommendation to Shareholders...............................3
Dissenters' Rights...........................................3
Vote Required to Approve the Merger..........................3
Interests of Certain Persons
in the Merger..............................................3
Conditions to the Merger; Regulatory Approvals...............4
Accounting Treatment as Additional Condition to the Merger...4
Tax Opinion..................................................4
Effective Date of Merger.....................................5
Waiver and Amendment.........................................5
Termination of Merger Agreement..............................6
Effect of Merger on Rights of Georgia Bank Shareholders......6
Comparative Market Price Information.........................6
UNAUDITED COMPARATIVE PER SHARE AND
SELECTED FINANCIAL DATA............................................7
RISK FACTORS.........................................................9
Fixed Merger Consideration Despite Potential
Change in Stock Price......................................9
A Warning About Forward-Looking Statements...................9
THE SPECIAL MEETING.................................................10
General Information.........................................10
Voting Information..........................................10
THE MERGER..........................................................11
The Merger Agreement........................................12
Terms of the Merger.........................................12
Background of and Reasons for the Merger....................13
Opinion of Financial Advisor................................14
Conditions to the Merger....................................18
Regulatory Approvals........................................19
Waiver and Amendment........................................20
Termination.................................................20
Interests of Certain Persons in the Merger..................20
Employee Benefits...........................................22
Tax Opinion.................................................22
Accounting Treatment........................................23
Expenses....................................................23
i
Resales of Synovus Common Stock.............................23
NYSE Listing................................................24
DESCRIPTION OF STOCK AND EFFECT OF MERGER
ON RIGHTS OF GEORGIA BANK SHAREHOLDERS............................24
Synovus Common Stock........................................26
Voting Rights - Certain Anti-Takeover
Effects - The Voting Amendment............................26
The Rights Plan.............................................27
Staggered Board of Directors; Supermajority Approvals.......30
Evaluation of Business
Combinations..............................................31
Georgia Bank Common Stock...................................31
Dissenters' Rights..........................................31
Conduct of Business of Georgia Bank
and Synovus Pending the Merger............................33
DESCRIPTION OF SYNOVUS..............................................34
Business....................................................34
Management and Additional Information.......................35
REGULATORY MATTERS..................................................35
General.....................................................35
Dividends...................................................36
Capital Requirements........................................37
Commitments to Subsidiary Banks.............................39
Prompt Corrective Action....................................39
Safety and Soundness Standards..............................40
Depositor Preference Statute................................41
DESCRIPTION OF GEORGIA BANK.........................................41
Background..................................................41
Business....................................................41
Georgia Bank Common Stock Owned by Management...............42
Management's Discussion and Analysis of
Financial Condition and Results of Operations.............44
EXPERTS.............................................................65
Synovus.....................................................65
Georgia Bank................................................65
OTHER MATTERS.......................................................65
SHAREHOLDER PROPOSALS...............................................65
WHERE YOU CAN FIND MORE INFORMATION.................................65
PRO FORMA FINANCIAL INFORMATION.....................................67
INDEX TO FINANCIAL STATEMENTS.......................................68
Appendix "A" - Agreement and Plan of Merger
Appendix "B" - Section 14-2-1301 et. seq. of the Official Code of Georgia
Annotated, as amended, relating to the rights of dissenting
shareholders
Appendix "C" - Opinion of Stevens & Company
Appendix "D" - Tax Opinion of KPMG Peat Marwick LLP
ii
SUMMARY
This summary highlights selected information contained in this Proxy
Statement/Prospectus and related documents. Because this is a summary, it does
not contain all of the information that may be important to you. To understand
the merger fully, you should read this entire document and other documents we
have referred you to.
The Companies and their Businesses
Synovus Financial Corp.
Suite 301, One Arsenal Place
901 Front Avenue
Columbus, Georgia 31901
(706) 649-2387
Synovus Financial Corp. ("Synovus") is a multi-financial services
company. Synovus is registered as a bank holding company under the Bank Holding
Company Act of 1956, as amended. As of June 30, 1998, Synovus had total assets
of about $9.4 billion, total deposits of $7.8 billion, shareholders' equity of
$954 million, and net loans of $6.6 billion. Synovus and its 35 commercial
banking affiliates presently provide banking services at approximately 230
offices located in the States of Georgia, Alabama, Florida and South Carolina.
Synovus also owns nonbanking subsidiaries, including a full service brokerage
firm and an 80.7% interest in Total System Services, Inc. Total System Services,
Inc. is a bankcard data processing company whose stock is traded on the New York
Stock Exchange ("NYSE"). See "DESCRIPTION OF SYNOVUS" (page 34).
Georgia Bank & Trust
135 Bryant Parkway
Calhoun, Georgia 31707
(706) 625-2265
Georgia Bank & Trust ("Georgia Bank") is a commercial bank, organized
and existing under the laws of the State of Georgia. As of June 30, 1998,
Georgia Bank had total assets of about $172.6 million, total deposits of $154.8
million, total shareholders' equity of $14.1 million and net loans of $117.4
million. See "DESCRIPTION OF GEORGIA BANK" (page 41).
The Merger
Georgia Bank will be merged with Interim Synovus Corp., with Georgia
Bank being the survivor of the merger.
What Georgia Bank Shareholders Will Receive
If the merger is completed, all holders of the $5.00 par value common
stock of Georgia Bank, except for dissenting shareholders, will receive 3.4612
shares of the $1.00 par value common stock of Synovus for each share of Georgia
Bank common stock held of record (the "Per Share Exchange Ratio").
1
No fractional shares of Synovus common stock will be issued in
connection with the merger. Cash (without interest) will be paid instead of
issuing fractional shares. See "THE MERGER - Terms of the Merger" (page 12).
Our Reasons for the Merger
The Board of Directors of Georgia Bank considered a variety of factors
in evaluating the merger. These factors included the following:
(i) the value of the consideration to be received by Georgia Bank
shareholders relative to the book value and earnings per share of
Georgia Bank common stock;
(ii) information concerning the financial condition, results of
operations and business prospects of Synovus;
(iii) the financial terms of recent business combinations in the
financial services industry;
(iv) the alternatives to the merger, including remaining an
independent institution;
(v) the competitive and regulatory environment for financial
institutions generally;
(vi) the fact that the merger will enable Georgia Bank shareholders to
exchange their shares of Georgia Bank common stock, in a tax-free
transaction, for shares of common stock of a regional company,
the stock of which is widely held and actively traded; and
(vii) the opinion of Stevens & Company that the consideration to be
received by Georgia Bank shareholders as a result of the merger
is fair from a financial point of view.
The Board of Directors of Synovus, after careful study and evaluation of
relevant factors, believes the merger will provide Synovus with expanded market
opportunities for profitable long-term growth. The Synovus Board believes that
the merger will result in the integration of a well-suited and well-positioned
banking organization into Synovus' existing organization. See "THE MERGER -
Background of and Reasons for the Merger" (page 13).
Opinion of Financial Advisor
Georgia Bank's financial advisor, Stevens & Company, has rendered its
opinion to Georgia Bank's Board of Directors that the Per Share Exchange Ratio
is fair from a financial point of view to Georgia Bank and its shareholders. A
copy of the opinion is attached to this Proxy Statement/Prospectus as Appendix
"C." We urge you to read the opinion in its entirety to understand the
assumptions made, other matters considered and the reviews undertaken. See "THE
MERGER - Opinion of Financial Advisor" (page 14).
2
Georgia Bank Special Shareholders' Meeting
The special meeting called to consider the merger will be held at 4:15
p.m., local time, on _________, 1998 at Georgia Bank's main office at 135 Bryant
Parkway, Calhoun, Georgia 31707. Only shareholders of record of Georgia Bank
common stock at the close of business on _______, 1998, will be entitled to
receive notice of and to vote at the special meeting. See "THE SPECIAL MEETING"
(page 10).
Recommendation to Shareholders
The Board of Directors of Georgia Bank has determined that the merger is
in the best interests of the shareholders of Georgia Bank and has approved the
Merger Agreement. Accordingly, the Board of Directors unanimously recommends
that the shareholders of Georgia Bank vote FOR the Merger Agreement. See "THE
MERGER - Background of and Reasons for the Merger" (page 13).
Dissenters' Rights
The Georgia Business Corporation Code entitles shareholders of Georgia
Bank common stock to statutory dissenters' rights of appraisal with respect to
the merger. You may lose these dissenters' rights if you do not precisely follow
the statutory procedure for exercising dissenters' rights. See "DESCRIPTION OF
STOCK AND EFFECT OF MERGER ON RIGHTS OF GEORGIA BANK SHAREHOLDERS - Dissenters'
Rights" (page 31).
Vote Required to Approve the Merger
The holders of two-thirds of the issued and outstanding shares of
Georgia Bank common stock entitled to vote at the special meeting must approve
the Merger Agreement and authorize the merger. The holders of Georgia Bank
common stock are entitled to one vote on each matter to be considered and voted
on at the special meeting for each share of Georgia Bank common stock held by
them of record at the close of business on _________, 1998.
As of _______, 1998, Georgia Bank's present directors, executive
officers and their affiliates had the power to vote, or direct the voting of,
approximately 17% of the outstanding shares of Georgia Bank common stock. We
expect that all shares of Georgia Bank common stock as to which Georgia Bank's
directors, executive officers and their affiliates control the voting power will
be voted to approve the Merger Agreement and the merger. Approval of the merger
by the holders of Synovus common stock is not required and will not be sought.
See "THE SPECIAL MEETING - Voting Information" (page 10).
Interests of Certain Persons in the Merger
Certain executive officers and directors of Georgia Bank have interests
in the merger that are different from your interests. Two current officers of
Georgia Bank, Larry Roye and Lamar Harrison, have entered into employment
agreements with Synovus providing for their continued employment by Georgia Bank
for three years following the merger. Also, Synovus will honor the
indemnification arrangements and benefit obligations which apply to the officers
and
3
directors of Georgia Bank. The Board of Directors of Georgia Bank was aware of
these interests and took them into account in approving the Merger Agreement.
See "THE MERGER Interests of Certain Persons in the Merger" (page 20).
Conditions to the Merger; Regulatory Approvals
Consummation of the merger is subject to various conditions, including:
(i) receipt of Georgia Bank shareholder approval;
(ii) receipt of the necessary regulatory approvals;
(iii) receipt of an opinion from KPMG Peat Marwick LLP regarding
certain tax aspects of the merger (which has been satisfied);
(iv) receipt of assurances that the merger qualifies for pooling of
interests accounting treatment; and
(v) satisfaction of other customary closing conditions.
The regulatory approvals and consents necessary to consummate the
transactions contemplated by the Merger Agreement include the approval of the
Board of Governors of the Federal Reserve System ("Federal Reserve"), the
Federal Deposit Insurance Corporation ("FDIC") and the Department of Banking and
Finance of the State of Georgia ("Georgia Banking Department"). Applications
have been submitted for such approvals. Neither the Federal Reserve, the FDIC
nor the Georgia Banking Department has approved the merger at this time. See
"THE MERGER - Conditions to the Merger" (page 18) and "- Regulatory Approvals"
(page 19).
Accounting Treatment as Additional Condition to the Merger
We expect the merger to qualify as a "pooling of interests," which means
that we will treat our companies as if they had always been one company for
accounting and financial reporting purposes. Both Synovus and Georgia Bank have
the right not to complete the merger if they do not receive a letter from
Synovus' independent public accountants that the merger will qualify as a
"pooling of interests" See "THE MERGER - Accounting Treatment" and " Resales of
Synovus Common Stock" (page 23).
Tax Opinion
Synovus and Georgia Bank have received a tax opinion from KPMG Peat
Marwick LLP, Certified Public Accountants. The tax opinion states that, for
federal income tax purposes:
(i) the merger will constitute a "reorganization" within the meaning
of Section 368(a)(1)(A) and 368(a)(2)(E) of the Internal Revenue
Code of 1986, as amended (the "Tax Code");
4
(ii) the basis of Synovus common stock to be received by each Georgia
Bank shareholder will be the same as the basis of Georgia Bank
common stock surrendered in exchange; and
(iii) the holding period of Synovus common stock will include the
holding period of the Georgia Bank common stock exchanged, if the
Georgia Bank common stock is held as a capital asset at the
effective date of the merger.
The tax opinion also states that, for federal income tax purposes, the
shareholders of Georgia Bank will not recognize gain or loss on the exchange in
the merger of their Georgia Bank common stock for Synovus common stock, except
that Georgia Bank shareholders could recognize gain or loss:
(i) to the extent of any cash paid in lieu of fractional shares or
any cash paid to those Georgia Bank shareholders who perfect
their statutory dissenters' rights against the merger; and
(ii) to the extent that the Share Purchase Rights, which are described
on pages 27 through 30 of this Proxy Statement/Prospectus, are
determined to be other property within the meaning of Section 356
of the Tax Code, as described on page 12 of the tax opinion which
is attached to this Proxy Statement/Prospectus as Appendix "D").
All Georgia Bank shareholders are urged to consult their own tax
advisors as to the specific consequences to them of the merger under federal,
state, local and any other applicable tax laws. See "THE MERGER - Tax Opinion"
(page 22).
Effective Date of Merger
The merger will become effective when a certificate of merger is filed
with the Secretary of State of Georgia, or on such later date as the certificate
of merger may specify. Subject to the conditions specified in the Merger
Agreement, the parties anticipate that the merger will become effective during
December, 1998. There can be no assurances, however, as to whether or when the
merger will occur. See "THE MERGER - Conditions to the Merger" (page 18) and
"Regulatory Approvals" (page 19).
Waiver and Amendment
Prior to the effective date of the merger, any provision of the Merger
Agreement may be waived by the party entitled to the benefits of such provision
or by all parties, to the extent allowed by law. Except as limited by law, the
Merger Agreement may be amended at any time by an agreement in writing between
Synovus and Georgia Bank after approval of their respective Boards of Directors.
See "THE MERGER - Waiver and Amendment" (page 20).
5
Termination of Merger Agreement
The Merger Agreement may be terminated at any time prior to the
effective date of the merger by the mutual consent of Synovus and Georgia Bank
if the Board of Directors of each company approves termination by a vote of a
majority of the members of its entire board. Georgia Bank may terminate the
Merger Agreement if the average closing price of Synovus common stock on the
NYSE during the 20 trading days ending on the fifth business day preceding the
date of the Georgia Bank shareholders' meeting called to consider the merger is
less than $21.00 per share. Similarly, Synovus may terminate the Merger
Agreement if the average closing price of Synovus common stock on the NYSE
during the same period is more than $25.67 per share. The Merger Agreement may
also be terminated by either company under certain other circumstances. See "THE
MERGER - Termination" (page 20).
Effect of Merger on Rights of Georgia Bank Shareholders
On the effective date of the merger, Georgia Bank shareholders (other
than Georgia Bank shareholders who exercise their statutory dissenters' rights
against the merger) will automatically become shareholders of Synovus. At that
time, their rights as shareholders of Synovus will be determined by the Georgia
Business Corporation Code and by Synovus' Articles of Incorporation and bylaws.
The rights of shareholders of Synovus differ from the rights of shareholders of
Georgia Bank with respect to certain important matters, including: (i) the
required shareholder votes as to certain matters, (ii) Synovus' Share Purchase
Rights Plan, and (iii) Synovus' Voting Rights Amendment which entitles certain
of its shareholders to ten votes per share. See "DESCRIPTION OF STOCK AND EFFECT
OF MERGER ON RIGHTS OF GEORGIA BANK SHAREHOLDERS" (page 24).
Comparative Market Price Information
The common stock of Synovus is traded on the NYSE. On April 17, 1998,
the last business day preceding the public announcement of the merger, Synovus
common stock closed at $24.33. On _________, 1998, the closing price for Synovus
common stock was $____.
On September 30, 1998, there were 791 shareholders of record of Georgia
Bank common stock. No established trading market for Georgia Bank common stock
exists. Transactions in Georgia Bank common stock are infrequent and are
negotiated privately between the persons involved in these transactions. These
transactions are not reported on an exchange or other organized trading system.
For these reasons, Georgia Bank does not have reliable data regarding recent
trading activity in Georgia Bank common stock. To the best knowledge of
management of Georgia Bank, its stock has traded at prices as high as $30 per
share. The last transaction in Georgia Bank common stock prior to announcement
of the merger took place in October 1997, but management does not know the price
at which the shares traded.
The following table sets forth the closing price for Synovus common
stock on April 17, 1998 and the estimated sale price for Georgia Bank common
stock.
The table also sets forth the "Georgia Bank Common Stock Equivalent."
This number represents the closing price of Synovus common stock on April 17,
1998 and _____, 1998,
6
multiplied by 3.4612, which is the number of shares of Synovus common stock
which will be traded for one share of Georgia Bank common stock in the merger.
<TABLE>
<CAPTION>
Georgia Bank Georgia Bank
Synovus Common Common Stock Common Stock
Stock (Estimated price) Equivalent
-------------- ----------------- ---------------
<S> <C> <C> <C>
April 17, 1998 $24.33 $30.00 $84.21
_____, 1998
</TABLE>
You should obtain current stock price quotations for Synovus common
stock. The market price of Synovus common stock likely will fluctuate before and
after completion of the merger. No assurances can be given as to the market
price of Synovus common stock or Georgia Bank common stock at, or in the case of
Synovus common stock after, the effective date of the merger.
UNAUDITED COMPARATIVE PER SHARE AND SELECTED FINANCIAL DATA
The following tables show summary historical financial data for Synovus
and Georgia Bank and also show similar information reflecting the merger of
Synovus and Georgia Bank (which is referred to as "pro forma" information). In
presenting the comparative pro forma information for certain time periods, it
was assumed that Synovus and Georgia Bank had been merged throughout those
periods. The pro forma financial information does not include the effects of
recently completed or other pending immaterial acquisitions by Synovus. The
following tables show information about Synovus and Georgia Bank's net income
per diluted share, dividends per share and book value per share, and similar pro
forma information.
The tables were prepared assuming that Synovus will treat Georgia Bank
as if it had always been combined with Synovus for accounting and financial
reporting purposes (a method known as "pooling of interests" accounting). The
information listed as "pro forma equivalent" for Georgia Bank was computed by
multiplying the pro forma amounts by the Per Share Exchange Ratio of 3.4612.
This information reflects the fact that Georgia Bank shareholders will receive
more than one share of Synovus common stock for each share of Georgia Bank
common stock they own before the Merger.
The pro forma information, while helpful in illustrating the financial
characteristics of the continuation of Synovus and Georgia Bank under one set of
assumptions, does not attempt to predict or suggest future results. The pro
forma information also does not attempt to show how Synovus and Georgia Bank
would actually have performed had the companies been combined throughout these
periods. All adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of results of the unaudited historical interim
periods have been included.
The information in the following tables is based on the historical
financial information that Synovus has presented in its prior filings with the
Securities and Exchange Commission and the historical financial information for
Georgia Bank included in this Proxy Statement/Prospectus. When you read the
summary financial information provided in the
7
following tables, you should also read the historical financial information
provided in this document, which you can find beginning at page F-1, as well as
the historical financial information in the other documents to which Synovus
refers. See "WHERE YOU CAN FIND MORE INFORMATION" on page 65.
[Rest of page intentionally blank]
The following table reflects the issuance of 1,811,284 shares of Synovus common
stock pursuant to the Per Share Exchange Ratio of 3.4612 shares of Synovus
common stock for each share of Georgia Bank common stock currently outstanding.
8
<TABLE>
<CAPTION>
As of and For The
Six Months Years Ended
Ended December 31,
June 30, 1998 1997 1996 1995
--------------------------------------------------------------------------
(Unaudited) (Unaudited except Synovus and Georgia Bank Historical)
<S> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE - BASIC
Historical:
Synovus $ 0.32 0.63 0.53 0.44
Georgia Bank 2.39 4.03 3.67 3.19
Pro forma combined 0.33 0.63 0.54 0.45
Pro forma equivalent per common Georgia Bank share <F1> 1.14 2.18 1.87 1.56
NET INCOME PER COMMON SHARE - ASSUMING DILUTION
Historical:
Synovus 0.32 0.62 0.53 0.44
Georgia Bank 2.39 4.03 3.51 3.07
Pro forma combined 0.32 0.63 0.53 0.44
Pro forma equivalent per common Georgia Bank share <F1> 1.11 2.18 1.83 1.52
CASH DIVIDENDS DECLARED PER COMMON SHARE
Historical:
Synovus 0.15 0.24 0.19 0.16
Georgia Bank 1.00 0.90 0.80 0.70
Equivalent per common Georgia Bank share <F2> 0.52 0.83 0.66 0.55
BOOK VALUES PER COMMON SHARE AT PERIOD END
Historical:
Synovus 3.63 3.44
Georgia Bank 26.92 25.54
Pro forma combined 3.66 3.47
Pro forma equivalent per common Georgia Bank share <F1> 12.67 12.01
<FN>
<F1> Determined by multiplying the pro forma amounts by the Exchange Ratio of
3.4612:1.
<F2> Determined by multiplying the Synovus historical cash dividends declared
per share by the Exchange Ratio of 3.4612:1.
</FN>
</TABLE>
8.1
SYNOVUS FINANCIAL CORP.
Selected Financial Data
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
(Unaudited) Years Ended December 31,
----------------------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income $ 214,002 200,763 412,389 374,874 341,875 301,231 263,213
Provision for losses on loans $ 14,598 15,280 32,296 31,766 25,787 25,387 24,924
Income before extraordinary item $ 85,425 75,129 165,236 139,604 114,583 89,452 80,379
Net income $ 85,425 75,129 165,236 139,604 114,583 89,452 77,467
Per share data:
Income before extraordinary item - basic $ 0.32 0.29 0.63 0.53 0.44 0.35 0.32
Income before extraordinary item - assuming
dilution $ 0.32 0.28 0.62 0.53 0.44 0.35 0.32
Net income - basic $ 0.32 0.29 0.63 0.53 0.44 0.35 0.31
Net income - assuming dilution $ 0.32 0.28 0.62 0.53 0.44 0.35 0.31
Cash dividends declared $ 0.15 0.12 0.24 0.19 0.16 0.13 0.11
Book value per share $ 3.63 3.17 3.44 2.99 2.66 2.27 2.17
Long-term debt $ 123,484 127,239 126,174 97,283 106,815 139,811 143,481
Average total equity $ 928,801 802,207 834,726 730,541 639,426 566,562 505,027
Average total assets $9,276,934 8,641,807 8,815,423 8,135,587 7,498,299 6,782,659 6,141,794
Ratios:
Return on assets before extraordinary item <F1> 1.86 % 1.75 1.87 1.72 1.53 1.32 1.31
Return on assets after extraordinary item <F1> 1.86 1.75 1.87 1.72 1.53 1.32 1.26
Return on equity before extraordinary item <F1> 18.55 18.89 19.80 19.11 17.92 15.79 15.92
Return on equity after extraordinary item <F1> 18.55 18.89 19.80 19.11 17.92 15.79 15.34
Dividend payout ratio 45.17 41.85 38.10 36.62 36.69 36.90 35.10
Average equity to average assets 10.02 9.29 9.47 8.98 8.53 8.35 8.22
<FN>
<F1> Ratios for the six month periods have been annualized.
</FN>
</TABLE>
8.2
GEORGIA BANK & TRUST
Selected Financial Data
<TABLE>
<CAPTION>
Six Months Ended
June 30, Years Ended December 31,
-----------------------------------------------------------------------------------
(Dollars in Thousands, Except Per Share Amounts)
1998 1997 1997 1996 1995 1994 1993
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet:
Total assets $172,599 $142,419 $160,807 $129,787 $107,786 $93,864 $78,377
Loans, net 117,380 96,051 110,157 88,013 72,218 60,010 46,087
Securities available-for-sale 30,110 25,476 22,375 21,616 18,404 12,240 -
Securities held-to-maturity 7,901 9,195 8,101 9,227 6,275 13,228 25,453
Federal funds sold 5,200 650 3,430 - 160 460 1,190
Deposits 154,803 128,610 145,721 117,048 95,973 85,307 70,469
Stockholders' equity 14,088 12,252 13,365 11,218 9,779 8,235 7,532
Operating Data:
Interest income 6,744 5,533 11,830 9,632 8,342 6,384 5,539
Interest expense 3,442 2,671 5,752 4,517 3,749 2,333 2,178
Net interest income 3,302 2,862 6,078 5,115 4,593 4,051 3,361
Provision for loan losses 120 60 120 - - - -
Net interest income after
provision for loan losses 3,182 2,802 5,958 5,115 4,593 4,051 3,361
Other income 775 566 1,188 1,189 897 647 716
Other expenses 2,087 1,886 4,064 3,635 3,190 2,682 2,504
Income tax expense 617 489 985 907 770 646 464
Net income 1,253 993 2,097 1,762 1,530 1,370 1,109
Basic earnings per share 2.39 1.92 4.03 3.67 3.19 2.86 2.31
Diluted earnings per share 2.39 1.92 4.03 3.51 3.07 2.76 2.31
Cash dividends
declared per share 1.00 .90 .90 .80 .70 .60 .30
</TABLE>
8.3
RISK FACTORS
In addition to the other information included in this document, Georgia
Bank shareholders should consider the matters described below carefully in
determining whether to approve the Merger Agreement and the transactions
contemplated by the Merger Agreement.
Fixed Merger Consideration Despite Potential Change in Stock Price
Upon completion of the merger, each share of Georgia Bank common stock
will be converted into the right to receive 3.4612 shares of Synovus common
stock. This Per Share Exchange Ratio will not be adjusted if there is an
increase or decrease in the price of Synovus common stock. (However, there are
termination provisions in the Merger Agreement associated with the price of
Synovus common stock. See "THE MERGER - Termination" (page 20)). The price of
Synovus common stock when the merger takes place may vary from its price at the
date of this document and at the date of the special meeting. Such variations in
the price of Synovus common stock may result from changes in the business,
operations or prospects of Synovus, market assessments of the likelihood and
when the merger will be completed, regulatory considerations, general market and
economic conditions and other factors. At the time of the special meeting,
Georgia Bank shareholders will not know the exact value of the Synovus common
stock that Georgia Bank shareholders will receive when the merger is completed.
You are urged to obtain current market quotations for Synovus common stock.
A Warning About Forward-Looking Statements
Each company makes forward-looking statements in this document, and in
our public documents, that are subject to risks and uncertainties. These
forward-looking statements include information about possible or assumed future
results of our operations. Also, when we use any of the words "believes,"
"expects," "anticipates" or similar expressions, we are making forward- looking
statements. Many possible events or factors could affect the financial results
and performance of each of our companies. This could cause results or
performances to differ materially from those expressed in our forward-looking
statements. You should consider these risks when you vote on the merger. These
possible events or factors include the following:
(i) our cost savings from the merger are less than we expect, or we are
unable to obtain those cost savings as soon as we expect;
(ii) we lose more deposits, customers, or business than we expect;
(iii) competition in the banking industry increases significantly;
(iv) our restructuring costs are higher than we expect or our operating
costs after the merger are greater than we expect;
(v) technological changes and systems integration are harder to make or
more expensive than we expect;
9
(vi) changes in the interest rate environment reduce our margins;
(vii) general economic or business conditions are worse than we expect;
(viii) legislative or regulatory changes occur which adversely affect our
business;
(ix) changes occur in business conditions and inflation;
(x) changes occur in the securities markets; and
(xi) we have more trouble obtaining regulatory approvals for the merger
than we expect.
THE SPECIAL MEETING
General Information
This Proxy Statement/Prospectus is being furnished to the shareholders of
Georgia Bank in connection with the solicitation, by and on behalf of the Board
of Directors of Georgia Bank, of proxies for use and to be voted at a special
meeting of shareholders of Georgia Bank to be held at 4:15 p.m., local time, on
_________, 1998 at Georgia Bank's main office at 135 Bryant Parkway, Calhoun,
Georgia 30703, and at any adjournment thereof, and is being mailed on _______,
1998 to the Georgia Bank shareholders entitled to receive notice of and to vote
at the special meeting.
The special meeting has been called by the Board of Directors of Georgia Bank
so that Georgia Bank shareholders may consider and vote upon a proposal to merge
Interim Synovus Corp., a wholly owned merger vehicle subsidiary of Synovus, with
and into Georgia Bank with Georgia Bank as the resulting bank of the merger
pursuant to the Merger Agreement, a copy of which is attached to this Proxy
Statement/Prospectus as Appendix "A," and incorporated herein by reference. Upon
the effective date of the merger, Georgia Bank shareholders will receive from
Synovus 3.4612 shares of Synovus common stock for each of their shares of
Georgia Bank common stock.
No fractional shares of Synovus common stock will be issued in connection with
the Merger but rather cash (without interest) will be paid in lieu thereof, with
the amount of cash in lieu of fractional shares to be determined based upon the
closing price per share of Synovus common stock on the NYSE on the fifth
business day immediately preceding the effective date of the merger.
If and when the Merger is consummated, Georgia Bank will operate as a wholly
owned subsidiary of Synovus.
Voting Information
At the close of business on _______, 1998, the record date for determining
shareholders of Georgia Bank common stock eligible to receive notice of and to
vote at the special meeting, 523,311 shares of Georgia Bank common stock were
issued and outstanding. With respect to all
10
matters to be considered and voted upon at the special meeting, each shareholder
of Georgia Bank common stock is entitled to one vote for each share of Georgia
Bank common stock he or she holds on the record date.
The presence, in person or by proxy, of at least a majority of the total
number of outstanding shares is necessary to constitute a quorum at the special
meeting. Some proxies may be broker non-votes (marked to indicate that the
shares are not being voted on the Merger Agreement). Any proxy authorized to be
voted at the meeting (including on routine matters pursuant to the discretionary
authority granted to management's proxy) whether or not the proxy is marked to
"ABSTAIN" or to effect a broker non-vote, will be counted in establishing a
quorum.
Approval of the Merger Agreement and the authorization of the merger require
the affirmative vote of the holders of two-thirds of the issued and outstanding
shares of Georgia Bank common stock entitled to vote at the special meeting.
Consequently, both abstentions and broker non- votes will have the effect of a
vote against the Merger Agreement.
As of the record date for the special meeting, Georgia Bank's directors,
executive officers and their affiliates had the power to vote, or direct the
voting of, approximately 17% of the issued and outstanding shares of Georgia
Bank common stock entitled to be voted at the special meeting. It is anticipated
that all shares of Georgia Bank common stock as to which Georgia Bank's present
directors, executive officers and their affiliates control the voting power will
be voted FOR approval of the Merger Agreement and the authorization of the
merger.
Shares represented by properly executed proxies, if such proxies are received
at or prior to the special meeting and not subsequently revoked, will be voted
at the special meeting in accordance with the choice specified therein, or, if
no choice is specified therein, will be voted FOR approval of the Merger
Agreement and the authorization of the merger. A proxy may be revoked by its
maker at any time before it is exercised by: (i) giving written notice of
revocation to Faye C. Mashburn or (ii) properly submitting to Georgia Bank a
duly executed proxy bearing a later date. Attendance at the special meeting will
constitute revocation of the proxy if the maker thereof elects to vote in
person.
The cost of soliciting proxies from holders of Georgia Bank common stock will
be borne by Georgia Bank. In addition to use of the mail, Georgia Bank
shareholders may be solicited by personal contact, or by telephone, telegraph or
other electronic communications, by directors, officers or employees of Georgia
Bank, who will receive no additional compensation for these activities. Georgia
Bank will reimburse custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred by them in connection with this solicitation of
proxies.
THE MERGER
The following is a description of certain provisions of the Merger Agreement,
the merger and the consequences of the merger. This description is qualified in
its entirety by reference to the full text of the Merger Agreement, a copy of
which is attached as Appendix "A" to this Proxy Statement/Prospectus and is
incorporated herein by reference. All shareholders are urged to read carefully
the Merger Agreement, as well as the other appendices, in their entirety.
11
The Merger Agreement
The Board of Directors of Georgia Bank has approved, and the proper officers
of Georgia Bank have executed and delivered, the Merger Agreement. The Merger
Agreement sets forth the terms of the merger and contains: (i) conditions
precedent to each party's obligations to consummate the merger; (ii) conditions
precedent to Synovus' obligations to consummate the merger; (iii) conditions
precedent to Georgia Bank's obligations to consummate the merger; (iv)
provisions relating to Georgia Bank's and Synovus' operations pending
consummation of the merger; and (v) certain other provisions.
Terms of the Merger
On the effective date of the merger (which is the date of or to be specified
in the certificate to be issued by the Secretary of State of Georgia causing the
Merger to become effective), the issued and outstanding shares of Georgia Bank
common stock will be converted into shares of Synovus common stock at the Per
Share Exchange Ratio. After the effective date, outstanding certificates
representing shares of Georgia Bank common stock will represent shares of
Synovus common stock.
Certificates representing shares of Georgia Bank common stock shall be
surrendered to Synovus by the holders thereof on or after the effective date of
the merger for new certificates representing shares of Synovus common stock.
Until so surrendered to Synovus, such certificates which previously represented
shares of Georgia Bank common stock will be deemed for all corporate purposes to
evidence the ownership of the respective number of shares of Synovus common
stock which the holders are entitled to receive upon their surrender to Synovus
(except for the payment of dividends, which is subject to the exchange of stock
certificates as provided herein).
Until the stock certificates nominally representing shares of Georgia Bank
common stock are surrendered to Synovus in exchange for certificates
representing shares of Synovus common stock, no dividends payable as of any date
subsequent to the effective date of the merger on the shares of Synovus common
stock represented by the Georgia Bank common stock certificates will be paid
(however, forms 1099 reporting the payment of such dividends will be filed with
the Internal Revenue Service and mailed to each shareholder); but upon the
surrender to Synovus of the Georgia Bank common stock certificates, Synovus will
pay to the record holders the amount of dividends which previously had become
payable, without interest, upon the shares of Synovus common stock represented
by the outstanding Georgia Bank common stock certificates.
Synovus will not issue fractional shares of Synovus common stock in connection
with the merger. Instead, Synovus will pay cash (without interest) in lieu of
fractional shares, with the amount of cash to be paid in lieu of fractional
shares being determined based upon the closing price per share of Synovus common
stock on the NYSE on the fifth day immediately preceding the effective date of
the merger.
The delivery of Synovus stock certificates and other amounts may be subject to
possible forfeiture under applicable escheat laws if Georgia Bank stock
certificates are not surrendered
12
for exchange within the legally specified periods of time which vary with the
state of residence of the certificate holder. Therefore, we urge all Georgia
Bank shareholders to surrender their Georgia Bank stock certificates at the
earliest possible date after consummation of the merger.
As soon as practicable following consummation of the Merger, Synovus will send
each shareholder of Georgia Bank common stock a letter of transmittal explaining
the procedure to be followed in exchanging certificates representing shares of
Georgia Bank common stock for certificates representing shares of Synovus common
stock. Until the letter of transmittal is received, shareholders of Georgia Bank
should continue to hold their certificates representing shares of Georgia Bank
common stock.
On the basis of the number of shares of Georgia Bank common stock which were
outstanding on the date of this Proxy Statement/Prospectus, a maximum of
1,811,284 shares of Synovus common stock may be issued to the shareholders of
Georgia Bank common stock pursuant to the terms of the Merger Agreement.
Background of and Reasons for the Merger
During the first quarter of 1997, the Board of Directors of Georgia Bank began
considering various strategic alternatives, including forming a holding company
for the bank, engaging a brokerage firm to make a market in Georgia Bank's
common stock, and combining with another financial institution. These
deliberations continued throughout the year, and during the fourth quarter of
1997, the Board of Directors retained Stevens & Company to assist it in
strategic planning. Thereafter, the executive committee of Georgia Bank held
discussions concerning the possibility of combining with various other financial
institutions and authorized Stevens to pursue expressions of interest from
various financial institutions, including Synovus.
At a special meeting on March 9, 1998, the Board of Directors met to review
and approve a strategy. At that meeting, a representative from Stevens & Company
reported that he had discussed the possible acquisition of Georgia Bank with two
financial institutions, including Synovus, and compared their offers for the
Board. The Board had previously approved these discussions because the Board
believes both institutions to be strongly oriented toward the communities in
which they operate, with local management playing a significant role in
developing the market strategy for the local bank's community. At the same
meeting, legal counsel reviewed with the directors their responsibilities when
considering a combination with another financial institution. Thereafter,
following a lengthy discussion of the advantages and disadvantages of the two
institutions which had expressed an interest in combining with Georgia Bank as
well as the possibility of remaining independent, the Board unanimously voted to
sign a letter of intent with Synovus and to recommend the transaction to
shareholders of Georgia Bank.
On April 20, 1998, Georgia Bank and Synovus announced their proposed
combination. Thereafter, Georgia Bank and Synovus conducted due diligence
investigations of each other, negotiated the terms of the proposed Merger
Agreement and negotiated the disposition of certain insurance benefit plans for
Georgia Bank's officers and directors.
At a special meeting on May 28, 1998, the Board met with legal counsel who
reviewed the terms of the proposed Merger Agreement. After discussion, the Board
approved and adopted the
13
Merger Agreement subject to inclusion of termination provisions relating to
Synovus' stock price, and with execution of the Merger Agreement to be delayed
pending completion of the negotiations relating to the insurance benefits. The
Merger Agreement was executed as of September 15, 1998.
Our Reasons for the Merger. Georgia Bank's Board of Directors has approved the
Merger Agreement and has determined that the Merger is in the best interests of
Georgia Bank and its shareholders. The terms of the Merger were the result of
arms'-length negotiations between representatives of Georgia Bank and
representatives of Synovus. Without assigning any relative or specific weights
to the factors, the Board of Directors of Georgia Bank considered the following
material factors:
(i) the value of the consideration to be received by Georgia Bank
shareholders relative to the book value and earnings per share of Georgia Bank
common stock;
(ii) information concerning the financial condition, results of operations
and business prospects of Synovus;
(iii) the financial terms of recent business combinations in the financial
services industry and a comparison of the multiples of selected combinations
with the terms of the proposed transaction with Synovus;
(iv) the alternatives to the merger, including remaining an independent
institution;
(v) the competitive and regulatory environment for financial institutions
generally;
(vi) the fact that the merger will enable Georgia Bank shareholders to
exchange their shares of Georgia Bank common stock, in a tax-free transaction,
for shares of common stock of a regional company, the stock of which is widely
held and actively traded; and
(vii) the opinion of Stevens & Company that the consideration to be received
by Georgia Bank shareholders as a result of the merger is fair from a financial
point of view.
