SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended 1997 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______to_____________
Commission file number 1-10312
SYNOVUS FINANCIAL CORP.
(Exact Name of Registrant as specified in its charter)
Georgia 58-1134883
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization Identification No.)
One Arsenal Place, 901 Front Avenue
Suite 301, Columbus, Georgia 31901
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (706) 649-2387
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ----------------------------- -----------------------------------------
Common Stock, $1.00 Par Value New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO___________
---------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of February 12, 1998, 175,265,721 shares of the $1.00 par value common
stock of Synovus Financial Corp. were outstanding, and the aggregate market
value of the shares of $1.00 par value common stock of Synovus Financial Corp.
held by non-affiliates was approximately $4,087,000,000 (based upon the closing
per share price of such stock on said date).
Portions of the 1997 Annual Report to Shareholders of Registrant are
incorporated in Parts I, II and IV of this report. Portions of the Proxy
Statement of Registrant dated March 13, 1998 are incorporated in Part III of
this report.
Registrant's Documents Incorporated by Reference
Part Number and Item
Document Incorporated Number of Form 10-K Into
by Reference Which Incorporated
- -------------------------- -----------------------------
Pages F-10, F-21 through Part I, Item 1, Business
F-28, and F-32 through F-55
of Registrant's 1997 Annual Report
to Shareholders
Pages F-16, and F-21 through F-23 Part I, Item 2, Properties
of Registrant's 1997 Annual Report to
Shareholders
Pages F-21 through F-23 of Part I, Item 3, Legal
Registrant's 1997 Annual Report Proceedings
to Shareholders
Pages F-51 through F-53 Part II, Item 5, Market
of Registrant's 1997 Annual for Registrant's Common
Report to Shareholders Equity and Related
Stockholder Matters
Page F-32 of Registrant's Part II, Item 6,
1997 Annual Report to Selected
Shareholders Financial Data
Pages F-32 through F-54 Part II, Item 7,
of Registrant's Management's Discussion
1997 Annual Report to and Analysis of Financial
Shareholders Condition and Results of
Operations
Page F-50 of Registrant's 1997 Part II, Item 7A, Quantitative
Annual Report to Shareholders and Qualitative Disclosures
About Market Risk
Pages F-2 through F-30, and F-55 Part II, Item 8,
of Registrant's 1997 Financial Statements and
Annual Report to Shareholders Supplementary Data
Pages 3 through 6, 9 and 10, Part III, Item 10,
and 25 of Registrant's Proxy Directors and Executive
Statement in connection with Officers of the Registrant
its Annual Shareholders' Meeting
to be held April 23, 1998
Pages 10 through 14, and Part III, Item 11,
Page 18 of Registrant's Proxy Executive Compensation
Statement in connection with its
Annual Shareholders'
Meeting to be held April 23, 1998
Pages 6 through 8, and 20 through Part III, Item 12,
23 of Registrant's Proxy Statement Security Ownership of
in connection with its Annual Certain Beneficial Owners
Shareholders' Meeting to be held and Management
April 23, 1998
Pages 18 and 19, 22, 24, and 25 Part III, Item 13,
of Registrant's Proxy Statement in Certain Relationships
connection with its Annual Shareholders' and Related Transactions
Meeting to be held April 23, 1998
Pages F-2 through F-30 Part IV, Item 14,
of Registrant's 1997 Exhibits, Financial Statement
Annual Report to Shareholders Schedules and Reports on
Form 8-K
Table of Contents
Item No. Caption Page No.
- --------- ----------- ---------
Part I
1. Business 2
2. Properties 8
3. Legal Proceedings 9
4. Submission of Matters to a Vote of 9
Security Holders
Part II
5. Market for Registrant's Common Equity 9
and Related Stockholder Matters
6. Selected Financial Data 9
7. Management's Discussion and Analysis 9
of Financial Condition and Results
of Operations
7A. Quantitative and Qualitative Disclosures About Market Risk 9
8. Financial Statements and Supplementary 10
Data
9. Changes In and Disagreements With 10
Accountants on Accounting and Financial Disclosure
Part III
10. Directors and Executive Officers of the Registrant 10
11. Executive Compensation 10
12. Security Ownership of Certain 10
Beneficial Owners and Management
13. Certain Relationships and Related 11
Transactions
Part IV
14. Exhibits, Financial Statement Schedules, 11
and Reports on Form 8-K
Part I
Certain statements contained in this Annual Report on Form 10-K and the
exhibits hereto which are not statements of historical fact constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act (the "Act"). In addition, certain statements in future
filings by Synovus Financial Corp.(R) ("Synovus(R)") with the Securities and
Exchange Commission, in press releases, and in oral and written statements made
by or with the approval of Synovus which are not statements of historical fact
constitute forward-looking statements within the meaning of the Act. Examples of
forward-looking statements include, but are not limited to: (i) projections of
revenues, income or loss, earnings or loss per share, the payment or non-payment
of dividends, capital structure and other financial items; (ii) statements of
plans and objectives of Synovus or it's management or Board of Directors,
including those relating to products or services; (iii) statements of future
economic performance; and (iv) statements of assumptions underlying such
statements. Words such as "believes," "anticipates," "expects," "intends,"
"targeted," and similar expressions are intended to identify forward-looking
statements but are not the exclusive means of identifying such statements.
Forward-looking statements involve risks and uncertainties which may cause
actual results to differ materially from those in such statements. Factors that
could cause actual results to differ from those discussed in the forward-looking
statements include, but are not limited to: (i) the strength of the U.S. economy
in general and the strength of the local economies in which operations are
conducted; (ii) the effects of and changes in trade, monetary and fiscal
policies and laws, including interest rate policies of the Board of Governors of
the Federal Reserve System; (iii) inflation, interest rate, market and monetary
fluctuations; (iv) the timely development of and acceptance of new products and
services and perceived overall value of these products and services by users;
(v) changes in consumer spending, borrowing and saving habits; (vi)
technological changes; (vii) acquisitions; (viii) the ability to increase market
share and control expenses; (ix) the effect of changes in laws and regulations
(including laws and regulations concerning taxes, banking, securities and
insurance) with which Synovus and its subsidiaries must comply; (x) the effect
of changes in accounting policies and practices, as may be adopted by the
regulatory agencies as well as the Financial Accounting Standards Board; (xi)
changes in Synovus' organization, compensation and benefit plans; (xii) the
costs and effects of litigation and of unexpected or adverse outcomes in such
litigation; and (xiii) the success of Synovus at managing the risks involved in
the foregoing.
Such forward-looking statements speak only as of the date on which such
statements are made, and Synovus undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made to reflect the occurrence of unanticipated events.
1
Item 1. Business.
Business and Business Segments.
Synovus is an $9.3 billion asset multi-financial services company which is
a registered bank holding company as defined under federal law in the bank
Holding Company Act of 1956, as amended (the "BHCA"), and under the bank holding
company laws of the State of Georgia (the "Georgia Act"). As a bank holding
company, Synovus is subject to supervision and regulation by the Board of
Governors of the Federal Reserve System ("Board") and the Department of Banking
and Finance of the State of Georgia ("Georgia Banking Department"). Synovus
conducts a broad range of financial services through its banking and
bank-related subsidiaries and affiliates.
Synovus is engaged in two principal business segments: banking (which
encompasses commercial banking, trust services, mortgage banking, credit card
banking and certain securities brokerage operations), and bankcard data
processing. While each of these activities is directly related to the provision
of financial services, their separation for financial reporting purposes is
appropriate under Statement of Financial Accounting Standards No. 14 and the
rules of the Securities and Exchange Commission ("SEC"). See Note 12 of Notes to
Consolidated Financial Statements on page F-24 of Synovus' 1997 Annual Report to
Shareholders which is specifically incorporated herein by reference.
Banking and Bank-Related Subsidiaries and Services.
Synovus currently has thirty-four wholly owned first and second tier
commercial banking subsidiaries located in four states. Of the 34 bank
subsidiaries, 21 are located in Georgia with approximately $5.1 billion in
assets, seven are located in Alabama with approximately $2 billion in assets,
five are located in Florida with approximately $658 million in assets and one is
located in South Carolina with approximately $1.4 billion in assets. Synovus'
commercial banking subsidiaries are hereinafter sometimes collectively referred
to as the "Banks."
The Banks offer a broad range of commercial banking services, including
accepting customary types of demand and savings deposits, making individual,
consumer, commercial, installment, first mortgage and second mortgage loans,
offering money transfers, safe deposit services, trust, investment, IRA, Keogh
and corporate employee benefit and other fiduciary services, correspondent
banking services, automated banking and electronic switch services, automated
fund transfers and bank credit card services, including MasterCard and Visa
services. All of the Banks' commercial banking activities are conducted within
the United States.