Each member of the Board of Directors of Georgia Bank has agreed to vote his
shares of Georgia Bank common stock in favor of the merger.
GEORGIA BANK'S BOARD OF DIRECTORS RECOMMENDS THAT GEORGIA
BANK SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE MERGER
AGREEMENT.
Management of Synovus believes that the merger will provide Synovus with
expanded market opportunities for profitable long-term growth. Management of
Synovus also believes that the merger will result in the addition of a
well-suited and positioned banking organization to Synovus' existing
organization.
14
Opinion of Financial Advisor
Georgia Bank has retained Stevens & Company to act as financial advisor in
connection with the merger. As part of this engagement, Stevens agreed to render
to Georgia Bank's Board an opinion with respect to the fairness to the
shareholders of the consideration to be received in the merger from a financial
point of view. On September 22, 1998, Stevens delivered to Georgia Bank a letter
confirming the consideration to be received as fair from a financial point of
view. The full text, appearing as Appendix "C" in the Proxy Statement/Prospectus
should be read carefully and in its entirety. Stevens' opinion does not
constitute a recommendation to any shareholder as to how such shareholder should
vote on the proposed transaction. The fairness opinion was based upon
information available to Stevens as of the date the opinion was rendered.
In rendering its opinion, Stevens has, among other things: (i) reviewed
certain publicly available financial and other data with respect to Synovus,
including financial statements for the past five years, Georgia Bank's audited
financial statements for the past five years, and certain other relevant
financial and operating records of Georgia Bank and Synovus; (ii) reviewed the
Merger Agreement; (iii) reviewed certain historical market prices and trading
volumes of Synovus common stock as reported by the NYSE and historical and
current market prices for Georgia Bank's common stock; (iv) considered the
financial terms, to the extent publicly available, of selected recent
acquisitions of financial institutions which Stevens deemed to be comparable, in
whole or in part, to the merger; (v) analyzed the business prospects of Georgia
Bank and Synovus, and the economies of their respective markets; (vi) reviewed
with management of Georgia Bank alternative merger prospects; (vii) inquired
about and discussed the Merger Agreement and other related matters with Georgia
Bank's counsel; and (viii) performed such other analyses and examinations as
Stevens deemed appropriate.
In connection with this review, Stevens assumed and relied on the accuracy and
completeness of the financial and other information provided to it by Georgia
Bank and Synovus.
Stevens is a financial consulting and investment banking firm that specializes
in community bank transactions. Georgia Bank's Board of Directors selected
Stevens to act as its financial advisor on the basis of the firm's expertise in
mergers and acquisitions of community banks, prior experience with Synovus, and
knowledge of the history of Georgia Bank.
This summary reflects the material analysis performed by Stevens but is not a
complete description of the analysis performed by Stevens. The evaluation of the
fairness, from a financial point of view, of the consideration to be received in
the merger was to some extent a subjective one based on the experience and
judgment of Stevens and not merely the result of mathematical analysis of
financial data. The preparation of a fairness opinion involves a determination
as to the most appropriate factors to be considered as well as relevant methods
of financial analysis and the application of those factors and methods to the
particular circumstances, and, therefore, such an opinion is not readily
susceptible to summary description. Stevens believes that its analysis must be
considered as a whole and that selecting only portions of the analysis and
factors considered by Stevens could create an incomplete view of the process
underlying Stevens' opinion. In addition, Stevens may have given various factors
more or less weight than others and may have deemed various assumptions more or
less probable than other
15
assumptions. In its analysis, Stevens incorporated numerous assumptions with
respect to business, market, monetary and economic conditions, industry
performance and other matters, many of which are beyond Georgia Bank's and
Synovus' control. Any estimates contained in Stevens' analysis are not
necessarily indicative of future results or values, which may be significantly
more or less favorable than such estimates. Such estimates were prepared solely
as part of Stevens' analysis of the fairness to Georgia Bank's shareholders of
the consideration to be paid in the merger.
The following is a brief summary of the analysis performed by Stevens in
connection with its opinion dated September 22, 1998.
Summary of Proposal. Stevens reviewed the terms of the proposed transaction as
reflected in the Merger Agreement, including the terms of the Per Share Exchange
Ratio. Based on a 50-day average trading price of Synovus of $21.50, the Per
Share Exchange Ratio of 3.4612 for each share of Georgia Bank common stock would
have a value of $74.42. Stevens also noted that the Board of Directors of
Georgia Bank can terminate the transaction if the average closing price of
Synovus common stock for the 20 trading days ending on the fifth business day
preceding the date of the Georgia Bank shareholders' meeting called to consider
the merger decreases to below $21.00 per share, or Synovus can terminate the
transaction if the average closing price of Synovus common stock during the same
period increases to more than $25.67.
Possible Value of Georgia Bank in a Sale of Control. In determining the
potential value per share of Georgia Bank common stock if Georgia Bank were sold
to an alternative purchaser, Stevens reviewed the historical results of Georgia
Bank and examined certain projections. Stevens computed the value of Georgia
Bank based on a multiple of 16 to 19 times 1997 earnings and a multiple of 2.25
to 2.50 times Georgia Bank's shareholders' equity. Based on this analysis,
Stevens calculated an expected value to Georgia Bank's shareholders in a sale of
control transaction of $59.52 on book, and $70.18 on earnings, for an average of
$64.85.
Net Present Value. The investment or earnings value of any bank's stock is an
estimate of the present value of the future benefits, usually earnings, cash
flow or dividends, which will accrue to the stock. An earnings value was
calculated using an annual future earnings stream over a period of time of not
less than ten years and an appropriate capitalization rate (the net present
value discount rate). The computations were based on an analysis of the banking
industry, the economic and competitive situations in Georgia Bank's market area,
and the current financial condition and historical levels of growth and
earnings. Using a net present value discount rate of 10%, the net present value
would be $36.17 per share.
Dividend Capacity. Stevens analysis also considered the dividend stream that
would be afforded following the merger. Given the rapid growth of Georgia Bank,
Stevens concluded that there would be enhanced dividend income for Georgia Bank
through the merger. Stevens noted that, based on the stated exchange ratio and
current dividend of Synovus, $0.29 per Synovus share would be paid to the
shareholders of Georgia Bank, or a total of $525,272 per year, or an increase in
total dividend payout of $54,292.
Analysis of Selected Other Bank Mergers. Stevens reviewed in excess of
fifty mergers involving transactions in the Southeastern portion of the United
States. Ten transactions were
16
highlighted as being similar to that of Georgia Bank. Stevens noted the prices
paid in these mergers as a multiple of earnings and book value. Stevens also
reviewed other data in connection with each of these mergers, including the
amount of total assets, return on equity, and return on assets of the selling
institutions. Stevens then compared this data to that of Georgia Bank, and to
the value to be received by the shareholders of Georgia Bank following the
merger.
The comparable transactions cited occurred during the period of 1997 and early
1998. The market made a correction in September 1998, with the Synovus peer
group dropping an average of 27.88%.
This comparison yielded a range of transaction values as multiples of latest
twelve months earnings per share from a low of 17.0 to a high of 29.0, with the
average being 21.04. Price to book, in this analysis ranged from 1.44 to 4.19
with the average being 2.78. Based on a 50-day average trading price of Synovus
of $21.50 and the Per Share Exchange Ratio, Georgia Bank would be at 2.97 times
book, and 18.56 times earnings.
There was no one company or transaction used in the above analysis as a
comparison that is identical to Georgia Bank, Synovus, or the merger.
Accordingly, an analysis of the results of the foregoing necessarily involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the companies and other factors that could affect
the public trading of the companies to which they are being compared.
Mathematical analysis (such as determining an average or median) is not, in
itself, a meaningful method of using comparable company data. Analysis must also
be given to the consolidation issues within the financial services industry.
Stevens also analyzed the value that Synovus would add in terms of (i)
liquidity, (ii) capital required to continue the growth patterns of Georgia
Bank, (iii) and the ability of senior management of Georgia Bank to complement
that of Synovus as they further expand their franchise in North Georgia. With
respect to liquidity, Synovus is traded on the NYSE, with an average daily
volume of 201,000 shares. Stevens also concluded that Georgia Bank and its
present management are key factors in Synovus' ability to grow its banking
franchise, especially in North Georgia.
Stevens is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, and valuations for
estate, tax, corporate and other purposes. Georgia Bank has paid Stevens a fee
of $10,000 in connection with its engagement. An additional fee of .75 of 1% of
the aggregate market value of the consideration received by Georgia Bank
shareholders will be payable to Stevens upon consummation of the merger, less
the $10,000 already paid. Based upon an assumed value of one share of Synovus
common stock on the effective date of the merger of $21.50 (the 50-day average
trading price of Synovus), this additional fee would be approximately $282,000.
No compensation payable to Stevens is contingent on the conclusions reached in
the opinion of Stevens. Georgia Bank has also agreed to indemnify Stevens and
certain related persons against certain liabilities relating to or arising out
of its engagement.
The foregoing description of Stevens' opinion is qualified in its entirety by
reference to the full text of such opinion which is attached hereto as Appendix
"C".
17
Conditions to the Merger
The obligations of Synovus and Georgia Bank to effect the merger are subject
to the satisfaction prior to the effective date of the following conditions: (i)
approval of the Merger Agreement and the transactions contemplated by that
agreement by the affirmative vote of the holders of two-thirds of Georgia Bank
common stock; (ii) approval of the Merger Agreement and the transactions
contemplated by that agreement by the Federal Reserve, the FDIC and the Georgia
Banking Department; (iii) receipt of all other regulatory consents and approvals
which are necessary to the consummation of the transactions contemplated by the
Merger Agreement; provided, however, that no approval or consent referred to in
the Merger Agreement or in clause (ii) above will be deemed to have been
received if it includes any conditions or requirements (other than conditions or
requirements which are customarily included in such an approval or consent)
which would have such a material adverse impact on the economic or business
benefits of the transactions contemplated by the Merger Agreement as to render
inadvisable the consummation of the Merger in the reasonable opinion of the
Board of Directors of Synovus or Georgia Bank; (iv) the satisfaction of all
other statutory or regulatory requirements which are necessary to the
consummation of the transactions contemplated by the Merger Agreement; (v)
neither Synovus nor Georgia Bank shall be subject to any order, decree or
injunction or any other action of a United States federal or state court or a
United States federal or state governmental, regulatory or administrative agency
or commission permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Merger Agreement; (vi) the Registration
Statement of which this Proxy Statement/Prospectus forms a part will have become
effective and no stop order suspending the effectiveness of the Registration
Statement will have been issued and no proceedings for that purpose will have
been initiated or threatened by the Securities and Exchange Commission or any
other regulatory authority; (vii) receipt by Synovus and Georgia Bank of an
opinion from KPMG to the effect that the merger will be treated for federal
income tax purposes as a tax-free reorganization within the meaning of Section
368(a)(1)(A) and 368(a)(2)(E) of the Tax Code; (viii) receipt by Synovus and
Georgia Bank from each other of a certificate to the effect that the
representations made by management of such party to KPMG in delivery of the
opinion referenced in (vii) above were true, correct and complete when made; and
(ix) receipt by Synovus of a letter dated as of the effective date of the merger
from KPMG to the effect that merger will qualify for pooling of interests
accounting treatment.
The obligation of Synovus to effect the Merger is subject to the satisfaction
prior to the effective date of the merger of the following additional
conditions: (i) there shall not exist inaccuracies in the representations and
warranties or instances of non-compliance with the covenants of Georgia Bank set
forth in the Merger Agreement such that their aggregate effect has, or is
reasonably likely to have, a material adverse effect on Georgia Bank, and
Synovus will have received a certificate signed by the Chief Executive Officer
of Georgia Bank, dated the effective date of the merger, to such effect; (ii) no
litigation or proceeding is pending which: (a) has been brought against Georgia
Bank by any governmental agency seeking to prevent consummation of the
transactions contemplated by the Merger Agreement; or (b) in the reasonable
judgment of Synovus is likely to have a material adverse effect on Georgia Bank;
(iii) Synovus will not have learned of any fact or condition with respect to the
business, properties, assets, liabilities, deposit relationships or earnings of
Georgia Bank which, in the reasonable judgment of Synovus, is materially and
adversely at variance with one or more of the warranties
18
or representations set forth in the Merger Agreement or which, in the reasonable
judgment of Synovus, has or will have a material adverse effect on Georgia Bank;
(iv) T. Larry Roye will have entered into an Employment Agreement with Synovus;
(v) on the effective date, Georgia Bank will have a CAMEL rating of at least 2
and a Community Reinvestment Act Rating of at least Satisfactory; (vi) on the
effective date, Georgia Bank will have a loan loss reserve of at least 1.0% of
loans which will be adequate in all material respects under generally accepted
accounting principles applicable to banks; (vii) Georgia Bank will have
delivered to Synovus certain environmental reports; (viii) the results of any
regulatory exam of Georgia Bank will be reasonably satisfactory to Synovus; and
(ix) each of Georgia Bank's officers and directors will have delivered a "no
claims" letter to Synovus.
The obligation of Georgia Bank to effect the Merger is subject to the
satisfaction prior to the effective date of the merger of the following
additional conditions: (i) there shall not exist inaccuracies in the
representations and warranties or instances of non-compliance with the covenants
of Synovus set forth in the Merger Agreement such that their aggregate effect
has, or is reasonably likely to have, a material adverse effect on Synovus, and
Georgia Bank will have received a certificate signed by the Chief Executive
Officer of Synovus, dated the effective date, to such effect; (ii) the listing
for trading of the shares of Synovus common stock (which will be issued pursuant
to the terms of the Merger Agreement) on the NYSE shall have been approved by
the NYSE subject to official notice of issuance; (iii) no litigation or
proceeding is pending which: (a) has been brought against Synovus by any
governmental agency seeking to prevent consummation of the transactions
contemplated by the Merger Agreement; or (b) in the reasonable judgment of
Georgia Bank is likely to have a material adverse effect on Synovus; and (iv)
Georgia Bank will not have learned of any fact or condition with respect to the
business, properties, assets, liabilities, deposit relationships or earnings of
Synovus which, in the reasonable judgment of Georgia Bank, is materially and
adversely at variance with one or more of the warranties or representations set
forth in the Merger Agreement or which, in the reasonable judgment of Georgia
Bank, has or will have a material adverse effect on Synovus.
Regulatory Approvals
As indicated above, consummation of the merger and the transactions
contemplated by the Merger Agreement is subject to, and conditioned upon,
receipt of the approvals from the Federal Reserve, the FDIC and the Georgia
Banking Department. Applications in connection with the merger were filed with
the Federal Reserve, the FDIC and the Georgia Banking Department on or about
October 1, 1998. The merger has not yet been approved by the Federal Reserve,
the FDIC or the Georgia Banking Department. The merger cannot be consummated for
30 days after approval thereof by the Federal Reserve and the FDIC, although
this period may be shortened to 15 days by the U.S. Attorney General. During
this period, the United States Justice Department may challenge the merger on
antitrust grounds.
There can be no assurance that the Federal Reserve, the FDIC or the Georgia
Banking Department or any other applicable regulatory authority will approve or
take other required action with respect to the merger. Synovus and Georgia Bank
are not aware of any governmental approvals or actions that are required in
order to consummate the merger except as described above. Should such other
approval or action be required, it is contemplated that Synovus and Georgia Bank
would seek the approval or action. There can be no assurance as to whether or
19
when any other approval or action, if required, could be obtained.
Waiver and Amendment
Prior to the effective date of the merger, any provision of the Merger
Agreement may be waived by the party entitled to the benefits of such provision
or by all parties, to the extent allowed by law. In addition, the Merger
Agreement may be amended at any time, to the extent allowed by law, by an
agreement in writing between Synovus, Georgia Bank and Interim Synovus Corp.
after approval of their respective Boards of Directors.
Termination
The Merger Agreement may be terminated prior to the effective date of the
merger, either before or after its approval by the shareholders of Georgia Bank:
(i) by the mutual consent of Synovus and Georgia Bank, if the Board of Directors
of each so determines by vote of a majority of the members of its entire Board;
(ii) by Synovus or Georgia Bank if consummation of the merger does not occur by
reason of the failure of any of the conditions precedent set forth in the Merger
Agreement; (iii) by Synovus or Georgia Bank, if its Board of Directors so
determines by vote of a majority of the members of its entire Board, in the
event that the merger is not consummated by March 31, 1999 unless the failure to
so consummate by such time is due to the breach of the Merger Agreement by the
party seeking to terminate; (iv) by Georgia Bank, if the average closing price
of Synovus common stock on the NYSE during the 20 trading days ending on the
fifth business day preceding the date of the Georgia Bank shareholders' meeting
called to consider the merger is less than $21.00 per share; or (v) by Synovus,
if the average closing price of Synovus common stock on the NYSE during the same
period is more than $25.67 per share.
Interests of Certain Persons in the Merger
No officer or director of Georgia Bank, nor any of their "associates," has any
direct or indirect material interest in the Merger, except insofar as the
following might be deemed to create such an interest: (i) the ownership by such
person of Georgia Bank common stock; (ii) the continued employment by such
person with Georgia Bank after consummation of the merger; (iii) the service by
such person as a director of Georgia Bank after consummation of the merger; (iv)
after the effective date of the merger, the eligibility of such persons to
participate in the Synovus Financial Corp. Director and/or Employee Stock
Purchase Plans or Synovus' welfare, incentive and benefit plans; and (v) certain
rights to indemnification. The Georgia Bank Board was aware of these interests
and considered them, among other matters, in approving the Merger Agreement and
related transactions.
Pursuant to the Merger Agreement, for a period of six years after the
effective date, Synovus will indemnify, defend and hold harmless each person
entitled to indemnification from Georgia Bank against all liabilities arising
out of actions or omissions occurring at or prior to the effective date
(including the transactions contemplated by the Merger Agreement) to the fullest
extent permitted under Georgia law and by Georgia Bank's Articles of
Incorporation and bylaws.
In addition, as a condition to the Merger, Synovus has agreed to enter into an
Employment Agreement with T. Larry Roye, President of Georgia Bank. Pursuant to
the Employment
20
Agreement, Mr. Roye will be elected as President of Georgia Bank. The Agreement
is for a three-year term and provides that Mr. Roye will be compensated for his
services at an annual rate of base compensation of $120,000 per year and will be
eligible to participate in the Synovus Incentive Bonus Plan. The Employment
Agreement also provides that Mr. Roye will be granted an option to purchase
10,000 shares of Synovus common stock on the effective date of the merger at an
exercise price equal to the closing price of Synovus common stock on the
effective date of the merger with the options becoming exercisable three years
from the effective date. Finally, the Employment Agreement provides that Mr.
Roye will not compete with Synovus for a two-year period following termination
of his employment under certain circumstances, with the restricted period
ending, in all events, on the third anniversary of the effective date of the
merger.
Synovus has also agreed to enter into an Employment Agreement with Lamar
Harrison, Executive Vice President and Chief Financial Officer of Georgia Bank.
Pursuant to the Employment Agreement, Mr. Harrison will be elected as Executive
Vice President and Chief Financial Officer of Georgia Bank. The Agreement is for
a three-year term and provides that Mr. Harrison will be compensated for his
services at an annual rate of base compensation of $83,500 per year. The
Employment Agreement also provides that Mr. Harrison will not compete with
Synovus for a two-year period following termination of his employment under
certain circumstances, with the restricted period ending, in all events, on the
third anniversary of the effective date of the merger.
In addition, Synovus has agreed to enter into its standard change of control
agreement with Mr. Roye. The agreement provides severance pay and continuation
of certain benefits in the event of a change of control. In order to receive
benefits under the agreement, 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: (i) the acquisition by any person of 20% or more of the
"beneficial ownership" of Synovus' outstanding voting stock, with certain
exceptions for Turner family members; (ii) the persons serving as directors of
Synovus as of the date of the change of control agreement and those replacements
or additions subsequently approved by a two-thirds (2/3) vote of the Synovus
Board ceasing to comprise at least two-thirds (2/3) of the Synovus Board; (iii)
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 (iv) a "triggering event" occurs as
defined in the Synovus Rights Agreement. For information concerning the Synovus
Rights Agreement, see "DESCRIPTION OF STOCK AND EFFECT OF MERGER ON RIGHTS OF
GEORGIA BANK SHAREHOLDERS - The Rights Plan." Under the change of control
agreement, severance pay would equal two 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 two 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. The executive would also receive a short-year bonus for the
year of separation based on
21
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.
If the executive were to be impacted by the Internal Revenue Service excise tax
that applies to certain change of control agreements, the executive would
receive additional gross up payments so that he would be in the same position as
if there were no excise tax. The agreement does not provide for retirement
benefits or perquisites.
Employee Benefits
Synovus has agreed in the Merger Agreement that, following the effective date,
Synovus will provide generally to officers and employees of Georgia Bank
employee benefits, including without limitation pension benefits, health and
welfare benefits, life insurance and vacation and severance arrangements, on
terms and conditions which, when taken as a whole, are substantially similar to
those currently provided by Georgia Bank. As soon as administratively and
financially practicable following the effective date, Synovus has agreed to
provide generally to officers and employees of Georgia Bank employee benefits
which, when taken as a whole, are substantially similar to those provided to
Synovus and its subsidiaries to their similarly situated officers and employees.
Tax Opinion
Synovus and Georgia Bank have received an opinion from KPMG, to the effect
that: (i) the Merger will constitute a tax-free reorganization under Section
368(a)(1)(A) and 368(a)(2)(E) of the Tax Code; (ii) the basis of Synovus common
stock to be received by each Georgia Bank shareholder will be the same as the
basis of Georgia Bank common stock being surrendered; (iii) the holding period
of Synovus common stock will include the holding period of the Georgia Bank
common stock being exchanged, provided that the Georgia Bank common stock is
held as a capital asset at the effective date of the merger; and (iv) that, upon
consummation of the merger, no gain or loss will be recognized by the
shareholders of Georgia Bank upon their receipt of shares of Synovus common
stock: (a) with the exception of any income or loss that will be recognized by
any Georgia Bank shareholders with respect to any cash payments required to be
received by them in lieu of their receipt of fractional shares of Synovus common
stock; (b) with the exception of any income or loss that will be recognized by
any Georgia Bank shareholders with respect to any cash payments received by them
by virtue of their exercise of their statutory dissenters' rights against the
merger; and (c) except to the extent that the Share Purchase Rights, which are
described on pages 27 through 30 of this Proxy Statement/Prospectus, are
determined to be other property within the meaning of Section 356 of the Tax
Code, as described on page 12 of the opinion, which is attached hereto as
Appendix "D." The Tax Opinion was issued on October 12, 1998. The Tax Opinion is
based upon certain assumptions and representations by the managements of Synovus
and Georgia Bank (including, in general, the absence of any plan or intention of
Georgia Bank's shareholders to sell or otherwise dispose of any amount of
Synovus common stock received in the merger that would violate certain
precedents regarding continuity of interest required to exist in a
reorganization). KPMG serves Synovus as independent auditors.
22
All Georgia Bank shareholders are urged to consult their own tax advisors as
to the specific consequences to them of the merger under federal, state, local
and any other applicable income tax laws.
Accounting Treatment
It is anticipated that the merger will be accounted for as a pooling of
interests for financial reporting purposes. The Merger Agreement provides that
consummation of the merger is subject to the receipt by Synovus of a letter from
KPMG to the effect that the merger will qualify as a pooling of interests under
generally accepted accounting principles and applicable rules of the Securities
and Exchange Commission if consummated in accordance with the Merger Agreement.
Expenses
The Merger Agreement provides that Synovus and Georgia Bank will each pay its
own expenses in connection with the merger and related transactions, including,
but not limited to, the fees and expenses of its own counsel and accountants.
Resales of Synovus Common Stock
The shares of Synovus common stock issued pursuant to the Merger Agreement
will be freely transferable under the Securities Act of 1933, as amended
("Securities Act") except for shares issued to any shareholder who may be deemed
to be an "affiliate" of Georgia Bank for purposes of Rule 145 under the
Securities Act as of the date of the Georgia Bank special meeting. Affiliates
may not sell their shares of Synovus common stock acquired in connection with
the merger except pursuant to an effective registration statement under the
Securities Act covering such shares or in compliance with Rule 145 promulgated
under the Securities Act or another applicable exemption from the registration
requirements of the Securities Act. Persons who may be deemed to be affiliates
of Georgia Bank generally include individuals or entities that control, are
controlled by or are under common control with Georgia Bank and may include
certain officers and directors of Georgia Bank as well as principal shareholders
of Georgia Bank.
Georgia Bank has agreed in the Merger Agreement to use its best efforts to
cause each director, executive officer and other person who is an affiliate of
Georgia Bank to enter into an agreement with Synovus providing that such person
will not sell, pledge, transfer or otherwise dispose of shares of Georgia Bank
common stock owned by such person or Synovus common stock to be received by such
person in the merger: (i) in the case of shares of Synovus common stock only,
except in compliance with the applicable provisions of the Securities Act and
the rules and regulations thereunder; and (ii) during the periods when any such
sale, pledge, transfer or other disposition would, under generally accepted
accounting principles or the rules, regulations or interpretations of the
Securities and Exchange Commission, disqualify the merger for pooling of
interests accounting treatment. Such periods in general encompass the period
commencing 30 days prior to the merger and ending at the time of publication of
financial results covering at least 30 days of combined operations of Synovus
and Georgia Bank. This Proxy Statement/Prospectus does not cover resales of
Synovus common stock following consummation of the merger, and no person may
make use of this Proxy Statement/Prospectus in connection
23
with any such resale.
NYSE Listing
Synovus common stock is listed on the NYSE. The Synovus common stock issued to
the shareholders of Georgia Bank pursuant to the Merger Agreement will be listed
on the NYSE.
DESCRIPTION OF STOCK AND EFFECT OF MERGER
ON RIGHTS OF GEORGIA BANK SHAREHOLDERS
If the merger is consummated, Georgia Bank shareholders will become
shareholders of Synovus (other than Georgia Bank shareholders who perfect their
statutory dissenters' rights against the merger).
The following sets forth, in summary form, a comparison of certain rights of
shareholders owning Synovus common stock and shareholders owning Georgia Bank
common stock.
[Rest of page intentionally blank]
24
<TABLE>
<CAPTION>
Synovus Georgia Bank
- --------------------------------------------------------------------------------
<S> <C>
1. Ten votes for each share held, 1. One vote for each share held
except in certain limited
circumstances described below
2. No cumulative voting rights in the 2. No cumulative voting rights in the
election of directors, meaning that election of directors, meaning that
the holders of a plurality of the the holders of a plurality of the
shares elect the entire Board of shares elect the entire Board of
Directors Directors
3. Dividends may be paid from funds 3. Dividends may be paid from funds
legally available, subject to legally available, subject to
contractual and regulatory contractual and regulatory
restrictions restrictions
4. Right to participate pro rata in 4. Right to participate pro rata in
distribution of assets upon distribution of assets upon
liquidation liquidation
5. No pre-emptive or other rights to 5. No pre-emptive or other rights to
subscribe for any additional shares subscribe for any
or securities additional shares or securities
6. No conversion rights 6. No conversion rights
7. Directors serve staggered 7. Directors serve one-year terms
3-year terms
8. Certain corporate actions, including 8. Corporate actions require the
business combinations, require the affirmative vote of a majority of the
affirmative action or vote of 66-2/3% votes actually cast at shareholders' meeting,
of the votes entitled to be unless otherwise required by law, as
cast by the shareholders of all is the case in business combinations
voting stock which require the affirmative vote of
two-thirds of the votes entitled to be
cast at the meeting
9. No preferred stock is authorized 9. No preferred stock is authorized
10. Common Stock Purchase Rights 10. No comparable provision
trade with shares as described
below
</TABLE>
25
Synovus Common Stock
Synovus is incorporated under the Georgia Business Corporation Code, and
Synovus is authorized to issue 600,000,000 shares of Synovus common stock, of
which shares 263,436,131 were outstanding on August 31, 1998. Synovus has no
preferred stock authorized. Synovus' Board of Directors may at any time, without
additional approval of the holders of Synovus common stock, issue authorized but
unissued shares of Synovus common stock.
Synovus' Articles of Incorporation and bylaws presently contain several
provisions which may make Synovus a less attractive target for an acquisition of
control by an outsider who does not have the support of Synovus' Board of
Directors. See "DESCRIPTION OF STOCK AND EFFECT OF MERGER ON RIGHTS OF GEORGIA
BANK SHAREHOLDERS - Voting Rights - Certain Anti-Takeover Effects - The Voting
Amendment"; " - The Rights Plan"; " Staggered Board of Directors"; and " -
Evaluation of Business Combinations."
Voting Rights - Certain Anti-Takeover Effects - The Voting Amendment
Pursuant to an amendment to Synovus' Articles of Incorporation and
bylaws which became effective on April 24, 1986 ("Voting Amendment"),
shareholders of Synovus common stock are entitled to ten votes on each matter
submitted to a vote at a meeting of shareholders for each share of Synovus
common stock which: (i) has had the same beneficial owner since April 24, 1986;
(ii) 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; (iii) 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, including shares of
Synovus common stock to be issued to the former shareholders of Georgia Bank
upon consummation of the merger; (iv) 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 such plan; (v) 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; (vi) 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; (vii) 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 has
had the same beneficial owner 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 (viii) is owned by a holder who, in addition to shares which are
beneficially owned under the provisions of (i)-(vii) above, is the beneficial
owner of less than 1,139,063 shares of Synovus common stock (which amount has
been appropriately adjusted to reflect the stock splits which have occurred
subsequent to April 24, 1986 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) ("ten-vote shares"). Shareholders of shares of Synovus common stock
not described above are entitled to one vote per share for each such share
("one-vote shares"). A shareholder may own both ten-vote shares and one-vote
shares, in which
26
case he will be entitled to ten votes for each ten-vote share and one vote for
each one-vote share.
In connection with various meetings of Synovus' shareholders,
shareholders are required to submit to Synovus' Board of Directors satisfactory
proof necessary for it to determine whether such shareholders' shares of Synovus
common stock are ten-vote shares. If such information is not provided to
Synovus' Board of Directors, shareholders who would, if they had provided such
information, be entitled to ten votes per share, are entitled to only one vote
per share.
As Synovus common stock is registered with the Securities and Exchange
Commission and is listed on the 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
listing on 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
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. Synovus' management believes that all current
shareholders of Synovus common stock are entitled to ten votes per share, and as
such, the further issuance of any ten-vote shares would not disenfranchise any
existing shareholders. In the event it is determined in the future that Synovus
cannot continue to issue ten-vote shares in mergers and acquisitions, Synovus
will consider repealing the Voting Amendment and restoring the principle of one
share/one vote.
If the merger is approved, present shareholders of Georgia Bank common
stock, as future shareholders of Synovus common stock, will, pursuant to the
Voting Amendment described above, be entitled to ten votes per share for each
share of Synovus common stock received by them on the effective date of the
merger. Such persons may also acquire by purchase, stock dividend or otherwise,
up to 1,139,063 additional shares of Synovus common stock which will also be
entitled to ten votes per share. However, if Georgia Bank shareholders acquire
by purchase, stock dividend or otherwise, more than 1,139,063 additional shares
of Synovus common stock, they will be entitled to only receive one vote per
share for each of such shares in excess of 1,139,063 shares until they have been
held for four years.
Except with respect to voting, ten-vote shares and one-vote shares are
identical in all respects and constitute a single class of stock, i.e., Synovus
common stock. Neither the ten-vote shares nor the one-vote shares have a
preference over the other with regard to dividends or upon liquidation. Synovus
common stock does not carry any preemptive rights enabling a holder to subscribe
for or receive shares of Synovus common stock.
The Rights Plan
On April 20, 1989, the Board of Directors of Synovus established a Share
Purchase Rights Plan and declared a dividend distribution of one Common Stock
Purchase Right ("Right") for each outstanding share of Synovus common stock.
Each Right once it becomes exercisable entitles the registered holder to
purchase from Synovus one share of Synovus common stock at a price of $12.84 per
share ("Purchase Price"). The description and terms of the Rights are set forth
in a Rights Agreement between Synovus and SunTrust Bank, Atlanta (formerly Trust
Company Bank), as Rights Agent.
27
As discussed below, initially the Rights will not be exercisable,
certificates will not be sent to shareholders and the Rights will automatically
trade with Synovus common stock. Until the close of business on the tenth day
following the earlier to occur of (i) a public announcement that a person or
group of affiliated persons has become an Acquiring Person, which is defined as
a person who has acquired, or obtained the right to acquire, beneficial
ownership of securities of Synovus representing 10% or more of the outstanding
common stock of Synovus, or such earlier date as a majority of the Board of
Directors shall become aware of the existence of an Acquiring Person (the "Stock
Acquisition Date"), or (ii) the commencement of, or public announcement of an
intention to commence, a tender or exchange offer the consummation of which
would result in the ownership of 15% or more of the outstanding Synovus common
stock (the earlier of such dates being called the "Distribution Date"), the
Rights will be evidenced by the Synovus common stock certificates. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights will be mailed to holders of record of Synovus common stock as of the
close of business on the Distribution Date, and such separate certificates alone
will evidence the Rights from and after the Distribution Date.
Each of the following persons (an "Exempt Person") will not be deemed to
be an Acquiring Person even if they have acquired, or obtained the right to
acquire, beneficial ownership of 10% or more of the outstanding common stock of
Synovus: (i) Synovus, any subsidiary of Synovus, any employee benefit plan or
employee stock plan of Synovus or of any subsidiary of Synovus; (ii) any
shareholder who is a descendant of D. Abbott Turner (the "Turner Family"), any
shareholder who is affiliated or associated with the Turner Family and any
person who would otherwise become an Acquiring Person as a result of the receipt
of common stock or a beneficial interest in common stock from one or more
members of the Turner Family by way of gift, devise, descent or distribution,
but not by way of sale, unless any such person, together with his affiliates and
associates, becomes the beneficial owner of more than 30% of the outstanding
shares of Synovus common stock; (iii) any person who would otherwise become an
Acquiring Person solely by virtue of a reduction in the number of outstanding
shares of Synovus common stock unless and until such person shall become the
beneficial owner of any additional shares of Synovus common stock; and (iv) any
person who is not otherwise an Exempt Person and who as of April 20, 1989 was
the beneficial owner of 10% or more of the outstanding Common Stock unless and
until such person shall become the beneficial owner of any additional shares of
Synovus common stock.
The Rights are not exercisable until the Distribution Date. The Rights
will expire at the close of business on May 4, 1999, unless earlier redeemed by
Synovus as described below.
The Purchase Price payable, and the number of shares of Synovus common
stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of the
common stock, (ii) upon the grant to holders of the common stock of certain
rights or warrants to subscribe for common stock or convertible securities at
less than the current market price of the common stock or (iii) upon the
distribution to holders of the common stock of evidences of indebtedness or
assets (excluding dividends payable in common stock) or of subscriber rights or
warrants (other than those referred to above).
After the Rights have become exercisable, if Synovus is acquired in a
merger or other
28
business combination (in which any shares of Synovus common stock are changed
into or exchanged for other securities or assets) or more than 30% of the assets
or earning power of Synovus and its subsidiaries (taken as a whole) are sold or
transferred in one transaction or a series of related transactions, the Rights
Agreement provides that proper provision shall be made so that each holder of
record of a Right will have the right to receive, upon payment of the Purchase
Price, that number of shares of common stock of the acquiring company having a
market value at the time of such transaction equal to two times the Purchase
Price.
In the event (i) any Person (other than an Exempt Person) becomes the
beneficial owner of 15% or more of the then outstanding shares of Synovus common
stock or any Exempt Person who is the beneficial owner of 15% or more of the
outstanding shares of Synovus common stock fails to continue to qualify as an
Exempt Person (unless, in either case, such Person's failure is inadvertent and,
within 10 days after the date upon which Synovus first becomes aware of the
occurrence of such ownership, the Board of Directors in its sole discretion
approves the beneficial ownership interest then held by such Person or provides
such Person a 30 day period to divest a sufficient number of shares so as to
decrease the beneficial ownership of such Person to less than 15% or to
requalify as an Exempt Person, and such Person does so) or (ii) any Acquiring
Person or any of its affiliates or associates, directly or indirectly, engages
in certain self-dealing transactions with Synovus as more particularly described
in the Rights Agreement, such as entering into a merger with Synovus or engaging
in transactions with Synovus on terms and conditions less favorable to Synovus
than Synovus would be able to obtain in an arm's- length negotiation with an
unaffiliated third party, then, and in each such case, each holder of record of
a Right, other than the Acquiring Person, will thereafter have the right to
receive, upon payment of the Purchase Price, that number of shares of Synovus
common stock having a market value at the time of the transaction equal to twice
the Purchase Price. Any Rights that are or were at any time, on or after the
earlier of the Stock Acquisition Date or the Distribution Date, beneficially
owned by an Acquiring Person which is or was involved in or which caused or
facilitated, directly or indirectly, the event or transaction or transactions
described in this paragraph shall become null and void. Each of the above
described events and each of the events described in the previous paragraph is
referred to as a "Triggering Event."
To the extent that sufficient shares of Synovus common stock are not
available for the exercise in full of the Rights, holders of Rights will receive
upon exercise shares of common stock to the extent available and then cash,
property or other securities of Synovus, in proportions determined by Synovus,
so that the aggregate value received is equal to twice the Purchase Price.
Synovus, however, shall not be required to issue any cash, property or
securities (other than common stock) upon exercise of the Rights to the extent
their aggregate value would exceed the amount of cash Synovus would otherwise be
entitled to receive upon exercise in full of the then exercisable Rights.
No fractional shares of Synovus common stock will be issued upon
exercise of the Rights and, in lieu thereof, a payment in cash will be made to
the holder of such Rights equal to the same fraction of the current market value
of a share of Synovus common stock.
At any time until the date of the first Triggering Event (subject to
extension by the Board of Directors), Synovus may redeem the Rights in whole,
but not in part, at a price of $0.01 per Right. Immediately upon the action of
the Board of Directors of Synovus authorizing
29
redemption of the Rights, the Rights will terminate, and the only right of the
holders of Rights will be to receive the redemption price without any interest
thereon.
Until the close of business on the date of the first Triggering Event
(subject to extension) Synovus may, except with respect to the redemption price
or the date of expiration of the Rights, amend the Rights in any manner. After
the date of the first occurrence of a Triggering Event (subject to extension),
Synovus may amend the Rights in any manner that does not adversely affect the
interest of holders of the Rights.
Until a Right is exercised, the holder, as such, will have no rights as
a shareholder of Synovus, including, without limitation, the right to vote or to
receive dividends.
The issuance of the Rights is not taxable to Synovus or to shareholders
under presently existing federal income tax law, and will not change the way in
which shareholders can presently trade Synovus common stock. If the Rights
should become exercisable, shareholders, depending on then existing
circumstances, may recognize taxable income.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A which
is incorporated into this Proxy Statement/Prospectus by reference. A copy of the
Rights Agreement is available free of charge from either SunTrust Bank, Atlanta
or Synovus. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement.
If the Merger is approved, Rights will attach to the Synovus common stock issued
to the present shareholders of Georgia Bank.
Staggered Board of Directors; Supermajority Approvals
Pursuant to Synovus' Articles of Incorporation and bylaws, Synovus'
Board of Directors is divided into three classes of directors serving staggered
3-year terms, with the terms of each class of directors to expire each
succeeding year. Also pursuant to Synovus' Articles of Incorporation and bylaws,
the vote or action of shareholders possessing 66-2/3% of the votes entitled to
be cast by the shareholders of all the issued and outstanding shares of Synovus
common stock is required to: (i) call a special meeting of Synovus'
shareholders; (ii) fix, from time to time, the number of members of Synovus'
Board of Directors; (iii) remove a member of Synovus' Board of Directors; (iv)
approve any merger or consolidation of Synovus with or into any other
corporation, and the sale, lease, exchange or other disposition of all, or
substantially all, of Synovus' assets to or with any other corporation, person
or entity, with respect to which the approval of Synovus' shareholders is
required by the provisions of the corporate laws of the State of Georgia; and
(v) alter, delete or rescind any provision of Synovus' Articles of
Incorporation.
This allows directors to be removed only for cause by 66-2/3% of the
votes entitled to be cast at a shareholders' meeting called for that purpose.
Vacancies or new directorships can only be filled by a majority vote of the
directors then in office. Synovus' staggered Board of Directors, especially when
combined with the Voting Amendment, makes it more difficult for its shareholders
to force an immediate change in the composition of the majority of the Board. A
potential acquiror with shares recently acquired and not entitled to 10 votes
per share under the
30
Voting Amendment may be discouraged or prevented from soliciting proxies for the
purpose of electing directors other than those nominated by current management
for the purpose of changing the policies or control of Synovus.
Evaluation of Business Combinations
Synovus' Articles of Incorporation also provide that in evaluating any
business combination or other action, Synovus' Board of Directors may consider,
in addition to the amount of consideration involved and the effects on Synovus
and its shareholders, the interests of the employees, customers, suppliers and
creditors of Synovus and its subsidiaries, the communities in which offices of
the corporation or its subsidiaries are located, and any other factors the Board
of Directors deem pertinent.
Georgia Bank Common Stock
The authorized capital stock of Georgia Bank consists of 1,000,000
shares of common stock, $5.00 par value. As of August 31, 1998, 523,311 shares
of Georgia Bank common stock were issued and outstanding.
Holders of Georgia Bank common stock are entitled to one vote per share
on all matters to be voted on by shareholders.
Holders of shares of Georgia Bank common stock are entitled to share
ratably in such dividends as may be declared by the Board of Directors and paid
by Georgia Bank out of funds legally available therefor and to share pro rata in
the distribution to shareholders upon dissolution of Georgia Bank .
Holders of Georgia Bank common stock do not have pre-emptive rights.
Holders of Georgia Bank common stock do not have conversion rights, and there
are no redemption provisions with respect to such shares. All outstanding shares
of Georgia Bank common stock are fully paid and nonassessable.
The preceding descriptive information supplied herein concerning Synovus
common stock and Georgia Bank common stock outlines certain provisions of
Synovus' Articles of Incorporation and bylaws, Georgia Bank's Articles of
Incorporation and bylaws and certain statutes regulating the rights of holders
of Synovus and Georgia Bank common stock. The information does not purport to be
complete and is subject in all respects to provisions of the Articles of
Incorporation and bylaws of Synovus and Georgia Bank and the laws of the State
of Georgia.
Dissenters' Rights
Pursuant to Sections 7-1-537 and 14-2-1301 et. seq. of the Official Code
of Georgia Annotated, as amended ("Georgia Law"), any shareholder of record of
Georgia Bank common stock who objects to the merger, and who fully complies with
all of the provisions of Georgia Law, will be entitled to demand and receive
payment in cash of an amount equal to the fair value of his or her shares of
Georgia Bank common stock if the merger is consummated. A record
31
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his or her name only if the shareholder dissents with respect to
all shares beneficially owned by any one beneficial shareholder and notifies
Georgia Bank in writing of the names and addresses of each person on whose
behalf he or she asserts dissenters' rights. A beneficial owner must dissent
with respect to all the shares he or she owns. For the purpose of determining
the amount to be received in connection with the exercise of statutory
dissenters' rights under Georgia Law, the fair value of a dissenting
shareholder's Georgia Bank common stock is determined as of the close of the
business on the date prior to the effective date of the merger, excluding any
appreciation or depreciation therein in anticipation of the merger.
Any Georgia Bank shareholder desiring to receive payment of the fair
value of his or her Georgia Bank common stock in accordance with the
requirements of Georgia Law: (i) must file with Georgia Bank prior to the
special meeting of shareholders of Georgia Bank at which the vote will be taken
on the Merger Agreement and the merger, or at the special meeting, but before
the vote is taken, a written notice of his or her intent to demand payment of
the fair value of his or her shares of Georgia Bank common stock if the Merger
Agreement is approved and the merger is consummated; (ii) must not vote in favor
of the proposal to which he or she objects (although he or she may abstain from
voting); and (iii) must, by the date specified in the dissenters' notice
("Dissenters' Notice") mailed to him or her by Georgia Bank, which date shall
not be fewer than 30 nor more than 60 days from the shareholders' receipt of the
Dissenters' Notice, demand payment for his or her shares and deposit his or her
share certificates in accordance with the terms of the Dissenters' Notice. A
filing of the written notice of intent to demand payment for shares and the
demand for payment pursuant to conditions (i) and (iii) above should be sent to:
Georgia Bank & Trust, 135 Bryant Parkway, Calhoun, Georgia 30703. A vote against
the Merger Agreement and the merger alone will not satisfy the requirements for
the separate written notice of intent to demand payment and the payment demand
referred to in conditions (i) and (iii) above; all three conditions must be
separately complied with.
If the Merger Agreement is approved and the merger is authorized,
Georgia Bank will mail within 10 days thereafter to each Georgia Bank
shareholder who has complied with conditions (i) and (ii) above, a Dissenters'
Notice, addressed to the Georgia Bank shareholder at such address as he has
furnished Georgia Bank in writing, or, if none, at the Georgia Bank
shareholder's address as it appears on the records of Georgia Bank, which notice
will: (i) state where the payment demand must be sent and where and when
certificates for certificated shares must be deposited; (ii) inform holders of
uncertificated shares to what extent transfer of the shares will be restricted
after the payment demand is received, and (iii) set a day by which Georgia Bank
must receive the payment demand which date may not be less than 30 nor more than
60 days after the Dissenters' Notice is delivered. A record shareholder who does
not demand payment or deposit his share certificates where required, each by the
date specified in the Dissenters' Notice, is not entitled to payment for his
shares.
If all of the conditions specified in (i), (ii) and (iii) above are
fully complied with, Georgia Bank is required to make a written offer, within 10
days of the later of the date the merger is consummated or receipt of the
payment demand, to each dissenting shareholder to purchase all of his or her
shares of Georgia Bank common stock at a specified price which Synovus and
Georgia Bank consider to be their fair value, plus accrued interest, as of the
close of business on the day prior to the merger, excluding any change in value
induced by the
32
proposed merger or its consummation.
The offer of payment must be accompanied by:
(i) A copy of Georgia Bank's balance sheet as of the end of a fiscal
year not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders'
equity for that year, and the latest available interim financial
statements, if any;
(ii) A statement of Georgia Bank's and Synovus' estimate of the fair
value of the shares;
(iii) An explanation of how the interest was calculated;
(iv) A statement of the dissenter's right to demand payment under
Section 14-2-1327 of Georgia Law; and
(v) A copy of Section 14-2-1301 et. seq. of Georgia Law, a copy of
which is attached to this Proxy Statement/Prospectus as Appendix
"B."
Assuming the merger has been effected, if the shareholder accepts
Georgia Bank's and Synovus' offer by written notice within 30 days after the
offer or is deemed to have accepted the offer by failing to respond within said
30 days, payment for his or her shares shall be made within 60 days after the
making of the offer of or the consummation of the merger, whichever is later. If
a dissenting shareholder's demand for payment under Section 14-2-1327 of Georgia
Law remains unsettled, Georgia Bank shall commence a proceeding within 60 days
after receiving the payment demand and petition the Superior Court of Gordon
County, Georgia to determine the fair value of the dissenter's shares and
accrued interest, which interest shall be computed from the effective date of
the merger. If Georgia Bank does not commence the proceeding within the 60 day
period, it must pay each dissenter whose demand remains unsettled the amount
demanded.
The foregoing does not purport to be a complete statement of the
provisions of Georgia Law relating to statutory dissenters' rights and is
qualified in its entirety by reference to said provisions, relevant portions of
which are reproduced in full in Appendix "B" to this Proxy Statement/Prospectus,
which is incorporated herein by reference.
Conduct of Business of Georgia Bank and Synovus Pending the Merger
The Merger Agreement provides that prior to the effective date of the
merger, Georgia Bank shall conduct its banking business only in the ordinary
course and will not, without the prior written consent of Synovus: (i) issue any
options to purchase capital stock or issue any shares of capital stock; (ii)
declare, set aside, or pay any dividend or distribution with respect to the
capital stock of Georgia Bank; (iii) directly or indirectly redeem, purchase or
otherwise acquire any capital stock of Georgia Bank; (iv) effect a split or
reclassification of the capital stock of Georgia Bank or a recapitalization of
Georgia Bank; (v) amend the articles of incorporation or bylaws of Georgia Bank;
(vi) grant any increase in the salaries payable or to become payable by Georgia
Bank or to any employee other than normal, annual salary increases
33
to be made with regard to the employees of Georgia Bank or as required by law;
(vii) make any change in any bonus, group insurance, pension, profit sharing,
deferred compensation, or other benefit plan, payment or arrangement made to,
for or with respect to any employees or directors of Georgia Bank, except to the
extent such changes are required by applicable laws or regulations; (viii) enter
into, terminate, modify or amend any contract, lease or other agreement with any
officer or director of Georgia Bank or any "associate" of any such officer or
director, as such term is defined in Regulation 14A under the Securities
Exchange Act of 1934, as amended, other than in the ordinary course of its
banking business; (ix) incur or assume any liabilities, other than in the
ordinary course of its business; (x) dispose of any of its assets or properties,
other than in the ordinary course of its business; (xi) solicit, encourage or
authorize any individual, corporation or other entity, including its directors,
officers and other employees, to solicit from any third party any inquiries or
proposals relating to the disposition of Georgia Bank's business or assets, or
the acquisition of its voting securities, or the merger of Georgia Bank with any
bank or other entity other than as provided by the Merger Agreement, or, subject
to the fiduciary obligations of its Board of Directors, provide any individual,
corporation or other entity with information or assistance or negotiate with any
individual, corporation or other entity in furtherance of such inquiries or to
obtain such a proposal (and Georgia Bank shall promptly notify Synovus of all of
the relevant details relating to all inquiries and proposals which it may
receive relating to any of such matters); (xii) take any other action not in the
ordinary course of its business; or (xiii) directly or indirectly agree to take
any of the foregoing actions.
The Merger Agreement also provides that without the prior written
consent of Georgia Bank, Synovus will not: (i) declare, set aside or pay any
cash dividend on its common stock other than normal and customary cash dividends
in accordance with Synovus' current dividend policy; or (ii) take any action
that would: (a) delay or adversely affect the ability of Synovus to obtain any
necessary approvals of regulatory authorities required for the transactions
contemplated by the Merger Agreement; or (b) adversely affect its ability to
perform its covenants and agreements on a timely basis under the Merger
Agreement.
DESCRIPTION OF SYNOVUS
Business
The disclosures made in this Proxy Statement/Prospectus, together with
the following information which is specifically incorporated by reference
herein, describe the business of Synovus:
1. Synovus' Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 (which includes certain portions of Synovus' 1997
Annual Report to Shareholders and its Proxy Statement for its
Annual Meeting of Shareholders held on April 23, 1998).
2. Synovus' Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1998 and June 30, 1998.
3. Synovus' Current Reports on Form 8-K dated March 9, 1998, April 23,
1998, May 18, 1998, June 5, 1998, July 15, 1998 and September 1,
1998.
34
Management and Additional Information
Certain information relating to the executive compensation, various
benefit plans, voting securities and the principal holders thereof, certain
relationships and related transactions and other related matters as to Synovus
is incorporated by reference or set forth in Synovus' Annual Report on Form 10-K
for the year ended December 31, 1997 which is incorporated herein by reference.
See "WHERE YOU CAN FIND MORE INFORMATION." Shareholders of Georgia Bank desiring
copies of such documents may contact Synovus at its address or phone number
indicated under "WHERE YOU CAN FIND MORE INFORMATION."
REGULATORY MATTERS
General
Synovus is a registered multi-bank holding company subject to
supervision and regulation by the Federal Reserve under the Bank Holding Company
Act ("BHC Act"), and by the Georgia Banking Department under the bank holding
company laws of the State of Georgia (the "Georgia Act"). As a bank holding
company, Synovus is required to furnish the Federal Reserve 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 Federal
Reserve and the Georgia Banking Department may require from time to time. The
Federal Reserve and the Georgia Banking Department also make examinations of
Synovus and certain of its subsidiaries and affiliates.
The BHC Act and the Georgia Act require each bank holding company to
obtain the prior approval of the Federal Reserve 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, 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 either of the states involved elected 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 BHC Act from engaging in, or acquiring or retaining direct or
indirect control of the voting shares of
35
any company engaged in non-banking activities. One of the principal exceptions
to this prohibition is for activities found by the Federal Reserve to be so
closely related to banking, or managing or controlling banks, as to be a proper
incident thereto.
Because Synovus is a registered multi-bank holding company, its
subsidiary 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 Synovus' subsidiary 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 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
Federal Reserve 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 Federal Reserve.
Numerous other federal and state laws, as well as regulations
promulgated by the Federal Reserve, 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.
Dividends
Under the laws of the State of Georgia, Synovus, as a business
corporation, may declare and pay dividends in cash or property unless the
payment or declaration would be contrary to restrictions contained in its
Articles of Incorporation, and unless, after payment of the dividend, it would
not be able to pay its debts when they become due in the usual course of its
businesses or its total assets would be less than the sum of its total
liabilities. Synovus is also subject to certain contractual and regulatory
capital restrictions that limit the amount of cash dividends that Synovus may
pay.
The primary sources of funds for Synovus' payment of dividends to its
shareholders are dividends and fees to Synovus from its banking and nonbanking
affiliates. Various federal and state statutory provisions and regulations limit
the amount of dividends that the subsidiary banks of Synovus and Georgia Bank
may pay. Pursuant to the regulations of the Georgia Banking Department, a
Georgia bank must have approval of the Georgia Banking Department to pay cash
dividends if, at the time of such payment: (i) the ratio of such banking
affiliate's equity capital (defined to include the aggregate par value of all
outstanding common stock, paid-in surplus,
36
retained earnings, capital resources, reserves for loan losses, aggregate par
value of outstanding preferred stock which is not redeemable and other
outstanding instruments which are required to be converted into common stock) to
its adjusted total assets is less than 6%; (ii) the aggregate amount of
dividends to be declared or anticipated to be declared during the current
calendar year exceeds 50% of its net after-tax profit for the previous calendar
year; or (iii) its total classified assets in its most recent regulatory
examination exceeded 80% of its equity capital (as defined above) as reflected
in such examination. In general, the approval of the Alabama Banking Department
and the Florida Banking Department, as applicable, is required if the total of
all dividends declared by an Alabama or Florida bank, as the case may be, in any
year would exceed the total of its net profits (as defined) for that year
combined with its retained net profits for the preceding two years less any
required transfers to surplus. In addition, the approval of the OCC is required
for a national bank to pay dividends in excess of the bank's net income for the
current year plus retained net income for the preceding two years, less any
required transfers to surplus.
Certain of Synovus' banking affiliates have in the past been required to
secure prior regulatory approval for the payment of dividends to Synovus in
excess of regulatory limits and may be required to seek approval for the payment
of dividends to Synovus in excess of such limits in the future. If such prior
regulatory approvals are sought, there is no assurance that any such regulatory
approvals will be granted.
Federal and state banking regulations applicable to Synovus and its
banking subsidiaries require minimum levels of capital which limit the amounts
available for payment of dividends. Synovus' objective is to pay out
approximately one-third of prior year's earnings in cash dividends to its
shareholders.
Synovus and its predecessors have paid cash dividends on their common
stock in every year since 1891. Under restrictions imposed under federal and
state laws, Synovus' subsidiary banks could declare aggregate dividends to
Synovus of approximately $92.9 million during 1998 without obtaining regulatory
approval.
At June 30, 1998, under restrictions imposed under federal and state
laws, Georgia Bank could declare aggregate dividends to its shareholders of
approximately $525,000 without obtaining regulatory approval.
Capital Requirements
Synovus is required to comply with the capital adequacy standards
established by the Federal Reserve and its banking subsidiaries must comply with
similar capital adequacy standards established by the OCC and FDIC as
applicable. Georgia Bank is required to comply with the capital adequacy
standards of the FDIC. There are two basic measures of capital adequacy for bank
holding companies and their banking subsidiaries that have been promulgated by
the Federal Reserve, the FDIC and the OCC: a risk-based measure and a leverage
measure. All applicable capital standards must be satisfied for a bank holding
company or a bank to be considered in compliance.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, to
37
account for off-balance-sheet exposure, and to minimize disincentives for
holding liquid assets. Assets and off-balance-sheet items are assigned to broad
risk categories, each with appropriate weights. The resulting capital ratios
represent capital as a percentage of total risk-weighted assets and
off-balance-sheet items.
The minimum guideline for the ratio ("Risk-Based Capital Ratio") of
total capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8.0%. At least
half of Total Capital must comprise common stock, minority interests in the
equity accounts of consolidated subsidiaries, noncumulative perpetual preferred
stock, and a limited amount of cumulative perpetual preferred stock, less
goodwill and certain other intangible assets ("Tier 1 Capital"). The remainder
may consist of subordinated debt, other preferred stock, and a limited amount of
loan loss reserves ("Tier 2 Capital").
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less goodwill
and certain other intangible assets, of 3.0% for bank holding companies that
meet certain specified criteria, including having the highest regulatory rating.
All other bank holding companies generally are required to maintain a Leverage
Ratio of at least 4.0%. Bank holding companies are expected to maintain
higher-than- minimum capital ratios if they have supervisory, financial,
operational, or managerial weaknesses, or if they are anticipating or
experiencing significant growth. Synovus has not been advised by the Federal
Reserve of any specific minimum Leverage Ratio applicable to it.
At June 30, 1998, Synovus' Total Capital ratio was 13.92%, its Tier 1
Capital ratio was 12.64% and its Tier 1 Leverage Ratio was 10.32%. Assuming the
Merger, and Synovus' other recently completed and pending acquisitions, had been
consummated on June 30, 1998, the Total Capital ratio of Synovus would have been
13.78%, its Tier 1 Capital ratio would have been 12.46% and its Tier 1 Leverage
Ratio would have been 10.08%. Each of these ratios exceeds the current
requirements under the Federal Reserve's capital guidelines. Each of Synovus'
subsidiary banks was in compliance with applicable minimum capital requirements
as of June 30, 1998.
At June 30, 1998, Georgia Bank's Total Capital ratio was 13.74%, its
Tier 1 Capital ratio was 12.63% and its Tier 1 Leverage Ratio was 8.27%. Each of
these ratios exceeds the current requirements under the FDIC's capital
guidelines.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including issuance of a capital directive, the termination
of deposit insurance by the FDIC, a prohibition on the taking of brokered
deposits, and certain other restrictions on its business. As described below,
substantial additional restrictions can be imposed upon FDIC- insured depository
institutions that fail to meet applicable capital requirements. See "Prompt
Corrective Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the federal banking agencies have amended the risk-based
capital standards that calculate the change in an institution's net economic
value attributable to increases and decreases in market interest rates and
require banks with excessive interest rate risk exposure to hold additional
amounts of capital
38
against such exposures.
Commitments to Subsidiary Banks
Under the Federal Reserve's 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.
In the event of Synovus' bankruptcy, any commitment by Synovus to a
federal bank regulatory agency to maintain the capital of a banking subsidiary
will be assumed by the bankruptcy trustee and entitled to a priority of payment.
In addition, the Federal Deposit Insurance Act provides that any financial
institution whose deposits are insured by the FDIC generally shall be liable for
any loss incurred by the FDIC in connection with the default of, or any
assistance provided by the FDIC to, a commonly controlled financial institution.
Prompt Corrective Action
The Federal Deposit Insurance Corporation Act of 1991 ("FDICIA")
establishes a system of prompt corrective action to resolve the problems of
undercapitalized institutions. Under this system the federal banking regulators
are required to rate supervised institutions on the basis of five capital
categories (well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized) and to take
certain mandatory supervisory actions, and are authorized to take other
discretionary actions, with respect to institutions in the three
undercapitalized categories, the severity of which will depend upon the capital
category in which the institution is placed. Generally, subject to a narrow
exception, FDICIA requires the banking regulator to appoint a receiver or
conservator for an institution that is critically undercapitalized. The federal
banking agencies have specified by regulation the relevant capital level for
each category.
Pursuant to FDICIA, the Federal Reserve, the FDIC, the OCC and the
Office of Thrift Supervision ("OTS") have adopted regulations setting forth a
five-tier scheme for measuring the capital adequacy of the financial
institutions they supervise. Under the regulations, an institution would be
placed in one of the following capital categories: (i) well capitalized (an
institution that has a Total Capital ratio of at least 10%, a Tier 1 Capital
ratio of at least 6% and a Tier 1 Leverage Ratio of at least 5%); (ii)
adequately capitalized (an institution that has a Total Capital ratio of at
least 8%, a Tier 1 Capital ratio of at least 4% and a Tier 1 Leverage Ratio of
at least 4%); (iii) undercapitalized (an institution that has a Total Capital
ratio of under 8%, a Tier 1 Capital ratio of under 4% or a Tier 1 Leverage Ratio
of under 4%); (iv) significantly undercapitalized (an institution that has a
Total Capital ratio of under 6%, a Tier 1 Capital ratio of under 3% or a Tier 1
Leverage Ratio of under 3%); and (v) critically undercapitalized (an institution
whose tangible equity is not greater than 2% of total tangible assets). The
regulations permit the appropriate Federal banking regulator to downgrade an
institution to the next lower category if the regulator determines (i) after
notice and opportunity for hearing or response, that the institution is in an
unsafe or unsound condition or (ii) that the institution has received (and not
corrected) a less-than-satisfactory rating for any of the categories of asset
quality,
39
management, earnings or liquidity in its most recent examination. Supervisory
actions by the appropriate Federal banking regulator depend upon an
institution's classification within the five categories. Synovus' management
believes that Synovus and its bank subsidiaries have the requisite capital
levels to qualify as well capitalized institutions under the FDICIA regulations.
FDICIA generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any management
fee to its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to
restrictions on borrowing from the Federal Reserve System. In addition,
undercapitalized depository institutions are subject to growth limitations and
are required to submit capital restoration plans. A depository institution's
holding company must guarantee the capital plan, up to an amount equal to the
lesser of 5% of the depository institution's assets at the time it becomes
undercapitalized or the amount of the capital deficiency when the institution
fails to comply with the plan. Federal banking agencies may not accept a capital
plan without determining, among other things, that the plan is based on
realistic assumptions and is likely to succeed in restoring the depository
institution's capital. If a depository institution fails to submit an acceptable
plan, it is treated as if it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to
a number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks. Critically
undercapitalized depository institutions are subject to appointment of a
receiver or conservator.
Safety and Soundness Standards
The Federal Deposit Insurance Act, as amended by FDICIA and the Riegle
Community Development and Regulatory Improvement Act of 1994, requires the
federal bank regulatory agencies to prescribe standards, by regulations or
guidelines, relating to internal controls, information systems and internal
audit systems, loan documentation, credit underwriting, interest rate risk
exposure, asset growth, asset quality, earnings, stock valuation and
compensation, fees and benefits and such other operational and managerial
standards as the agencies deem appropriate. The federal bank regulatory agencies
have adopted a set of guidelines prescribing safety and soundness standards
pursuant to FDICIA. The guidelines establish general standards relating to
internal controls and information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth and
compensation, fees and benefits. In general, the guidelines require, among other
things, appropriate systems and practices to identify and manage the risks and
exposures specified in the guidelines. The guidelines prohibit excessive
compensation as an unsafe and unsound practice and describe compensation as
excessive when the amounts paid are unreasonable or disproportionate to the
services performed by an executive officer, employee, director or principal
stockholders. The federal banking agencies determined that stock valuation
standards were not appropriate. In addition, the agencies adopted regulations
that authorize, but do not require, an agency to order an institution that has
been given notice by an agency that it is not satisfying any of such safety and
soundness standards to submit a compliance plan. If, after being so notified, an
institution fails to submit an acceptable compliance plan, the agency must issue
an order directing action to correct the
40
deficiency and may issue an order directing other actions of the types to which
an undercapitalized institution is subject under the prompt correction action
provisions of FDICIA. See "Prompt Corrective Action." If an institution fails to
comply with such an order, the agency may seek to enforce such order in judicial
proceedings and to impose civil money penalties.
Depositor Preference Statute
Legislation has been enacted providing that deposits and certain claims
for administrative expenses and employee compensation against an insured
depository institution would be afforded a priority over other general unsecured
claims against such an institution, including federal funds and letters of
credit, in the "liquidation or other resolution" of such an institution by any
receiver.
DESCRIPTION OF GEORGIA BANK
Background
Georgia Bank was chartered on April 9, 1987 and operates two offices in
Calhoun, Georgia and one office in Fairmount, Georgia.
Business
The principal business of Georgia Bank is to accept deposits from the
public and to make loans and other investments in and around its primary service
area of Oconee County, Georgia. The principal sources of income for Georgia Bank
are interest and fees collected on loans, interest and dividends collected on
other investments, and service charges on deposit accounts. The principal
expenses of the Georgia Bank are interest paid on deposits, employee
compensation, office expenses, and other overhead expenses.
Georgia Bank offers a full range of deposit services that are typically
available from financial institutions, including NOW accounts, demand accounts,
savings accounts, and other time deposit accounts. In addition, retirement
accounts such as Individual Retirement Accounts are available. All deposit
accounts are insured by the FDIC up to the maximum amount currently permitted by
law, which is generally $100,000 per depositor subject to certain aggregation
rules.
Georgia Bank also provides loans to businesses, including both secured
and unsecured short-term loans for working capital purposes, term loans for
fixed asset and expansion needs such as real estate acquisition and
improvements, real estate construction loans, and other commercial loans
suitable to the needs of its business customers. Loans to individuals which are
offered by Georgia Bank include second mortgage loans and installment loans for
personal use such as education and personal investment, or for the purchase of
automobiles or other consumer items. Georgia Bank also acts as a broker for
mortgage loans.
Georgia Bank's loan portfolio at December 31, 1997, consisted of
approximately 60.1% real estate mortgage loans, 4.6% real estate construction
loans, 21.4% commercial loans, and 13.9% consumer and other installment loans.
41
Georgia Bank's marketing plan relies heavily upon local advertising and
promotional activity and upon personal contacts by its directors, officers and
employees to attract business and to acquaint potential customers with Georgia
Bank's personalized services. Georgia Bank emphasizes a high degree of
personalized client service to provide for each customer's banking needs. At the
present time, Georgia Bank does not offer trust services.
Georgia Bank Common Stock Owned by Management
The following table sets forth as of September 30, 1998, the number and
percentage ownership of shares of Georgia Bank common stock beneficially owned
by each director of Georgia Bank , by all directors and executive officers as a
group, and by each owner of more than 5% of the outstanding shares of Georgia
Bank common stock. Unless otherwise indicated, each person is the record owner
of and has sole voting and investment powers over his or her shares.
<TABLE>
<CAPTION>
Number of Shares Percentage
Name of Director Beneficially Owned<F1> of Total
- --------------------------------------------------------------------------------
<S> <C> <C>
William R. Davis 1,400<F2> *
James A. Franklin 18,187<F3> 3.47
W. Rodney Harbin 9,143<F4> 1.75
S. Lamar Harrison 15,675<F5> 2.99
John A. King, Jr. 5,100 *
Arthur C. Owens, Jr. 4,395<F6> *
T. Larry Roye 19,993<F7> 3.82
Stanley M. Taylor 13,200<F8> 2.52
All Directors and Executive
Officers as a
Group (12 persons) 91,093 17.41
42
Name/Address of Additional
5% Shareholders
- -------------------------------
Southeastern Pathology, P.C. 35,950<F9> 6.87
311 W. Eighth Street
Rome, Georgia
- --------------
* - less than 1%
<FN>
<F1> The information shown above is based upon information furnished by the
named persons. Information relating to beneficial ownership is based
upon "beneficial ownership" concepts set forth in rules promulgated
under the Securities Exchange Act of 1934, as amended. Under such rules
a person is deemed to be a "beneficial owner" of a security if that
person has or shares "voting power," which includes the power to dispose
or to direct the voting of such security, or "investment power," which
includes the power to dispose or to direct the disposition of such
security. A person is also deemed to be a beneficial owner of any
security of which that person has the right to acquire beneficial
ownership within sixty (60) days. Under the rules, more than one person
may be deemed to be a beneficial owner of the same securities, and a
person may be deemed to be a beneficial owner of the same securities,
and a person may be deemed to be a beneficial owner of securities as to
which he or she has no beneficial interest.
<F2> Includes 500 shares owned by members of Mr. Davis' immediate family, as
to which Mr. Davis disclaims beneficial ownership.
<F3> Includes 200 shares owned by members of Mr. Franklin's immediate family,
as to which Mr. Franklin disclaims beneficial ownership.
<F4> Includes 3,912 shares owned by members of Mr. Harbin's immediate family,
as to which Mr. Harbin disclaims beneficial ownership.
<F5> Includes 450 shares owned by members of Mr. Harrison's immediate family.
<F6> Includes 1,300 shares owned by members of Mr. Owens' immediate family,
as to which Mr. Owens disclaims beneficial ownership.
<F7> Includes 585 shares owned by members of Mr. Roye's immediate family, as
to which Mr. Roye disclaims beneficial ownership.
<F8> Includes 200 shares owned by members of Mr. Taylor's immediate family.
<F9> Consists of 35,950 shares held in various accounts by A. G. Edwards &
Sons, as trustee.
</FN>
</TABLE>
43
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF GEORGIA BANK & TRUST FOR THE YEARS ENDED DECEMBER 31, 1997
AND 1996 AND THE SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
General - Years Ended December 31, 1997 and 1996
The purpose of this discussion is to focus on information about the
financial condition and results of operations of Georgia Bank & Trust (the
"Bank") which is not otherwise apparent from the financial statements included
in this Proxy Statement/Prospectus. Reference should be made to those statements
and the selected financial data presented elsewhere in this Proxy
Statement/Prospectus for an understanding of the following discussion and
analysis.
Summary
During 1997 and 1996, the Bank continued to experience significant
growth in interest-earning and total assets which has been funded by increases
in deposits and the retention of net profits. The Bank has recorded net income
of approximately $2,097,000 and $1,761,000 for the years ended December 31, 1997
and 1996, respectively, increasing total equity to approximately $13,365,000 at
December 31, 1997.
Balance Sheets
Total assets of the Bank increased approximately $31 million or 23.9%
for the year ended December 31, 1997 compared to $22 million or 20.4% for the
same period in 1996. The increase in total assets consists primarily of an
increase in interest-earning assets of $24 million or 21.6% compared to an
increase of $15 million or 15.8% during 1996. The growth in 1997 is considered
above average based on the Georgia banking environment.
The Bank's primary focus is to maximize earnings through lending
activities. Any excess funds are invested according to the Bank's investment
policy. Loans increased 25% or $22 million during the year ended December 31,
1997. This is compared to an increase of 21.5% or $16 million during 1996. The
increase in loans included a 20% increase in real estate loans, or $12 million,
an increase in commercial loans of $8 million, and an increase in consumer and
other loans of $2.1 million. For the past several years, the Calhoun/Gordon
County area has been experiencing significant changes in the local banking
community. This activity continues due to mergers of regional banks in the
community and subsequent movement of loans and deposits. In addition, the
economy in Georgia as a whole continues to be strong. As of December 31, 1997
and 1996, the Bank's loan-to-deposit ratio was 76%.
Securities available for sale and Federal funds sold increased $759,000 and
$3.4 million, respectively, during 1997 compared to an overall increase during
1996 of $3.1 million. The significant increase in Federal funds sold was due to
the deposits increasing at a faster pace than loans. These funds are used for
short-term liquidity and to provide funding for loan growth. During 1997, total
deposits grew by $28.7 million, or 24.5%. This increase consists primarily of
an increase in time deposits of $15.7 million or 23.7% compared to an increase
of $9.3 million or 16.3% during 1996. The significant increase in time deposits
is due to more competitive rates
44
offered by the Bank in 1997 and the movement of deposits from the regional
banks in the Calhoun area. Interest-bearing demand deposits increased during the
year approximately 32.1% compared to 55.0% during 1996.
Liquidity and Capital Resources
Liquidity management involves the matching of the cash flow
requirements of customers who may be either depositors desiring to withdraw
funds or borrowers needing assurance that sufficient funds will be available to
meet their credit needs and the ability of the Bank to meet those needs. The
Bank seeks to meet liquidity requirements primarily through management of
short-term investments (principally Federal funds sold), monthly amortizing
loans, maturing single payment loans, and maturities of securities and
prepayments. Also, the Bank maintains relationships with correspondent banks
which could provide funds on short notice.
The liquidity and capital resources of the Bank are monitored on a
periodic basis by management and state and Federal regulatory authorities. At
December 31, 1997, the Bank's liquidity ratio was 30.37% which was above the
Bank's target ratio of 25%. Management reviews liquidity on a periodic basis to
monitor and adjust liquidity as necessary. Management has the ability to adjust
liquidity by selling securities available for sale, selling participations in
loans generated by the Bank and accessing available funds through various
borrowing arrangements. The Bank's short-term investments are adequate to cover
any reasonably anticipated immediate need for funds. The Bank is not aware of
any events or trends likely to result in a material change in liquidity.
At December 31, 1997, the Bank's capital to asset ratios were
considered adequate based on guidelines established by the regulatory
authorities. During 1997, the Bank increased its capital by retaining net
earnings of approximately $1,626,000. The unrealized gains (losses) on
securities available-for-sale increased by $76,000 as a result of an improvement
in the bond market. At December 31, 1997, total capital of the Bank amounted to
approximately $13,365,000 and is considered well-capitalized based on regulatory
requirements.
In 1997, the Bank paid dividends of $.90 per share. The dividend payout
ratio, defined as dividends per share divided by net income per share, was
22.33% in 1997 as compared with 22.79% for 1996.
At December 31, 1997, management was not aware of any known trends,
events, uncertainties or recommendations by regulatory authorities that will
have or are reasonably likely to have a material effect on the Bank's liquidity,
capital resources or operations.
Effects of Inflation
The impact of inflation on banks differs from its impact on
non-financial institutions. Banks, as financial intermediaries, have assets
which are primarily monetary in nature and which tend to fluctuate in concert
with inflation. A bank can reduce the impact of inflation if it can manage its
rate sensitivity gap. This gap represents the difference between rate sensitive
assets and rate sensitive liabilities. The Bank, through its asset-liability
committee, attempts to structure the assets and liabilities and manage the rate
sensitivity gap, thereby seeking to minimize the
45
potential effects of inflation. For information on the management of the Bank's
interest rate sensitive assets and liabilities, see the "Asset/Liability
Management" section of this discussion.
Results of Operations
The Bank's profitability is determined by its ability to effectively
manage interest income and expense, to minimize loan and investment losses, to
generate noninterest income and to control noninterest expense. Since interest
rates are determined by market forces and economic conditions beyond the control
of the Bank, the ability to generate net interest income is dependent upon the
Bank's ability to obtain an adequate spread between the rate earned on
interest-earning assets and the rate paid on interest-bearing liabilities. Thus,
the key performance measure for net interest income is the interest margin or
net yield, which is net interest income divided by average earning assets.
In 1997, the net yield decreased by 11 basis points to 4.57% as
compared to 4.68% in 1996. In 1996, the net yield decreased by 19 basis points
to 4.68% as compared to 4.87% in 1995. The yield on average interest-earning
assets increased slightly in 1997 to 8.90% from 8.82% in 1996 and the rate paid
on average interest-bearing liabilities increased from 4.88% in 1996 to 5.05% in
1997, or 17 basis points. These changes resulted in a net interest income of
$6,078,000 in 1997 as compared to $5,115,000 in 1996, representing an increase
of 18.8%. Net interest income increased $522,000 in 1996 as compared to
$4,593,000 in 1995, representing an increase of 11.37%. The increase in net
interest income over the past two years is primarily attributable to the
increase in average interest-earning assets.