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Synovus Financial Corp., Synovus, Synovus Securities, Inc., Synovus
Mortgage Corp., Columbus Bank and Trust Company and CB&T are federally
registered service marks of Synovus Financial Corp. TSYS, TS2, Total System
Services, Inc. and THE TOTAL SYSTEM are federally registered service marks of
Total System Services, Inc.
2
Synovus owns the federally registered service marks of Synovus Financial
Corp., Synovus, the stylized S logo, Synovus Mortgage Corp. and Synovus
Securities, Inc. Synovus also owns other service marks. In the opinion of
management of Synovus, the loss of the right to use such marks would not
materially affect Synovus' business.
The bank-related subsidiaries of Synovus are: (1) Synovus Securities,
Inc.(R), Columbus, Georgia ("Synovus Securities"), which specializes in
professional portfolio management for fixed-income securities, the execution of
securities transactions as a broker/dealer and the provision of individual
investment advice on equity and other securities; (2) Synovus Trust Company(sm),
Columbus, Georgia, one of the southeast's largest providers of trust services;
(3) Synovus Mortgage Corp.(R), Birmingham, Alabama, which offers mortgage
servicing; and (4) Synovus Technologies, Inc.(sm), Columbus, Georgia, which
facilitates the use of technology by and participates in the development of new
products and services for the Banks. (During 1997, Synovus Technologies, Inc.
was named Synovus Data Corp. and provided general bank data processing services
to the Banks.)
Bankcard Data Processing and Other Affiliates and Services.
Business. Established in 1983 as an outgrowth of an on-line accounting and
bankcard data processing system developed for Synovus' wholly owned subsidiary,
Columbus Bank and Trust Company(R) ("CB&T(R)"), Total System Services, Inc.(R)
("TSYS(R)") is now one of the world's largest credit, debit, commercial and
private-label card processing companies. Based in Columbus, Georgia, and traded
on the New York Stock Exchange under the symbol "TSS," TSYS provides a
comprehensive on-line system of data processing services marketed as THE TOTAL
SYSTEM(R), servicing issuing institutions throughout the United States, Puerto
Rico, Canada and Mexico, representing approximately 93 million cardholder
accounts. TSYS provides card production, domestic and international clearing,
statement preparation, customer service support, and management support. Synovus
owns 80.7 percent of TSYS.
During 1997, TSYS had four wholly owned subsidiaries: (1) Columbus Depot
Equipment Company(sm) ("CDEC(sm)"), which sells and leases computer related
equipment associated with TSYS' bankcard data processing services; (2) Mailtek,
Inc.(sm) ("Mailtek"), which provides full-service direct mail production
services and offers data processing, list management, laser printing, computer
output microfiche, card embossing, encoding and mailing services; (3) TSYS Total
Solutions, Inc.(sm) ("TSI")(formerly Lincoln Marketing, Inc.), which provides
correspondence, fulfillment, telemarketing, data processing and mailing
services; and (4) Columbus Productions, Inc.(sm) ("CPI"), which provides
full-service commercial printing and related services. On December 31, 1997,
Mailtek was merged into TSI and TSI continues to provide the services formerly
provided by Mailtek.
TSYS also holds a 49% equity interest in a joint venture company named
Total System Services de Mexico, S.A. de C.V., which provides credit card
related processing services to Mexican banks, and a 50% interest in Vital
Processing Services L.L.C., a joint venture with Visa U.S.A. Inc. that combines
the front-end authorization and back-end accounting and settlement processing of
merchants.
3
Due to the seasonal nature of the credit card industry, TSYS' revenues and
results of operations have generally increased in the fourth quarter of each
year because of increased transaction and authorization volumes during the
traditional holiday shopping season.
Service Marks. TSYS owns the federally registered service marks TSYS, TS2,
Total System Services, Inc. and THE TOTAL SYSTEM, to which TSYS believes strong
customer identification attaches. TSYS also owns other service marks. Management
does not believe the loss of such marks would have a material impact on the
business of TSYS.
Major Customers. A significant amount of TSYS' revenues are derived from
certain major customers who are processed under long-term contracts. For the
year ended December 31, 1997, AT&T Universal Card Services Corp. and NationsBank
accounted for 14.35% and 11.13%, respectively, of TSYS' total revenues. As a
result, the loss of one of TSYS' major customers could have a material adverse
effect on TSYS' results of operations.
See "Non-Interest Income" under the "Financial Review" Section on pages
F-36 and F-37, "Non-Interest Expense" under the "Financial Review" Section on
pages F-37 and F-38, and Note 10 of Notes to Consolidated Financial Statements
on pages F-21 through F-23 of Synovus' 1997 Annual Report to Shareholders which
are specifically incorporated herein by reference.
Supervision, Regulation and Other Factors.
Synovus is a registered multi-bank holding company, subject to supervision
and regulation by the Board under the BHCA, and by the Georgia Banking
Department under the Georgia Act. As a bank holding company, Synovus is required
to furnish the Board and the Georgia Banking Department with annual reports of
the financial condition, management and inter-company relationships of Synovus
and its subsidiaries and affiliates at the end of each fiscal year, and such
additional information as the Board and the Georgia Banking Department may
require from time to time. The Board and the Georgia Banking Department also
make examinations of Synovus and certain of its subsidiaries and affiliates.
The BHCA and the Georgia Act require each bank holding company to obtain
the prior approval of the Board and the Georgia Banking Department before: (i)
it may acquire direct or indirect ownership or control of any voting shares of
any bank, if, after such acquisition, such bank holding company will, directly
or indirectly, own or control more than 5% of the voting shares of such bank;
(ii) it or any of its subsidiaries, other than a bank, may acquire all or
substantially all of the assets of a bank; or (iii) it may merge or consolidate
with any other bank holding company. In addition, under the Georgia Act, it is
unlawful for any bank holding company to acquire, direct or indirect, 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
4
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 BHCA from engaging in, or acquiring or retaining direct or indirect
control of the voting shares of any company engaged in non-banking activities.
One of the principal exceptions to this prohibition is for activities found by
the Board to be so closely related to banking, or managing or controlling banks,
as to be a proper incident thereto.
The Board has issued guidelines for the implementation of risk-based
capital requirements by U.S. banks and Bank holding companies. See "Capital
Resources and Dividends" under the "Financial Review" Section on pages F-51
through F-53 and Note 13 of Notes to Consolidated Financial Statements on pages
F-25 through F-28 of Synovus' 1997 Annual Report to Shareholders which are
specifically incorporated herein by reference.
Under the Board's current policy, Synovus is expected to act as a source of
financial strength to its subsidiary banks and to commit resources to support
its subsidiary banks in circumstances when it might not do so absent such
policy. In addition, any capital loans by Synovus to any of its subsidiary banks
would also be subordinate in right of payment to depositors and to certain other
indebtedness of such Bank.
As a result of the enactment of the Financial Institutions Reform, Recovery
and Enforcement Act of 1989 ("FIRREA"), a depository institution insured by the
Federal Deposit Insurance Corporation ("FDIC") can be held liable for any loss
incurred by, or reasonably expected to be incurred by, the FDIC in connection
with: (i) the default of a commonly controlled FDIC insured depository
institution; or (ii) any assistance provided by the FDIC to a commonly
controlled FDIC insured depository institution in danger of default. "Default"
is defined generally as the appointment of a conservator or receiver and "in
danger of default" is defined generally as the existence of certain conditions
indicating that a "default" is likely to occur in the absence of regulatory
assistance. All of Synovus' subsidiary banks are FDIC insured depository
institutions within the meaning of FIRREA.
The principal source of funds for the payment of dividends by Synovus is
dividends paid to it by its subsidiary banks. Various federal and state
statutory provisions limit the assessment of dividends that may be paid to
Synovus by its subsidiary banks. See "Parent Company" under the "Financial
Review" Section on page F-54, and Note 13 of Notes to Consolidated Financial
Statements on pages F-25 through F-28 of
5
Synovus' 1997 Annual Report to Shareholders which are specifically incorporated
herein by reference.
The Federal Deposit Insurance Corporation Improvement Act of 1991 "FDICIA"
required the various federal banking regulatory agencies to issue regulations on
a broad range of issues including capital standards, non-capital standards for
safety and soundness relating generally to operations and management, asset
quality and executive compensation, additional disclosure regarding loans and
deposits to enhance consumer protection, limits on state Bank powers, audit
requirements and examination requirements. Various federal regulatory agencies
have adopted regulations which, among other matters, implement provisions of
FDICIA that require or permit the respective federal regulatory agencies to take
specific supervisory actions when FDIC- insured institutions come within one of
five specific capital categories. The five capital categories are designated as
(1) well capitalized, (2) adequately capitalized, (3) undercapitalized, (4)
significantly under-capitalized, and (5) critically undercapitalized. FDICIA
defines well capitalized banks or bank holding companies as entities having a
total risk-based capital ratio of 10% or higher, a Tier 1 risk-based capital
ratio of 6% or higher and a leverage ratio of 5% or higher. At December 31, 1997
Synovus and its significant bank subsidiaries had adequate capital to be
classified as well capitalized institutions under the FDICIA regulations. See
Note 13 of Notes to Consolidated Financial Statements on pages F-25 through F-28
of Synovus' 1997 Annual Report to Shareholders which is specifically
incorporated herein by reference.