Average interest-earning assets increased by $23,633,000 or 21.6% to
$132,884,000 in 1997 from $109,251,000 in 1996. Average loans increased by
$18,623,000, average securities increased by $5,291,000 and average Federal
funds sold decreased by $281,000. The overall increase in average
interest-earning assets was funded by an increase in average deposits. Average
deposits increased $22,962,000 or 21.7% to $128,723,000 in 1997 from
$105,761,000 in 1996. By comparison, average interest-earning assets increased
by $14,912,000 or 15.8% to $109,251,000 in 1996 from $94,339,000 in 1995.
Approximately 12% and 13% of the average deposits were noninterest-bearing
deposits in 1997 and 1996, respectively, which increased in 1997 by 6.5% over
the prior year.
The allowance for loan losses represents a reserve for potential losses
in the loan portfolio. The adequacy of the allowance for loan losses is
evaluated periodically based on growth of the loan portfolio, the amount of net
charge-offs incurred, consideration of peer group averages, the general economy
and a review of all significant loans, with a particular emphasis on impaired,
past due, classified and other loans that management believes require
consideration.
The provision for loan losses is a charge to earnings to maintain the
allowance at a level management has determined to be adequate. In 1997, the Bank
charged $120,000 to the provision. There were no provisions charged to earnings
in 1996 or 1995, primarily due to the minimal amount of net charge-offs in 1996
and 1995 of $60,000 and $2,500, respectively. For the year ended December 31,
1997, the Bank recognized net recoveries of $13,000. The provision for loan
losses in 1997 was necessary due to the continued significant growth in loans
over the past two years.
46
Net loan charge-offs (recoveries) as a percentage of total average
loans was (.01%) and .07% for the years ended December 31, 1997 and 1996,
respectively. The allowance for loan losses as a percentage of total loans
outstanding at December 31, 1997, 1996, and 1995 was 1.02%, 1.12% and 1.44%,
respectively.
Following is a comparison of noninterest income for 1997, 1996
and 1995.
<TABLE>
<CAPTION> Year Ended December 31,
-------------------------------------------------------------
1997 1996 1995
--------------------- ------------------ -------------------
<S> <C> <C> <C>
Service charges on deposit accounts $ 942,000 $ 847,000 $ 687,000
Other service charges, commissions and fees 44,000 30,000 40,000
Other income 210,000 319,000 163,000
Securities gains (losses) (8,000) (7,000) 7,000
--------------------- ------------------ -------------------
$ 1,188,000 $ 1,189,000 $ 897,000
===================== ================== ===================
</TABLE>
Total noninterest income decreased in 1997 by $1,000 to $1,188,000
compared to $1,189,000 in 1996. Service charges on deposit accounts increased by
$95,000 or 11.22% to $942,000 in 1997 compared to $847,000 in 1996. This
increase is primarily due to the increase in total demand deposits of 29.5%
during 1997. The increase in service charge income was supplemented by an
increase in other service charges, commissions and fees totaling $14,000. The
decrease in other income in 1997 is due to a reduction in gains on sales of
other real estate of $134,000.
Following is an analysis of noninterest expense for 1997, 1996 and
1995.
<TABLE>
<CAPTION> Year Ended December 31,
------------------------------------------------------------
1997 1996 1995
--------------------- ------------------ ------------------
<S> <C> <C> <C>
Salaries and employee benefits $ 2,298,000 $ 2,106,000 $ 1,839,000
Equipment expense 256,000 224,000 242,000
Occupancy expense 220,000 183,000 176,000
Stationery and supplies 192,000 163,000 138,000
Deposit insurance premiums 15,000 2,000 96,000
Other operating expenses 1,083,000 957,000 699,000
--------------------- ------------------ ------------------
$ 4,064,000 $ 3,635,000 $ 3,190,000
===================== ================== ==================
</TABLE>
The most significant noninterest expense is salaries and employee
benefits which represents 57%, 58%, and 58% of total noninterest expense for the
years ended December 31, 1997, 1996 and 1995, respectively. The Bank provided
other employee benefits totaling $403,164 as compared to $380,217 in 1996. These
benefits include employee uniforms, matching contributions to the Bank's 401(k)
profit-sharing plan, insurance and other miscellaneous benefits. The remainder
of the increase is attributable to normal salary increases. Other operating
expenses increased by $126,000 from $957,000 in 1996 to $1,083,000 in 1997. The
most significant item in other operating expenses was a decrease in loan
collection expenses of $83,000. The other increases represent normal increases
as well as additional expenses directly related to the increase in the number of
loan and deposit accounts.
47
Income tax expense increased in 1997 by $78,000 or 8.59% as compared to
and increase of $137,000 or 17.79% in 1996. The effective tax rate for 1997 and
1996 was 32% and 34%, respectively. The net result is an increase in net income
from $1,761,000 to $2,097,000 in 1997, representing an increase of $336,000, or
19.08% from 1996 to 1997 as compared to an increase in net income of $232,000 in
1996, or 15.17%.
Capability of the Bank's Data Processing Software to Accommodate the Year 2000
Like many financial institutions, the Bank relies upon computers for
the daily conduct of their business and for data processing generally. There is
concern among industry experts that commencing on January 1, 2000, computers
will be unable to "read" the new year and there may be widespread computer
malfunctions. Management of the Bank has assessed the electronic systems,
programs, applications, and other electronic components used in the operations
of the Bank and believes that its hardware and software has been programmed to
be able to accurately recognize the year 2000, and that significant additional
costs will not be incurred in connection with the year 2000 issue, although
there can be no assurance in this regard.
SELECTED FINANCIAL INFORMATION AND STATISTICAL DATA
The tables and schedules on the following pages set forth certain
significant financial information and statistical data with respect to: the
distribution of assets, liabilities and stockholders' equity; the interest rates
and interest differentials experienced and the interest rate sensitivity gap;
the securities portfolio; the loan portfolio, including types of loans,
maturities and sensitivity to changes in interest rates and information on
nonperforming loans; summary of the loan loss experience and allowance for loan
losses; types of deposits and the return on equity and assets.
48
Table 1 - Distribution of Assets, Liabilities and Stockholders' Equity
Interest Rates and Interest Differentials
The following table sets forth the average balance sheets and the
amount of the Bank's interest income and interest expense for each category of
interest-earning assets and interest-bearing liabilities and the average
interest rate for total interest-earning assets and total interest-bearing
liabilities, net interest spread, and net yield on average interest-earning
assets. Federally tax-exempt income is not presented on a taxable-equivalent
basis.
<TABLE>
<CAPTION>
1997 1996
---------------------------------------- ----------------------------------
Average Income or Yields/ Average Income or Yields/
Balances<F1> Expense Rates Balances<F1> Expense Rates
- -------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Taxable securities $ 27,898 1,768 6.34 22,575 1,329 5.89
Nontaxable securities 4,395 213 4.85 4,427 219 4.95
Unrealized gains (losses)
on securities 78 (114)
Federal funds sold 1,546 81 5.24 1,827 100 5.47
Loans <F2><F4><F5> 99,045 9,768 9.86 80,422 7,984 9.93
Allowance for loan losses (1,065) (1,051)
Cash and due from banks 5,255 5,034
Other assets 5,606 4,904
-------- ------- -----
Total $ 142,758 11,830 118,024 9,632
======== ======= ======= =====
Total interest-earning assets $ 132,884 8.90 % 109,251 8.82%
====== ===== ======= ====
Noninterest-bearing demand 15,194 14,261
Interest-bearing demand & savings 39,318 1,370 3.48 30,958 959 3.10
Time 74,211 4,359 5.87 60,542 3,499 5.78
------- ------ ------ -----
Total deposits 128,723 5,729 105,761 4,458
Borrowings 462 23 4.98 1,043 59 5.66
Other liabilities 1,233 891
Stockholders' equity <F3> 12,340 10,329
-------- ------
Total 142,758 5,752 118,024 4,517
======== ===== ======= =====
Total interest-bearing liabilities 113,991 5.05% 92,543 4.88%
======== ======
Net interest income 6,078 5,115
===== ======
Net interest spread 3.86% 3.94%
Net yield on average interest-earning 4.57% 4.68%
assets
<FN>
<F1> Average balances were determined using the daily average balances.
<F2> Nonaccrual loans are included in the average balance of loans.
<F3> Average unrealized gains (losses) on securities available for sale,
net of tax, have been included in stockholders' equity of $51,000 and
$74,000 for 1997 and 1996, respectively.
<F4> Interest and fees on loans include $607,454 and $500,135 of loan fee
income for the years ended December 31, 1997 and 1996, respectively.
<F5> For the years ended December 31, 1997 and 1996, there was $268 and
$24,315 of interest recognized on nonaccrual loans, respectively.
</FN>
</TABLE>
49
Table 2 - Rate and Volume Analysis
The following table describes the extent to which changes in interest
rates and changes in volume of interest-earning assets and interest-bearing
liabilities have affected the Bank's interest income and expense during the year
indicated. For each category of interest-earning assets and interest-bearing
liabilities, information is provided on changes attributable to (i) change in
volume (change in volume multiplied by old rate); (ii) change in rate (change in
rate multiplied by old volume); and (iii) a combination of change in rate and
change in volume. The changes in interest income and interest expense
attributable to both volume and rate have been allocated proportionately to the
change due to volume and the change due to rate.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------
1997 vs. 1996 1996 vs. 1995
----------------------------------- -------------------------------------
Increase (decrease) Increase (decrease)
due to change in due to change in
----------------------- -----------------------
Rate Volume Total Rate Volume Total
----------- ----------- ----------- ---------- ------------ -------------
(Dollars in Thousands)
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income from interest-earning assets:
Interest and fees on loans $ (56) $ 1,840 $ 1,784 $ (53) $ 1,312 $ 1,259
Interest on taxable securities 108 331 439 (46) 35 (11)
Interest on nontaxable securities (4) (2) (6) (9) 25 16
Interest on Federal funds sold (4) (15) (19) (7) 33 26
----------- ----------- ----------- ---------- ------------ -------------
Total interest income 44 2,154 2,198 (115) 1,405 1,290
----------- ----------- ----------- ---------- ------------ -------------
Expense from interest-bearing liabilities:
Interest on interest-bearing deposits 128 283 411 66 147 213
Interest on time deposits 55 805 860 75 464 539
Interest on other borrowings and
Federal funds purchased (6) (30) (36) (2) 18 16
----------- ----------- ----------- ---------- ------------ -------------
Total interest expense 177 1,058 1,235 139 629 768
----------- ----------- ----------- ---------- ------------ -------------
Net interest income $ (133) $ 1,096 $ 963 $ (254) $ 776 $ 522
=========== =========== =========== ========== ============ =============
</TABLE>
50
Asset/Liability Management
The Bank's objective is to manage assets and liabilities to provide a
satisfactory, consistent level of profitability within the framework of
established cash, loan, investment, borrowing and capital policies. Certain
officers are charged with the responsibility for monitoring policies and
procedures that are designed to ensure acceptable composition of the
asset/liability mix. It is the overall philosophy of management to support asset
growth primarily through growth of core deposits of all categories made by local
individuals, partnerships and corporations.
The Bank's asset/liability mix is monitored on a regular basis with a
report reflecting the interest rate sensitive assets and interest rate sensitive
liabilities being prepared and presented to the Board of Directors on a monthly
basis. The objective of this policy is to monitor interest rate sensitive assets
and liabilities so as to minimize the impact of substantial movements in
interest rates on earnings. An asset or liability is considered to be interest
rate-sensitive if it will reprice or mature within the time period analyzed,
usually one year or less. The interest rate-sensitivity gap is the difference
between the interest-earning assets and interest-bearing liabilities scheduled
to mature or reprice within such time period. A gap is considered positive when
the amount of interest rate-sensitive assets exceeds the amount of interest
rate-sensitive liabilities. A gap is considered negative when the amount of
interest rate-sensitive liabilities exceeds the interest rate-sensitive assets.
During a period of rising interest rates, a negative gap would tend to adversely
affect net interest income, while a positive gap would tend to result in an
increase in net interest income. Conversely, during a period of falling interest
rates, a negative gap would tend to result in an increase in net interest
income, while a positive gap would tend to adversely affect net interest income.
If the Bank's assets and liabilities were equally flexible and move
concurrently, the impact of any increase or decrease in interest rates on net
interest income would be minimal.
A simple interest rate "gap" analysis by itself may not be an accurate
indicator of how net interest income will be affected by changes in interest
rates. Accordingly, the Bank also evaluates how the repayment of particular
assets and liabilities is impacted by changes in interest rates. Income
associated with interest-earning assets and costs associated with
interest-bearing liabilities may not be affected uniformly by changes in
interest rates. In addition, the magnitude and duration of changes in interest
rates may have a significant impact on net interest income. For example,
although certain assets and liabilities may have similar maturities or periods
of repricing, they may react in different degrees to changes in market interest
rates. Interest rates on certain types of assets and liabilities fluctuate in
advance of changes in general market rates, while interest rates on other types
may lag behind changes in general market rates. In addition, certain assets,
such as adjustable rate mortgage loans, have features (generally referred to as
"interest rate caps and floors") which limit changes in interest rates.
Prepayment and early withdrawal levels also could deviate significantly from
those assumed in calculating the interest rate gap. The ability of many
borrowers to service their debts also may decrease during periods of rising
interest rates.
Changes in interest rates also affect the Bank's liquidity position.
The Bank currently prices deposits in response to market rates and it is
management's intention to continue this policy. If deposits are not priced in
response to market rates, a loss of deposits could occur which would negatively
affect the Bank's liquidity position.
51
At December 31, 1997, the Bank's cumulative one year interest rate
sensitivity gap ratio was 73%. The Bank's targeted ratio is 80% to 120% within
the six-month time horizon. The Bank's ratio for the six-month time horizon was
slightly below its target, or 79%. This indicates that the Bank's
interest-earning assets will reprice during this period at a rate slower than
the Bank's interest-bearing liabilities. The Bank could sell participations in
loans and securities available for sale in a rising interest rate environment to
match the repricing of liabilities and assets. Secondly, for presentation
purposes below, all interest-bearing demand deposits and savings deposits have
been reported in the three month time horizon. Based on the Bank's experience,
the majority of these deposits are not interest rate sensitive and are
considered "core" deposits. Core deposits are those deposits that are placed on
deposit with the Bank based on customer relationships and not strictly based on
interest rates paid. The rates paid on these deposits do not fluctuate as
rapidly as do time deposits.
The following table sets forth the distribution of the repricing of the
Bank's interest-earning assets and interest-bearing liabilities as of December
31, 1997, the interest rate sensitivity gap (i.e., interest rate sensitive
assets less interest rate sensitive liabilities), the cumulative interest rate
sensitivity gap, the interest rate sensitivity gap ratio (i.e., interest rate
sensitive assets divided by interest rate sensitive liabilities) and the
cumulative interest rate sensitivity gap ratio. The table also sets forth the
time periods in which interest-earning assets and interest-bearing liabilities
will mature or may reprice in accordance with their contractual terms. However,
the table does not necessarily indicate the impact of general interest rate
movements on the net interest margin since the repricing of various categories
of assets and liabilities is subject to competitive pressures and the needs of
the Bank's customers. In addition, various assets and liabilities indicated as
repricing within the same period may in fact reprice at different times within
such period and at different rates.
52
<TABLE>
<CAPTION>
After
Three After
Months One Year
Within But But
Three Within Within After
Months One Year Five Years Five Years Total
------------- ------------- ------------- ------------- ------------
(Dollars in Thousands)
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Securities $ 10,614 $ 7,167 $ 11,120 $ 1,575 $ 30,476
Federal funds sold 3,430 - - - 3,430
Loans 43,582 25,280 40,810 1,615 111,287
------------- ------------- ------------- ------------- ------------
Total interest-earning assets 57,626 32,447 51,930 3,190 145,193
------------- ------------- ------------- ------------- ------------
Interest-bearing liabilities:
Interest-bearing demand deposits 38,902 - - - 38,902
Savings 6,962 - - - 6,962
Time deposits, $100,000 and over 5,979 17,214 605 - 23,798
Time deposits, less than $100,000 15,351 39,122 3,892 - 58,365
Federal funds purchased - - - - -
------------- ------------- ------------- ------------- ------------
Total interest-bearing liabilities 67,194 56,336 4,497 - 128,027
------------- ------------- ------------- ------------- ------------
Interest rate sensitivity gap $ (9,568) $ (23,889) $ 47,433 $ 3,190 $ 17,166
============= ============= ============= ============= ============
Cumulative interest rate sensitivity gap $ (9,568) $ (33,457) $ 13,976 $ 17,166
============= ============= ============= =============
Interest rate sensitivity gap ratio 0.86 0.58 11.55 -
============= ============= ============= =============
Cumulative interest rate sensitivity gap ratio 0.86 0.73 1.11 1.13
============= ============= ============= =============
</TABLE>
53
SECURITIES PORTFOLIO
Types of Securities
The carrying amounts of securities at the date indicated are summarized
as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1997 1996
----------------- ----------------
(Dollars in Thousands)
------------------------------------
<S> <C> <C>
U. S. Treasury and other Government agencies and corporations $ 18,481 $ 17,585
State and municipal securities 5,361 4,437
Mortgage-backed securities 6,242 8,498
Equity securities 392 323
----------------- ----------------
$ 30,476 $ 30,843
================= ================
</TABLE>
Maturities
The amounts of securities in each category as of December 31, 1997 are
shown in the following table according to maturity classifications (i) one year
or less, (ii) after one year through five years, (iii) after five years through
ten years and (iv) after ten years.
<TABLE>
<CAPTION>
<F4>
U. S. Treasury
and Other U. S. State and
Government Agencies Municipal
and Corporations <F3> Securities
------------------------------ ------------------------------
Yield Yield
Amount <F1> Amount <F1><F2>
---------------- ------------ ---------------- ------------
(Dollars in Thousands)
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Maturity:
One year or less $ 4,498 5.41 % $ 411 5.16 %
After one year through five years 13,058 6.34 3,446 5.06
After five years through ten years 3,574 6.37 1,400 5.11
After ten years 3,593 5.78 104 5.00
---------------- ----------------
$ 24,723 $ 5,361
================ ================
<FN>
<F1> Yields were computed using coupon interest, adding discount accretion
or subtracting premium amortization, as appropriate, on a ratable basis
over the life of each security. The weighted average yield for each
maturity range was computed using the carrying value of each security
in that range.
<F2> Yields on municipal securities are not stated on a tax-equivalent basis.
<F3> Includes mortgage-backed securities at their contractual maturity.
<F4> The maturity table does not include $392,000 of equity securities
because these securities have no contractual maturity date.
</FN>
</TABLE>
54
LOAN PORTFOLIO
Types of Loans
The amount of loans outstanding at the dates indicated is shown in the
following table according to type of loans.
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1997 1996
---------------- ----------------
(Dollars in Thousands)
-----------------------------------
<S> <C> <C>
Real estate - construction $ 5,180 $ 4,883
Real estate - mortgage 66,898 55,021
Commercial, financial and agricultural 23,802 15,732
Consumer <F1> 12,875 10,372
Other 2,532 3,002
---------------- ----------------
111,287 89,010
Less allowance for loan losses (1,130) (997)
---------------- ----------------
Loans, net $ 110,157 $ 88,013
================ ================
<FN>
<F1> Consumer loans are stated net of $104,000 and $69,000 of unearned interest for 1997 and 1996,
respectively.
</FN>
</TABLE>
Maturities and Sensitivities to Changes in Interest Rates
Total loans as of December 31, 1997 are shown in the following table
according to maturity classifications (i) one year or less, (ii) after one year
through five years and (iii) after five years. The disclosure of loans by the
required categories, commercial, financial and agricultural and real estate
construction, is not available and would involve undue burden and expense to the
Bank.
<TABLE>
<CAPTION>
(Dollars in
Thousands)
---------------
<S> <C>
Maturity:
One year or less $ 61,663
After one year through five years 47,071
After five years 2,553
---------------
$ 111,287
===============
</TABLE>
The following table summarizes loans at December 31, 1997 with due
dates after one year which (i) have predetermined interest rates and (ii) have
floating or adjustable interest rates.
<TABLE>
<CAPTION>
(Dollars in
Thousands)
----------------
<S> <C>
Predetermined interest rates $ 41,153
Floating or adjustable interest rates 8,471
----------------
$ 49,624
================
</TABLE>
55
Risk Elements
The following table presents, at the dates indicated, the aggregate of
nonperforming loans for the categories indicated.
<TABLE>
<CAPTION>
December 31,
------------------------------------
1997 1996
---------------- ----------------
(Dollars in Thousands)
------------------------------------
<S> <C> <C>
Loans accounted for on a nonaccrual basis $ 181 $ 101
Installment loans and term loans contractually past due ninety days
or more as to interest or principal payments
and still accruing 23 -
Loans, the terms of which have been renegotiated to provide a
reduction or deferral of interest or principal because of
deterioration in the financial position of the
borrower - -
Loans now current about which there are serious doubts as to the
ability of the borrower to comply with present
loan repayment terms 62 117
------------------------------------
$ 266 $ 218
====================================
</TABLE>
The reduction in interest income associated with nonaccrual loans for the
year ended December 31, 1997 is as follows:
Interest income that would have been recorded on nonaccrual
loans under original terms $ 7,886
================
Interest income that was recorded on nonaccrual loans $ 268
================
In the opinion of management, any loans classified by regulatory
authorities as doubtful, substandard or special mention that have not been
disclosed above do not (i) represent or result from trends or uncertainties
which management reasonably expects will materially impact future operating
results, liquidity or capital resources or (ii) represent material credits about
which management is aware of any information which causes management to have
serious doubts as to the ability of such borrowers to comply with the loan
repayment terms. Any loans classified by regulatory authorities as loss have
been charged off.
Commitments and Lines of Credit
In the ordinary course of business, the Bank has granted commitments to
extend credit to approved customers. Generally, these commitments to extend
credit have been granted on a temporary basis for seasonal or inventory
requirements and have been approved by the Bank's Board of Directors. The Bank
has also granted commitments to approved customers for standby letters of
credit. These commitments are recorded in the financial statements when funds
are
56
disbursed or the financial instruments become payable. The Bank uses the
same credit and collateral policies for these off balance sheet commitments as
it does for financial instruments that are recorded in the financial statements.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitment amounts expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.
Credit card commitments are granted primarily to consumers on an
unsecured basis.
Following is a summary of the commitments outstanding at December 31,
1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
(Dollars in Thousands)
----------------------------------
<S> <C> <C>
Commitments to extend credit $ 16,744 $ 15,954
Standby letters of credit 2,032 1,799
Credit card commitments 1,193 915
--------------- ---------------
$ 19,969 $ 18,668
=============== ===============
</TABLE>
57
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes average loan balances for each year
determined using the daily average balances; changes in the allowance for
possible loan losses arising from loans charged off and recoveries on loans
previously charged off; additions to the allowance which have been charged to
operating expense; and the ratio of net charge-offs during the year to average
loans.
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1997 1996
---------------- ---------------
(Dollars in Thousands)
-----------------------------------
<S> <C> <C>
Average amount of loans outstanding $ 99,045 $ 80,422
================ ===============
Balance of allowance for possible loan losses at beginning
of year $ 997 $ 1,057
---------------- ---------------
Loans charged off:
Commercial, financial and agricultural (6) (2)
Real estate-mortgage and construction (76) (81)
Instalment (13) (21)
---------------- ---------------
(95) (104)
---------------- ---------------
Recoveries:
Commercial, financial and agricultural 60 8
Real estate-mortgage and construction 18 10
Instalment 30 26
---------------- ---------------
108 44
---------------- ---------------
Net loan (charge offs) recoveries during year 13 (60)
---------------- ---------------
Additions to allowance charged to operating expenses 120 -
---------------- ---------------
Balance of allowance for possible loan losses at end of year $ 1,130 $ 997
================ ===============
Ratio of net loan charge offs (recoveries) during the year to
average loans outstanding (.01%) .07%
================ ===============
</TABLE>
Allowance for Possible Loan Losses
The allowance for loan losses is maintained at a level deemed
appropriate by management to adequately cover all known and inherent risks in
the loan portfolio. Management's evaluation of the loan portfolio includes a
periodic review of loan loss experience, current economic conditions which may
affect the borrower's ability to pay and the underlying collateral value of the
loans. The loan committee meets weekly and reviews all new and renewed lines of
credit of $50,000 and over and receives updates on problem loans and past due
loans. The loan officers rate their own loans as they are originated and update
internally and externally classified loans quarterly. The Bank's internal loan
review personnel grade all lines of $25,000 and over
58
and report directly to the
loan committee. A report of loan ratings for the previous month, an updated
composite report and an analysis of the loan loss allowance are presented to the
Board of Directors each month, along with a discussion of significant changes
since the previous month. At December 31, 1997 and 1996, there were no
allocations of the allowance for loan losses to specific loans in accordance
with generally accepted accounting principles. Specific allocations by
management are determined based on a percentage of the outstanding balance.
These loans are included in impaired loans.
DEPOSITS
Average amounts of deposits and average rates paid thereon, classified
as to noninterest-bearing demand deposits, interest-bearing demand and savings
deposits and time deposits, for the periods indicated are presented below.
<TABLE>
<CAPTION>
<F1>
Year Ended December 31,
--------------------------------------------------------------
1997 1996
------------------------------ ------------------------------
Amount Rate Amount Rate
---------------- ------------ ---------------- ------------
(Dollars in Thousands)
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Noninterest-bearing demand deposits $ 15,194 - % $ 14,261 - %
Interest-bearing demand and savings deposits 39,318 3.48 30,958 3.10
Time deposits 74,211 5.87 60,542 5.78
---------------- ----------------
Total deposits $ 128,723 $ 105,761
================ ================
<FN>
<F1>Average balances were determined using the daily average balances.
</FN>
</TABLE>
The amounts of time deposits issued in amounts of $100,000 or more as
of December 31, 1997 are shown below by category, which is based on time
remaining until maturity of (i) three months or less, (ii) over three through
six months, (iii) over six through twelve months and (iv) over twelve months.
<TABLE>
<CAPTION>
(Dollars in
Thousands)
----------------
<S> <C>
Three months or less $ 5,875
Over three through six months 8,195
Over six through twelve months 7,350
Over twelve months 2,378
----------------
Total $ 23,798
================
</TABLE>
59
RETURN ON EQUITY AND ASSETS
The following rate of return information for the years indicated is
presented below.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
Return on assets <F1> 1.47 % 1.49 %
Return on equity <F2> 16.99 17.05
Dividend payout ratio <F3> 22.33 22.79
Equity to assets ratio <F4> 8.64 8.75
<FN>
<F1> Net income divided by average total assets.
<F2> Net income divided by average equity.
<F3> Dividends declared per share divided by net income per share.
<F4> Average equity divided by average total assets.
</FN>
</TABLE>
General - Six Months Ended June 30, 1998 and 1997
The following is management's discussion and analysis of certain
significant factors which have affected the financial position and operating
results of the Bank during the periods included in the accompanying financial
statements.
Financial Condition
Total assets increased during the second calendar quarter of 1998 from
$166.3 million to $172.6 million, or 3.79% for the quarter. The growth in total
assets for the six months ended June 30, 1998 was $11.8 million, or 7.33%
compared to 9.73% for the same period in 1997. The six-month growth in both
years was funded by increases in total deposits of $9.1 million and $11.6
million, respectively, and retained net profits. The increase in total assets
for the six months ended June 30, 1998 consisted primarily of an increase of
$7.5 million in securities, an increase of $7.2 million in net loans, an
increase of $1.8 million in Federal funds sold, less a decrease of $4.5 million
in cash and due from banks. The decrease in cash and due from banks represents
the utilization of excess cash as a funding vehicle for loan and securities
growth. The loan to deposit ratio at June 30, 1998 was 77% compared to 75% at
June 30, 1997. The increase in the loan to deposit ratio is due to the continued
loan demand in the Bank's market area.
Liquidity
Liquidity management involves the matching of the cash flow
requirements of customer withdrawals of funds and the funding of loan
originations, and the ability of the Bank to meet those requirements. Management
monitors and maintains appropriate levels of liquidity so that maturities of
assets and deposit growth are such that adequate funds are provided to meet
estimated customer withdrawals and loan requests.
At June 30, 1998, the Bank's liquidity ratio was 26.30% compared to
27.80% for the same period in 1997. The liquidity ratio at June 30, 1998
exceeded the Bank's target ratio of
60
25%. The Bank is a member of the Federal
Home Loan Bank of Atlanta and is able to obtain advances if needed. At June 30,
1998, the Bank had, in addition to amounts already borrowed, a combined credit
availability of approximately $17.6 million.
Regulatory Capital Requirements
Banking regulations require the Bank to maintain minimum capital levels
in relation to assets. At June 30, 1998, the Bank's capital ratios were
considered adequate based on regulatory minimum capital requirements. The
minimum capital requirements and the actual capital ratios for the Bank at June
30, 1998 are as follows:
<TABLE>
<CAPTION>
Regulatory
Actual Requirement
------- -----------
<S> <C> <C>
Leverage Capital Ratio 8.27% 4.00%
Risk-Based Capital Ratios
Core Capital 12.63% 4.00%
Total Capital 13.74% 8.00%
</TABLE>
Management is not aware of any other current recommendations by the
regulatory authorities, events or trends, which, if they were to be implemented,
would have a material effect on the Bank's liquidity, capital resources, or
operations.
Results of Operations
Net Interest Income. Net interest income increased by $188,000 for the
quarter ended June 30, 1998 compared to the same period in 1997, or by 12.5%.
The increase in 1997 as compared to the quarter ended June 30, 1996 was
$244,000. Net interest income increased for the six-month period ended June 30,
1998 by $440,000 as compared to the same period in 1997. The increase in 1997
compared to 1996 was $449,000. The increases in net interest income for the
quarter and six months ended June 30, 1998 are attributable to an increase in
earning assets of $29.4 million compared to June 30, 1997. During this same
period, total interest-bearing deposits increased by $24.4 million. The most
significant increase in earning assets was loans which increased during this
period by $21.5 million. The net interest income is based on the spread between
rates earned on interest earning assets and rates paid on interest bearing
liabilities. The net interest margin decreased to 4.30% at June 30, 1998 as
compared to 4.65% at June 30, 1997. Therefore, the increase in net interest
income is due primarily to the increase in volume of earning assets.
Provision for Loan Losses. The provision for loan losses is based on
management's evaluation of the economic environment, the history of charged off
loans and recoveries, size and composition of the loan portfolio, nonperforming
and past due loans, and other aspects of the loan portfolio. Management reviews
the allowance for loan loss on a monthly basis and makes provisions as
necessary. A provision of $60,000 and $120,000 was made during the three- and
six-month periods ended June 30, 1998, respectively. The provision for loan
losses has increased by 100% compared to the same period in 1997 due to the
increase in loan volume. The increase in the provision for loan losses is
attributable to the increase in loan growth, a slight in-
61
rease in net charge offs, and the increase in past due loans. In addition,
increased provisions are based on indications of an overall weakening
economy. The allowance for loan loss as a percentage of total loans
was 1.05% at June 30, 1998 compared to 1.02% at December 31, 1997. Nonperforming
loans as a percentage of total loans were .07% at June 30, 1998 compared to
.16% at December 31, 1997. Management believes the allowance for loan losses
at June 30, 1998 is adequate to meet any future losses in the loan portfolio.
At June 30, 1998 and December 31, 1997, nonaccrual, past due, and
restructured loans were as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------------------------
(Dollars in thousands)
<S> <C> <C>
Total nonaccruing loans $ 80 $ 181
Loans contractually past due ninety days
or more as to interest or principal
payments and still accruing 431 23
Restructured loans - -
</TABLE>
The past due loans over 90 days consists of real estate loans of $366,000,
installment loans of $3,000, and commercial loans of $62,000.
It is the policy of the Bank to discontinue the accrual of interest
income when, in the opinion of management, collection of such interest becomes
doubtful. This status is accorded such interest when (i) there is a significant
deterioration in the financial condition of the borrower and full repayment of
principal and interest is not expected and (ii) the principal or interest is
more than ninety days past due, unless the loan is both well-secured and in the
process of collection. Accrual of interest on such loans is resumed when, in
management's judgment, the collection of interest and principal becomes
probable.
Loans classified for regulatory purposes as loss, doubtful, substandard,
or special mention that have not been included in the table above do not
represent or result from trends or uncertainties which management reasonably
expects will materially impact future operating results, liquidity, or capital
resources. These classified loans do not represent material credits about which
management is aware of any information which causes management to have serious
doubts as to the ability of such borrowers to comply with the loan repayment
terms.
62
Information regarding certain loans and allowance for loan loss data
through June 30, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------------------
1998 1997
-------------------- -------------------
(Dollars in thousands)
<S> <C> <C>
Average amount of loans outstanding $ 114,937 $ 91,671
Balance of allowance for loan losses at beginning of period $ 1,129 $ 997
Loans charged off
Commercial (6) -
Real estate (12) (58)
Installment (16) (17)
-------------------- -------------------
(34) (75)
-------------------- -------------------
Loans recovered
Commercial 1 44
Real estate 19 18
Installment 9 26
-------------------- -------------------
29 88
-------------------- -------------------
Net (charge-offs) recoveries (5) 13
-------------------- -------------------
Additions to allowance charged to operating expense during period 120 60
-------------------- -------------------
Balance of allowance for loan losses at end of period $ 1,244 $ 1,070
==================== ===================
Ratio of net (charge-offs) recoveries during the
period to average loans outstanding (.01%) .01%
==================== ===================
</TABLE>
Other Income. Other income increased by $131,000 and $209,000 for the
three and six months ended June 30, 1998, respectively, as compared to the same
periods in 1997. For the three months and six months ended June 30, 1997, other
income decreased slightly by $16,000 and $17,000, respectively, compared to
1996.
Increases in service charges on deposit accounts of $45,000 and $81,000
for the three- and six-month periods ended June 30, 1998 accounted for over a
third of the total increase in other income for both periods. These increases
are directly related to the growth in deposit accounts. Included in the increase
in service charges was an increase of approximately $82,000 in NSF charges for
the six months ended June 30, 1998. Other significant increases in other income
for the six months ended June 30, 1998 were increases in mortgage origination
fees of $63,000 and brokerage fees of $49,000, as compared to the same period in
1997.
Other Expenses. Other expenses increased by $137,000 and $201,000 for
the three and six months ended June 30, 1998, respectively, as compared to 1997.
The increases in 1997 as
63
compared to 1996 were $95,000 and $245,000,
respectively. The single most significant increase for all periods is the
increase in salaries and employee benefits which increased by $27,000 and
$85,000 for the three and six months ended June 30, 1998. The comparable
increases in 1997 were $27,000 and $65,000. The increase in salaries and
employee benefits represents normal increases in salaries and costs incurred in
adding additional banking staff. At June 30, 1998, the number of full time
equivalent employees was 67 compared to 65 at June 30, 1997.
Other operating expense increased for the three and six months ended
June 30, 1998 by $90,000 and $99,000, respectively, as compared to the same
periods in 1997. Increases in advertising and data processing expenses of
$47,000 and $24,000, respectively, account for 72% of the increase for the six
month period. The remainder of the increase is considered normal increases in
overhead expenses.
Net Income. Net income increased by $102,000 and $260,000 for the three
and six months ended June 30, 1998 as compared to 1997. The increase in net
income is attributable to the increase in net interest income combined with the
increases in other income. The effective tax rate for the six months ended June
30, 1998 and 1997 was 33% and 33%, respectively.
Capability of the Bank's Data Processing Software to Accommodate the Year 2000
The Bank heavily relies upon computers for the daily conduct of their
business and for data processing generally. There is a concern among industry
experts that commencing on January 1, 2000, computers will be unable to "read"
the new year and there may be widespread computer malfunctions.
During 1997, the Bank developed a three-phase program for the Year 2000
("Y2K") information systems compliance. Phase I is to identify those systems
with which the Bank has exposure to Y2K issues. Phase II is the development and
implementation of action plans to be Y2K compliant in all areas by late 1998.
Phase III, to be completed by mid-1999, is the final testing of each major area
of exposure to ensure compliance. The evaluation and review of the Y2K issue is
a continuing process as testing will be performed throughout the remainder of
1998 and 1999.
Based on the review of computer and other components, management does
not believe the cost of remediation will be material to the Bank's financial
statements, although there can be no assurances in this regard.
64
EXPERTS
Synovus
The consolidated balance sheets of Synovus and its subsidiaries as of
December 31, 1997 and 1996, 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, 1997, all of which are incorporated by
reference in this Proxy Statement/Prospectus, have been audited by KPMG Peat
Marwick LLP, independent certified public accountants, whose report thereon is
incorporated herein by reference. Such financial statements have been so
incorporated herein by reference in reliance upon the report of KPMG Peat
Marwick LLP and upon their authority as experts in accounting and auditing.
Georgia Bank
The balance sheets of Georgia Bank as of December 31, 1997 and 1996, and the
related statements of income, stockholders' equity and cash flows for each of
the years ended December 31, 1997, 1996 and 1995, included in this Proxy
Statement/Prospectus have been audited by Mauldin & Jenkins, LLC, independent
certified public accountants, in reliance upon their report appearing elsewhere
herein, and upon their authority as experts in accounting and auditing.
OTHER MATTERS
Georgia Bank's Board of Directors does not know of any matters to be
presented at the special meeting other than those set forth above. If any other
matters are properly brought before the special meeting or any adjournment
thereof, the enclosed proxy will be deemed to confer discretionary authority on
the individuals named as proxies therein to vote the shares represented by the
proxy as to any such matters.
SHAREHOLDER PROPOSALS
Synovus management expects to hold its next annual meeting of shareholders
during April 1999. Under the rules of the Securities and Exchange Commission,
proposals of shareholders intended to be presented at that meeting must have
been received by Synovus at its principal executive offices on or before
November 13, 1998 for consideration by Synovus for possible inclusion in such
proxy materials.
If the merger is not consummated, Georgia Bank will inform its shareholders
of the date and time of the 1999 annual meeting of shareholders of Georgia Bank
.
WHERE YOU CAN FIND MORE INFORMATION
Synovus files annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). You may read and copy any reports, statements or other
information that Synovus files with the Commission at the Commission's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the Commission at 1-800-SEC-0330 for further information on the
public reference rooms. These Commission filings are also available to the
public from commercial
65
document retrieval services and at the Internet world wide web site maintained
by the Commission at "http://www.sec.gov." Reports, proxy statements and other
information should also be available for inspection at the offices of the NYSE.
Synovus filed a Registration Statement on Form S-4 (the "Registration
Statement") to register with the Commission the Synovus common stock to be
issued to Georgia Bank shareholders in the Merger. This Proxy
Statement/Prospectus is a part of that Registration Statement and constitutes a
prospectus of Synovus. As allowed by Commission rules, this Proxy
Statement/Prospectus does not contain all the information you can find in
Synovus' Registration Statement or the exhibits to that Registration Statement.
The Commission allows Synovus to "incorporate by reference" information into
this Proxy Statement/Prospectus, which means that Synovus can disclose important
information to you by referring you to another document filed separately with
the Commission. The information incorporated by reference is considered part of
this Proxy Statement/Prospectus, except for any information superseded by
information contained directly in this Proxy Statement/Prospectus or in later
filed documents incorporated by reference in this Proxy Statement/Prospectus.
This Proxy Statement/Prospectus incorporates by reference the documents set
forth below that Synovus has previously filed with the Commission. These
documents contain important information about Synovus and its finances.
Synovus Commission Filings (File No. 1-10312)
(i) Synovus' Annual Report on Form 10-K for the year ended December 31,
1997;
(ii) Synovus' Quarterly Reports on Form 10-Q for the quarters ended March
31, 1998 and June 30, 1998;
(iii) Synovus' Current Reports on Form 8-K dated March 9, 1998, April 23,
1998, May 18, 1998, June 5, 1998, July 15, 1998 and September 1, 1998;
(iv) the description of Synovus common stock contained in Synovus'
Registration Statement on Form 8-A filed with the Commission on August 21, 1989;
and
(v) the description of the Common Stock Rights of Synovus contained in
Synovus' Registration Statement on Form 8-A filed with the Commission on May 3,
1989.
Synovus also incorporates by reference additional documents that may be
filed with the Commission between the date of this Proxy Statement/Prospectus
and the consummation of the merger or the termination of the Merger Agreement.
These include periodic reports, such as Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy
statements.
Synovus has supplied all information contained or incorporated by reference
in this Proxy Statement/Prospectus relating to Synovus and Georgia Bank has
supplied all information contained in this Proxy Statement/Prospectus relating
to Georgia Bank.
66
You can obtain any of the documents incorporated by reference from Synovus,
the Commission or the Commission's Internet web site as described above.
Documents incorporated by reference are available from Synovus without charge,
excluding all exhibits, except that if Synovus has specifically incorporated by
reference an exhibit in this Proxy Statement/Prospectus, the exhibit will also
be available without charge. You may obtain documents incorporated by reference
in this Proxy Statement/Prospectus by requesting them in writing or by telephone
from:
Synovus Financial Corp.
901 Front Avenue
Suite 301
Columbus, Georgia 31901
Attn: G. Sanders Griffith, III
Senior Executive Vice President,
General Counsel & Secretary
Telephone: (706)649-2267
PRO FORMA FINANCIAL INFORMATION
Pro forma financial information reflecting the acquisition of Georgia Bank
by Synovus is not presented herein since the pro forma effect is not
significant.
On June 5, 1998, Synovus signed an Agreement and Plan of Merger providing
for the acquisition of Community Bank Capital Corporation ("CBCC"). CBCC is
located in Alpharetta, Georgia and has one subsidiary, the Bank of North
Georgia. At June 30, 1998, CBCC had total assets of $345.9 million and
shareholders' equity of $22.3 million, and for the six months ended June 30,
1998, reported net income of $1.6 million. On August 31, 1998, Synovus completed
its acquisition of CBCC. On April 22, 1998, Synovus signed an Agreement and Plan
of Merger providing for the acquisition of Bank of Georgia which is located in
Watkinsville, Georgia. At June 30, 1998, Bank of Georgia had total assets of $54
million and shareholders' equity of $5.8 million, and for the six months ended
June 30, 1998, reported net income of $480,351. Pro forma financial information
reflecting these two acquisitions is not presented in this Proxy
Statement/Prospectus because such acquisitions are not significant either
individually or in the aggregate, or when combined with Georgia Bank.
67
INDEX TO FINANCIAL STATEMENTS
Georgia Bank & Trust:
Independent Auditors' Report..............................................F-1
Balance Sheets - December 31, 1997 and 1996...............................F-2
Statements of Income for the Years
ended December 31, 1997, 1996 and 1995................................F-3
Statements of Stockholders' Equity for the Years
ended December 31, 1997, 1996 and 1995................................F-4
Statements of Cash Flows for the Years
ended December 31, 1997, 1996 and 1995................................F-5
Notes to Financial Statements.............................................F-7
Unaudited Condensed
Balance Sheet - June 30, 1998........................................F-24
Unaudited Condensed Statements of Income and Comprehensive Income
for the Three and Six Months Ended
June 30, 1998 and 1997...............................................F-25
Unaudited Condensed Statements of Cash Flows
for the Six Months Ended
June 30, 1998 and 1997...............................................F-26
Notes to Unaudited Condensed
Financial Statements.................................................F-27
[Rest of page intentionally blank]
68
INDEPENDENT AUDITOR'S REPORT
- --------------------------------------------------------------------------------
To the Board of Directors
Georgia Bank & Trust
Calhoun, Georgia
We have audited the accompanying balance sheets of Georgia Bank & Trust as
of December 31, 1997 and 1996, and the related statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Bank's management. Our responsibility is to express an opinion on these
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 financial statements referred to above present fairly,
in all material respects, the financial position of Georgia Bank & Trust as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
/s/Mauldin & Jenkins, LLC
Atlanta, Georgia
February 13, 1998
F-1
GEORGIA BANK & TRUST
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Assets 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks $10,382,261 $ 6,080,886
Federal funds sold 3,430,000 --
Securities available-for-sale 22,375,499 21,616,396
Securities held-to-maturity, at cost (fair value of $8,087,329
and $9,112,751) 8,100,536 9,227,035
Loans 111,286,869 89,009,634
Less allowance for loan losses 1,129,639 996,627
- ----------------------------------------------------------------------------------------------------
Loans, net 110,157,230 88,013,007
- ----------------------------------------------------------------------------------------------------
Premises and equipment 2,603,835 2,639,835
Other assets 3,758,075 2,210,069
- ----------------------------------------------------------------------------------------------------
Total assets $ 160,807,436 $129,787,228
====================================================================================================
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing demand $17,695,038 $14,253,524
Interest-bearing demand 38,901,513 29,452,304
Savings 6,961,558 6,896,002
Time, $100,000 and over 23,797,979 16,581,687
Other time 58,364,857 49,864,655
- ---------------------------------------------------------------------------------------------------
Total deposits 145,720,945 117,048,172
Other liabilities 1,721,789 520,619
Federal funds purchased -- 1,000,000
- ---------------------------------------------------------------------------------------------------
Total liabilities 147,442,734 118,568,791
- ---------------------------------------------------------------------------------------------------
Commitments and contingent liabilities
Stockholders' equity
Common stock, par value $5; 1,000,000 shares
authorized 523,311 and 480,811 issued and
outstanding, respectively 2,616,555 2,404,055
Capital surplus 4,657,140 4,425,797
Retained earnings 6,004,031 4,377,865
Unrealized gains on securities available-for-sale,
net of tax 86,976 10,720
- ---------------------------------------------------------------------------------------------------
Total stockholders' equity 13,364,702 11,218,437
- ---------------------------------------------------------------------------------------------------
Total liabilities and stockholders $ 160,807,436 $129,787,228
===================================================================================================
</TABLE>
See Notes to Financial Statements.
F-2
GEORGIA BANK & TRUST
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income
Loans $ 9,768,451 $ 7,984,780 $ 6,724,923
Taxable securities 1,739,951 1,306,234 1,323,322
Nontaxable securities 213,473 218,565 202,856
Federal funds sold 81,415 99,737 74,195
Other 27,405 22,725 17,034
- --------------------------------------------------------------------------------------------
Total interest income 11,830,695 9,632,041 8,342,330
- --------------------------------------------------------------------------------------------
Interest expense
Deposits 5,729,131 4,458,115 3,705,711
Federal funds purchased 18,419 9,779 9,129
Other borrowings 4,800 49,600 34,378
- --------------------------------------------------------------------------------------------
Total interest expense 5,752,350 4,517,494 3,749,218
- --------------------------------------------------------------------------------------------
Net interest income 6,078,345 5,114,547 4,593,112
Provision for loan losses 120,000 -- --
- ---------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 5,958,345 5,114,547 4,593,112
- --------------------------------------------------------------------------------------------
Other income
Service charges on deposit accounts 942,472 847,476 687,237
Other service charges, commissiions and fees 44,078 30,105 40,315
Gain on sale of other real estate 11,658 146,105 9,500
Net realized gains (losses) on sales of
securities (8,073) (6,955) 6,638
Other operating income 197,909 172,459 153,480
- --------------------------------------------------------------------------------------------
Total other income 1,188,044 1,189,190 897,170
- --------------------------------------------------------------------------------------------
Other expenses
Salaries and employee benefits 2,297,522 2,106,326 1,839,097
Equipment expenses 256,165 223,621 242,143
Occupancy expenses 220,348 183,377 175,638
Stationery and supplies 192,237 162,747 138,213
Data processing fees 177,466 57,511 37,307
Deposit insurance premiums 14,511 2,000 96,022
Other operating expenses 905,646 899,220 661,890
- --------------------------------------------------------------------------------------------
Total other expenses 4,063,895 3,634,802 3,190,310
- --------------------------------------------------------------------------------------------
Income before income taxes 3,082,494 2,668,935 2,299,972
Income tax expense 985,348 907,438 770,000
- --------------------------------------------------------------------------------------------
Net income $ 2,097,146 $ 1,761,497 $ 1,529,972
============================================================================================
Basic earnings per common share $ 4.03 $ 3.67 $ 3.19
============================================================================================
Diluted earnings per common share $ 4.03 $ 3.51 $ 3.07
============================================================================================
</TABLE>
See Notes to Financial Statements.
F-3
GEORGIA BANK & TRUST
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Unrealized
Gains (Losses)
on Securities
Available Total
Common Stock Capital Retained for-Sale, Stockholders'
Shares Par Value Surplus Earnings Net of Tax Equity
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1994 479,511 $ 2,397,555 $ 2,395,550 $ 3,822,558 $ (380,594) $ 8,235,069
Net income -- -- -- 1,529,972 -- 1,529,972
Dividends declared,
$.70 per share -- -- -- (335,658) -- (335,658)
Transfer to surplus -- -- 1,016,895 (1,016,895) -- --
Net change in unrealized
gain (losses) on
securities available-
for-sale, net of tax -- -- -- -- 349,948 349,948
- -------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 479,511 2,397,555 3,412,445 3,999,977 (30,646) 9,779,331
1995
Net income -- -- -- 1,761,497 -- 1,761,497
Dividends declared,
$.80 per share -- -- -- (383,609) -- (383,609)
Transfer to surplus -- -- 1,000,000 (1,000,000) -- --
Stock options exercised 1,300 6,500 13,352 -- -- 19,852
Net change in unrealized
gains (losses) on
securities available-
for-sale, net of tax -- -- -- -- 41,366 41,366
- -------------------------------------------------------------------------------------------------------------------------------
Balance, December 31,
1996 480,811 2,404,055 4,425,797 4,377,865 10,720 11,218,437
Net income -- -- -- 2,097,146 -- 2,097,146
Dividends declared,
$.90 per share -- -- -- (470,980) -- (470,908)
Stock options exercised 42,500 212,500 231,343 -- -- 443,843
Net change in unrealized
gains (losses) on
securities available-
for-sale, net of tax -- -- -- -- 76,256 76,256
- -------------------------------------------------------------------------------------------------------------------------------
Balance, December 31,
1997 523,311 $2,616,555 $ 4,657,140 $6,004,031 $ 86,976 $ 13,364,702
===============================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-4
GEORGIA BANK & TRUST
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,097,146 $ 1,761,497 $ 1,529,972
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 236,791 207,512 178,699
Provision for loan losses 120,000 -- --
Deferred income taxes (62,750) 38,854 24,764
Net realized (gains) losses on sales of
securities 8,073 6,955 (6,638)
Increase in interest receivable (166,254) (214,897) (119,844)
Increase (decrease) in interest payable 101,027 (6,866) 196,940
Gain on sale of other real estate (11,658) (146,105) (9,500)
Other operating activities 92,324 30,835 219,794
- --------------------------------------------------------------------------------------------
Net cash provided by 2,414,699 1,677,785 2,014,187
- --------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchases of securities available-for-sale (12,235,213) (9,737,320) (6,365,842)
Proceeds from sales of securities
available-for-sale 5,764,148 4,813,397 2,488,593
Proceeds from maturities of securities
available-for-sale 5,819,122 1,767,087 2,792,522
Purchase of securities held-to-maturity (497,031) (2,966,423) --
Proceeds from maturities of securities
held-to-maturity 1,623,530 14,847 2,410,427
Net (increase) decrease in Federal funds sold (3,430,000) 160,000 300,000
Net increase in loans (22,264,223) (16,644,873) (12,207,908)
Proceeds from sale of other real estate -- 996,064 35,000
Payment of life insurance premiums (338,502) (376,150) (554,082)
Purchase of premises and equipment (200,791) (283,102) (656,223)
- --------------------------------------------------------------------------------------------
Net cash used in investing Activities (25,758,960) (22,256,473) (11,757,513)
- --------------------------------------------------------------------------------------------
</TABLE>
F-5
GEORGIA BANK & TRUST
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Net increase in deposits $ 28,672,773 $21,075,066 $10,666,334
Net increase(decrease)in other borrowings -- (1,000,000) 1,000,000
Net increase (decrease) in Federal funds
purchased (1,000,000) 500,000 500,000
Dividends paid (470,980) (383,609) (335,658)
Proceeds from exercise of stock options 443,843 19,852 --
- --------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 27,645,636 20,211,309 11,830,676
- --------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and due from banks 4,301,375 (367,379) 2,087,350
Cash and due from banks at beginning of year 6,080,886 6,448,265 4,360,915
- --------------------------------------------------------------------------------------------------------
Cash and due from banks at end of year $10,382,261 $ 6,080,886 $ 6,448,265
========================================================================================================
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest $ 5,651,323 $ 4,524,360 $ 3,552,278
Income taxes $ 1,023,692 $ 843,450 $ 778,292
NONCASH TRANSACTIONS
Unrealized gains on securities
available-for-sale $ (115,232) $ (62,577) $ (530,573)
Principal balances on loans transferred to
other real estate $ 100,980 $ 849,959 $ -
Financed sales of other real estate $ (112,638) $ - $ -
Transfer of securities held-to-maturity to securities
available-for-sale $ - $ - $ 4,542,176
</TABLE>
See Notes to Financial Statements.
F-6
GEORGIA BANK & TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Georgia Bank & Trust is a commercial bank with operations in
Calhoun, Georgia. The Bank has two locations in Calhoun and a branch
location in Fairmount. The Bank provides a full range of banking
services to individual and corporate customers in its primary market
area of Gordon County, Georgia and surrounding counties.
Basis of Presentation
The accounting and reporting policies of the Bank conform to
generally accepted accounting principles and general practices within
the financial services industry. In preparing the financial
statements, management is required to make estimates and assumptions
that affect the reported amounts and disclosures of assets and
liabilities as of the date of the balance sheet and revenues and
expenses for the period. Actual results could differ from those
estimates.
Cash and Due from Banks
Cash on hand, cash items in process of collection, and amounts
due from banks are included in cash and due from banks.
The Bank maintains amounts due from banks which, at times, may
exceed Federally insured limits. The Bank has not experienced any
losses in such accounts.
Securities
Securities are classified based on management's intention on the
date of purchase. Securities which management has the intent and
ability to hold to maturity are classified as held-to-maturity and
reported at amortized cost. All other debt securities are classified
as available-for-sale and carried at fair value with net unrealized
gains and losses included in stockholders' equity net of tax. Equity
securities without a readily determinable fair value are carried at
cost.
Interest and dividends on securities, including amortization of
premiums and accretion of discounts, are included in interest income.
Realized gains and losses from the sales of securities are determined
using the specific identification method.
F-7
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans
Loans are carried at their principal amounts outstanding less
unearned income and the allowance for loan losses. Interest income on
loans is credited to income based on the principal amount outstanding.
Loan origination fees and certain direct costs of most loans are
recognized at the time the loan is recorded. Loan origination fees and
costs incurred for other loans are deferred and recognized as income
over the life of the loan. Because net loan origination fees and costs
which are recognized immediately are not material, the results of
operations are not materially different than the results which would
be obtained by accounting for all loan fees and costs in accordance
with generally accepted accounting principles.
The allowance for loan losses is maintained at a level that
management believes to be adequate to absorb potential losses in the
loan portfolio. Management's determination of the adequacy of the
allowance is based on an evaluation of the portfolio, past loan loss
experience, current economic conditions, volume, growth, composition
of the loan portfolio, and other risks inherent in the portfolio. In
addition, regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for loan
losses, and may require the Bank to record additions to the allowance
based on their judgment about information available to them at the
time of their examinations.
The accrual of interest on impaired loans is discontinued when,
in management's opinion, the borrower may be unable to meet payments
as they become due. When accrual of interest is discontinued, all
unpaid accrued interest is reversed. Interest accrued but not
collected in previous years is written off against the allowance for
loan losses. Interest income is subsequently recognized only to the
extent cash payments are received.
A loan is impaired when it is probable the Bank will be unable to
collect all principal and interest payments due in accordance with the
terms of the loan agreement. Individually identified impaired loans
are measured based on the present value of payments expected to be
received, using the contractual loan rate as the discount rate.
Alternatively, measurement may be based on observable market prices
or, for loans that are solely dependent on the collateral for
repayment, measurement may be based on the fair value of the
collateral. If the recorded investment in the impaired loan exceeds
the measure of fair value, a valuation allowance is established as a
component of the allowance for loan losses. Changes to the valuation
allowance are recorded as a component of the provision for loan
losses.
F-8
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Premises and Equipment
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed principally by the
straight-line method over the estimated useful lives of the assets.
Other Real Estate Owned
Other real estate owned represents properties acquired through
foreclosure. Other real estate owned is held for sale and is carried
at the lower of the recorded amount of the loan or fair value of the
properties less estimated selling costs. Any write-down to fair value
at the time of transfer to other real estate owned is charged to the
allowance for loan losses. Subsequent gains or losses on sale and any
subsequent adjustment to the value are recorded as other income.
Income Taxes
Income tax expense consists of current and deferred taxes.
Current income tax provisions approximate taxes to be paid or refunded
for the applicable year. Deferred tax assets and liabilities are
recognized for the temporary differences between the bases of assets
and liabilities as measured by tax laws and their bases as reported in
the financial statements. Deferred tax expense or benefit is then
recognized for the change in deferred tax assets or liabilities
between periods.
Recognition of deferred tax balance sheet amounts is based on
management's belief that it is more likely than not that the tax
benefit associated with certain temporary differences, tax operating
loss carryforwards and tax credits will be realized. A valuation
allowance would be recorded for those deferred tax items for which it
is more likely than not that realization would not occur.
Earnings Per Common Share
Basic earnings per common share are computed by dividing net
income by the weighted-average number of shares of common stock
outstanding. Diluted earnings per share are computed by dividing net
income by the sum of the weighted-average number of shares of common
stock outstanding and potential common shares. Potential common shares
consist of stock options.
F-9
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Developments
The Financial Accounting Standards Board (FASB) has issued, and
the Bank has adopted, Statement of Financial Accounting Standards
(SFAS) No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities". SFAS No. 125 was amended
by SFAS No. 127, which defers the effective date of certain provisions
of SFAS No. 125 until January 1, 1998. This statement provides
accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that focuses
on control. It distinguishes transfers of financial assets that are
sales from transfers that are secured borrowings. The adoption of this
statement did not have a material effect on the Bank's financial
statements.
The FASB has issued, and the Bank has adopted, SFAS No. 128,
"Earnings Per Share". SFAS No. 128 supersedes Accounting Principles
Board Opinion No. 15 "Earnings Per Share" and specifies the
computation, presentation, and disclosure requirements for earnings
per share (EPS) for entities with publicly held common stock or
potential issuable common stock. SFAS No. 128 replaces the
presentation of primary EPS with a presentation of basic EPS and fully
diluted EPS with diluted EPS. It also requires dual presentation of
basic and diluted EPS on the face of the income statement for all
entities with complex capital structures and requires a reconciliation
of the numerator and denominator for the basic EPS computation to the
numerator and denominator of the diluted EPS computation. SFAS No. 128
is effective for financial statements for both interim and annual
periods ending after December 15, 1997. The adoption of this statement
did not have a material effect on the Bank's financial statements.
The FASB has issued SFAS No. 130, "Reporting Comprehensive
Income". This statement establishes standards for reporting and
display of comprehensive income and its components in the financial
statements. SFAS No. 130 requires all items that are required to be
recognized under accounting standards as components of comprehensive
income to be reported in a financial statement that is displayed in
equal prominence with the other financial statements. The term
"comprehensive income" is used in the SFAS to describe the total of
all components of comprehensive income including net income. "Other
comprehensive income" refers to revenues, expenses, gains and losses
that are included in comprehensive income but excluded from earnings
under current accounting standards. Currently, "other comprehensive
income" for the Bank consists of items previously recorded directly in
equity under SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities". SFAS No. 130 is effective for periods
beginning after December 15, 1997.
F-10
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2. SECURITIES
The amortized cost and fair value of securities are summarized as
follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities Available-for-Sale
December 31, 1997:
U. S. Government and
agency securities $ 14,985,186 $ 48,916 $ (36,492) $ 14,997,610
State and municipal securities 5,217,843 160,593 (17,814) 5,360,622
Mortgage-backed securities 1,648,645 3,544 (27,022) 1,625,167
Equity securities 392,100 -- -- 392,100
- ---------------------------------------------------------------------------------------------
$ 22,243,774 $ 213,053 $ (81,328) $ 22,375,499
==============================================================================================
December 31, 1996:
U. S. Government and
agency securities $ 13,132,201 $ 45,194 $ (65,173) $ 13,112,222
State and municipal securities 4,348,346 97,351 (8,372) 4,437,325
Mortgage-backed securities 3,795,956 14,985 (67,492) 3,743,449
Equity securities 323,400 -- -- 323,400
- ---------------------------------------------------------------------------------------------
$ 21,599,903 $ 157,530 $ (141,037) $ 21,616,396
==============================================================================================
Securities Held-to-Maturity
December 31, 1997:
U. S. Government and
agency securities $ 3,483,267 $ 17,160 $ (12,702) $ 3,487,725
Mortgage-backed securities 4,617,269 22,037 (39,702) 4,599,604
- ---------------------------------------------------------------------------------------------
$ 8,100,536 $ 39,197 $ (52,404) $ 8,087,329
=============================================================================================
December 31, 1996:
U. S. Government and
agency securities $ 4,472,205 $ 23,182 $ (34,361) $ 4,461,026
Mortgage-backed securities 4,754,830 19,090 (122,195) 4,651,725
- ---------------------------------------------------------------------------------------------
$ 9,227,035 $ 42,272 $ (156,556) $ 9,112,751
=============================================================================================
</TABLE>
F-11
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 2. SECURITIES (Continued)
The amortized cost and fair value of securities as of December
31, 1997 by contractual maturity are shown below. Maturities may
differ from contractual maturities in mortgage-backed securities
because the mortgages underlying the securities may be called or
prepaid with or without penalty. Therefore, these securities and
equity securities are not included in the maturity categories in the
following summary.
<TABLE>
<CAPTION>
Securities Available-for-Sale Securities Held-to-Maturity
- -------------------------------------------------------------------------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less $ 3,407,594 $ 3,412,869 $1,496,797 $1,487,405
Due from one to five years 11,853,910 11,728,643 1,486,470 1,498,915
Due from five to ten years 4,841,525 5,112,610 500,000 501,405
Due after ten years 100,000 104,110
Mortgage-backed securities 1,648,645 1,625,167 4,617,269 4,599,604
Equity securities 392,100 392,100
- -------------------------------------------------------------------------------------------------
$22,243,774 $22,375,499 $8,100,536 $8,087,329
=================================================================================================
</TABLE>
Securities with a carrying value of $9,242,401 and $4,758,498 at
December 31, 1997 and 1996, respectively, were pledged to secure
public deposits and for other purposes.
Gains and losses on sales of securities consist of the following:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------------------------------
<S> <C> <C> <C>
Gross gains $ 22,631 $ 17,185 $ 15,857
Gross losses (30,704) (24,140) (9,219)
----------------------------------------------------------------
Net realized gains (losses) $ (8,073) $ (6,955) $ 6,638
================================================================
</TABLE>
Under special provisions adopted by the Financial Accounting
Standards Board in October 1995, the Bank transferred $4,542,176 from
securities held-to-maturity to securities available-for-sale on
December 31, 1995, resulting in a net unrealized gain of $100,935
which was included in stockholders' equity at $67,122 net of related
taxes of $33,813.
F-12
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
December 31,
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Real estate - construction $ 5,180,000 $ 4,883,000
Real estate - mortgage 66,898,000 55,021,000
Commercial, financial and agricultural 23,802,000 15,732,000
Consumer loans 12,979,000 10,441,000
Other 2,531,551 3,001,773
- --------------------------------------------------------------------------------
111,390,551 89,078,773
Unearned income (103,682) (69,139)
Allowance for loan losses (1,129,639) (996,627)
- --------------------------------------------------------------------------------
Loans, net $ 110,157,230 $ 88,013,007
================================================================================
</TABLE>
Changes in the allowance for loan losses for the years ended
December 31, 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $ 996,627 $ 1,057,104 $ 1,059,630
Loans charged off (95,059) (103,903) (30,580)
Recoveries 108,071 43,426 28,054
Provision for loan losses 120,000 -- --
- --------------------------------------------------------------------------------
Balance, end of year $ 1,129,639 $ 996,627 $ 1,057,104
================================================================================
</TABLE>
The total recorded investment in impaired loans was $243,728 and
$217,840 at December 31, 1997 and 1996, respectively. None of these
loans had a specific allowance determined in accordance with generally
accepted accounting principles. The average recorded investment in
impaired loans for 1997 and 1996 was $107,000 and $520,250,
respectively. Interest income on impaired loans of $268, $24,315, and
$42,507 was recognized for cash payments received for the years ended
1997, 1996 and 1995, respectively.
F-13
NOTES TO FINANCIAL STATEMENTS
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)
The Bank has granted loans to certain related parties including
directors, executive officers, and their related entities. The
interest rates on these loans were substantially the same as rates
prevailing at the time of the transaction and repayment terms are
customary for the type of loan involved. Changes in related party
loans for the year ended December 31, 1997 are as follows:
Balance, beginning of year $ 260,748
Advances 501,029
Repayments (195,657)
-----------------------------------------------------------
Balance, end of year $ 566,120
===========================================================
NOTE 4. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------
1997 1996
------------------------------------------------------
<S> <C> <C>
Land $ 325,530 $ 325,530
Buildings 2,158,811 2,061,810
Equipment 1,723,694 1,680,662
------------------------------------------------------
4,208,035 4,068,002
Accumulated depreciation (1,604,200) (1,428,167)
------------------------------------------------------
$ 2,603,835 $ 2,639,835
======================================================
</TABLE>
NOTE 5. EMPLOYEE BENEFIT PLAN
The Bank has a contributory 401(k) profit-sharing plan covering
all employees, subject to certain minimum age and service
requirements. The Bank contributed $46,491, $41,271 and $32,483 to the
plan for the years ended December 31, 1997, 1996 and 1995,
respectively.
F-14
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 6. DEFERRED COMPENSATION PLAN
The Bank has a deferred compensation plan providing for death and
retirement benefits for certain officers and directors. The estimated
amounts to be paid under the compensation plan are being funded
through the purchase of life insurance policies on the officers and
directors. In 1997, 1996 and 1995, the Bank expensed $38,139, $33,151
and $72,128, respectively, for deferred compensation related to this
plan. Accrued deferred compensation of $76,171 and $45,376 is
reflected in other liabilities as of December 31, 1997 and 1996,
respectively. Cash surrender values of $1,284,440 and $945,938 on the
insurance policies as of December 31, 1997 and 1996, respectively, are
included in other assets.
NOTE 7. STOCK OPTION PLAN
The Bank had a Key Employee Incentive Stock Option Plan with
50,000 shares of common stock reserved for options to key employees of
the Bank. The option price was not less than the fair market value of
the stock as of the date the options were granted. The options were
exercisable in cumulative instalments over a 10 year period. The plan
terminated during the year ended December 31, 1997. Other pertinent
information related to the options is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Number Price Number Price Number Price
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Under option, beginning of year 42,500 $ 10.44 43,800 $ 10.59 43,800 $ 10.59
Granted -- -- -- -- --
Exercised (42,500) 10.44 (1,300) 15.27 -- --
- ------------------------------------------------------ -------------- ---------
Under option, end of year -- 42,500 10.44 43,800 10.59
====================================================== ============== =========
</TABLE>
F-15
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 8. INCOME TAXES
Income tax expense consists of the following:
<TABLE>
<CAPTION>
December 31,
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current $ 1,048,098 $868,584 $745,236
Deferred (62,750) 38,854 24,764
- --------------------------------------------------------------------------------
Income tax expense $ 985,348 $907,438 $770,000
================================================================================
</TABLE>
The Bank's income tax expense differs from the amounts computed
by applying the Federal income tax statutory rates to income before
income taxes. A reconciliation of the differences is as follows:
<TABLE>
<CAPTION>
December 31,
- ------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income taxes at statutory rate $ 1,048,048 34% $ 907,438 34% $781,990 34%
Tax-exempt interest (103,858) (3) (92,102) (3) (89,007) (4)
Disallowed interest 15,624 -- 13,109 -- 12,224 --
State income taxes 51,347 2 51,629 2 39,836 2
Officer life insurance, net (5,572) -- (753) -- 12,803 1
Other items, net (20,241) (1) 28,117 1 12,154 --
- ------------------------------------------------------------------------------------------------------------------------------
Income tax expense $ 985,348 32% $ 907,438 34% $770,000 33%
==============================================================================================================================
</TABLE>
F-16
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 8. INCOME TAXES (Continued)
The components of deferred income tax are as follows:
<TABLE>
<CAPTION>
December 31,
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Loan loss reserves $198,844 $153,556
Deferred compensation 28,747 17,125
- --------------------------------------------------------------------------------
227,591 170,681
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation 106,876 82,442
Securities available-for-sale 44,743 23,582
Other 29,800 60,074
- --------------------------------------------------------------------------------
181,419 166,098
- --------------------------------------------------------------------------------
Net deferred tax assets $ 46,172 $ 4,583
================================================================================
</TABLE>
NOTE 9. EARNINGS PER COMMON SHARE
The following is a reconciliation of net income (the numerator)
and weighted-average shares outstanding (the denominator) used in
determining basic and diluted earnings per common share (EPS):
<TABLE>
<CAPTION>
Year Ended December 31, 1997
- -----------------------------------------------------------------------------------------------
Net Weighted-Average
Income Shares Per share
(Numerator) (Denominator) Amount
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic EPS $2,097,146 520,157 $ 4.03
===============
Effect of Dilutive Securities
Stock options -- --
- ----------------------------------------------------------------
Diluted EPS $2,097,146 520,157 $ 4.03
===============================================================================================
</TABLE>
F-17
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 9. EARNINGS PER COMMON SHARE (Continued)
<TABLE>
<CAPTION>
Year Ended December 31, 1996
Net Weighted-Average
Income Shares Per share
(Numerator) (Denominator) Amount
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic EPS $1,761,497 479,761 $ 3.67
=========
Effect of Dilutive Securities
Stock options -- 22,196
----------------------------------------------------------------------
Diluted EPS $1,761,497 501,957 $ 3.51
========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1995
Net Weighted-Average
Income Shares Per share
(Numerator) (Denominator) Amount
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic EPS $1,529,972 479,511 $ 3.19
=========
Effect of Dilutive Securities
Stock options -- 19,220
----------------------------------------------------------------------
Diluted EPS $1,529,972 498,731 $ 3.07
=================================================
</TABLE>
F-18
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Bank has entered into
off-balance sheet financial instruments which are not reflected in the
financial statements. These financial instruments include commitments
to extend credit and standby letters of credit. Such financial
instruments are included in the financial statements when funds are
disbursed or the instruments become payable. These instruments
involve, to varying degrees, elements of credit risk in excess of the
amount recognized in the balance sheet.
The Bank's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to
extend credit and standby letters of credit is represented by the
contractual amount of those instruments. A summary of the Bank's
commitments is as follows:
<TABLE>
<CAPTION>
December 31,
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Commitments to extend credit $16,743,631 $15,953,708
Standby letters of credit 2,032,050 1,798,750
Credit card commitments 1,192,987 914,796
- --------------------------------------------------------------------------------
$19,968,668 $18,667,254
================================================================================
</TABLE>
Commitments to extend credit 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, the total commitment amounts do not necessarily represent
future cash requirements. The credit risk involved in issuing these
financial instruments is essentially the same as that involved in
extending loans to customers. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Bank upon extension of credit, is
based on management's credit evaluation of the customer. Collateral
held varies but may include real estate and improvements, marketable
securities, accounts receivable, inventory, equipment and personal
property.
Standby letters of credit are conditional commitments issued by
the Bank to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private
borrowing arrangements. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loans to
customers. Collateral held varies as specified above and is required
in instances which the Bank deems necessary.
Credit card commitments are unsecured.
In the normal course of business, the Bank is involved in various
legal proceedings. In the opinion of management of the Bank, any
liability resulting from such proceedings would not have a material
effect on the Bank's financial statements.
F-19
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 11. CONCENTRATIONS OF CREDIT
The Bank originates primarily commercial, residential, and
consumer loans to customers in Gordon and surrounding counties. The
ability of the majority of the Bank's customers to honor their
contractual loan obligations is dependent on the economy in their
primary market area.
Sixty-seven percent of the Bank's loan portfolio is concentrated
in loans secured by real estate. A substantial portion of these loans
are secured by real estate in the Bank's primary market area.
Accordingly, the ultimate collectibility of the loan portfolio is
susceptible to changes in market conditions in the Bank's primary
market area. The other significant concentrations of credit by type of
loan are set forth in Note 3.
The Bank, as a matter of policy, does not generally extend credit
to any single borrower or group of related borrowers in excess of 25%
of statutory capital, or approximately $1,818,000.
NOTE 12. REGULATORY MATTERS
The Bank is subject to certain restrictions on the amount of
dividends that may be declared without prior regulatory approval. At
December 31, 1997, approximately $1,048,000 of retained earnings were
available for dividend declaration without regulatory approval.
The Bank 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 the financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that
involve quantitative measures of the assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting
practices. The Bank capital amounts and classification are also
subject to qualitative judgments by the regulators about components,
risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios of
total and Tier I capital to risk-weighted assets and of Tier I capital
to average assets. Management believes, as of December 31, 1997, the
Bank meets all capital adequacy requirements to which it is subject.
F-20
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 12. REGULATORY MATTERS (Continued)
As of December 31, 1997, the most recent notification from the
FDIC categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the following
table. There are no conditions or events since that notification that
management believes have changed the Bank's category.
The Bank's actual capital amounts and ratios are presented in the
following table.
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
- -------------------------------------------------------------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
- -------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997
Total Capital
(to Risk Weighted Assets) $14,388 15.59% $7,383 8.00% $9,229 10.00%
Tier I Capital
(to Risk Weighted Assets) $13,280 14.39% $3,691 4.00% $5,537 6.00%
Tier I Capital
(to Average Assets) $13,280 8.63% $6,155 4.00% $7,694 5.00%
As of December 31, 1996
Total Capital
(to Risk Weighted Assets) $12,248 14.31% $6,847 8.00% $8,559 10.00%
Tier I Capital
(to Risk Weighted Assets) $11,252 13.15% $3,423 4.00% $5,134 6.00%
Tier I Capital
(to Average Assets) $11,252 8.72% $5,161 4.00% $6,452 5.00%
</TABLE>
F-21
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Bank in
estimating its fair value disclosures for financial instruments. In
cases where quoted market prices are not available, fair values are
based on estimates using discounted cash flow methods. Those methods
are significantly affected by the assumptions used, including the
discount rates and estimates of future cash flows. In that regard, the
derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in
immediate settlement of the instrument. The use of different
methodologies may have a material effect on the estimated fair value
amounts. Also, the fair value estimates presented herein are based on
pertinent information available to management as of December 31, 1997
and 1996. Such amounts have not been revalued for purposes of these
financial statements since those dates and, therefore, current
estimates of fair value may differ significantly from the amounts
presented herein.
Cash, Due From Banks, and Federal Funds Sold:
The carrying amounts of cash, due from banks, and Federal funds
sold approximate their fair value.
Securities:
Fair values for securities are based on quoted market prices. The
carrying values of equity securities with no readily determinable fair
value approximate fair values.
Loans:
For variable-rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying
values. For other loans, the fair values are estimated using
discounted cash flow methods, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit
quality. Fair values for impaired loans are estimated using discounted
cash flow methods or underlying collateral values.
Deposits:
The carrying amounts of demand deposits, savings deposits, and
variable-rate certificates of deposit approximate their fair values.
Fair values for fixed-rate certificates of deposit are estimated using
discounted cash flow methods, using interest rates currently being
offered on certificates.
F-22
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Accrued Interest:
The carrying amounts of accrued interest approximate their fair
values.
Off-Balance Sheet Instruments:
Fair values of the Bank's off-balance sheet financial instruments
are based on fees charged to enter into similar agreements. However,
commitments to extend credit and standby letters of credit do not
represent a significant value to the Bank until such commitments are
funded. The Bank has determined that these instruments do not have a
distinguishable fair value and no fair value has been assigned.