FIRREA and FDICIA provide the federal banking agencies with significantly
expanded powers to take enforcement action against institutions which fail to
comply with capital or other standards. Such action may include the termination
of deposit insurance by the FDIC.
Because Synovus is a registered multi-bank holding company, the Banks are
also subject to examination, supervision and regulation by the Board. The Banks
which are chartered under the banking laws of the States of Georgia, Florida and
Alabama are subject to examination, supervision and regulation by the Georgia
Banking Department, Florida Banking Department and the Alabama Banking
Department, respectively. The Banks which are chartered under the banking laws
of the United States are subject to examination, supervision and regulation by
the Office of the Comptroller of the Currency ("OCC"). In addition, the deposits
of the Banks are insured by the FDIC to the extent provided by law, and are
subject to examination, supervision and regulation by the FDIC.
The Georgia Banking Department, Florida Banking Department, Alabama Banking
Department, OCC and the FDIC regulate all areas of the Banks' banking and trust
operations, including, where appropriate, reserves, investments, loans, mergers,
the 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,
6
Florida Banking Department, Alabama Banking Department, the OCC, the Board and
the FDIC. The payment of management fees by non-banking subsidiaries of a bank
holding company is also subject to supervision and regulation by the Board.
Numerous other federal and state laws, as well as regulations promulgated
by the Board, the Georgia Banking Department, Florida Banking Department,
Alabama Banking Department, the OCC and the FDIC govern almost all aspects of
the operations of the Banks.
Employees.
On February 28, 1998, Synovus had 7,496 full time employees, 3,158 of whom
are employees of TSYS.
Competition.
Banking. Synovus and the Banks encounter vigorous competition from other
commercial banks, savings and loan associations and other financial institutions
and intermediaries in their respective market areas. Certain of the Banks are
smaller than many of the financial institutions in their respective market
areas.
The Banks compete with other banks in their respective market areas in
obtaining new deposits and accounts, making loans, obtaining branch banking
locations and providing other banking services. The Banks also compete with
savings institutions and credit unions in their respective markets for savings
and transaction deposits, certificates of deposit and various types of loans.
Competition for loans is also offered by other financial intermediaries,
including savings institutions, mortgage banking firms and real estate
investment trusts, small loan and finance companies, insurance companies, credit
unions, leasing companies and certain government agencies. Competition for time
deposits and, to a more limited extent, demand and transaction deposits is also
offered by a number of other financial intermediaries and investment
alternatives, including "money-market" mutual funds, brokerage firms, government
and corporate bonds and other securities.
In the offering of fiduciary services, the Banks and Synovus Trust Company,
a wholly owned subsidiary of CB&T, compete with commercial banks and savings
institutions having trust powers, trust companies, and investment advisory and
brokerage firms and other individuals and firms that offer fiduciary, escrow, or
corporate trust services.
Synovus Securities competes with full-service brokerage firms. In the
offering of investment advisory and securities brokerage services, Synovus
Securities competes with banking and brokerage concerns which provide investment
advisory and broker-dealer services for fixed income portfolios.
Bankcard Data Processing Subsidiary. TSYS encounters vigorous competition
7
in providing bankcard data processing services from several different sources.
The national market in third party bankcard data processors is presently being
provided by approximately five vendors. TSYS believes that it is the second
largest third party bankcard processor in the United States. In addition, TSYS
competes against software vendors which provide their products to institutions
which process in-house. TSYS is presently encountering, and in the future
anticipates continuing to encounter, substantial competition from bankcard
associations, data processing and bankcard computer service firms and other such
third party vendors located throughout the United States.
TSYS' major competitor in the bankcard data processing industry is First
Data Resources, Inc., a wholly owned subsidiary of First Data Corporation, which
is headquartered in Omaha, Nebraska, and provides bankcard data processing
services, including authorization and data entry services. The principal methods
of competition between TSYS and First Data Resources are price, quality,
features and functionality, and reliability of service. Certain other
subsidiaries of First Data Corporation also compete with TSYS. In addition,
there are a number of other companies which have the necessary financial
resources and the technological ability to develop or acquire products and, in
the future, to provide services similar to those being offered by TSYS.
Selected Statistical Information.
The "Financial Review" Section, which is set forth on pages F-32 through
F-55 of Synovus' 1997 Annual Report to Shareholders, which includes the
information encompassed within "Selected Statistical Information", is
specifically incorporated herein by reference.
Item 2. Properties.
Synovus and its subsidiaries own, in some cases subject to mortgages or
other security interests, or lease all of the real property and/or buildings on
which it is located. All of such buildings are in a good state of repair and are
appropriately designed for the purposes for which they are used.
See Note 6 and Note 10 of Notes to Consolidated Financial Statements on
page F-16, and pages F-21 through F-23, of Synovus' 1997 Annual Report to
Shareholders which are specifically incorporated herein by reference.
CB&T occupies an approximately 225,000 square foot building known as the
Uptown Center in Columbus, Georgia which provides office space for most of its
operations.
TSYS occupies a 252,000 square foot production center which is located on a
40.4 acre tract of land in north Columbus, Georgia ("North Center"). Primarily a
production center, this facility houses TSYS' primary data processing computer
operations, statement preparation, mail handling, microfiche production and
purchasing, as well as other related operations. TSYS began expanding the North
Center in 1997 to add additional space to house TSYS' card production services.
8
A separate 72,000 square foot building was completed on the North Center
property in 1997 to serve as TSI's headquarters.
TSYS owns a 110,000 square foot building on a 23 acre site in Columbus,
Georgia which accommodates current and future space needs for technical staff.
During 1997, TSYS entered into an operating lease agreement for the purpose
of financing its 540,000 square foot new campus-type facility on approximately
46 acres of land in downtown Columbus, Georgia. The campus facility will
consolidate most of TSYS' multiple Columbus locations and will facilitate future
growth. The campus development will be a multi year phased project.
Item 3. Legal Proceedings.
See Note 10 of Notes to Consolidated Financial Statements on pages F-21
through F-23 of Synovus' 1997 Annual Report to Shareholders which is
specifically incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Shares of common stock of Synovus are traded on the New York Stock Exchange
under the symbol "SNV." See "Capital Resources and Dividends" under the
"Financial Review" Section which is set forth on pages F-51 through F-53 of
Synovus' 1997 Annual Report to Shareholders which is specifically incorporated
herein by reference.
Item 6. Selected Financial Data.
See "Five Year Selected Financial Data" under the "Financial Review"
Section which is set forth on page F-32 of Synovus' 1997 Annual Report to
Shareholders which is specifically incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The "Financial Review" Section which is set forth on pages F-32 through
F-55 of Synovus' 1997 Annual Report to Shareholders, which includes the
information encompassed by "Management's Discussion and Analysis of Financial
Condition and Results of Operations", is specifically incorporated herein by
reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
9
See "Market Risk" under the "Financial Review" Section which is set forth
on page F-50 of Synovus' 1997 Annual Report to Shareholders which is
specifically incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
The "Summary of Quarterly Financial Data" Section which is set forth on
page F- 55, and the "Consolidated Balance Sheets, Consolidated Statements of
Income, Consolidated Statements of Changes in Shareholders' Equity, Consolidated
Statements of Cash Flows, Summary of Significant Accounting Policies, Notes to
Consolidated Financial Statements and Independent Auditors' Report" Sections
which are set forth on pages F-2 through F-30 of Synovus' 1997 Annual Report to
Shareholders are specifically incorporated herein by reference.
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Part III
Item 10. Directors and Executive Officers of the Registrant.
The "ELECTION OF DIRECTORS - Information Concerning Directors and Nominees"
Section which is set forth on pages 3 and 4, the "ELECTION OF DIRECTORS
- -Information Concerning Directors and Nominees for Class I Directors General
Information" Section which is set forth on pages 4 through 6, the "ELECTION OF
DIRECTORS - Executive Officers" Section which is set forth on pages 9 and 10,
and the "SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE SECTION" which
is set forth on page 25 of Synovus' Proxy Statement in connection with its
Annual Shareholders' Meeting to be held on April 23, 1998 are specifically
incorporated herein by reference.
Item 11. Executive Compensation.