The estimated fair values of the Bank's financial instruments
were as follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
- ---------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash, due from banks
and Federal funds sold $ 13,812,261 $ 13,812,261 $ 6,080,886 $ 6,080,886
Securities available-for-sale 22,375,499 22,375,499 21,616,396 21,616,396
Securities held-to-maturity 8,100,536 8,087,329 9,227,035 9,112,751
Loans 110,157,230 110,268,353 88,013,007 88,321,112
Accrued interest receivable 1,284,536 1,284,536 1,118,282 1,118,282
Financial liabilities:
Deposits 145,720,945 146,318,109 117,048,172 117,411,830
Federal funds purchased 1,000,000 1,000,000
Accrued interest payable 541,449 541,449 440,422 440,422
</TABLE>
F-23
GEORGIA BANK & TRUST
BALANCE SHEET
JUNE 30, 1998
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Assets
-------
<S> <C>
Cash and due from banks $ 5,806
Interest-bearing deposits in banks 45
Securities available-for-sale, at fair value 30,110
Securities held-to-maturity (fair value of $7,937) 7,901
Federal funds sold 5,200
Loans 118,624
Less allowance for loan losses 1,244
- --------------------------------------------------------------------
Loans, net 117,380
- --------------------------------------------------------------------
Premises and equipment 2,565
Other assets 3,592
- --------------------------------------------------------------------
$ 172,599
====================================================================
Liabilities and Stockholders' Equity
------------------------------------
Deposits
Noninterest-bearing demand $ 17,227
Interest-bearing deposits 137,576
- --------------------------------------------------------------------
Total deposits 154,803
Other borrowings 2,400
Other liabilities 1,308
- --------------------------------------------------------------------
Total liabilities 158,511
- --------------------------------------------------------------------
Commitments and contingent liabilities
Stockholders' equity
Common stock, par value $5.00; 1,000,000 shares
authorized; 523,311 shares issued and outstanding 2,617
Capital surplus 4,657
Retained earnings 6,735
Accumulated other comprehensive income 79
- --------------------------------------------------------------------
Total common stockholders' equity 14,088
- --------------------------------------------------------------------
$ 172,599
====================================================================
</TABLE>
The accompanying notes are an integral part of these financial
statements
F-24
GEORGIA BANK & TRUST
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE MONTHS ENDED JUNE 30, 1998 AND 1997 AND
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------------
1998 1997 1998 1997
-------------------------------------------------
<S> <C> <C> <C> <C>
Interest income
Loans $ 2,845 $ 2,346 $ 5,571 $ 4,511
Securities 538 541 1,013 987
Federal funds sold 77 11 159 34
Deposits in banks 1 1 1 1
- ---------------------------------------------------------------------------------------------
Total interest income 3,461 2,899 6,744 5,533
Interest expense
Deposits 1,765 1,391 3,442 2,671
- ---------------------------------------------------------------------------------------------
Net interest income 1,696 1,508 3,302 2,862
Provision for loan losses 60 30 120 60
- ---------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses 1,636 1,478 3,182 2,802
- ---------------------------------------------------------------------------------------------
Other income
Service charges on deposit accounts 264 219 501 420
Other operating income 159 73 273 146
Gain on sale of securities - - 1 -
- ---------------------------------------------------------------------------------------------
423 292 775 566
--------------------------------------------------------------------------------------------
Other expenses
Salaries and employee benefits 542 515 1,099 1,014
Equipment and occupancy expenses 140 120 267 250
Other operating expenses 389 299 721 622
- ---------------------------------------------------------------------------------------------
1,071 934 2,087 1,886
--------------------------------------------------------------------------------------------
Income before income taxes 988 836 1,870 1,482
Income tax expense 326 276 617 489
- ---------------------------------------------------------------------------------------------
Net income 662 560 1,253 993
- ---------------------------------------------------------------------------------------------
Other comprehensive income (loss):
Unrealized gains (losses) on securities
available-for-sale arising during period (26) 146 (9) 67
Less: reclassification adjustment for
gains included in net income, net of tax - - 1 -
- ---------------------------------------------------------------------------------------------
Total comprehensive income (loss (26) 146 (8) 67
- ---------------------------------------------------------------------------------------------
Comprehensive income $ 636 $ 706 $ 1,245 $ 1,060
=============================================================================================
Basic earnings per common share $ 1.27 $ 1.07 $ 2.39 $ 1.92
=============================================================================================
Diluted earnings per common share $ 1.27 $ 1.07 $ 2.39 $ 1.92
=============================================================================================
Cash dividends per share of common stock $ - $ - $ 1.00 $ 0.90
=============================================================================================
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-25
GEORGIA BANK & TRUST
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,253 $ 993
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 131 117
Provision for loan losses 120 60
Net realized gains on securities
available-for-sale (1) -
Increase in interest receivable (179) (90)
Decrease in interest payable 52 97
Other operating activities (136) 53
- -------------------------------------------------------------------------------
Net cash provided by operating activities 1,240 1,230
------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchases of securities (15,084) (6,470)
Proceeds from sales of securities 7,409 2,486
Proceeds from maturities of securities 237 225
Purchase of Federal Home Loan Bank stock (87) (69)
Net increase in Federal funds sold (1,770) (650)
Net increase in loans (7,343) (8,098)
Purchase of premises and equipment (92) (73)
------------------------------------------------------------------------------
Net cash used in investing activities (16,730) (12,649)
- -------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase in deposits 9,082 11,562
Net increase (decrease) in other borrowings 2,400 (590)
Exercise of stock options - 444
Dividends paid (523) (471)
- -------------------------------------------------------------------------------
Net cash provided by financing activities 10,959 10,945
- -------------------------------------------------------------------------------
Net decrease in cash and due from banks (4,531) (474)
- -------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 10,382 6,081
- -------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 5,851 $ 5,607
===============================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
GEORGIA BANK & TRUST
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The financial information included herein is unaudited;
however, such information reflects all adjustments (consisting
solely of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair statement of
results for the interim periods.
The results of operations for the three and six month periods
ended June 30, 1998 are not necessarily indicative of the
results to be expected for the full year.
NOTE 2. EARNINGS PER COMMON SHARE
The following is a reconciliation of net income and
weighted-average shares outstanding used in determining basic
and diluted earnings per common share (EPS):
<TABLE>
<CAPTION>
Three Months Ended June 30, 1998
---------------------------------------------------------
<S> <C> <C> <C>
Net Weighted-Average Per share
Income Shares Amount
--------------- -------------------- ----------------
Basic EPS $ 662,000 523,311 $ 1.27
=============== ==================== ================
Diluted EPS $ 662,000 523,311 $ 1.27
=============== ==================== ================
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30, 1997
----------------------------------------------------------
Net Weighted-Average Per share
Income Shares Amount
---------------- -------------------- ----------------
<S> <C> <C> <C>
Basic EPS $ 560,000 523,311 $ 1.07
================ ==================== ================
Diluted EPS $ 560,000 523,311 $ 1.07
================ ==================== ================
</TABLE>
F-27
GEORGIA BANK & TRUST
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 2. EARNINGS PER COMMON SHARE (Continued)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1998
----------------------------------------------------------
Net Weighted-Average Per share
Income Shares Amount
---------------- --------------------- ----------------
<S> <C> <C> <C>
Basic EPS $ 1,253,000 523,311 $ 2.39
================ ===================== ================
Diluted EPS $ 1,253,000 523,311 $ 2.39
================ ===================== ================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1997
---------------------------------------------------------
Net Weighted-Average Per share
Income Shares Amount
--------------- -------------------- ----------------
<S> <C> <C> <C>
Basic EPS $ 993,000 516,949 $ 1.92
=============== ==================== ================
Diluted EPS $ 993,000 516,949 $ 1.92
=============== ==================== ================
</TABLE>
NOTE 3. CURRENT ACCOUNTING DEVELOPMENTS
The adoption of the provisions of SFAS No. 125, "Accounting
for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" that became effective on
January 1, 1998 did not have a material effect on the Bank's
financial statements.
The adoption of SFAS No. 130, "Reporting Comprehensive
Income", that became effective on January 1, 1998 required the
Bank to report comprehensive income in the Bank's Statements
of Income and Comprehensive Income.
F-28
GEORGIA BANK & TRUST
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 3. CURRENT ACCOUNTING DEVELOPMENTS (Continued)
The Financial Accounting Standards Board has issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging
Activities". SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including certain
derivative instruments imbedded in other contracts and for
hedging activities. It requires that all derivatives be
recognized as either assets or liabilities at fair value. The
accounting for changes in the fair value of derivative
instruments (gains and losses) depends on the intended use of
the derivative. Designated uses are fair value hedges, cash
flow hedges, and foreign currency hedges. The effective date
of this statement is for all fiscal quarters of fiscal years
beginning after June 15, 1999. The Bank has not assessed the
impact that this statement will have on the financial
statements.
There are no other recent accounting pronouncements that have
had, or are expected to have, a material effect on the Bank's
financial statements.
NOTE 4. BUSINESS COMBINATION
On September 15, 1998, the Bank entered into an Agreement and
Plan of Merger with Synovus Financial Corp. ("Synovus") of
Columbus, Georgia. Under this agreement, the Bank will merge
with and into a subsidiary of Synovus. Upon consummation of
the merger, each share of Bank stock will be converted into
and exchanged for the right to receive 3.4612 shares of
Synovus common stock, subject to possible adjustment as
defined in the agreement. Consummation is subject to certain
conditions, including regulatory and stockholder approval.
F-29
APPENDIX A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of the 15th day of September,
1998 (the "Plan" or the "Agreement"), by and among Synovus Financial Corp.
("Synovus"), Georgia Bank & Trust ("Georgia Bank") and Interim Synovus Corp.
("Interim").
RECITALS:
A. Synovus. Synovus has been duly incorporated and is an existing
corporation in good standing under the laws of Georgia, with its principal
executive offices located in Columbus, Georgia. As of the date hereof, Synovus
has 600,000,000 authorized shares of common stock, par value $1.00 per share
("Synovus Common Stock"), of which 263,436,131 shares are outstanding on August
31, 1998. All of the issued and outstanding shares of Synovus Common Stock are
duly and validly issued and outstanding and are fully paid and nonassessable and
not subject to any preemptive rights. Synovus has 34 wholly-owned banking
subsidiaries (as defined in Rule 1-02 of Regulation S-X promulgated by the
Securities and Exchange Commission, a "Subsidiary") and other non-banking
Subsidiaries as of the date hereof.
B. Georgia Bank. Georgia Bank has been duly incorporated and is an
existing banking corporation in good standing under the laws of Georgia, with
its principal executive offices located in Calhoun, Georgia. As of the date
hereof, Georgia Bank has 1,000,000 authorized shares of common stock, par value
$5.00 per share ("Georgia Bank Common Stock"), of which 523,311 shares are
outstanding on the date hereof. All of the issued and outstanding shares of
Georgia Bank Common Stock are duly and validly issued and outstanding and are
fully paid and nonassessable and not subject to any preemptive rights.
C. Interim. Interim has been duly incorporated and is an existing
corporation in good standing under the laws of Georgia, with its principal
executive offices located in Columbus, Georgia. As of the date hereof, Interim
has 100 authorized shares of common stock, par value $1.00 per share ("Interim
Common Stock"), of which 10 shares are outstanding on the date hereof. All of
the Interim Common Stock is owned by Synovus. Interim was formed for the purpose
of facilitating Synovus' acquisition of Georgia Bank.
D. Board Approvals. The Boards of Directors of Synovus, Georgia Bank
and Interim have duly approved the Plan and have duly authorized its execution.
E. Materiality. Unless the context otherwise requires, any reference in
this Agreement to materiality with respect to Synovus shall be deemed to be with
respect to Synovus and its Subsidiaries.
In consideration of their mutual promises and obligations hereunder,
and intending to be legally bound hereby, Synovus, Georgia Bank and Interim
hereto adopt and make the Plan and prescribe the terms and conditions hereof and
the manner and basis of carrying it into effect, which shall be as follows:
I. THE MERGER
(A) Structure of the Merger. On the Effective Date (as defined in
Article VII), Interim will merge (the "Merger") with and into Georgia Bank, with
Georgia Bank being the surviving bank (the "Surviving Bank") under the name
Georgia Bank & Trust pursuant to the Financial Institutions Code of Georgia. On
the Effective Date, the Articles of Incorporation and by-laws of Georgia Bank
(as the Surviving Bank) shall be the Articles of Incorporation and by-laws of
Georgia Bank in effect immediately prior to the Effective Date.
(B) Effect on Outstanding Shares. By virtue of the Merger,
automatically and without any action on the part of the holder thereof, each
share of Georgia Bank Common Stock issued and outstanding on the Effective Date
(other than shares as to which dissenters' appraisal rights have been validly
exercised and perfected and for which cash is payable pursuant to the Georgia
Business Corporation Code ("Dissenters' Shares")) shall become and be converted
into 3.4612 shares of Synovus Common Stock ("Per Share Exchange Ratio"). As of
the Effective Date, each share of Georgia Bank Common Stock held as treasury
stock of Georgia Bank shall be canceled, retired and cease to exist, and no
payment shall be made in respect thereof.
No fractional shares of Synovus Common Stock shall be issued in
connection with the Merger, but rather cash shall be paid in lieu thereof
(without interest), with the amount of cash to be paid in lieu of fractional
shares to be determined based upon the closing price per share of Synovus Common
Stock on the New York Stock Exchange ("NYSE") on the fifth business day
immediately preceding the Effective Date of the Merger.
Each shareholder of Georgia Bank Common Stock will be entitled to ten
votes for each share of Synovus Common Stock to be received by him on the
Effective Date pursuant to a set of resolutions adopted by the Board of
Directors of Synovus on September 3, 1998 in accordance with and subject to
those certain Articles of Amendment to Synovus' Articles of Incorporation, dated
April 24, 1986. Synovus shall provide Georgia Bank with certified copies of such
Resolutions.
Upon and after the Effective Date, each issued and outstanding share of
Synovus Common Stock shall remain unchanged and shall continue to evidence the
same number of shares of Synovus Common Stock. Upon and after the Effective Date
Synovus, as the sole shareholder of Interim Common Stock, shall be entitled to
receive 523,311 shares of Georgia Bank Common Stock in exchange for the 10
shares of Interim Common Stock held by it. The 10 shares of Interim Common Stock
outstanding on the Effective Date shall, automatically and without any action on
the part of Synovus, be converted into 523,311 shares of Georgia Bank Common
Stock. The certificate previously representing 10 shares of Interim Common Stock
shall be canceled and retired.
Dissenters' Shares shall be purchased and paid for in accordance with
the applicable provisions of Section 14-2-1301, et seq. of the Georgia Business
Corporation Code.
2
In the event that, subsequent to the date of this Plan but prior to the
Effective Date, the outstanding shares of Synovus Common Stock shall have been
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities through reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, or other
like changes in Synovus' capitalization, then an appropriate and proportionate
adjustment shall be made to the Per Share Exchange Ratio.
(C) Procedures. Certificates which represent shares of Georgia Bank
Common Stock that are outstanding on the Effective Date (each, a "Certificate")
and are converted into shares of Synovus Common Stock pursuant to the Plan
shall, after the Effective Date, be deemed to represent shares of the Synovus
Common Stock into which such shares have become converted and shall be
exchangeable by the holders thereof in the manner provided in the transmittal
materials described below for new certificates representing the shares of
Synovus Common Stock into which such shares have been converted.
As promptly as practicable after the Effective Date, Synovus shall send
to each holder of record of shares of Georgia Bank Common Stock outstanding on
the Effective Date transmittal materials for use in exchanging the Certificates
for such shares for certificates for shares of the Synovus Common Stock into
which such shares of the Georgia Bank Common Stock have been converted pursuant
to the Plan. Upon surrender of a Certificate, together with a duly executed
stock power and any other required documents, the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate for the number
of shares of Synovus Common Stock to which such holder is entitled, and such
Certificate shall forthwith be canceled. No dividend or other distribution
payable after the Effective Date with respect to the Synovus Common Stock shall
be paid to the holder of any unsurrendered Certificate until the holder thereof
surrenders such Certificate, at which time such holder shall receive all
dividends and distributions, without interest thereon, previously withheld from
such holder pursuant hereto. After the Effective Date, there shall be no
transfers on the stock transfer books of Georgia Bank of shares of Georgia Bank
Common Stock which were issued and outstanding on the Effective Date and
converted pursuant to the provisions of the Plan. If, after the Effective Date,
Certificates are presented for transfer to Georgia Bank, they shall be canceled
and exchanged for the shares of Synovus Common Stock deliverable in respect
thereof as determined in accordance with the provisions of Paragraph (B) of
Article I and in accordance with the procedures set forth in this Paragraph C.
After the Effective Date, holders of Georgia Bank Common Stock shall
cease to be, and shall have no rights as, stockholders of Georgia Bank, other
than to receive shares of Synovus Common Stock into which such shares have been
converted or fractional share payments pursuant to the Plan.
Notwithstanding the foregoing, neither Synovus nor Georgia Bank nor any
other person shall be liable to any former holder of shares of Georgia Bank
Common Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
3
(D) Directors. The Board of Directors of Georgia Bank immediately
following the Effective Date shall consist of the persons named in Exhibit "A"
to the Plan, each of whom shall serve until his respective successor is elected
and qualified or until a new Board of Directors is elected as provided in the
Articles of Incorporation or bylaws of Georgia Bank or as provided by law.
II. ACTIONS PENDING MERGER
(A) Georgia Bank shall conduct its banking business only in the
ordinary course and shall not, without the prior written consent of Synovus,
which consent will not be unreasonably withheld: (1) issue any options to
purchase capital stock or issue any shares of capital stock; (2) declare, set
aside, or pay any dividend or distribution with respect to the capital stock of
Georgia Bank, (3) directly or indirectly redeem, purchase or otherwise acquire
any capital stock of Georgia Bank; (4) effect a split or reclassification of
Georgia Bank's capital stock or a recapitalization of Georgia Bank; (5) amend
the Articles of Incorporation or bylaws of Georgia Bank; (6) grant any increase
in the compensation payable or to become payable by Georgia Bank to any employee
other than normal, annual compensation increases that are desired to be made
with regard to Georgia Bank's employees or are required by law; (7) make any
change in any bonus, group insurance, pension, profit sharing, deferred
compensation, or other benefit plan, payment or arrangement made to, for or with
respect to any employees or directors of Georgia Bank, except to the extent such
changes are required by applicable laws or regulations or result from a third
party's exercise of its rights to terminate an insurance contract providing
benefits under such benefit plan, payment or arrangement ; (8) enter into,
terminate, modify or amend any contract, lease or other agreement with any
officer or director of Georgia Bank or any "associate" of any such officer or
director, as such term is defined in Regulation 14A under the Securities
Exchange Act of 1934, as amended ("Exchange Act"), other than in the ordinary
course of its banking business; (9) incur or assume any liabilities, other than
in the ordinary course of its banking business; (10) dispose of any of its
assets or properties, other than in the ordinary course of its banking business;
(11) solicit, encourage or authorize any individual, corporation or other
entity, including its directors, officers and other employees, to solicit from
any third party any inquiries or proposals relating to the disposition of its
business or assets, or the acquisition of its voting securities, or the merger
of it with any corporation or other entity other than as provided by this
Agreement, or subject to the fiduciary obligations of its Board of Directors,
provide any individual, corporation or other entity with information or
assistance or negotiate with any individual, corporation or other entity in
furtherance of such inquiries or to obtain such a proposal (and Georgia Bank
shall promptly notify Synovus of all of the relevant details relating to all
inquiries and proposals which it may receive relating to any of such matters);
(12) take any other action not in the ordinary course of its business; or (13)
directly or indirectly agree to take any of the foregoing actions.
(B) Without the prior written consent of Georgia Bank, which consent
will not be unreasonably withheld, Synovus will not declare, set aside or pay
any cash dividend on its Common Stock other than normal and customary quarterly
cash dividends in accordance with Synovus' current dividend policy or take any
action that would: (1) delay or adversely affect the ability of Synovus to
obtain any necessary approvals of regulatory
4
authorities required for the transactions contemplated hereby; or (2) adversely
affect its ability to perform its covenants and agreements on a timely basis
under this Plan.
III. REPRESENTATIONS AND WARRANTIES
Synovus hereby represents and warrants to Georgia Bank, and Georgia
Bank represents and warrants to Synovus, that, except as previously disclosed in
a letter of Synovus or Georgia Bank, respectively, of even date herewith
delivered to the other party (all references to Synovus below shall be deemed to
include its Subsidiaries):
(A) the representations set forth in Recitals A through D of the Plan
with respect to it are true and correct;
(B) its outstanding shares of capital stock are duly authorized,
validly issued and outstanding, fully paid and (subject to 12 U.S.C. ss.55 in
the case of a national bank subsidiary) non-assessable, and subject to no
preemptive rights;
(C) it has the power and authority, and is duly qualified in all
jurisdictions (except for such qualifications the absence of which will not as a
whole have a Material Adverse Effect, as hereinafter defined) where such
qualification is required, to carry on its business as it is now being conducted
and to own all its material properties and assets, and it has all federal,
state, local, and foreign governmental authorizations necessary for it to own or
lease its properties and assets and to carry on its business as it is now being
conducted, except for such powers and authorizations the absence of which,
either individually or in the aggregate, would not have a Material Adverse
Effect;
(D) in the case of Synovus, the shares of capital stock of each of its
Subsidiaries are owned by it (except for director's qualifying shares) free and
clear of all liens, claims, encumbrances and restrictions on transfer;
(E) subject, in the case of Georgia Bank, to the receipt of any
required shareholder approval of this Plan, the Plan has been authorized by all
necessary corporate action of it and, subject to receipt of such approvals of
shareholders and required regulatory approvals, is a valid and binding agreement
of it enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles;
(F) the execution, delivery and performance of the Plan by it does not,
and the consummation of the transactions contemplated hereby by it will not,
constitute: (1) a breach or violation of, or a default under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of it or to which it (or any of its
respective properties) is subject which breach, violation or default would have
a material adverse effect on the financial condition, results of operations or
business of it, and in the case of Synovus, its subsidiaries, taken as a whole
(a "Material Adverse Effect"), or enable any person to enjoin any of the
transactions contemplated hereby; or (2) a breach or violation of, or a default
under, its articles of incorporation or
5
by-laws; and the consummation of the transactions contemplated hereby will not
require any consent or approval under any such law, rule, regulation, judgment,
decree, order, governmental permit or license or the consent or approval of any
other party to any such agreement, indenture or instrument, other than the
required approvals of applicable regulatory authorities and the approval of the
shareholders of Georgia Bank, both of which are referred to in Paragraph (A) of
Article V and any consents and approvals the absence of which will not have a
Material Adverse Effect;
(G) in the case of Synovus, its Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, nor any other document filed subsequent to
December 31, 1997 under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act,
each in the form filed with the Securities and Exchange Commission ("SEC")
(collectively, its "Reports"), contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading. Each of the balance sheets in or incorporated by
reference into Synovus' Reports (including the related notes and schedules)
fairly presents the financial position of the entity or entities to which it
relates as of its date and each of the statements of operations and retained
earnings and of cash flows and changes in financial position or equivalent
statements in or incorporated by reference into Synovus' Reports (including any
related notes and schedules) fairly presents the results of operations, retained
earnings and cash flows and changes in financial position, as the case may be,
of the entity or entities to which it relates for the periods set forth therein
(subject, in the case of unaudited interim statements, to normal year-end audit
adjustments that are not material in amount or effect), in each case in
accordance with generally accepted accounting principles applicable to bank
holding companies consistently applied during the periods involved, except as
may be noted therein. Synovus has no material obligations or liabilities
(contingent or otherwise) except as disclosed in the Reports. For purposes of
this Paragraph, material shall have the meaning as defined under the Securities
Act of 1933, as amended ("Securities Act"), the Exchange Act and the rules
promulgated thereunder;
(H) in the case of Georgia Bank, it has no material liabilities and
obligations secured or unsecured, whether accrued, absolute, contingent or
otherwise, known or unknown, due or to become due, including, but not limited to
tax liabilities, that should have been but are not reflected in or reserved
against in its audited financial statements as of December 31, 1997 or in its
unaudited financial statements as of March 31, 1998 or disclosed in the notes
thereto;
(I) there has not been the occurrence of one or more events,
conditions, actions or states of facts which have caused a Material Adverse
Effect with respect to it since December 31, 1997;
(J) all material federal, state, local, and foreign tax returns
required to be filed by or on behalf of it have been timely filed or requests
for extensions have been timely filed and any such extension shall have been
granted and not have expired; and to the best of its knowledge, all such returns
filed are complete and accurate in all material respects. All taxes shown on
returns filed by it have been paid in full or adequate provision has been made
for any such taxes on its balance sheet (in accordance with generally accepted
6
accounting principles). As of the date of the Plan, there is no audit
examination, deficiency, or refund litigation with respect to any taxes of it
that would result in a determination that would have a Material Adverse Effect.
All taxes, interest, additions, and penalties due with respect to completed and
settled examinations or concluded litigation relating to it have been paid in
full or adequate provision has been made for any such taxes on its balance sheet
(in accordance with generally accepted accounting principles). It has not
executed an extension or waiver of any statute of limitations on the assessment
or collection of any material tax due that is currently in effect;
(K)(1) no litigation, proceeding or controversy before any court or
governmental agency is pending, and there is no pending claim, action or
proceeding against it, which in the reasonable judgment of its Chief Executive
Officer is likely to have a Material Adverse Effect or to prevent consummation
of the transactions contemplated hereby, and, to the best of its knowledge, no
such litigation, proceeding, controversy, claim or action has been threatened or
is contemplated; and (2) it is not subject to any agreement, memorandum of
understanding, commitment letter, board resolution or similar arrangement with,
or transmitted to, any regulatory authority materially restricting its
operations as conducted on the date hereof or requiring that certain actions be
taken which could reasonably be expected to have a Material Adverse Effect;
(L) it is not in default in any material respect under any material
contract (as defined in Item 601(b)(10)(i) and (ii) of Regulation S-K) and there
has not occurred any event that, with the lapse of time or the giving of notice
or both, would constitute such a default;
(M) all "employee benefit plans," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), that
cover any of its employees, comply in all material respects with all applicable
requirements of ERISA, the Code and other applicable laws; it has not engaged in
a "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975
of the Code) with respect to any such plan which is likely to result in any
material penalties or taxes under Section 502(i) of ERISA or Section 4975 of the
Code; no material liability to the Pension Benefit Guaranty Corporation has been
or is expected by it to be incurred with respect to any such plan which is
subject to Title IV of ERISA ("Pension Plan"), or with respect to any
"single-employer plan" (as defined in Section 4001(a)(15) of ERISA) currently or
formerly maintained by it, them or any entity which is considered one employer
with it under Section 4001 of ERISA or Section 414 of the Code; no Pension Plan
had an "accumulated funding deficiency" (as defined in Section 302 of ERISA
(whether or not waived) as of the last day of the end of the most recent plan
year ending prior to the date hereof; the fair market value of the assets of
each Pension Plan exceeds the present value of the "benefit liabilities" (as
defined in Section 4001(a)(16) of ERISA) under such Pension Plan as of the end
of the most recent plan year with respect to the respective Plan ending prior to
the date hereof, calculated on the basis of the actuarial assumptions used in
the most recent actuarial valuation for such Pension Plan as of the date hereof;
no notice of a "reportable event" (as defined in Section 4043 of ERISA) for
which the 30-day reporting requirement has not been waived has been required to
be filed for any Pension Plan within the 12-month period ending on the date
hereof; it has not contributed to a "multi-employer plan", as defined in Section
3(37) of ERISA; and it does not have any obligations for retiree health and life
benefits under any benefit plan,
7
contract or arrangement, except as required by Section 4980B of the Code and
Part 6 of Subtitle B of Title I of ERISA;
(N) it has good and marketable title to its properties and assets,
tangible or intangible (other than property as to which it is lessee) that are
material to its business except for such defects in title which would not, in
the aggregate, have a Material Adverse Effect;
(O) it knows of no reason why the regulatory approvals referred to in
Paragraphs (A)(2) and (A)(3) of Article V should not be obtained without the
imposition of any condition of the type referred to in the proviso following
such Paragraphs (A)(2) and (A)(3) or why the accountants' letter referred to in
Paragraph (A)(9) of Article V cannot be obtained;
(P) it has all material permits, licenses, certificates of authority,
orders, and approvals of, and has made all filings, applications, and
registrations with, federal, state, local, and foreign governmental or
regulatory bodies that are required in order to permit it to carry on its
business as it is presently conducted and the absence of which would have a
Material Adverse Effect; all such permits, licenses, certificates of authority,
orders, and approvals are in full force and effect, and to the best knowledge of
it no suspension or cancellation of any of them is threatened;
(Q) in the case of Synovus, the shares of capital stock to be issued
pursuant to the Plan, when issued in accordance with the terms of the Plan, will
be duly authorized, validly issued, fully paid and nonassessable and subject to
no preemptive rights;
(R) it is not a party to, and is not bound by, any collective
bargaining agreement, contract, or other agreement or understanding with a labor
union or labor organization, nor is it the subject of a proceeding asserting
that it has committed an unfair labor practice or seeking to compel it to
bargain with any labor organization as to wages and conditions of employment,
nor is there any strike or other labor dispute involving it pending or
threatened;
(S) other than services provided by Stevens & Company, which has been
retained by Georgia Bank and the arrangements with which, including fees, have
been disclosed to Synovus prior to the date hereof, neither it nor any of its
respective officers, directors, or employees, has employed any broker or finder
or incurred any liability for any financial advisory fees, brokerage fees,
commissions, or finder's fees, and no broker or finder has acted directly or
indirectly for it, in connection with the Plan or the transactions contemplated
hereby;
(T) the information to be supplied by it for inclusion in: (1) the
Registration Statement on Form S-4 and/or such other form(s) as may be
appropriate to be filed under the Securities Act with the SEC by Synovus for the
purpose of, among other things, registering the issuance of the Synovus Common
Stock to be issued to the shareholders of Georgia Bank in the Merger (the
"Registration Statement"); or (2) the proxy statement to be distributed in
connection with Georgia Bank's meeting of its shareholders to vote upon this
Plan (as amended or supplemented from time to time, the "Proxy Statement", and
together
8
with the prospectus included in the Registration Statement, as amended or
supplemented from time to time, the "Proxy Statement/Prospectus") will not at
the time such Registration Statement becomes effective, and in the case of the
Proxy Statement/Prospectus at the time it is mailed and at the time of the
meeting of stockholders contemplated under this Plan, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading;
(U) for purposes of this section, the following terms shall have the
indicated meaning:
"Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to: (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource); and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances. The term
Environmental Law includes without limitation: (1) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
ss. 9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
U.S.C. ss. 6901, et seq; the Clean Air Act, as amended, 42 U.S.C. ss. 7401, et
seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. ss. 1251, et
seq; the Toxic Substances Control Act, as amended, 15 U.S.C. ss. 9601, et seq;
the Emergency Planning and Community Right to Know Act, 42 U.S.C. ss. 11001, et
seq; the Safe Drinking Water Act, 42 U.S.C. ss. 300f, et seq; all accompanying
federal regulations and all comparable state and local laws; and (2) any common
law (including without limitation common law that may impose strict liability)
that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Hazardous
Substance.
"Hazardous Substance" means any substance or waste presently listed,
defined, designated or classified as hazardous, toxic, radioactive or dangerous,
or otherwise regulated, under any Environmental Law, whether by type or by
quantity, including any material containing any such substance as a component.
Hazardous Substances include without limitation petroleum or any derivative or
by-product thereof, asbestos, radioactive material, and polychlorinated
biphenyls.
"Loan Portfolio Properties and Other Properties Owned" means those
properties owned or operated by Synovus or any of its Subsidiaries or Georgia
Bank as applicable.
(1) there are no actions, suits, demands, notices, claims,
investigations or proceedings pending or, to its actual knowledge, threatened
against it relating to the Loan Portfolio Properties and Other Properties Owned
by it under any Environmental Law, including without limitation any notices,
demand letters or requests for information from any federal or state
environmental agency relating to any such liabilities under or violations of
Environmental Law, nor, to its actual knowledge, are there any circumstances
which could
9
lead to such actions, suits, demands, notices, claims, investigations or
proceedings, except such which will not have, or result in, a Material Adverse
Effect; and
(2) Georgia Bank will, within 30 days after the date hereof, engage a
firm satisfactory to Synovus to conduct: (a) a phase one environmental
assessment of the banking facilities currently owned by Georgia Bank upon which
Georgia Bank is conducting a banking business, which assessment shall meet the
standards of ASTM E1527-97 and shall include at a minimum a site history,
on-site inspection, asbestos report, evaluation of surrounding properties and
soil tests in the event any underground storage tanks are discovered; and (b) a
transaction screen that meets the standards of ASTM E1528 for the property that
Georgia Bank leases, which is known as the "Fairmount Office," and in addition,
Georgia Bank agrees to conduct a phase I assessment of the leased property if,
in Synovus' reasonable judgment, the transaction screen indicates potential
environmental liabilities associated with the leased properties. Synovus has
requested such inspection and testing in an effort to reasonably determine
whether potential liabilities exist relating to Environmental Laws . Delivery of
the phase I assessments and transaction screens satisfactory to Synovus is an
express condition precedent to the consummation of the Merger. Within 15 days
after receipt of such reports, Synovus shall notify Georgia Bank in writing
whether or not, in the reasonable judgment of Synovus, the results of such
reports will have a Material Adverse Effect on Georgia Bank. In the event that
Synovus determines, in its reasonable judgment, that the results of such reports
will have a Material Adverse Effect on Georgia Bank, such written notification
shall include a statement by Synovus regarding whether or not it intends to
terminate this Agreement based upon the results of such reports. The Parties
agree that Synovus has given Georgia Bank good and valuable consideration for
its agreement to obtain and pay the cost of such inspection and testing, and
Synovus shall be entitled to rely on same;
(V) in the case of Synovus, its reserve for possible loan losses as
shown in its audited financial statements as of December 31, 1997 was, and its
reserve for possible loan losses as shown in its Quarterly Reports on Form 10-Q
filed prior to the Effective Date will be, adequate in all material respects
under generally accepted accounting principles applicable to banks and bank
holding companies and, in the case of Georgia Bank, its reserve for possible
loan losses as shown in its audited financial statements as of December 31, 1997
was, and its reserve for possible loan losses as shown in its unaudited
quarterly financial statements prepared for all quarters ending prior to the
Effective Date will be, adequate in all material respects under generally
accepted accounting principles applicable to banks;
(W) in the case of Georgia Bank, there are no outstanding options,
agreements, contracts, calls or commitments which would require the issuance by
Georgia Bank of any shares of Georgia Bank Common Stock or securities
convertible into such Common Stock; and
(X) it has adopted and is in the process of implementing policies and
procedures to ensure that it will be in compliance with the Federal Financial
Institution Examination Counsel's May 5, 1997 Interagency Statement on Year 2000
Project Management Awareness and subsequent regulatory directives with respect
to Year 2000 issues.