The "EXECUTIVE COMPENSATION - Summary Compensation Table; Stock Option
Exercises and Grants; Compensation of Directors; Employment Contracts and Change
in Control Arrangements; and Compensation Committee Interlocks and Insider
Participation" Sections which are set forth on pages 10 through 14 and page 18
of Synovus' Proxy Statement in connection with its Annual Shareholders' Meeting
to be held on April 23, 1998 are specifically incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The "ELECTION OF DIRECTORS - Information Concerning Directors and Nominees
for Class I Directors - Synovus Common Stock Ownership of Directors and
Management" Section which is set forth on pages 6 through 8, the "PRINCIPAL
10
SHAREHOLDERS" Section which is set forth on pages 20 and 21, and the
"RELATIONSHIPS BETWEEN SYNOVUS, COLUMBUS BANK, TSYS AND CERTAIN OF SYNOVUS'
SUBSIDIARIES AND AFFILIATES - TSYS Common Stock Ownership of Directors and
Management" Section which is set forth on pages 22 and 23 of Synovus' Proxy
Statement in connection with its Annual Shareholders' Meeting to be held on
April 23, 1998 are specifically incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The "EXECUTIVE COMPENSATION - Compensation Committee Interlocks and Insider
Participation" Section which is set forth on page 18, "EXECUTIVE COMPENSATION
- -Transactions with Management" Section which is set forth on pages 18 and 19,
the "RELATIONSHIPS BETWEEN SYNOVUS, COLUMBUS BANK, TSYS AND CERTAIN OF SYNOVUS'
SUBSIDIARIES AND AFFILIATES - Beneficial Ownership of TSYS Common Stock by
Columbus Bank" Section which is set forth on page 22, the "RELATIONSHIPS BETWEEN
SYNOVUS, COLUMBUS BANK, TSYS AND CERTAIN OF SYNOVUS' SUBSIDIARIES AND AFFILIATES
- - Interlocking Directorates of Synovus, Columbus Bank and TSYS" Section which is
set forth on page 22, and the "RELATIONSHIPS BETWEEN SYNOVUS, COLUMBUS BANK,
TSYS AND CERTAIN OF SYNOVUS' SUBSIDIARIES AND AFFILIATES - Transactions and
Agreements Between Synovus, Columbus Bank, TSYS and Certain of Synovus'
Subsidiaries" Section which is set forth on pages 24 and 25 of Synovus' Proxy
Statement in connection with its Annual Shareholders' Meeting to be held on
April 23, 1998 are specifically incorporated herein by reference.
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial Statements
The following Consolidated Financial Statements of
Synovus Financial Corp. and its subsidiaries are
specifically incorporated by reference from pages F-2
through F-30 of Synovus' 1997 Annual Report to
Shareholders, in response to Item 8, Part II,
Financial Statements and Supplementary Data.
Consolidated Balance Sheets - December 31,1997 and
1996
Consolidated Statements of Income - Years Ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Changes in Shareholders'
Equity - Years Ended December 31, 1997, 1996 and
1995
Consolidated Statements of Cash Flows - Years Ended
11
December 31, 1997, 1996 and 1995
Summary of Significant Accounting Policies -
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements -
December 31, 1997, 1996 and 1995
Independent Auditors' Report
2. Financial Statement Schedules
Financial Statement Schedules - None applicable
because the required information has been
incorporated in the Consolidated Financial Statements
of Synovus Financial Corp. and its subsidiaries
incorporated by reference herein.
3. Exhibits
Exhibit
Number Description
--------- ------------
3.1 Articles of Incorporation, as
amended, of Synovus Financial Corp.
("Synovus") incorporated by
reference to Exhibit 4(a) of
Synovus' Registration Statement on
Form S-8 filed with the Securities
and Exchange Commission on July 23,
1990 (File No. 33-35926).
3.2 Bylaws, as amended, of Synovus,
incorporated by reference to Exhibit
3.2 of Synovus' Annual Report on
Form 10-K for the fiscal year ended
December 31, 1996, as filed with the
Commission on March 6, 1997.
4.1 Form of Rights Agreement
incorporated by reference to Exhibit
1 of Synovus' Registration Statement
on Form 8-A dated May 3, 1989
pursuant to Section 12 of the
Securities Exchange Act of 1934, as
amended.
9.1 Voting Lease Agreement incorporated
by reference to Exhibit 9.1 of
Synovus' Annual Report on Form 10-K
for the fiscal year ended December
31, 1994, as filed with the
Commission on March 24, 1995.
10. EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
10.1 Employment Agreements of James H.
Blanchard and James D. Yancey with
Synovus incorporated by
12
reference to Exhibit 10.1 of
Synovus' Registration Statement on
Form S-1 filed with the Commission
on December 18, 1990
(File No. 33-38244).
10.2 Incentive Bonus Plan of Synovus
incorporated by reference to Exhibit
10.5 of Synovus' Registration
Statement on Form S-1 filed with the
Commission on December 18, 1990
(File No. 33-38244).
10.3 Director Stock Purchase Plan of
Synovus incorporated by reference to
Exhibit 10(a) of Synovus'
Registration Statement on Form S-8
filed with the Commission on
December 3, 1984 (File No. 2-94639).
10.4 Key Executive Restricted Stock Bonus
Plan of Synovus incorporated by
reference to Exhibit 10.6 of
Synovus' Registration Statement on
Form S-1 filed with the Commission
on December 18, 1990 (File No.
33-38244).
10.5 1989 Stock Option Plan of Synovus
incorporated by reference to Exhibit
"A" of Synovus' Registration
Statement on Form S-8 filed with the
Commission on July 23, 1990 (File
No. 33-35926), which Option Plan was
amended on March 16, 1992 to
eliminate the stock appreciation
rights feature of the outstanding
options under the Plan and reduce
the exercise price from $16 5/8 per
share to $9.70 per share.
10.6 Consulting Agreement of H. Lynn Page
with Synovus incorporated by
reference to Exhibit 10.6 of
Synovus' Annual Report on Form 10-K
for the fiscal year ended December
31, 1992, as filed with the
Commission on March 29, 1993.
10.7 Excess Benefit Agreement of Synovus
incorporated by reference to Exhibit
10.7 of Synovus' Annual Report on
Form 10-K for the fiscal year ended
December 31, 1994, as filed with the
Commission on March 24, 1995.
10.8 Wage Continuation Agreement of
Synovus incorporated by reference to
Exhibit 10.8 of Synovus' Annual
Report on Form 10-K for the fiscal
year ended December 31, 1992, as
filed with the Commission on March
29, 1993.
13
10.9 1991 Stock Option Plan for Key
Executives of Synovus incorporated
by reference to Exhibit 10.9 of
Synovus' Annual Report on Form 10-K
for the fiscal year ended December
31, 1992, as filed with the
Commission on March 29, 1993.
10.10 Synovus Financial Corp. 1992
Long-Term Incentive Plan
incorporated by reference to Exhibit
10.10 of Synovus' Annual Report on
Form 10-K for the fiscal year ended
December 31, 1992, as filed with the
Commission on March 29, 1993.
10.11 Agreement in Connection with Use of
Aircraft incorporated by reference
to Exhibit 10.11 of Synovus' Annual
Report on Form 10-K for the fiscal
year ended December 31, 1992, as
filed with the Commission on March
29, 1993.
10.12 Life Insurance Trusts incorporated
by reference to Exhibit 10.12 of
Synovus' Annual Report on Form 10- K
for the fiscal year ended December
31, 1992, as filed with the
Commission on March 29, 1993.
10.13 Supplemental Compensation Agreement,
Incentive Compensation Agreements
and Performance Compensation
Agreement with Richard E. Anthony;
which Agreements were assumed by
Synovus on December 31, 1992 as a
result of its acquisition of First
Commercial Bancshares, Inc.; and
which stock awards made pursuant to
the Agreements were converted at a
ratio of 1.5 to 1, the exchange
ratio applicable to the merger
incorporated by reference to Exhibit
10.13 of Synovus' Annual Report on
Form 10- K for the fiscal year ended
December 31, 1992, as filed with the
Commission on March 29, 1993.
10.14 1993 Split Dollar Insurance
Agreement of Synovus incorporated by
reference to Exhibit 10.14 of
Synovus' Annual Report on Form 10-K
for the fiscal year ended December
31, 1993, as filed with the
Commission on March 28, 1994.
10.15 1995 Split Dollar Insurance
Agreement of Synovus incorporated by
reference to Exhibit 10.15 of
Synovus' Annual Report on Form 10-K
for the fiscal year ended December
31, 1994, as filed with the
Commission on March 24, 1995.
14
10.16 Synovus Financial Corp. 1994
Long-Term Incentive Plan
incorporated by reference to Exhibit
10.16 of Synovus' Annual Report on
Form 10-K for the fiscal year ended
December 31, 1994, as filed with the
Commission on March 24, 1995.
10.17 Employment Agreement of Robert V.
Royall, Jr. incorporated by
reference to Exhibit 10.17 of
Synovus' Annual Report on Form 10-K
for the fiscal year ended December
31, 1995, as filed with the
Commission on March 25, 1996.
10.18 Synovus Financial Corp. Executive
Bonus Plan incorporated by reference
to Exhibit 10.18 of Synovus' Annual
Report on Form 10-K for the fiscal
year ended December 31, 1995, as
filed with the Commission on March
25, 1996.
10.19 Change of Control Agreements
incorporated by reference to Exhibit
10.19 of Synovus' Annual Report on
Form 10-K for the fiscal year ended
December 31, 1995, as filed with the
Commission on March 25, 1996.
10.20 Consulting Agreement of Joe E.
Beverly incorporated by reference to
Exhibit 10.20 of Synovus' Annual
Report on Form 10-K for the fiscal
year ended December 31, 1996, as
filed with the Commission on March
6, 1997.
11.1 Statement of Computation of Net
Income Per Common Share.
13.1 Certain specified pages of Synovus'
1997 Annual Report to Shareholders
which are specifically incorporated
herein by reference.
20.1 Proxy Statement, for the Annual
Meeting of Shareholders of Synovus
to be held on April 23, 1998,
certain specified pages of which are
specifically incorporated herein by
reference.
21.1 Subsidiaries of Synovus Financial
Corp.
23.1 Independent Auditors' Consents.
24.1 Powers of Attorney contained on the
signature pages
15
of the 1997 Annual Report on Form
10-K.
27.1 Financial Data Schedule (for SEC use
only).
27.2 Amended and Restated Financial Data
Schedule (for SEC use only).
27.3 Amended and Restated Financial Data
Schedule (for SEC use only).
27.4 Amended and Restated Financial Data
Schedule (for SEC use only).
99.1 Annual Report on Form 11-K for the
Synovus Financial Corp. Employee
Stock Purchase Plan for the year
ended December 31, 1997 (to be filed
as an amendment hereto within 120
days of the end of the period
covered by this report).
99.2 Annual Report on Form 11-K for the
Synovus Financial Corp. Director
Stock Purchase Plan for the year
ended December 31, 1997 (to be filed
as an amendment hereto within 120
days of the end of the period
covered by this report).
Synovus agrees to furnish the Commission, upon request, a copy of each
instrument with respect to issues of long-term debt. The principal amount of any
individual instrument, which has not been previously filed, does not exceed ten
percent of the total assets of Synovus and its subsidiaries on a consolidated
basis.
(b) Reports on Form 8-K.
On November 25, 1997, Synovus filed a Report on Form 8-K with the
Commission in connection with its notification by Standard & Poor's that Synovus
would be added to the S&P 500 Index.
On March 9, 1998, Synovus filed a Report on Form 8-K with the Commission in
connection with: (1) its announcement of a 22.2% increase in its quarterly
dividend; and (2) the announcement by TSYS that it is engaged in negotiations
with Sears, Roebuck and Co. to support Sears' private label credit card
accounts.
filings\snv\10k.97
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Synovus Financial Corp. has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SYNOVUS FINANCIAL CORP.
(Registrant)
March 20, 1998 By:/s/James H. Blanchard
---------------------
James H. Blanchard,
Chairman of the Board and
Principal Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James H. Blanchard, James D. Yancey and Stephen
L. Burts, Jr., and each of them, his or her true and lawful attorney(s)-in-fact
and agent(s), with full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all capacities, to sign any
or all amendments to this report and to file the same, with all exhibits and
schedules thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney(s)-in-fact and
agent(s) full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney(s)-in-fact and agent(s), or their
substitute(s), may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange
Act of 1934, as amended, this report has been signed by the following persons in
the capacities and on the dates indicated.
/s/William B. Turner Date: March 20, 1998
- -----------------------------------------------
William B. Turner,
Director and Chairman of
the Executive Committee
/s/James H. Blanchard Date: March 20, 1998
- -----------------------------------------------
James H. Blanchard,
Chairman of the Board and
Principal Executive Officer
17
/s/John T. Oliver, Jr. Date: March 20, 1998
- -----------------------------------------------
John T. Oliver, Jr.,
Director and Vice Chairman
of the Executive Committee
/s/James D. Yancey Date: March 20, 1998
- -----------------------------------------------
James D. Yancey,
Vice Chairman of the Board
/s/Richard E. Anthony Date: March 20, 1998
- -----------------------------------------------
Richard E. Anthony,
Vice Chairman of the Board
/s/Walter M. Deriso, Jr. Date: March 20, 1998
- -----------------------------------------------
Walter M. Deriso, Jr.,
Vice Chairman of the Board
/s/Stephen L. Burts, Jr. Date: March 20, 1998
- -----------------------------------------------
Stephen L. Burts, Jr.,
President
/s/Thomas J. Prescott Date: March 20, 1998
- ------------------------------------------------
Thomas J. Prescott,
Executive Vice President, Treasurer,
Principal Accounting and Financial Officer
/s/Joe E. Beverly Date: March 20, 1998
- ------------------------------------------------
Joe E. Beverly,
Director
/s/Richard Y. Bradley Date: March 20, 1998
- ------------------------------------------------
Richard Y. Bradley,
Director
/s/C. Edward Floyd Date: March 20, 1998
- ------------------------------------------------
C. Edward Floyd,
Director
18
/s/Gardiner W. Garrard, Jr. Date: March 20, 1998
- -----------------------------------------------
Gardiner W. Garrard, Jr.,
Director
/s/V. Nathaniel Hansford Date: March 20, 1998
- -----------------------------------------------
V. Nathaniel Hansford,
Director
/s/John P. Illges, III Date: March 20, 1998
- -----------------------------------------------
John P. Illges, III,
Director
/s/Mason H. Lampton Date: March 20, 1998
- ----------------------------------------------
Mason H. Lampton,
Director
/s/Elizabeth C. Ogie Date: March 20, 1998
- ----------------------------------------------
Elizabeth C. Ogie,
Director
/s/H. Lynn Page Date: March 20, 1998
- ----------------------------------------------
H. Lynn Page,
Director
/s/Robert V. Royall, Jr. Date: March 20, 1998
- ----------------------------------------------
Robert V. Royall, Jr.,
Director
/s/Melvin T. Stith Date: March 20, 1998
- ----------------------------------------------
Melvin T. Stith,
Director
/s/George C. Woodruff, Jr. Date: March 20, 1998
- ----------------------------------------------
George C. Woodruff, Jr.,
Director
filings\SNV\confo.sig
19
SYNOVUS FINANCIAL CORP.
COMPUTATION OF NET INCOME
PER COMMON SHARE
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Twelve Months Ended December 31, 1997 Twelve Months Ended December 31, 1996
- --------------------------------------------------------------------------------------------------------------
Average Per Share Average Per Share
Income Shares Amount Income Shares Amount
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Net Income $165,236 174,814 0.95 139,604 174,199 0.80
Effect of Dilutive Options 0 2,296 0 1,690
- --------------------------------------------------------------------------------------------------------------
EPS - Assuming Dilution $165,236 177,110 0.93 139,604 175,889 0.79
==============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended December 31, 1997 Three Months Ended December 31, 1996
- --------------------------------------------------------------------------------------------------------------
Average Per Share Average Per Share
Income Shares Amount Income Shares Amount
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Net Income $ 47,006 175,092 0.27 41,661 174,497 0.24
Effect of Dilutive Options 0 2,402 0 2,125
- --------------------------------------------------------------------------------------------------------------
EPS - Assuming Dilution $ 47,006 177,494 0.26 41,661 176,622 0.24
==============================================================================================================
</TABLE>
All information presented in Exhibit 11.1 reflects the three-for-two stock split
declared by the Synovus Board of Directors on March 10, 1997, effective April 8,
1997, to shareholders of record on March 21, 1997.
Options to purchase 844,892 shares of common stock at $27.56 per share were
outstanding during the second half of 1997 but were not included in the
computation of diluted earnings per share since the options' exercise price was
greater than the average market price of the common shares. The options, which
expire on June 30, 2005, were still outstanding at December 31, 1997.
[logo}(R)
SYNOVUS(R)
FINANCIAL CORP.