10
IV. COVENANTS
Synovus hereby covenants to Georgia Bank, and Georgia Bank hereby
covenants to Synovus, that:
(A) it shall take or cause to be taken all action necessary or
desirable under the Plan on its part as promptly as practicable, including the
filing of all necessary applications and the Registration Statement, so as to
permit the consummation of the transactions contemplated by the Plan at the
earliest possible date and cooperate fully with the other party hereto to that
end;
(B) in the case of Georgia Bank, it shall: (1) take all steps necessary
to duly call, give notice of, convene and hold a meeting of its shareholders for
the purpose of approving, upon the recommendation of its Board of Directors, the
Plan as soon as is reasonably practicable; (2) distribute to its shareholders
the Proxy Statement/Prospectus in accordance with applicable federal and state
law and with its articles of incorporation and by-laws; (3) recommend to its
shareholders that they approve the Plan (unless such recommendation would
constitute a breach of its board of directors' fiduciary duties as determined in
good faith after consultation with counsel); and (4) cooperate and consult with
Synovus with respect to each of the foregoing matters;
(C) it will cooperate in the preparation and filing of the Proxy
Statement/Prospectus and Registration Statement in order to consummate the
transactions contemplated by the Plan as soon as is reasonably practicable;
(D) Synovus will advise Georgia Bank, promptly after Synovus receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop order
or the suspension of the qualification of the shares of Synovus Common Stock
issuable pursuant to the Plan for offering or sale in any jurisdiction, of the
initiation or threat of any proceeding for any such purpose or of any request by
the SEC for the amendment or supplement of the Registration Statement or for
additional information;
(E) in the case of Synovus, it shall take all actions to obtain, prior
to the effective date of the Registration Statement, all applicable state
securities law or "Blue Sky" permits, approvals, qualifications or exemptions
for the Synovus shares to be issued pursuant to this Plan;
(F) subject to its disclosure obligations imposed by law, unless
reviewed and agreed to by the other party hereto in advance, it will not issue
any press release or written statement for general circulation relating to the
transactions contemplated hereby; provided, however, that nothing in this
Paragraph (F) shall be deemed to prohibit either party from making any
disclosure which its counsel deems necessary or advisable in order to satisfy
such party's disclosure obligations imposed by law;
(G) from and subsequent to the date hereof, it will: (1) give to the
other party hereto and its respective counsel and accountants full access to its
premises and books and
11
records during normal business hours for any reasonable purpose related to the
transactions contemplated hereby; and (2) cooperate and instruct its respective
counsel and accountants to cooperate with the other party hereto and with its
respective counsel and accountants with regard to the formulation and production
of all necessary information, disclosures, financial statements, registration
statements and regulatory filings with respect to the transactions encompassed
by the Plan. Any nonpublic information regarding either party shall be held
strictly confidential and used solely for the purposes of the transactions
contemplated herein. In the event of termination, each party shall return all
nonpublic information regarding the other party to such other party;
(H) it shall notify the other party hereto as promptly as practicable
of: (1) any breach of any of its representations, warranties or agreements
contained herein; (2) any occurrence or impending occurrence, of any event or
circumstance which would cause or constitute a material breach of any of the
representations, warranties or agreements of it contained herein; (3) any
material adverse change in its financial condition, results of operations or
business; and (4) it shall use its best efforts to prevent or remedy the same;
(I) it shall cooperate and use its best efforts to promptly prepare and
file all necessary documentation, to effect all necessary applications, notices,
petitions, filings and other documents, and to obtain all necessary permits,
consents, approvals and authorizations of all third parties and governmental
bodies or agencies, including, in the case of Synovus, submission of
applications for approval of the Plan and the transactions contemplated hereby
to the Board of Governors of the Federal Reserve System (the "Board of
Governors") in accordance with the provisions of the Bank Holding Company Act of
1956, as amended (the "BHC Act"), the Georgia Department of Banking and Finance
("Georgia Department"), the Federal Deposit Insurance Corporation ("FDIC") and
to such other regulatory agencies as required by law;
(J) it will use its best efforts to cause the Merger to qualify for
pooling-of-interests accounting treatment;
(K) in the case of Synovus, it shall cause the shares of Synovus Common
Stock to be issued pursuant to the terms of this Plan to be approved for listing
on the NYSE, and each such share shall be entitled to ten votes per share in
accordance with and subject to those certain Articles of Amendment to Synovus'
Articles of Incorporation dated April 24, 1986;
(L) in the case of Synovus, following the Effective Date, it shall
provide generally to officers and employees of Georgia Bank employee benefits,
including without limitation pension benefits, health and welfare benefits, life
insurance and vacation and severance arrangements ("Employee Benefits") on terms
and conditions which, when taken as a whole, are substantially similar to those
currently provided by Georgia Bank. As soon as administratively and financially
practicable following the Effective Date, Synovus shall provide generally to
officers and employees of Georgia Bank Employee Benefits which, when taken as a
whole, are substantially similar to those provided from time to time by Synovus
and its Subsidiaries to their similarly situated officers and employees. With
respect to Employee Benefits maintained by Synovus in which Georgia Bank
participates after the
12
Effective Date, Synovus agrees: (1) to treat service by Georgia Bank employees
prior to the Effective Date as service with Synovus for eligibility, vesting,
and with the exception of the Synovus Financial Corp./Total System Services,
Inc. Money Purchase Pension Plan, Profit Sharing Plan and 401(K) Savings Plan,
benefit accrual purposes ; and (2) to waive pre-existing condition limitations,
if any, as would otherwise be applied to participating employees of Georgia Bank
upon the implementation of such Employee Benefits constituting "group health
plans" within the meaning of Section 5000(b)(i) of the Code;
(M) in the case of Georgia Bank, it will use its best efforts to
deliver to Synovus on or prior to the date of this Agreement audited
consolidated financial statements of Georgia Bank as of, and for the year ended,
December 31, 1997;
(N) in the case of Georgia Bank, it shall use its best efforts to cause
each director, executive officer and other person who is an "affiliate" (for
purposes of Rule 145 under the Securities Act and for purposes of qualifying for
"pooling-of interests" treatment as described below) to deliver to Synovus as
soon as practicable after the date hereof, but in no event after the date of the
Georgia Bank shareholders meeting called to approve the Merger, a written
agreement providing that such person will not sell, or in any other way reduce
his risk relative to any shares of Georgia Bank Common Stock held by such
"affiliate" and the shares of Synovus Common Stock to be received by such
"affiliate" in the Merger: (1) in the case of shares of Synovus Common Stock
only, except in compliance with the applicable provisions of the Securities Act
and the rules and regulations thereunder; and (2) during the periods during
which any such sale, pledge, transfer or other disposition would, under
generally accepted accounting principles or the rules, regulations or
interpretations of the SEC, disqualify the Merger for "pooling-of-interests"
accounting treatment, except as permitted by Staff Accounting Bulletin No. 76
issued by the SEC. The certificates of Synovus Common Stock issued to affiliates
of Georgia Bank will bear an appropriate legend reflecting the foregoing. The
parties understand that such periods in general encompass the period commencing
30 days prior to the Merger and ending at the time of the publication of
financial results covering at least 30 days of combined operations of Synovus
and Georgia Bank within the meaning of Section 201.01 of the SEC's Codification
of Financial Reporting Policies;
(O) it will not directly or indirectly take any action or omit to take
any action to cause any of its representations and warranties made in this Plan
to become untrue;
(P) in the case of Synovus, it shall take no action which would cause
the shareholders of Georgia Bank to recognize gain or loss as a result of the
Merger to the extent such shareholders would not otherwise recognize gain or
loss as described in Paragraph (A)(7) of Article V;
(Q) it shall take no action which would prevent the issuance of the
accountants' letter referred to in Paragraph (A)(9) of Article V; and
(R)(1) in the case of Synovus, subject to the conditions set forth in
Paragraph (2) below, for a period of six years after the Effective Date, Synovus
shall indemnify, defend and hold harmless each person entitled to
indemnification from Georgia Bank (each, an
13
"Indemnified Party") against all liabilities arising out of actions or omissions
occurring at or prior to the Effective Date (including the transactions
contemplated by this Agreement) to the fullest extent permitted under Georgia
law and by Georgia Bank's Articles of Incorporation and bylaws as in effect on
the date hereof, including provisions relating to advances of expenses incurred
in the defense of any litigation. Without limiting the foregoing, in any case in
which approval by Synovus is required to effectuate any indemnification, Synovus
shall direct, at the election of the Indemnified Party, that the determination
of any such approval shall be made by independent counsel mutually agreed upon
between Synovus and the Indemnified Party.
(2) Any Indemnified Party wishing to claim indemnification under
Paragraph (1) upon learning of any such liability or litigation, shall promptly
notify Synovus thereof. In the event of any such litigation (whether arising
before or after the Effective Date ), (a) Synovus shall have the right to assume
the defense thereof, and Synovus shall not be liable to such Indemnified Parties
for any legal expenses of other counsel or any other expenses subsequently
incurred by such Indemnified Parties in connection with the defense thereof,
except that if Synovus elects not to assume such defense or counsel for the
Indemnified Parties advises that there are substantive issues which raise
conflicts of interest between Synovus and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and Synovus shall
pay all reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, that Synovus shall be
obligated pursuant to this Paragraph (2) to pay for only one firm of counsel for
all Indemnified Parties in any jurisdiction, (b) the Indemnified Parties will
cooperate in the defense of any such litigation, and (c) Synovus shall not be
liable for any settlement effected without its prior written consent; and
provided further, that Synovus shall not have any obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall determine,
and such determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law.
V. CONDITIONS TO CONSUMMATION
(A) The respective obligations of Synovus and of Georgia Bank to effect
the Merger shall be subject to the satisfaction prior to the Effective Date of
the following conditions:
(1) the Plan and the transactions contemplated hereby shall have been
approved by the affirmative vote of the shareholders of Georgia Bank owning at
least two-thirds of Georgia Bank Common Stock;
(2) the procurement by Synovus of approval of the Plan and the
transactions contemplated hereby by the Board of Governors, the Georgia
Department and the FDIC;
(3) procurement of all other regulatory consents and approvals which
are necessary to the consummation of the transactions contemplated by the Plan;
provided, however, that no approval or consent in Paragraphs (A)(2) and (A)(3)
of this Article V shall be deemed to have been received if it shall include any
conditions or requirements (other than conditions or requirements which are
customarily included in such an approval or consent)
14
which would have a Material Adverse Effect on the economic or business benefits
of the transactions contemplated hereby as to render inadvisable the
consummation of the Merger in the reasonable opinion of the Board of Directors
of Synovus or Georgia Bank;
(4) the satisfaction of all other requirements prescribed by law which
are necessary to the consummation of the transactions contemplated by the Plan;
(5) no statute, rule, regulation, order, injunction or decree shall
have been enacted, entered, promulgated or enforced by any governmental
authority which prohibits, unreasonably restricts or makes illegal consummation
of the Merger;
(6) the Registration Statement shall have become effective and no stop
order suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC and Synovus shall have received all state securities law
and "Blue Sky" permits, approvals, qualifications or exemptions necessary to
consummate the transactions contemplated hereby;
(7) each party shall have received an opinion from KPMG Peat Marwick,
Certified Public Accountants ("KPMG"), updated as of the Effective Date, to the
effect that, the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a)(1)(A) and 368(a)(2)(E) of
the Code and that, accordingly: (i) no gain or loss will be recognized by
Synovus or Georgia Bank as a result of the Merger; and (ii) no gain or loss will
be recognized by the shareholders of Georgia Bank who exchange their shares of
Georgia Bank Common Stock solely for shares of Synovus Common Stock pursuant to
the Merger (except with respect to cash received in lieu of a fractional share
interest in Synovus Common Stock or cash received as a result of the exercise of
statutory dissenters' rights against the Merger);
(8) each party shall have delivered to the other party a certificate,
dated as of the Effective Date, signed by its Chairman of the Board, and its
Chief Financial Officer or Controller to the effect that, to the best knowledge
and belief of such officers, the statement of facts and representations made on
behalf of the management of such party, presented to KPMG in delivering the Tax
Opinion, were at the date of such presentation true, correct and complete. Each
party shall have received a copy of the Tax Opinion referred to in Paragraph
(A)(7) of this Article V; and
(9) Synovus shall have received a letter dated as of the Effective Date
from KPMG, its independent certified public accountants, to the effect that the
Merger will qualify for pooling-of-interests accounting treatment.
(B) The obligation of Synovus to effect the Merger shall be subject to
the satisfaction prior to the Effective Date of the following additional
conditions:
(1)(a) For purposes of this Article V(B)(1), the accuracy of
the representations and warranties of Georgia Bank set forth in this Agreement
shall be
15
assessed as of the date of this Agreement and as of the Effective Date with the
same effect as though all such representations and warranties had been made on
and as of the Effective Date (provided, that representations and warranties that
are confined to a specific date shall speak only as of that date).
(b) The representations and warranties set forth in
Recital B regarding the number of shares of Georgia Bank Common Stock
outstanding shall be true and correct (except for inaccuracies that are de
minimus in amount). There shall not exist inaccuracies in the representations
and warranties or instances of non-compliance with the covenants of Georgia Bank
set forth in this Agreement such that the aggregate effect of such inaccuracies
or such instances of non-compliance has, or is reasonably likely in the opinion
of Synovus to have, a material adverse effect on Georgia Bank, and Synovus shall
have received a certificate, signed by the Chief Executive Officer of Georgia
Bank, dated the Effective Date, to such effect. For purposes of this subsection
(b) only, those representations and warranties that are qualified by references
to "Material" or "Material Adverse Effect" shall be deemed not to include such
qualifications;
(2) there shall be no discovery of facts, or actual or threatened
causes of action, investigations or proceedings by or before any court or other
governmental body that relates to or involves Georgia Bank: (a) which, in the
reasonable judgment of Synovus, would have a Material Adverse Effect upon either
Georgia Bank or the consummation of the transactions contemplated by this
Agreement; (b) that challenges the validity or legality of this Agreement or the
consummation of the transactions contemplated by this Agreement; or (c) that
seeks to restrain or invalidate the consummation of the transactions
contemplated by this Agreement or seeks damages in connection therewith;
(3) Synovus shall not have learned of any fact or condition with
respect to the business, properties, assets, liabilities, deposit relationships
or earnings of Georgia Bank which, in the reasonable judgment of Synovus, is
materially and adversely at variance with one or more of the warranties or
representations set forth in this Agreement or which, in the reasonable judgment
of Synovus, has or will have a Material Adverse Effect on Georgia Bank,
including, without limitation, the loan portfolio of Georgia Bank and the
adequacy of the loan loss reserves for such loan portfolio;
(4) T. Larry Roye shall have executed an employment agreement with
Synovus as proposed by Synovus and approved by Mr. Roye;
(5) on the Effective Date, Georgia Bank will have a CAMEL rating of at
least 2 and a Compliance Rating and Community Reinvestment Act Rating of at
least Satisfactory;
(6) on the Effective Date, Georgia Bank will have a loan loss reserve
of at least 1.0% of loans and which will be adequate in all material respects
under generally accepted accounting principles applicable to banks;
(7) Georgia Bank shall have delivered to Synovus the environmental
reports referenced in Paragraph (U) of Article III;
16
(8) the results of any regulatory exam of Georgia Bank occurring
between the date hereof and the Effective Date shall be reasonably satisfactory
to Synovus; and
(9) each of the officers and directors of Georgia Bank shall have
delivered a letter to Synovus to the effect that such person is not aware of any
claims he might have against Georgia Bank other than routine compensation,
benefits and the like as an employee, or ordinary rights as a customer.
(C) The obligation of Georgia Bank to effect the Merger shall be
subject to the satisfaction prior to the Effective Date of the following
additional conditions:
(1)(a) For purposes of this Article V(C)(1), the accuracy of the
representations and warranties of Synovus set forth in this Agreement shall be
assessed as of the date of this Agreement and as of the Effective Date with the
same effect as though all such representations and warranties had been made on
and as of the Effective Date (provided, that representations and warranties that
are confined to a specific date shall speak only as of that date).
(b) The representations and warranties set forth in Recital A
regarding the number of shares of Synovus Common Stock outstanding shall be true
and correct (except for inaccuracies that are de minimus in amount). There shall
not exist inaccuracies in the representations and warranties or instances of
non-compliance with the covenants of Synovus set forth in this Agreement such
that the aggregate effect of such inaccuracies or such instances of
non-compliance has, or is reasonably likely in the opinion of Georgia Bank to
have, a material adverse effect on Synovus, and Georgia Bank shall have received
a certificate, signed by the Chief Executive Officer of Synovus, dated the
Effective Date, to such effect. For purposes of this subsection (b) only, those
representations and warranties that are qualified by references to "Material" or
"Material Adverse Effect" shall be deemed not to include such qualifications.
(2) the listing for trading of the shares of Synovus Common Stock which
shall be issued pursuant to the terms of this Plan on the NYSE shall have been
approved by the NYSE subject to official notice of issuance;
(3) there shall be no discovery of facts, or actual or threatened
causes of action, investigations or proceedings by or before any court or other
governmental body that relates to or involves either Synovus or its
Subsidiaries: (a) which, in the reasonable judgment of Georgia Bank, would have
a Material Adverse Effect upon either Synovus or the consummation of the
transactions contemplated by this Agreement; (b) that challenges the validity or
legality of this Agreement or the consummation of the transactions contemplated
by the Agreement; or (c) that seeks to restrain or invalidate the consummation
of the transactions contemplated by this Agreement or seeks damages in
connection therewith; and
(4) Georgia Bank shall not have learned of any fact or condition with
respect to the business, properties, assets, liabilities, deposit relationships
or earnings of Synovus which, in the reasonable judgment of Georgia Bank, is
materially and adversely at variance with
17
one or more of the warranties or representations set forth in this Agreement or
which, in the reasonable judgment of Georgia Bank, has or will have a Material
Adverse Effect on Synovus.
VI. TERMINATION
A. The Plan may be terminated prior to the Effective Date, either
before or after its approval by the stockholders of Georgia Bank:
(1) by the mutual consent of Synovus and Georgia Bank, if the
Board of Directors of each so determines by vote of a majority of the members of
its entire Board;
(2) by Synovus or Georgia Bank if consummation of the Merger
does not occur by reason of the failure of any of the conditions precedent set
forth in Article V hereof unless the failure to meet such condition precedent is
due to a breach of the Plan by the party seeking to terminate;
(3) by Synovus or Georgia Bank if its Board of Directors so
determines by vote of a majority of the members of its entire Board in the event
that the Merger is not consummated by March 31, 1999 unless the failure to so
consummate by such time is due to the breach of the Plan by the party seeking to
terminate;
(4) by Georgia Bank, if the average closing price of Synovus
Common Stock on the NYSE during the 20 trading days ending on the fifth business
day preceding the date of the Georgia Bank shareholders' meeting called to
consider the Merger (the "Measurement Period") is less than $21.00 per share.
Georgia Bank shall have three business days subsequent to the Measurement Period
in which to make a determination to terminate this Agreement; or
(5) by Synovus, if the average closing price of Synovus Common
Stock on the NYSE during the Measurement Period is more than $25.67 per share.
Synovus shall have three business days subsequent to the Measurement Period in
which to make a determination to terminate this Agreement.
B. In the event of the termination of this Plan by Synovus or Georgia
Bank for the reasons and as provided in 1, 2, 3, 4 or 5 above, this Plan shall
thereafter become void and there shall be no liability on the part of any party
hereto or their respective officers or directors.
VII. EFFECTIVE DATE
The "Effective Date" shall be the date on which the Merger becomes
effective as specified in the Certificate of Merger to be filed with the
Secretary of State of Georgia approving the Merger.
18
VIII. OTHER MATTERS
(A) The agreements and covenants of the parties which by their terms
apply in whole or in part after the Effective Date shall survive the Effective
Date. Except for Paragraph (Q) of Article III, and Paragraphs (N) and (R) of
Article IV which shall survive the Effective Date, no other representations,
warranties, agreements and covenants shall survive the Effective Date. If the
Plan shall be terminated, the agreements of the parties in Paragraph (G) of
Article IV and Paragraphs (E) and (F) of this Article shall survive such
termination.
(B) Prior to the Effective Date, any provision of the Plan may be: (1)
waived by the party benefitted by the provision or by both parties; or (2)
amended or modified at any time (including the structure of the transaction) by
an agreement in writing between the parties hereto approved by their respective
Boards of Directors (to the extent allowed by law) or by their respective Boards
of Directors.
(C) This Plan may be executed in multiple and/or facsimile originals,
and each copy of the Plan bearing the manually executed, facsimile transmitted
or photocopied signature of each of the parties hereto shall be deemed to be an
original.
(D) The Plan shall be governed by, and interpreted in accordance with,
the laws of the State of Georgia.
(E) Each party hereto will bear all expenses incurred by it in
connection with the Plan and the transactions contemplated hereby, including,
but not limited to, the fees and expenses of its respective counsel and
accountants.
(F) Each of the parties and its respective agents, attorneys and
accountants will maintain the confidentiality of all information provided in
connection herewith which has not been publicly disclosed unless it is advised
by counsel that any such information is required by law to be disclosed.
(G) All notices, requests, acknowledgments and other communications
hereunder to a party shall be in writing and shall be deemed to have been duly
given when delivered by hand, telecopy, telegram or telex (confirmed in
writing), by overnight courier or sent by registered or certified mail, postage
paid, to such party at its address set forth below or such other address as such
party may specify by notice to the other party hereto.
If to Synovus, to Mr. Thomas J. Prescott, Executive Vice President and
Chief Financial Officer of Synovus, Suite 201, 901 Front Avenue, Columbus,
Georgia 31901 (fax (706)649-2342), with a copy to Ms. Kathleen Moates at the
same address.
If to Georgia Bank, to Mr. T. Larry Roye, President of Georgia Bank,
P.O. Box 250, Calhoun, Georgia 30703 (fax (706)625-3106), with a copy to Mr.
Walter G. Moeling, IV, Powell, Goldstein, Frazer & Murphy LLP, 16th Floor, 191
Peachtree Street, N.E., Atlanta, Georgia 30303 (fax (404) 572-6999).
19
(H) All terms and provisions of the Plan shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. Except as expressly provided for herein, nothing in this Plan is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Plan.
(I) The Plan represents the entire understanding of the parties hereto
with reference to the transactions contemplated hereby and supersedes any and
all other oral or written agreements heretofore made.
(J) This Plan may not be assigned by any party hereto without the
written consent of the other parties.
In Witness Whereof, the parties hereto have caused this instrument to
be executed in counterparts by their duly authorized officers as of the day and
year first above written.
SYNOVUS FINANCIAL CORP.
By: /s/D. Lamar Weaver
Title: Senior Vice President
Attest: /s/Kathy Moates
Title: Assistant Secretary
GEORGIA BANK & TRUST
BY: /s/T. Larry Roye
Title: President
Attest: /s/Lamar Harrison
Title: Executive Vice President
INTERIM SYNOVUS CORP.
BY: /s/D. Lamar Weaver
Title: Senior Vice President
Attest: /s/Kathy Moates
Title: Secretary
20
Exhibit "A"
Board of Directors of Georgia Bank & Trust
James A. Franklin
W. Rodney Harbin
S. Lamar Harrison
John A. King, Jr.
Arthur C. Owens, Jr.
T. Larry Roye
Stanley M. Taylor
William R. Davis
APPENDIX B
GEORGIA Business Corporation Code
Article 13. Dissenters' Rights
Part 1. Right to Dissent and Obtain Payment for Shares
14-2-1301 DEFINITIONS. - As used in this article, the term:
(1) "Beneficial Shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302 RIGHT TO DISSENT. - (a) A record shareholder of the
corporation is entitled to dissent from, and obtain payment of the fair value of
his shares in the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of incorporation and
the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its parent
under Code Section 14-2-1104;
(2) Consummation of plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the sale or
exchange pursuant to Code Section 14-2-1202, but not including a sale pursuant
to court order or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed to the
shareholders within one year after the date of sale;
1
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the shares
to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any matter,
or to cumulate votes, other than a limitation by dilution through issuance of
shares or other securities with similar voting rights;
(E) Reduces the number of shares owned by the shareholder to a fraction
of a share if the fractional share so created is to be acquired for cash under
Code Section 14-2- 604; or
(F) Cancels, redeems, or repurchases all or part of the shares of the
class;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation, bylaws,
or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall be
no right of dissent in favor of the holder of shares of any class or series
which, at the record date fixed to determine the shareholders entitled to
receive notice of and to vote at a meeting at which a plan of merger or share
exchange or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or share
exchange to accept for their shares anything except shares of the surviving
corporation or another publicly held corporation which at the effective date of
the merger or share exchange are either listed on a national securities exchange
or held of record by more than 2,000 shareholders, except for scrip or cash
payments in lieu of fractional shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303 DISSENT BY NOMINEES AND BENEFICIAL OWNERS. - A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this
2
Code section are determined as if the shares as to which he dissents and his
other shares were registerd in the names of different shareholders.
Part 2. Procedure for Exercise of Dissenters' Rights
14-2-1320 NOTICE OF DISSENTERS' RIGHTS. - (a) If proposed corporate
action creating dissenters' rights under Code Section 14-2-1302 is submitted to
a vote at a shareholders' meeting, the meeting notice must state that
shareholders are or may be entitled to assert dissenters' rights under this
article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321 NOTICE OF INTENT TO DEMAND PAYMENT. - (a) If proposed
corporate action creating dissenters' rights under Code Section 14-2-1302 is
submitted to a vote at a shareholders' meeting, a record shareholder who wishes
to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action is
effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322 DISSENTERS' NOTICE. - (a) If proposed corporate action
creating dissenters' rights under Code Section 14-2-1302 is authorized at a
shareholders' meeting, the corporation shall deliver a written dissenters'
notice to all shareholders who satisfied the requirements of Code Section
14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after
the corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the date
the notice required in subsection (a) of this Code section is delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323 DUTY TO DEMAND PAYMENT. - (a) A record shareholder sent a
dissenters' notice described in Code Section 14-2-1322 must demand payment and
deposit his certificates in accordance with the terms of the notice.
3
(b) A record shareholder who demands payment and deposits his shares
under subsection (a) of this Code section retains all other rights of a
shareholder until these rights are canceled or modified by the taking of the
proposed corporate action.
(c) A record shareholder who does not demand payment or deposit his
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for his shares under this article.
14-2-1324 SHARE RESTRICTIONS. - (a) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is taken or the restrictions
released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325 OFFER OF PAYMENT. - (a) Except as provided in Code Section
14- 2-1327, within ten days of the later of the date the proposed corporate
action is taken or receipt of a payment demand, the corporation shall by notice
to each dissenter who complied with Code Section 14-2-1323 offer to pay to such
dissenter the amount the corporation estimates to be the fair value of his or
her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income statement
for that year, a statement of changes in shareholders' equity for that year, and
the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written
notice to the corporation within 30 days after the corporation's offer or is
deemed to have accepted such offer by failure to respond within said 30 days,
payment for his or her shares shall be made within 60 days after the making of
the offer or the taking of the proposed corporate action, whichever is later.
14-2-1326 FAILURE TO TAKE ACTION. - (a) If the corporation does not
take the proposed action within 60 days after the date set for demanding payment
and depositing share certificates, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
4
14-2-1327 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
- - (a) A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment of
his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest due is
incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for demanding
payment.
(b) A dissenter waives his or her right to demand payment under this
Code section and is deemed to have accepted the corporation's offer unless he or
she notifies the corporation of his or her demand in writing under subsection
(a) of this Code section within 30 days after the corporation offered payment
for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth
in subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide the
information to the shareholder within ten days after receipt of a written demand
for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of the
fair value of his shares and the amount of interest due and demand payment of
his estimate of the fair value of his shares and interest due.
Part 3. Judicial Appraisal of Shares
14-2-1330 COURT ACTION. - (a) If a demand for payment under Code
Section 14-2-1327 remains unsettled, the corporation shall commence a proceeding
within 60 days after receiving the payment demand and petition the court to
determine the fair value of the shares and accrued interest. If the corporation
does not commence the proceeding within the 60 day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a
nonjury equitable valuation proceeding, in the superior court of the county
where a corporation's registered office is located. If the surviving corporation
is a foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the registered office
of the domestic corporation merged with or whose shares were acquired by the
foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents
of this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each
5
nonresident dissenting shareholder either by registered or certified mail or by
publication, or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to
judgment for the amount which the court finds to be the fair value of his
shares, plus interest to the date of judgment.
14-2-1331 COURT COSTS AND COUNSEL FEES. - (a) The court in an appraisal
proceeding commenced under Code Section 14-2-1330 shall determine all costs of
the proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court, but not including fees and expenses of attorneys and
experts for the respective parties. The court shall assess the costs against the
corporation, except that the court may assess the costs against all or some of
the dissenters, in amounts the court finds equitable, to the extent the court
finds the dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under Code Section 14-2-1327.
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2- 1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332 LIMITATION OF ACTIONS. - No action by any dissenter to
enforce dissenters' rights shall be brought more than three years after the
corporate action was taken, regardless of whether notice of the corporate action
and of the right to dissent was given by the corporation in compliance with the
provisions of Code Section 14-2-1320 and Code Section 14-2-1322.
6
APPENDIX C
STEVENS & COMPANY
1027 Peninsula Drive
LaGrange, Georgia 30240
September 24, 1998
Board of Directors
Georgia Bank and Trust
P.O. Box 12050
Calhoun, Georgia 30703
Ladies and Gentlemen:
You have asked us to advise you with respect to the fairness to the shareholders
of Georgia Bank & Trust (the "Company"), from a financial point of view, of the
exchange ratio (the "Exchange Ratio") provided for in the Agreement and Plan of
Merger dated as of September 15, 1998, (the "Merger Agreement") between the
Company and Synovus Financial Corporation ("Synovus"). The Merger Agreement
provides for a merger (the "Merger") of the Company and Synovus pursuant to
which the common shareholders of the Company will receive 3.4612 common shares
of Synovus for every common share of the Company. Termination rights to the
Merger are available as fully described in the Merger Agreement, to the Company,
if the average closing price of Synovus common stock for the 20 trading days
ending on the fifth business day preceding the date of the Company shareholders'
meeting called to consider the Merger (the "Measurement Period") has declined
below $21.00 per share or to Synovus, if the average closing price of Synovus
common stock during the measurement period increases to greater than $25.67.
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to Synovus and the Company. We have
also reviewed certain other information, including financial forecasts and
budgets and have discussed with the Company's management the business and
prospects of the Company.
We have also considered certain financial and stock market data of Synovus
and we have compared that data with similar data for other publicly held bank
holding companies and we have considered the financial terms of certain other
comparable transactions which have recently been effected. We also considered
such other information, financial studies, analyses and investigations and
financial, economic and market criteria which we deemed relevant. In connection
with our review, we have not independently verified any of the foregoing
information and have relied on its being complete and accurate in all material
respects. With respect to the financial forecasts and budgets, we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments the Company's management as to the future
financial performance of the Company. We have not made an independent evaluation
or appraisal of the assets of Synovus or the Company and we have assumed that
the aggregate allowances for loan losses for Synovus and the
Board of Directors
Georgia Bank and Trust
September 24, 1998
Company are adequate to cover such losses. We have not solicited third party
indications of interest in acquiring the Company.
It should be noted that this opinion is based on market conditions and other
circumstances existing on the date hereof and this opinion does not represent
our view as to what the value of the Synovus common stock necessarily will be
when the Synovus common stock is issued to the stockholders of the Company upon
consummation of the Merger.
Stevens & Company is a financial consulting and investment banking firm that
specializes in community bank transactions. We have acted as financial advisor
to the Company in connection with the Merger and will receive a fee for our
services, a significant portion of which is contingent upon the consummation of
the Merger.
Based on the above, it is our opinion that the Exchange Ratio to be received
of the Merger is fair, as of the date hereof, from a financial point of view, to
the common shareholders of the Company.
This opinion is being delivered to the Board of Directors of the Company, and
is not to be reproduced or, delivered to any third party without the expressed
written consent of Stevens & Company, except as required by law. However, it is
understood that this opinion may be included in its entirety in any
communication by the Company or its Board of Directors to the Company's
shareholders.
STEVENS & COMPANY
APPENDIX D
October 12, 1998
PRIVATE & CONFIDENTIAL
Board of Directors Board of Directors
Synovus Financial Corp. Georgia Bank and Trust
P.O. Box 120 P.O. Box 250
Columbus, GA 31902 Calhoun, GA 30703
Board Members:
You have requested the opinion of KPMG Peat Marwick LLP ("KPMG") regarding
certain Federal income tax consequences relating to the merger of Interim
Synovus Corporation ("Interim"), a wholly owned subsidiary of Synovus Financial
Corp. ("Synovus"), with and into Georgia Bank and Trust ("Georgia Bank").
Specifically, you have requested us to opine that the form and substance of the
merger of Georgia Bank with and into Georgia Bank constitutes a tax-free
reorganization under Section 368(a)(1)(A) and Section 368(a)(2)(E) of the
Internal Revenue Code of 1986, as amended (the "Code") (hereinafter all section
references are to the Code unless otherwise indicated) and that under the Code
no gain or loss will be recognized by the shareholders of Georgia Bank upon
receipt of the Synovus common stock in exchange for their Georgia Bank common
stock upon consummation of the merger.
Our opinion as to the tax-free reorganization treatment of the merger of Interim
with and into Georgia Bank does not include: (1) cash payments that are to be
made to Georgia Bank common shareholders in lieu of their receipt of fractional
shares of Synovus common stock and (2) cash payments that are made to Georgia
Bank shareholders who exercise their statutory dissenters' rights against the
merger and receive cash. All affected Georgia Bank common shareholders should
consult their own tax advisers on these matters.
Facts
Synovus is a bank holding company organized and existing under the laws of
Georgia and having its principal office in Muscogee County, Georgia. It has
authorized 600,000,000 shares of $1.00 par value common stock of which
263,436,131 were outstanding at August 31, 1998. Synovus common stock is widely
held, is publicly traded and is listed on the New York Stock Exchange.
Board of Directors
Synovus Financial Corp.
Georgia Bank and Trust
October 12, 1998
Page 2
Interim, a wholly owned subsidiary of Synovus, is organized and existing under
the laws of Georgia and having its principal office in Columbus, Georgia.
Interim has authorized 100 shares of $1.00 par value common stock. As of August
31, 1998, 10 shares of Interim common stock were issued and outstanding.
Synovus common stock carries ten votes per share unless the shares do not meet
certain ownership tests, in which case each share is entitled to only one vote.
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, 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 the record date for any meeting of shareholders which: (1)
has had the same beneficial owner since April 24, 1986; (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 has
been held by the same beneficial owner 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; (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 that are beneficially owned
under the provisions of (1)-(7) above, is the beneficial owner of less than
1,139,063 shares of Synovus common stock (which amount has been appropriately
adjusted to reflect the stock splits which have occurred subsequent to April 24,
1986, 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). There
are no other classes of stock authorized. Ten-vote shares will be issued to the
Georgia Bank shareholders in the proposed transaction.
Board of Directors
Synovus Financial Corp.
Georgia Bank and Trust
October 12, 1998
Page 3
Effective April 20, 1989, the Board of Directors of Synovus adopted a plan that
provides the common shareholders of Synovus with Common Stock Purchase Rights
("poison pill rights"), i.e. rights to acquire the stock of Synovus or its
successor.
Under the terms of the plan, holders of Synovus common stock received a poison
pill right for each share of Synovus common stock held by them. A shareholder's
ability to exercise his rights is contingent upon the occurrence of either a
tender offer for 15% or more, or the actual acquisition of 10% or more, of
Synovus common stock by a corporation or individual (the "acquiring person")
without the approval of the Synovus' Board of Directors.
In general, the rights become exercisable on the earlier of (1) ten days
following a public announcement that, without prior approval of Synovus, a
person or group of affiliated persons has acquired, or obtained the right to
acquire, beneficial ownership of 10% or more of the outstanding common stock of
Synovus, or (2) ten days following the commencement or announcement of an
intention to make a tender offer or exchange offer, without the prior written
consent of Synovus, for 15% or more of the outstanding shares of Synovus common
stock. Until the rights become exercisable, they cannot be transferred
separately from the underlying common stock on which they were distributed, nor
are the rights represented by any certificate other than the underlying stock
certificate itself. Additional, Synovus may redeem the poison pill rights for 1
cent per right until the date that specified events occur. The poison pill
rights expire on May 4, 1999.
Once they become exercisable, the poison pill rights entitle the holder to
purchase from Synovus one share of common stock. No fractional shares of common
stock will be issued upon exercise of the poison pill right. In lieu thereof, a
payment in cash will be made to the holder of such poison pill right equal to
the same fraction of the current market value of a share of common stock.
If, after the rights become exercisable, a "flip-in" or "flip-over" event
occurs, all holders of such rights, except the acquiring person, are entitled to
purchase, at a 50 percent discount, the stock of either Synovus or the acquiring
corporation (whichever is applicable). A "flip-in" event is either (1) the
acquisition by the acquiring person of 15% or more of the outstanding stock of
Synovus, or (2) the conduct of certain self-dealing transactions between an
acquiring person or any of its affiliates or associates and Synovus. A
"flip-over" event is either (1) a merger or other business combination in which
Synovus is not the surviving corporation, or (2) a sale or transfer of more than
30% of the assets or earning power of Synovus and its subsidiaries (taken as a
whole) in one or a series of transactions.
Board of Directors
Synovus Financial Corp.
Georgia Bank and Trust
October 12, 1998
Page 4
Georgia Bank is a commercial bank organized and existing under the laws of
Georgia and having its principal office in Calhoun, Georgia. Georgia Bank has
authorized 1,000,000,000 shares of $5.00 par value common stock. As of August
31, 1998, 523,311 shares of Georgia Bank common stock were issued and
outstanding. Georgia Bank shares are not listed on an exchange and are not
publicly traded. There are no outstanding warrants, options, rights, calls, or
other commitments of any nature that would require the issuance by Georgia Bank
of any additional shares of Georgia Bank stock. There are no outstanding
securities or debt obligations of Georgia Bank convertible into shares of
Georgia Bank common stock.
PROPOSED TRANSACTION
For what has been represented to be valid business purposes, Interim and Georgia
Bank want to combine their businesses. In order to reach that result, the
following transaction is proposed:
1. Pursuant to the Agreement and Plan of Merger dated September 15, 1998
(collectively referred to as the "Merger Agreement"), by and among Synovus,
Interim, and Georgia Bank, Interim will merge with and into Georgia Bank in
accordance with Georgia state law. Georgia Bank will survive the merger and
the separate corporate existence of Interim will cease.
2. As a result of the Merger and on its effective date, Georgia Bank
shareholders will be entitled to receive from Synovus 3.4612 shares of
Synovus common stock for each of their shares of Georgia Bank common stock
with the exact ratio (the "Per Share Exchange Ratio"). The maximum number of
shares of Synovus common stock to be issued in the merger is 1,811,284
shares.
3. No fractional shares of Synovus common stock will be issued in the Merger.
Instead, Georgia Bank shareholders who would otherwise be entitled to a
fractional share of Synovus common stock will be paid in cash for the
fractional shares to be determined based upon the closing price per share of
Synovus common stock on the NYSE on the fifth business day immediately
preceding the effective date of the Merger.
4. Each Georgia Bank shareholder has the right, pursuant to the state laws of
Georgia, to dissent from the Merger. Each dissenting shareholder will be
entitled to receive from Synovus (as the successor to Georgia Bank), the
fair value of his or her shares in cash as established by Georgia law.
5. Following the effective date of the Merger, Synovus will enter into an
Employment Agreement with Mr. T. Larry Roye, President of Georgia Bank, for
three years and
Board of Directors
Synovus Financial Corp.
Georgia Bank and Trust
October 12, 1998
Page 5
Mr. Lamar Harrison, Executive Vice President and Chief
Financial Officer of Georgia Bank, for three years. The contracts will
provide for Mr. Roye and Mr. Harrison to continue to receive substantially
the same base salary and benefits which they presently receive, and certain
severance benefits and participation in various Synovus incentive, welfare
and benefit plans.