FINANCIAL APPENDIX
<TABLE>
<CAPTION>
<S> <C>
Consolidated Balance Sheets as of December 31, 1997 and 1996 ........................................................ F-2
Consolidated Statements of Income for the Years ended December 31, 1997, 1996, and 1995 ............................. F-3
Consolidated Statements of Changes In Shareholders' Equity for the Years ended December 31, 1997, 1996, and 1995 .... F-4
Consolidated Statements of Cash Flows for the Years ended December 31, 1997, 1996, and 1995 ......................... F-5
Summary of Significant Accounting Policies .......................................................................... F-6
Notes to Consolidated Financial Statements .......................................................................... F-10
Independent Auditors' Report ........................................................................................ F-30
Financial Highlights ................................................................................................ F-31
Financial Review .................................................................................................... F-32
Summary of Quarterly Financial Data, Unaudited ...................................................................... F-55
Senior Management and Directors ..................................................................................... F-56
</TABLE>
F-1
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Cash and due from banks, including cash deposits of $12,171 and $28,445 for 1997 and 1996,
respectively, on deposit to meet Federal Reserve requirements (note 9) ................... $ 388,134 404,952
Interest earning deposits with banks (note 9) .................................................... 1,272 2,040
Federal funds sold (note 9) ...................................................................... 93,392 38,249
Investment securities available for sale (notes 2 and 9) ......................................... 1,325,036 1,276,083
Investment securities held to maturity (approximate market value of $335,107
and $364,694 for 1997 and 1996, respectively) (notes 2 and 9) ............................ 330,137 363,008
Loans (notes 3 and 9) ............................................................................ 6,615,584 6,075,465
Less:
Unearned income .......................................................................... (5,712) (10,235)
Reserve for loan losses .................................................................. (103,050) (94,683)
- ----------------------------------------------------------------------------------------------------------------------------
Loans, net ............................................................... 6,506,822 5,970,547
- ----------------------------------------------------------------------------------------------------------------------------
Premises and equipment, net (note 6) ............................................................. 272,281 247,191
Other assets (note 4) ............................................................................ 343,257 310,274
- ----------------------------------------------------------------------------------------------------------------------------
Total assets ............................................................. $ 9,260,331 8,612,344
============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits (notes 5 and 9):
Non-interest bearing ............................................................. $ 1,256,639 1,189,973
Interest bearing ................................................................. 6,451,288 6,013,062
- ----------------------------------------------------------------------------------------------------------------------------
Total deposits ........................................................... 7,707,927 7,203,035
Federal funds purchased and securities sold under agreement to repurchase (note 9) ....... 305,868 339,200
Long-term debt (notes 6 and 9) ........................................................... 126,174 97,283
Other liabilities (notes 7 and 8) ........................................................ 174,065 154,641
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities ........................................................ 8,314,034 7,794,159
- ----------------------------------------------------------------------------------------------------------------------------
Minority interest in consolidated subsidiary ..................................................... 42,641 34,435
Shareholders' equity (notes 1, 2, 6, 8, and 13):
Common stock -- $1.00 par value. Authorized 600,000,000 shares; issued 175,322,276 in 1997
and 174,635,319 in 1996; outstanding 175,205,433 in 1997 and 174,518,476 in 1996 . 175,322 174,635
Surplus .................................................................................. 48,917 40,312
Less treasury stock - 116,843 shares in 1997 and 1996 .................................... (1,285) (1,285)
Less unamortized restricted stock ........................................................ (3,734) (5,344)
Net unrealized gain (loss) on investment securities available for sale ................... 6,651 (112)
Retained earnings ........................................................................ 677,785 575,544
- ----------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity ............................................... 903,656 783,750
Commitments (note 10)
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity ............................... $ 9,260,331 8,612,344
============================================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
F-2
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
Years ended December 31, 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Loans, including fees ......................................................... $ 618,172 562,208 525,080
Investment securities:
U.S. Treasury and U.S. Government agencies ............................ 80,369 73,167 59,866
Mortgage-backed securities ............................................ 17,050 17,971 15,975
State and municipal ................................................... 6,536 6,766 7,397
Other investments ..................................................... 1,387 1,266 1,357
Federal funds sold ............................................................ 2,086 1,866 6,006
Interest earning deposits with banks .......................................... 73 59 107
- -----------------------------------------------------------------------------------------------------------------------
Total interest income ................................. 725,673 663,303 615,788
- -----------------------------------------------------------------------------------------------------------------------
Interest expense:
Deposits (note 5) ............................................................. 287,260 267,349 253,761
Federal funds purchased and securities sold under agreement to repurchase ..... 18,836 14,973 12,092
Long-term debt ................................................................ 7,188 6,107 8,060
- -----------------------------------------------------------------------------------------------------------------------
Total interest expense ................................ 313,284 288,429 273,913
- -----------------------------------------------------------------------------------------------------------------------
Net interest income ................................... 412,389 374,874 341,875
Provision for losses on loans (note 3) ................................................ 32,296 31,766 25,787
- -----------------------------------------------------------------------------------------------------------------------
Net interest income after provision for losses on loans 380,093 343,108 316,088
- -----------------------------------------------------------------------------------------------------------------------
Non-interest income:
Data processing services ...................................................... 343,946 296,511 236,125
Service charges on deposit accounts ........................................... 56,215 52,417 46,657
Fees for trust services ....................................................... 12,645 11,438 9,649
Credit card fees .............................................................. 11,001 9,105 7,288
Securities gains (losses), net (note 2) ....................................... (23) (176) 368
Other operating income ........................................................ 65,462 56,083 40,747
- -----------------------------------------------------------------------------------------------------------------------
Total non-interest income ............................. 489,246 425,378 340,834
- -----------------------------------------------------------------------------------------------------------------------
Non-interest expense:
Salaries and other personnel expense (note 8) ................................. 339,534 297,912 252,479
Net occupancy and equipment expense (notes 4 and 10) .......................... 136,372 121,141 99,629
Other operating expenses (note 11) ............................................ 125,387 117,983 120,012
Special FDIC assessment ....................................................... -- 4,546 --
Minority interest in subsidiary's net income .................................. 9,143 7,592 5,333
- -----------------------------------------------------------------------------------------------------------------------
Total non-interest expense ............................ 610,436 549,174 477,453
- -----------------------------------------------------------------------------------------------------------------------
Income before income taxes ............................ 258,903 219,312 179,469
Income tax expense (note 7) ........................................................... 93,667 79,708 64,886
- -----------------------------------------------------------------------------------------------------------------------
Net income ............................................ $165,236 139,604 114,583
=======================================================================================================================
Net income per share (note 14):
Basic ......................................................................... $ .95 .80 .66
=======================================================================================================================
Assuming dilution ............................................................. .93 .79 .66
=======================================================================================================================
Weighted average shares outstanding (note 14):
Basic ......................................................................... 174,814 174,199 172,432
=======================================================================================================================
Assuming dilution ............................................................. 177,110 175,889 173,462
=======================================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
F-3
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands, except per share data)
<TABLE>
<CAPTION>
Net
Unrealized
Unamortized Gain/(Loss)
Shares Common Treasury Restricted on Securities Retained
Years ended December 31, 1997, 1996, and 1995 Issued Stock Surplus Stock Stock Avail. for Sale Earnings Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 ..................171,303 $171,303 23,613 (7,680) (1,538) (20,744) 414,926 579,880
Issuance of common stock for acquisitions
(note 1) .............................. 1,191 1,191 3,830 6,078 -- 183 547 11,829
Net income .................................... -- -- -- -- -- -- 114,583 114,583
Cash dividends declared - $.24 per share ...... -- -- -- -- -- -- (42,042) (42,042)
Treasury shares purchased ..................... -- -- -- (1,303) -- -- -- (1,303)
Issuance of restricted stock (note 8) ......... 203 203 1,851 -- (2,054) -- -- --
Amortization of restricted stock issued under
restricted stock bonus plan (note 8) .. -- -- 493 -- 779 -- -- 1,272
Stock options exercised (note 8) .............. 506 506 179 1,883 -- -- -- 2,568
Repayment of obligation of employee stock
ownership plan at subsidiary .......... -- -- -- -- 150 -- -- 150
Net unrealized gain on investment securities
available for sale .................... -- -- -- -- -- 26,335 -- 26,335
Ownership change at majority-owned subsidiary . -- -- (4) -- -- -- -- (4)
Loss on foreign currency translation .......... -- -- -- -- -- -- (850) (850)
Conversion of subordinated debentures into
common stock .......................... 679 679 458 -- -- -- -- 1,137
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 ..................173,882 173,882 30,420 (1,022) (2,663) 5,774 487,164 693,555
Net income .................................... -- -- -- -- -- -- 139,604 139,604
Cash dividends declared - $.29 per share ...... -- -- -- -- -- -- (51,123) (51,123)
Treasury shares purchased ..................... -- -- -- (263) -- -- -- (263)
Issuance of restricted stock (note 8) ......... 227 227 3,494 -- (3,771) -- -- (50)
Amortization of restricted stock issued under
restricted stock bonus plan (note 8) .. -- -- 469 -- 1,090 -- -- 1,559
Stock options exercised (note 8) .............. 530 530 2,337 -- -- -- -- 2,867
Stock option tax benefit ...................... -- -- 3,394 -- -- -- -- 3,394
Net unrealized loss on investment
securities available for sale (note 2). -- -- -- -- -- (5,886) -- (5,886)
Ownership change at majority-owned subsidiary . -- -- 234 -- -- -- -- 234
Loss on foreign currency translation .......... -- -- -- -- -- -- (101) (101)
Fractional shares for stock split ............. (4) (4) (36) -- -- -- -- (40)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 ..................174,635 174,635 40,312 (1,285) (5,344) (112) 575,544 783,750
Net income .................................... -- -- -- -- -- -- 165,236 165,236
Cash dividends declared - $.36 per share ...... -- -- -- -- -- -- (62,948) (62,948)
Issuance of restricted stock (note 8) ......... 9 9 237 -- (246) -- -- --
Amortization of restricted stock issued under
restricted stock bonus plan (note 8) .. -- -- (45) -- 1,856 -- -- 1,811
Stock options exercised (note 8) .............. 680 680 3,674 -- -- -- -- 4,354
Stock option tax benefit ...................... -- -- 4,775 -- -- -- -- 4,775
Net unrealized gain on investment securities
available for sale (note 2) ........... -- -- -- -- -- 6,763 -- 6,763
Ownership change at majority-owned subsidiary . -- -- -- -- -- -- (47) (47)
Fractional shares for stock split ............. (2) (2) (36) -- -- -- -- (38)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 ..................175,322 $175,322 48,917 (1,285) (3,734) 6,651 677,785 903,656
===================================================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Years ended December 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income ...................................................................................$ 165,236 139,604 114,583
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for losses on loans ........................................................ 32,296 31,766 25,787
Depreciation, amortization, and accretion, net ....................................... 49,092 43,280 38,617
Deferred income tax expense (benefit) ................................................ 750 (9,483) (4,171)
Increase in interest receivable ...................................................... (6,911) (1,113) (9,973)
Increase in interest payable ......................................................... 6,284 791 14,680
Minority interest in subsidiary's net income ......................................... 9,143 7,592 5,333
Increase in mortgage loans held for sale ............................................. (2,522) (12,173) (15,398)
Other, net ........................................................................... 3,801 8,240 (1,541)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities .................................... 257,169 208,504 167,917
- ------------------------------------------------------------------------------------------------------------------------------------
Investing Activities
Cash acquired from acquisitions .............................................................. -- 30,113 4,431
Net (increase) decrease in interest earning deposits with banks .............................. 768 (947) 1,956
Net (increase) decrease in federal funds sold ................................................ (55,143) 85,583 (70,770)
Proceeds from maturities and principal collections of investment securities available for sale 348,873 327,897 173,109
Proceeds from sales of investment securities available for sale .............................. 67,932 106,207 136,502
Purchases of investment securities available for sale ........................................ (455,602) (614,952) (394,406)
Proceeds from maturities and principal collections of investment securities held to maturity . 70,086 71,091 82,837
Purchases of investment securities held to maturity .......................................... (37,884) (53,833) (92,966)
Net increase in loans ........................................................................ (566,049) (546,741) (385,228)
Purchases of premises and equipment .......................................................... (66,436) (63,806) (48,212)
Disposals of premises and equipment .......................................................... 2,274 2,986 1,888
Proceeds from sales of other real estate ..................................................... 8,001 6,852 12,032
Additions to contract acquisition costs ...................................................... (17,558) (7,890) (9,955)
Additions to computer software ............................................................... (15,106) (9,196) (8,130)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities ........................................ (715,844) (666,636) (596,912)
- ------------------------------------------------------------------------------------------------------------------------------------
Financing Activities
Net increase in demand and savings deposits .................................................. 298,374 320,638 193,870
Net increase in certificates of deposit ...................................................... 206,518 108,078 528,690
Net increase (decrease) in federal funds purchased and securities
sold under agreement to repurchase ................................................... (33,332) 109,723 (182,870)
Principal repayments on long-term debt ....................................................... (9,980) (20,872) (33,682)
Proceeds from issuance of long-term debt ..................................................... 38,871 11,340 1,823
Purchases of treasury stock .................................................................. -- (263) (1,303)
Dividends paid to shareholders ............................................................... (62,948) (51,123) (42,042)
Proceeds from issuance of common stock ....................................................... 4,354 2,867 2,568
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities .................................... 441,857 480,388 467,054
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents ..................................................... (16,818) 22,256 38,059
Cash and cash equivalents at beginning of period ..................................................... 404,952 382,696 344,637
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period ........................................................... $388,134 404,952 382,696
====================================================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
F-5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Operations
The consolidated financial statements include the accounts of Synovus
Financial Corp. (Parent Company) and its consolidated subsidiaries, all but one
of which were wholly-owned at December 31, 1997. Synovus has 34 wholly-owned
bank subsidiaries predominantly involved in commercial banking activities and
wholly-owned trust, mortgage, and broker/dealer companies. Total System
Services, Inc. (TSYS), an 80.7% owned subsidiary, is a bankcard data processing
company. In addition, the financial statements include joint ventures of TSYS
accounted for using the equity method of accounting.
The consolidated revenues are primarily contributed from the banking
operations, with TSYS' revenues contributing approximately 25% of consolidated
revenues. The banking operations' revenues are earned in four southeastern
states: Georgia (59%), Alabama (20%), South Carolina (14%), and Florida (7%).
TSYS has two major customers which account for approximately 25% of its
revenues. All of TSYS' revenues are generated from customers located in North
America.
Basis of Presentation
In preparing the consolidated financial statements in accordance with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities as of the
date of the balance sheet and the reported amounts of revenues and expenses for
the period. Actual results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the reserve for loan losses; the valuation of
real estate acquired in connection with foreclosures or in satisfaction of
loans; and the disclosures for contingent assets and liabilities. In connection
with the determination of the reserve for loan losses and the valuation of other
real estate, management obtains independent appraisals for significant
properties and properties collateralizing impaired loans.
The accounting and reporting policies of Synovus Financial Corp. and
subsidiaries (Synovus) conform to generally accepted accounting principles and
to general practices within the banking and data processing industries. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The following is a description of the more significant of those
policies.
Cash Flow Information
For the years ended December 31, 1997, 1996, and 1995, income taxes of $93
million, $90 million, and $68 million, and interest of $307 million, $288
million, and $259 million, respectively, were paid.
Loans receivable of approximately $8 million, $7 million, and $9 million
were transferred to other real estate during 1997, 1996, and 1995, respectively.
Federal Funds Sold, Federal Funds Purchased, and Securities Sold Under
Agreement to Repurchase
Federal funds sold, federal funds purchased, and securities sold under
agreement to repurchase generally mature in one day.
Investment Securities
Synovus classifies its securities into two categories: available for sale
or held to maturity. Held to maturity securities are those securities for which
Synovus has the ability and intent to hold until maturity. All other securities
not included in held to maturity are classified as available for sale.
Available for sale securities are recorded at fair value. Fair value is
determined at a specific point in time, based on quoted market prices. Held to
maturity securities are recorded at cost, adjusted for the amortization or
accretion of premiums or discounts. Unrealized gains and losses, net of the
related tax effect, on securities available for sale are excluded from earnings
and are reported as a separate component of shareholders' equity until realized.
Transfers of securities between categories are recorded at fair value at the
date of transfer. The unrealized gains or losses included in the separate
component of shareholders' equity for a security transferred from available for
sale to held to maturity are maintained and amortized into earnings over the
remaining life of the security as an adjustment to yield in a manner consistent
with the amortization or accretion of premium or discount on the associated
security.
A decline in the market value of any available for sale or held to maturity
security below cost that is deemed other than temporary results in a charge to
earnings and the establishment of a new cost basis for the security.
Premiums and discounts are amortized or accreted over the life of the
related security as an adjustment to the yield using the effective interest
method and prepayment assumptions. Dividend and interest income are recognized
when earned. Realized gains and losses for securities classified as available
for sale and held to maturity are included in earnings and are derived using the
specific identification method for determining the amortized cost of securities
sold.
Gains and losses on sales of investment securities are recognized on the
settlement date, based on the amortized cost of the specific security. The
financial statement impact of settlement date accounting versus trade date
accounting is immaterial.
Loans and Interest Income
Loans are reported at principal amounts outstanding, less unearned income,
including net deferred fees and the reserve for loan losses.
First mortgage loans held for sale are reported at the lower of aggregate
cost or fair value. Fair values are based upon quoted prices from secondary
market investors and forward commitments to sell. No valuation allowances were
required at December 31, 1997 or 1996.