The following assumptions of fact have been made in regard to the proposed
merger (and they form an integral part of the opinions contained herein) each of
which you have examined and agree with:
a) The fair market value of the Synovus voting common stock and cash to
be received by each of the Georgia Bank shareholders as a result of
the merger will be approximately equal, in each instance, to the fair
market value of the Georgia Bank common stock exchanged therefor.
b) The Georgia Bank shareholders, as a group, will receive an amount of
Synovus voting common stock in the Merger having, in the aggregate, a
fair market value as of the date of the transaction of not less than
50 percent of the fair market value of the formerly outstanding stock
of Georgia Bank as of the date of the transaction. For purposes of
this representation, shares of Georgia Bank common stock exchanged for
cash as a result of dissenters' rights or in lieu of fractional shares
will be treated as outstanding stock of Georgia Bank on the date of
the transaction which was disposed of for cash. None of (i) Synovus,
(ii) any member of Synovus' affiliated group as defined in Section
1504 of the Code without regard to Section 1504(b) of the Code (iii)
any corporation in which at least fifty percent (50%) of the total
combined voting power of all classes of stock entitled to vote or at
least fifty percent (50%) of the value of all classes of stock
outstanding is owned directly or indirectly by Synovus, or (iv) any
entity that is treated as a partnership for federal income tax
purposes and has as an owner a corporation described in (i), (ii) or
(iii) of this paragraph, has not any Georgia Bank common stock prior
to the Merger, nor has the intent to, at the time of the merger, or
shall, in a transaction that may be considered in connection with the
merger, acquire or redeem (directly or indirectly) any shares of
Synovus common stock issued in connection with the merger except for
repurchases by Synovus of a small percentage of its stock in the open
market as part of any ongoing stock repurchase program not created or
modified in any way in connection with the merger. For purposes
hereof, any entity described in (ii), (iii), or (iv) shall be referred
to as a Synovus Related Party. An entity will be treated as a Synovus
Related Party
Board of Directors
Synovus Financial Corp.
Georgia Bank and Trust
October 12, 1998
Page 6
if the requisite relationship exists immediately before
or immediately after the acquisition or redemption. In addition, an
entity (other than Georgia Bank or any Georgia Bank Related Party)
will be treated as a Synovus Related Party if the requisite
relationship is created in connection with the merger. A Georgia Bank
Related Party means any corporation in which at least fifty percent
(50%) of the total combined voting power of all classes of stock
entitled to vote or at least fifty percent (50%) of the value of all
classes of stock outstanding is owned directly or indirectly by
Georgia Bank.
c) Georgia Bank will hold at least 90 percent of the fair market value of
its net assets and at least 70 percent of the fair market value of its
gross assets and at least 90 percent of the fair market value of
Interim's net assets and at least 70 percent of the fair market value
of Interim's gross assets held immediately prior to the transaction.
For purposes of this representation, amounts paid by Georgia Bank to
shareholders who receive cash or other property, Georgia Bank assets
used to pay its reorganization expenses, and all redemptions and
distributions (except for "regular, normal" dividends) made by Georgia
Bank immediately preceding the transfer, will be included as assets of
Georgia Bank held immediately prior to the transaction.
d) Prior to the Merger, Synovus will be in control of Interim within the
meaning of Section 368(c) of the Code.
e) Following the Merger, Georgia Bank will not issue additional shares of
its stock that would result in Synovus losing control of Georgia Bank
within the meaning of Section 368(c).
f) Synovus has no plan or intention to liquidate Georgia Bank, to merge
Georgia Bank with and into another corporation, to sell or otherwise
dispose of the stock of Georgia Bank, or to cause to sell or otherwise
dispose of any assets of Georgia Bank acquired in the transaction,
except for dispositions made in the ordinary course of business or
transfers described in Section 368(a)(2)(C).
g) The liabilities of Interim assumed by Georgia Bank and the liabilities
to which the transferred assets of Interim are subject were incurred
by Interim in the ordinary course of its business.
h) Following the transaction, Georgia Bank will continue its historic
business or use a significant portion of its historic assets in a
business.
Board of Directors
Synovus Financial Corp.
Georgia Bank and Trust
October 12, 1998
Page 7
i) Synovus, Interim, Georgia Bank, and the shareholders of Georgia Bank
will each pay their own fees, expenses, and disbursements in
connection with the merger.
j) There is no intercorporate debt existing between Synovus and Georgia
Bank or between Interim and Georgia Bank that was issued, acquired,
settled or will be settled at a discount.
k) No two parties to the merger (i.e. Synovus, Interim and Georgia Bank)
are investment companies within the meaning of such term as used in
Section 368 (a)(2)(F)(iii) and (iv).
l) Georgia Bank is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of 368(a)(3)(A).
m) On the effective date of the Merger, the fair market value of the
assets of Georgia Bank will exceed the sum of its liabilities plus the
amount of liabilities to which the assets are subject.
n) None of the Synovus common stock being issued to the Georgia Bank
shareholders will represent compensation for past or future services.
The compensation to be paid to Georgia Bank directors, officers, and
employees who are stockholders of Georgia Bank and who will be
employed following the Merger will not be part of the consideration
paid for their Georgia Bank common stock but will be commensurate, in
each instance, with past or future services.
o) All distributions made by Georgia Bank prior to the merger will be
"regular, normal" distributions.
p) The maximum amount of cash to be paid in lieu of fractional shares of
Synovus voting common stock will, in the aggregate, be less than one
percent of the total consideration paid to the Georgia Bank
shareholders in the transaction. The payment of cash in lieu of
fractional shares of Synovus common stock is solely for the purpose of
avoiding the expense and inconvenience of issuing fractional shares
and does not represent separately bargained-for consideration.
q) No event has occurred which would make the poison pill rights
exercisable.
Board of Directors
Synovus Financial Corp.
Georgia Bank and Trust
October 12, 1998
Page 8
r) Synovus does not own, nor has it owned during the past five years, any
shares of the stock of Georgia Bank.
s) At the time of the Merger, Georgia Bank will not have outstanding any
warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in Georgia Bank that,
if exercised or converted, would affect Synovus' acquisition or
retention of control of Georgia Bank, as defined in Section 368(c).
t) In the Merger, shares of Georgia Bank stock representing control of
Georgia Bank, as defined in Section 368(c), will be exchanged solely
for voting stock of Synovus. For purposes of this representation,
shares of Georgia Bank stock exchanged for cash or other property
originating with Synovus will be treated as outstanding Georgia Bank
stock on the date of the Merger.
The opinions expressed in this letter are rendered only with respect to the
specific matters discussed herein and we express no opinion with respect to any
other legal, federal, or state income tax aspect of this transaction.
Therefore, no inference should be drawn on any matter not expressly opined on.
The opinions contained herein are based on the facts, circumstances, and
assumptions stated above. If any of the above-stated facts, circumstances or
assumptions are not entirely complete or accurate, it is imperative that we be
informed immediately, as the incompleteness or inaccuracy could have a material
effect on our conclusions and we have not independently verified each of the
above facts or assumptions.
In rendering our opinion, we are relying upon the relevant provisions of the
Internal Revenue Code of 1986, as amended; the regulations thereunder; and
judicial and administrative interpretations thereof, all of which are subject to
change or modification by subsequent legislative, regulatory, administrative or
judicial decisions. Such change could be retroactive in effect and therefore
could have an effect on our conclusions. We undertake no responsibility to
update our opinions in the event of any such change.
DISCUSSION
Merger
Classification as a reorganization
Section 368(a)(1)(A) provides that the term "reorganization" includes a
statutory merger. The term statutory merger refers to a merger effected pursuant
to the corporate laws of
Board of Directors
Synovus Financial Corp.
Georgia Bank and Trust
October 12, 1998
Page 9
the United States, a state or territory, or the District of Columbia,
Treasury Regulation Section 1.368-2(b).
Section 368(a)(2)(E) provides that a transaction otherwise qualifying as a
statutory merger under Section 368(a)(1)(A) will not be disqualified if the
stock of a corporation (the "controlling corporation"), which before the merger
was in control of the acquiring corporation, is used to acquire substantially
all of the properties of another corporation if no stock of the acquiring
corporation is used in the transaction. Control for this purpose is defined in
Section 368(c) as the direct ownership of stock possessing at least 80 percent
of the total combined voting power and at least 80 percent of the total number
of shares of all other classes of stock.
The term "substantially all" as used in Section 368(a)(2)(E) has the same
meaning as does the phrase when used in Section 368(a)(1)(C), and in Regulation
Section 1.368-2(b)(2). Section 368(a)(1)(C) and the regulations promulgated
thereunder do not define what constitutes substantially all the properties of a
corporation. The Internal Revenue Service (the "Service") has established a
quantitative test as to the amount of assets of a corporation that will satisfy
the "substantially all" properties requirement for purposes of obtaining a
private letter ruling. Under Revenue Procedure 77-37, 1977-2 C.B. 568, the
"substantially all" requirement is satisfied if the acquiring corporation
acquired properties of the transferor corporation representing at least 90
percent of the fair market value of the net assets and at least 70 percent of
the fair market value of the gross assets held by the transferor corporation
immediately prior to the reorganization.
The "ninety/seventy" guidelines are arbitrary percentages selected by the
Service that do not necessarily represent judicial interpretations of the
meaning of the phrase "substantially all of the properties" under the
various subdivisions of Section 368. See Louis F. Viereck v. United States,
83-2 U.S.T.C. para 9664 (Cl. Cts.), Ralph C. Wilson, Sr. 46 T.C. 334 (1966),
John G. Moffar 42 T.C. 558, 363 F2d 860 (9th Cir. 1966)(Aff'g T.C.) 66-2
U.S.T.C. para 9498, James Armour, Inc., 43 T.C. 295 (1964), Smothers v.
United States, 642 f. 2d 894 (5th Cir. 1981) (affg DC), 79-1 U.S.T.C. para
9216 and American Manufacturing Company, Inc. 55 T.C. 204 (1970).
What constitutes "substantially all of the properties" in a situation other than
a request for a ruling from the Service depends upon the facts and circumstances
in each case rather than upon any particular percentage, Revenue Ruling 57-518,
1957-2 C.B. 253. The Service is of the view that the "substantially all"
properties requirement applies separately to each trade or business of the
transferor corporation. In this transaction, however, it has been assumed as a
fact that the ninety/seventy test will be met, thus, the substantially all
requirement should clearly be met.
Board of Directors
Synovus Financial Corp.
Georgia Bank and Trust
October 12, 1998
Page 10
Requisite to all reorganizations under Section 368(a)(1) are (1) valid business
purpose; (2) a continuity of the business enterprise under the modified
corporate form; and (3) a continuity of interest in the corporation surviving
the merger on the part of those persons who directly or indirectly were the
owners of the merged corporation prior to the reorganization, Regulation Section
1.368-1(b). The term "reorganization" does not embrace the mere purchase by one
corporation of the properties of another, Regulation Section 1.368-2(a). These
regulations reflect well-developed judicial interpretation of the statutory
definition of a reorganization, the purpose of which is to exclude from the
scope of the reorganization provisions those transactions that are in fact
sales.
Continuity of business enterprise requires that the transferee corporation
either continue the transferor corporation's historic business or use a
significant portion of the transferor corporation's historic business assets,
Regulation Section 1.368-1(d)(2). This will be satisfied in this transaction as
per representation "h" above.
The regulations under Section 368(a) do not establish the amount of qualifying
consideration necessary to satisfy the continuity of shareholder interest
requirement. However, the Service has promulgated a definite test as to the
requirement for purposes of obtaining a private letter ruling. Under Revenue
Procedure 77-37, 1977-2 C.B. 568, the continuity of interest requirement of
Regulation section 1.368-1(b) is satisfied if:
[T]here is continuing interest through stock ownership in the acquiring or
transferee corporation.... on the part of the former shareholders of the
acquired or transferor corporation which is equal in value, as of the effective
date of the reorganization, to at least 50 percent of the value of all the
formerly outstanding stock of the acquired or transferor corporation as of the
same date. It is not necessary that each shareholder of the acquired or
transferor corporation receive in the exchange, stock of the acquiring of
transferor corporation... which is equal in value to at least 50 percent of the
value of his former stock interest in the acquired or transferor corporation, so
long as one or more of the shareholders of the acquired or transferor
corporation have a continuing interest through stock ownership in the acquiring
or transferee corporation... which is, in the aggregate, equal in value to at
least 50 percent of the value of all of the formerly outstanding stock of the
acquired or transferor corporation.
The 50 percent definitive test of this revenue procedure does not as a matter of
law establish the amount of qualifying consideration necessary to meet the
continuity of interest requirement of Regulation Section 1.368-1(b). In other
words, the continuation of a capital stock ownership in the acquiring
corporation equal to less that 50 percent of the value of the stock of the
acquired corporation does not itself mark a discontinuity of interest. The
Supreme Court in John A. Nelson Co. v. Helvering, 296 U.S. 374 (1935),
Board of Directors
Synovus Financial Corp.
Georgia Bank and Trust
October 12, 1998
Page 11
36-1 U.S.T.C. para 9019, held that there was a reorganization even though the
shareholders of the acquired corporation received less than half of their total
consideration in the form of stock of the acquiring corporation and received
nonvoting preferred stock. It is only necessary that the shareholders continue
to have a definite and substantial equity interest in the assets of the
acquiring corporation, Revenue Ruling 61-156, 1961-2 C.B. 62. This requirement
should be met in this transaction as per representation "b" above.
In addition to the foregoing, it has been represented as a fact that this
transaction is being undertaken for a bona fide corporate business reason, thus
satisfying the first requirement stated above.
The merger of Interim with and into Georgia Bank will constitute a
reorganization within the meaning of Section 368(a)(1)(A) and Section 368
(a)(2)(E) provided that (1) the merger of Interim with and into Georgia Bank
qualified as a statutory merger under the applicable federal and state laws and
is undertaken for a valid business purpose as stated in the above facts; (2)
after the transaction Georgia Bank continues its historic business; and (3)
Georgia Bank shareholders exchange for Synovus voting common stock an amount of
the Georgia Bank stock meeting the continuity of shareholder interest test.
Synovus, Interim and Georgia Bank will each be "a party to a reorganization"
within the meaning of Section 368(b). As discussed above, each of the foregoing
will be complied with in this transaction.
Federal income tax consequences to exchanging shareholders
Section 354(a)(1) provides that no gain or loss will be recognized if stock of a
corporation which is a party to a reorganization is, pursuant to the plan or
reorganization, exchanged solely for stock of such corporation or of another
corporation which is a party to the reorganization. Section 356(a)(1) in
relevant part provides that if money or other property is received in an
exchange to which section 354 would otherwise apply, then gain, if any, to the
recipient will be recognized to the extent of the sum of the money and fair
market value of the property received. If the exchange has the effect of the
distribution of a dividend, then the amount of gain recognized that is not in
excess of each distributee shareholder's ratable share of the undistributed
earnings and profits of the acquired corporation will be treated as a dividend,
Section 356(a)(2). No loss will be recognized on the exchange, Section 356(c).
Section 358 provides that, generally, shareholders are entitled to a carryover
basis for stock received in a reorganization transaction qualifying under
Section 354 or 356.
The Georgia Bank common shareholders who receive solely Synovus common stock in
exchange for their Georgia Bank common stock will not recognize any gain or loss
Board of Directors
Synovus Financial Corp.
Georgia Bank and Trust
October 12, 1998
Page 12
pursuant to Section 354(a)(1). The tax basis which these Georgia Bank common
shareholders will have in their newly received Synovus common stock will be the
same as their tax basis in the Georgia Bank common stock immediately prior to
the merger under Section 358(a).
If the property received in an exchange (i.e., Synovus common stock) has the
same (i.e., carryover) basis as the property given up, then Section 1223(1)
applies to determine the holding period for the property received. Section
1223(1) provides that the period during which the taxpayer held the property
surrendered in the exchange is added to the period he or she holds the property
received in the exchange in order to determine the holding period of the
property received.
This tacking of the previous holding period applies only if the property
exchanged (i.e., Georgia Bank common stock) was a capital asset in the
taxpayer's hands at the time of the exchange, Section 1223(1). The status of the
property as a capital asset is determined under Section 1221, which defines
"capital asset" as any property of a taxpayer other than property within
specified classifications. As a general rule, stock of a corporation would be
treated as a capital asset under this section. Provided that his or her Georgia
Bank common stock is a capital asset, then each Georgia Bank shareholder will be
able to include his or her respective ownership period of the Georgia Bank
common stock in determining the holding period of the Synovus common stock
received in the proposed transaction.
Poison Pill Rights
The shares of Synovus common stock to be issued to the Georgia Bank shareholders
entitle such shareholders to receive the poison pill rights which will become
excercisable upon the happening of future events as described above. An issue
with respect to the poison pill rights is whether the rights should be
considered separable from the Synovus common stock and therefore "other
property" within the meaning of Section 356(a) or rather as an attribute of the
Synovus common stock, that is, a right to a future dividend inseparable from the
other rights inherent in the stock and not personal to the shareholders.
Presently, the Service has not published any direct authoritative position
regarding the treatment of poison pill rights in the context of a corporate
reorganization that can be cited as precedent. Nor are there any judicial
opinions specifically addressing poison pill rights in the context of a
corporate reorganization.
The only available guidance consists of Private Letter Rulings ("PLRs") that
address the shareholder tax consequences upon the receipt of capital stock
incorporating a poison pill
Board of Directors
Synovus Financial Corp.
Georgia Bank and Trust
October 12, 1998
Page 13
rights plan in the context of a corporate reorganization. Under Section
6110(j)(3), PLRs may not be used or cited as precedent. If the Service issues
further authority, such authority could be prospective only in accordance
with the provisions of Section 7805.
In PLR 8808081, the Service ruled that poison pill rights incorporated in the
terms of capital stock issued in a corporate reorganization constituted "other
property" within the meaning of Section 356(a). Accordingly, the filing held
that the acquired corporation's shareholders recognized gain, to the extent of
the fair market value of the poison pill rights, in the exchange for capital
stock of the acquiring corporation.
Subsequently, however, the Service reversed its position and ruled in PLR
8925087, PLR 8925088, PLR 9040069, and PLR 9040042 (among others) that poison
pill rights did not constitute other property within the meaning of Section
356(a).
Indirect support for the proposition that poison pill rights do not constitute
"other property" can also be found in Revenue Ruling 90-11, 1990-1 C.B. 10.
Although not in the context of a corporate reorganization, the Service concluded
that the initial issuance of poison pill rights is not a distribution of
property which would give rise to current tax to the shareholders. The terms of
the poison pill plan described in the ruling are comparable to the terms of the
Synovus plan. This ruling is a published ruling, and therefore may be cited as
precedent. This published ruling indicates that the more recent private letter
rulings cited immediately above reflect the current thinking of the Service,
i.e., that poison pill rights do not constitute other property when associated
with stock received in a corporate reorganization. Should the Service
successfully maintain that the poison pill rights are other property, then gain,
if any, realized by a Georgia Bank common shareholder receiving such rights
would be recognized to the extent of the fair market value of such rights.
CONCLUSION
Based on the foregoing, it is the opinion of KPMG that:
1. The merger of Interim with and into Georgia Bank, provided it is in
accordance with Georgia state law, will be treated as a reorganization under
Section 368(a)(1)(A) and Section 368(a)(2)(E), and that Synovus, Interim and
Georgia Bank will each be a party to the reorganization as defined in
Section 368(b).
2. No gain or loss will be recognized by the shareholders of Georgia Bank who
receive solely shares of Synovus voting common stock for their Georgia Bank
common stock upon consummation of the Merger. The basis of the Synovus
shares received by such Georgia Bank shareholders (including any fractional
share to which they may be
Board of Directors
Synovus Financial Corp.
Georgia Bank and Trust
October 12, 1998
Page 14
entitled) will be the same as the basis of the Georgia Bank common stock
surrendered in the exchange. Provided that the Georgia Bank common stock was
a capital asset in the shareholder's hands, the holding period of the
Synovus common stock (including any fractional share to which they may be
entitled) will include the holding period of the Georgia Bank stock.
3. The payment by Synovus of cash in lieu of fractional share interests in its
common stock will, for federal income tax purposes, be treated as if Synovus
actually issued the fractional share interests to the Georgia Bank common
shareholders and then Synovus redeemed such fractional shares for cash. See
Revenue Ruling 66-365, 1966-2 C.B. 116. Each affected Georgia Bank common
shareholder should consult their own tax advisor for the tax effect to them
of such redemption (i.e. exchange treatment or dividend).
4. Under Sections 357(a) and 361, no gain or loss will be recognized by Georgia
Bank in exchange for solely shares of Synovus common stock. Under Section
361(c), Georgia Bank will not recognize any gain or loss upon the
distribution of the Synovus common stock to its shareholders in pursuance of
the plan of reorganization.
5. Based on the discussion above under Poison Pill Rights, it appears
reasonable to conclude that the Synovus poison pill rights plan adopted on
April 20, 1989, should be treated as an attribute of the Synovus common
stock, a right that is inseparable from other rights inherent in the stock
and does not constitute other property received by the Georgia Bank common
shareholders in exchange for their Georgia Bank common stock. However,
in view of the lack of precedent, there can be no assurance that the
Service will agree with this conclusion. In the event the Service
ultimately establishes that such poison pill rights constitute other
property, then the Georgia Bank shareholders, who realize gain on the
exchange of their shares for Synovus common stock, will recognize such
gain to the extent of the value of the poison pill rights received.
6. No gain or loss will be recognized by Georgia Bank upon the transfer of its
assets, subject to its liabilities (Section 357(a) and 361(a)).
7. The basis of the assets of Georgia Bank post transaction will be the same as
the basis of such assets in the hands of Georgia Bank immediately prior to
the Merger (Section 362(b)).
8. The tax attributes enumerated in Section 381(c), including any earnings and
profits or a deficit of earnings and profits, will be taken into account by
Synovus following the Merger.
Board of Directors
Synovus Financial Corp.
Georgia Bank and Trust
October 12, 1998
Page 15
9. Where a Georgia Bank shareholder elects to receive cash by exercising
statutory dissenter's rights, such cash will be treated as having been
received by the shareholder as a distribution in redemption of his or her
Georgia Bank stock subject to the provisions and limitations of Section 302
of the Code.
We are furnishing this opinion to you solely in connection with Article V
paragraph (A)(7) of the Merger Agreement. This opinion is solely for your
benefit and is not to be used, circulated, quoted or otherwise referred to for
any purpose without our express written permission.
We consent to the use of our opinion included herein as Appendix D and to the
reference to our firm under the heading of "Tax Opinion" in the prospectus of
Synovus Financial Corp. and the proxy statement of Georgia Bank.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS; UNDERTAKINGS
Item 20. Indemnification of Directors and Officers
Subsection (a) of Section 14-2-851 of the Georgia Business Corporation
Code provides that a corporation may indemnify or obligate itself to indemnify
an individual made a party to a proceeding because he or she is or was a
director against liability incurred in the proceeding if such individual
conducted himself or herself in good faith and such individual reasonably
believed, in the case of conduct in an official capacity, that such conduct was
in the best interests of the corporation and, in all other cases, that such
conduct was at least not opposed to the best interests of the corporation and,
in the case of any criminal proceeding, such individual had no reasonable cause
to believe such conduct was unlawful. Subsection (d) of Section 14-2-851 of the
Georgia Business Corporation Code provides that a corporation may not indemnify
a director in connection with a proceeding by or in the right of the corporation
except for reasonable expenses incurred if it is determined that the director
has met the relevant standard of conduct, or in connection with any proceeding
with respect to conduct under Section 14-2-851 of the Georgia Business
Corporation Code for which he was adjudged liable on the basis that personal
benefit was improperly received by him. Notwithstanding the foregoing, pursuant
to Section 14-2-854 of the Georgia Business Corporation Code a court may order a
corporation to indemnify a director or advance expenses if such court determines
that the director is entitled to indemnification under the Georgia Business
Corporation Code or that the director is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, whether or not such
director met the standard of conduct set forth in subsections (a) and (b) of
Section 14-2-851 of the Georgia Business Corporation Code, failed to comply with
Section 14-2-853 of the Georgia Business Corporation Code or was adjudged liable
as described in paragraph (1) or (2) of subsection (d) of Section 14-2-851 of
the Georgia Business Corporation Code.
Section 14-2-852 of the Georgia Business Corporation Code provides that
to the extent that a director has been successful, on the merits or otherwise,
in the defense of any proceeding to which he was a party, because he or she is
or was a director of the corporation, the corporation shall indemnify the
director against reasonable expenses incurred by the director in connection
therewith.
Section 14-2-857 of the Georgia Business Corporation Code provides that
a corporation may indemnify and advance expenses to an officer of the
corporation who is a party to a proceeding because he or she is an officer of
the corporation to the same extent as a director and if he or she is not a
director to such further extent as may be provided in its articles of
incorporation, bylaws, action of its board of directors or contract except for
liability arising out of conduct specified in Section 14-2-857(a)(2) of the
Georgia Business Corporation Code. Section 14-2-857 of the Georgia Business
Corporation Code also provides that an officer of the corporation who is not a
director is entitled to mandatory indemnification under Section 14-2-852 and is
entitled to apply for court ordered indemnification or advances for expenses
under Section 14-2-854, in each case to the same extent as a director. In
addition, Section 14-2-857 provides that a corporation may also indemnify and
advance expenses to an employee or agent who is not a director to the extent,
consistent with public policy, that may be provided by its articles of
incorporation, bylaws, action of its board of directors or contract.
In accordance with Article VIII of the Company's Bylaws, every person
who is or was (and the heirs and personal representatives of such person) a
director, officer, employee or agent of the Company shall be indemnified and
held harmless by the Company from and against the obligation to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with respect to an
employee benefits 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 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 Company; (b) because he or she or is or was serving at the request
of the Company 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
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 interest of such 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.
Pursuant to Article VIII of the Bylaws of the Company, reasonable
expenses incurred in any proceeding shall be paid by the Company 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 Company, 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 are
not intended to be exclusive of any other right to which those indemnified may
be entitled, and the Company has reserved the right to provide additional
indemnity and rights to its directors, officers, employees or agents to the
extent they are consistent with law.
The Company carries insurance for the purpose of providing
indemnification to its directors and officers. Such policy provides for
indemnification of the Company for losses and expenses it might incur to its
directors and officers for successful defense of claims alleging negligent acts,
errors, omissions or breach of duty while acting in their capacity as directors
or officers and indemnification of its directors and officers for losses and
expense upon the unsuccessful defense of such claims.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful defense
of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Item 21. Exhibits and Financial Statement Schedules
The following Exhibits are filed as part of this Registration
Statement:
Exhibit No. Description
2 Agreement and Plan of Merger is attached as Appendix "A" to
the Proxy Statement/Prospectus included in this Registration
Statement.
4.1 Articles of Incorporation of Synovus Financial Corp., as
amended, incorporated by reference to Exhibit 4(a) of Synovus
Financial Corp.'s Registration Statement on Form S-8 filed
with the Securities and Exchange Commission on July 23, 1990
(File No. 33-35926).
4.2 Bylaws, as amended, of Synovus Financial Corp., incorporated
by reference to Exhibit 3.2 of Synovus Financial Corp.'s
Annual Report on Form 10-K for the fiscal year ended December
31, 1996 filed with the Securities and Exchange Commission on
March 6, 1997.
4.3 Form of Rights Agreement incorporated by reference to Exhibit
1 of Synovus Financial Corp.'s Registration Statement on Form
8-A dated May 3, 1989 filed with the Securities and Exchange
Commission on May 3, 1989 pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended.
5 Legal opinion of the Deputy General Counsel of Synovus
regarding the legality of the Synovus Common Stock being
issued in the Merger.
8 Tax opinion of KPMG Peat Marwick LLP regarding the tax
consequences of the Merger to shareholders of Georgia Bank &
Trust Common Stock is attached as Appendix "D" to the Proxy
Statement/Prospectus included in this Registration Statement.
23.1 The consent of KPMG Peat Marwick LLP re: Consolidated
Financial Statements of Synovus Financial Corp. and
Subsidiaries.
23.2 The consent of Mauldin & Jenkins re: Financial Statements of
Georgia Bank & Trust.
23.3 The consent of KPMG Peat Marwick LLP regarding its tax opinion
filed as Appendix "D" to the Proxy Statement/Prospectus
included in this Registration Statement.
23.4 The consent of the Deputy General Counsel of Synovus is
contained in her opinion filed as Exhibit 5 to the
Registration Statement.
23.5 The consent of Stevens & Company regarding its opinion as to
the fairness of the consideration to be received by Georgia
Bank & Trust shareholders.
24 Powers of Attorney contained on the signature pages of the
Registration Statement.
99.1 Form of Proxy
99.2 Opinion of Stevens & Company as to the fairness of the
consideration to be received by Georgia Bank & Trust's
shareholders is attached as Exhibit "C" to the Proxy/Statement
prospectus included in the Registration Statement.
The Registrant agrees to provide to the Commission, upon request,
copies of instruments defining the rights of holders of long-term debt of the
Registrant.
Item 22. Undertakings.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide public offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other that the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes the information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form S-4 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Columbus, State of Georgia, on the 13th day of
October, 1998.
SYNOVUS FINANCIAL CORP.
(Registrant)
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 Registration Statement
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 Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/William B. Turner Date: October 13, 1998
- ------------------------------------------
William B. Turner,
Director and Chairman of
the Executive Committee
/s/James H. Blanchard Date: October 13, 1998
- ------------------------------------------
James H. Blanchard,
Chairman of the Board and
Principal Executive Officer
/s/John T. Oliver Date: October 13, 1998
- -------------------------------------------
John T. Oliver, Jr.,
Director and Vice Chairman
of the Executive Committee
/s/James D. Yancey Date: October 13, 1998
- ------------------------------------------
James D. Yancey,
President and Director
/s/Richard E. Anthony Date: October 13, 1998
- -------------------------------------------
Richard E. Anthony,
Vice Chairman of the Board
/s/Walter M. Deriso, Jr. Date: October 13, 1998
- ---------------------------------------------
Walter M. Deriso, Jr.,
Vice Chairman of the Board
/s/Stephen L. Burts, Jr. Date: October 13, 1998
- --------------------------------------------
Stephen L. Burts, Jr.,
Vice Chairman of the Board
/s/Thomas J. Prescott Date: October 13, 1998
- --------------------------------------------
Thomas J. Prescott,
Executive Vice President, Treasurer,
Principal Accounting and Financial Officer
/s/Joe E. Beverly Date: October 13, 1998
- --------------------------------------------
Joe E. Beverly,
Director
/s/Richard Y. Bradley Date: October 13, 1998
- --------------------------------------------
Richard Y. Bradley,
Director
/s/C. Edward Floyd Date: October 13, 1998
- --------------------------------------------
C. Edward Floyd,
Director
/s/Gardiner W. Garrard Date: October 13, 1998
- --------------------------------------------
Gardiner W. Garrard, Jr.,
Director
/s/Nathaniel Hansford Date: October 13, 1998
- --------------------------------------------
V. Nathaniel Hansford,
Director
/s/John P. Illges, III Date: October 13, 1998
- -----------------------------------------------
John P. Illges, III,
Director
/s/Mason H, Lampton Date: October 13, 1998
- ---------------------------------------------
Mason H. Lampton,
Director
- ---------------------------------------------- Date:
Elizabeth C. Ogie,
Director
/s/H. Lynn Page Date: October 13, 1998
- ----------------------------------------------
H. Lynn Page,
Director
/s/Robert V. Royall, Jr. Date: October 13, 1998
- --------------------------------------------
Robert V. Royall, Jr.,
Director
/s/Melvin T. Stith
- ---------------------------------------------- Date: October 13, 1998
Melvin T. Stith,
Director
October 13, 1998
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street
Washington, D.C. 20549
Ladies and Gentlemen:
As Senior Vice President and Deputy General Counsel of Synovus Financial
Corp. (the "Registrant"), I am familiar with the preparation and filing of the
Registrant's Registration Statement on Form S-4, as filed with the Securities
and Exchange Commission on or about October 13, 1998, pursuant to which the
Registrant proposes to issue up to 1,811,284 shares of its $1.00 par value
common stock ("Registrant's Common Stock") to certain of the former shareholders
of Georgia Bank & Trust upon its acquisition by Registrant.
I have examined, and am familiar with, the originals or copies, certified
or otherwise, of the documents, corporate records and other instruments of the
Registrant relating to the proposed issuance of Registrant's Common Stock which
I deem relevant and which form the basis of the opinion hereinafter set forth.
I am of the opinion that under the laws of the State of Georgia, the
jurisdiction in which the Registrant is incorporated and the jurisdiction in
which the Registrant has its principal office, upon the issuance of the shares
of the Registrant's Common Stock pursuant to the aforesaid Registration
Statement, all such shares when so issued will be duly authorized, validly
issued and outstanding, and will be fully paid and non-assessable shares of the
Registrant's Common Stock, and no personal liability will attach to the holders
of any of the shares of the Registrant's Common Stock.
The undersigned counsel to the Registrant hereby consents to the use of
my opinion as Exhibit 5 to the aforesaid Registration Statement.
Sincerely,
/s/Kathleen Moates
Kathleen Moates
KM/bmk
EXHIBIT 5
Accountants' Consent
The Board of Directors
Synovus Financial Corp:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Proxy
Statement/Prospectus.
Atlanta, Georgia /s/KPMG Peat Marwick LLP
October 13, 1998 KPMG Peat Marwick LLP
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement of our
report, dated February 13, 1998, relating to the financial statements of Georgia
Bank & Trust, and to the reference to our Firm under the caption "Experts" in
the Prospectus.
/s/Mauldin & Jenkins
Mauldin & Jenkins, LLC
Atlanta, Georgia
October 13, 1998
EXHIBIT 23.2
The Board of Directors
Synovus Financial Corp.
P.O. Box 120
Columbus, GA 31902
We consent to the use of our tax opinion included herein as Appendex C and to
the reference to our firm under the heading of "Experts" and "Tax Opinion"
in the prospectus.
/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Memphis, Tennessee
October 13, 1998
EXHIBIT 23.3
Consent of Financial Advisor
We hereby consent to the use in this Registration Statement on Form S-4 of
Synovus Financial Corp. of our letter to the Board of Directors of Georgia Bank
and Trust, included an Appendix to the Proxy Statement/Prospectus that is part
of the Registration Statement, and to the references to such letter and to
our firm in the Proxy Statement/Prospectus. In giving such consent we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1993 or the rules and
regulations of the Securities and Exchange Commission thereunder.
STEVENS & COMPANY
/s/Charles Stevens
October 13, 1998
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form S-4 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Columbus, State of Georgia, on the 13th day of
October, 1998.
SYNOVUS FINANCIAL CORP.
(Registrant)
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 Registration Statement
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 Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/William B. Turner Date: October 13, 1998
- ------------------------------------------
William B. Turner,
Director and Chairman of
the Executive Committee
/s/James H. Blanchard Date: October 13, 1998
- ------------------------------------------
James H. Blanchard,
Chairman of the Board and
Principal Executive Officer
/s/John T. Oliver Date: October 13, 1998
- -------------------------------------------
John T. Oliver, Jr.,
Director and Vice Chairman
of the Executive Committee
/s/James D. Yancey Date: October 13, 1998
- ------------------------------------------
James D. Yancey,
President and Director
/s/Richard E. Anthony Date: October 13, 1998
- -------------------------------------------
Richard E. Anthony,
Vice Chairman of the Board
/s/Walter M. Deriso, Jr. Date: October 13, 1998
- ---------------------------------------------
Walter M. Deriso, Jr.,
Vice Chairman of the Board
/s/Stephen L. Burts, Jr. Date: October 13, 1998
- --------------------------------------------
Stephen L. Burts, Jr.,
Vice Chairman of the Board
/s/Thomas J. Prescott Date: October 13, 1998
- --------------------------------------------
Thomas J. Prescott,
Executive Vice President, Treasurer,
Principal Accounting and Financial Officer
/s/Joe E. Beverly Date: October 13, 1998
- --------------------------------------------
Joe E. Beverly,
Director
/s/Richard Y. Bradley Date: October 13, 1998
- --------------------------------------------
Richard Y. Bradley,
Director
/s/C. Edward Floyd Date: October 13, 1998
- --------------------------------------------
C. Edward Floyd,
Director
/s/Gardiner W. Garrard Date: October 13, 1998
- --------------------------------------------
Gardiner W. Garrard, Jr.,
Director
/s/Nathaniel Hansford Date: October 13, 1998
- --------------------------------------------
V. Nathaniel Hansford,
Director
/s/John P. Illges, III Date: October 13, 1998
- -----------------------------------------------
John P. Illges, III,
Director
/s/Mason H, Lampton Date: October 13, 1998
- ---------------------------------------------
Mason H. Lampton,
Director
- ---------------------------------------------- Date:
Elizabeth C. Ogie,
Director
/s/H. Lynn Page Date: October 13, 1998
- ----------------------------------------------
H. Lynn Page,
Director
/s/Robert V. Royall, Jr. Date: October 13, 1998
- --------------------------------------------
Robert V. Royall, Jr.,
Director
/s/Melvin T. Stith
- ---------------------------------------------- Date: October 13, 1998
Melvin T. Stith,
Director
GEORGIA BANK & TRUST
135 Bryant Parkway
Calhoun, Georgia 30703
PROXY SOLICITED BY THE BOARD OF
GEORGIA BANK & TRUST
FOR A SPECIAL MEETING OF SHAREHOLDERS
__________, 1998
The undersigned shareholder of Georgia Bank & Trust hereby appoints
__________ _________ and ________________ each of them, with full power of
substitution, proxies to vote the shares of stock which the undersigned could
vote if personally present at the Special Meeting of Shareholders of Georgia
Bank & Trust to be held at ____ p.m., local time, on __________, 1998 at Georgia
Bank & Trust's office at 135 Bryant Parkway, Calhoun, Georgia 30703 or at any
adjournment thereof.
(1) PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF MERGER BY AND
AMONG SYNOVUS FINANCIAL CORP., GEORGIA BANK & TRUST AND
INTERIM SYNOVUS CORP. AND THE TRANSACTIONS CONTEMPLATED BY THE
AGREEMENT AND PLAN OF MERGER.
FOR______ AGAINST______ ABSTAIN_____
(2) IN THEIR DISCRETION UPON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE SPECIAL MEETING OF
SHAREHOLDERS.
IF NO DIRECTION TO THE CONTRARY IS INDICATED, THIS PROXY WILL BE VOTED FOR
PROPOSAL (1).
Dated:_______________, 1998 ___________________________________
Signature(s) of Shareholder
Please sign exactly as name appears hereon. If shares are held jointly, each
shareholder should sign. Agents, executors, administrators, guardians, trustees,
etc., should use full title, and if more than one, all should sign. If the
shareholder is a corporation, please sign full corporate name by an authorized
officer.
Please fill in, date and sign the proxy and return it in the enclosed postpaid
envelope.