F-6
Interest income on consumer loans, made on a discount basis, is recognized
in a manner which approximates the level yield method. Interest income on
substantially all other loans is recognized on a level yield basis.
Loan fees, net of certain direct origination costs, are deferred and
amortized over the terms of the loans using a method which approximates the
level yield method. Annual fees, net of costs, collected for credit cards are
recognized on a straight-line basis over the period the fee entitles the
cardholder to use the card.
Loans on which the accrual of interest has been discontinued are designated
as nonaccrual loans. Accrual of interest on loans is discontinued when
reasonable doubt exists as to the full collection of interest or principal or
when they become contractually in default for 90 days or more as to either
interest or principal, unless they are both well-secured and in the process of
collection. When a loan is placed on nonaccrual status, previously accrued and
uncollected interest is charged to interest income on loans, unless management
believes that the accrued interest is recoverable through the liquidation of
collateral. Interest payments received on nonaccrual loans are applied as a
reduction of principal. Loans are returned to accruing status when they are
brought fully current with respect to interest and principal and when, in the
judgment of management, the loans are estimated to be fully collectible as to
both principal and interest. Such interest, when ultimately collected, is
recorded as interest income in the period received. Interest on accruing
impaired loans is recognized as long as such loans do not meet the criteria for
nonaccrual classification.
Reserve for Loan Losses
The reserve for loan losses is established through provisions for loan
losses charged to operations. Loans are charged against the reserve for loan
losses when management believes that the collection of principal is unlikely.
Subsequent recoveries are added to the reserve. Management's evaluation of the
adequacy of the reserve for loan losses is based on a formal analysis which
assesses the risk within the loan portfolio. This analysis includes
consideration of historical performance, current economic conditions, level of
nonperforming loans, loan concentrations, and review of certain individual
loans.
Management believes that the reserve for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the reserve for loan losses may be necessary based on changes in
economic conditions. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review Synovus' subsidiary
banks' reserves for loan losses. Such agencies may require Synovus' subsidiary
banks to recognize additions to the reserve for loan losses based on their
judgments about information available to them at the time of their examination.
Management, considering current information and events regarding a
borrowers' ability to repay its obligations, considers a loan to be impaired
when the ultimate collectibility of all amounts due, according to the
contractual terms of the loan agreement, is in doubt. When a loan is considered
to be impaired, the amount of impairment is measured based on the present value
of expected future cash flows discounted at the loan's effective interest rate.
If the loan is collateral-dependent, the fair value of the collateral is used to
determine the amount of impairment. Impairment losses are included in the
reserve for loan losses through a charge to the provision for losses on loans.
Subsequent recoveries are added to the reserve for loan losses. Cash receipts
for accruing loans are applied to principal and interest under the contractual
terms of the loan agreement. Cash receipts on impaired loans for which the
accrual of interest has been discontinued are applied first to principal and
then to interest income.
The accounting for impaired loans described above applies to all loans,
except for large pools of smaller-balance, homogeneous loans that are
collectively evaluated for impairment, loans that are measured at fair value or
at the lower of cost or fair value, and debt securities. The reserve for loan
losses for large pools of smaller-balance, homogeneous loans is established
through consideration of such factors as changes in the nature and volume of the
portfolio, overall portfolio quality, adequacy of the underlying collateral,
loan concentrations, historical charge-off trends, and economic conditions that
may affect the borrowers' ability to pay.
Premises and Equipment
Premises and equipment, including leasehold improvements and purchased
internal-use software, are reported at cost, less accumulated depreciation and
amortization, which are computed using straight-line or accelerated methods over
the estimated useful life of the related asset.
Other Assets
The following paragraphs describe some of the more significant amounts
included in other assets. Long-lived assets and certain identifiable intangibles
are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
the assets described below is measured by a comparison of the carrying amount of
the asset to future undiscounted cash flows expected to be generated by the
asset. If such assets are considered impaired, the amount of impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets to be disposed of are reported at
the lower of the carrying amount or fair value less costs to sell.
Intangibles:
Goodwill, which represents the excess of cost over the fair value of net
assets acquired of purchased companies, is being amortized using the
straight-line method over periods of 15 to 40 years.
Core deposit premiums resulting from the valuation of core deposit
intangibles acquired in business combinations or in the purchase of branch
offices are amortized using accelerated methods over periods not exceeding the
estimated average remaining life of the existing customer deposit bases
acquired. Amortization periods range from 10 to 18 years.
Amortization periods for intangible assets are monitored to determine if
events and circumstances require such periods to be reduced.
Computer Software:
Software development costs are capitalized from the time technological
feasibility of the software product or enhancement is established until the
F-7
software is ready for use in providing processing services to customers.
Research and development costs and computer software maintenance costs are
expensed as incurred. Software development costs related to the core TS2 are
amortized using the greater of the straight-line method over the estimated
useful life of 10 years or the ratio of current revenues to current and
anticipated revenues. All other software development costs and costs of
purchased computer software are amortized using the greater of the straight-line
method over the estimated useful life not to exceed 5 years or the ratio of
current revenues to current and anticipated revenues.
Investment in Joint Ventures:
TSYS' 49% investment in Total System Services de Mexico, S.A. de C.V. (TSYS
de Mexico), a bankcard data processing operation located in Mexico, is accounted
for using the equity method of accounting, as is TSYS' 50% investment in Vital
Processing Services L.L.C. (Vital), a merchant processing operation
headquartered in Tempe, Arizona.
Contract Acquisition Costs:
TSYS capitalizes certain contract acquisition costs related to signing or
renewing long-term contracts. These costs, which primarily consist of cash
payments for rights to provide processing services, incremental internal
conversion and software development costs, and third-party software development
costs, are amortized using the straight-line method over the contract term
beginning when the customer's cardholder accounts are converted to TSYS's
processing system.
Other Real Estate
Other real estate, consisting of properties obtained through foreclosure or
in satisfaction of loans, is reported at the lower of cost or fair value,
determined on the basis of current appraisals, comparable sales, and other
estimates of value obtained principally from independent sources, adjusted for
estimated selling costs. Any excess of the loan balance at the time of
foreclosure over the fair value of the real estate held as collateral is treated
as a loan charge-off. Gain or loss on sale and any subsequent adjustment to the
value are recorded as a component of non-interest expense.
Originated and Purchased Mortgage Servicing Rights
The rights to service mortgage loans for others, regardless of whether the
servicing rights are acquired through either the purchase or origination of
mortgage loans, are recognized as separate assets. The capitalized mortgage
servicing rights are evaluated for impairment based upon the fair value of those
rights. Fair value is estimated by determining the present value of the
estimated future cash flows using discount rates commensurate with the risks
involved. In determining the present value, Synovus stratifies its mortgage
servicing rights based on risk characteristics including loan types, note rates,
and note terms.
Capitalized mortgage servicing rights are amortized in proportion to and
over the period of estimated net servicing income, using a method that
approximates level yield and taking into consideration prepayment of the
underlying loans. Management re-evaluates the terms used for amortization based
upon prepayment history and adjusts the terms as necessary.
Derivative Financial Instruments
As part of its overall interest rate risk management activities, Synovus
utilizes off-balance sheet derivatives to modify the repricing characteristics
of on-balance sheet assets and liabilities. The primary instruments utilized by
Synovus are interest rate swaps and purchased interest rate floor and cap
arrangements. The fair values of these off-balance sheet derivative financial
instruments are based on dealer quotes and third party financial models.
Interest rate swaps, floors, and caps are accounted for on an accrual
basis, and the net interest differential, including premiums paid, if any, is
recognized as an adjustment to interest income or expense of the related
designated asset or liability. Changes in the fair values of the swaps, floors,
and caps are not recorded in the consolidated statements of income because these
agreements are being treated as synthetic alterations of the designated assets
or liabilities as long as (i) the swap is designated with a specific asset or
liability or finite pool of assets or liabilities; (ii) the notional amount of
the swap is less than or equal to the principal amount of the designated asset
or liability; and (iii) the swap term is less than or equal to the expected
remaining term of the designated asset or liability. The criteria for
consideration of a floor or cap as a synthetic alteration of an asset or
liability are generally the same as those for a swap arrangement, except that,
there must be a high correlation, at inception and throughout the period of the
synthetic alteration, between changes in the interest income or expense
generated by the floor or cap and changes in the interest income or expense
generated by the designated asset or liability.
If the swap, floor, or cap arrangements are terminated before their
maturity, the net proceeds received or paid are deferred and amortized over the
shorter of the remaining contract life or the maturity of the designated asset
or liability as an adjustment to interest income or expense. If the designated
asset or liability is sold or matures, the swap agreement is marked to market
and the gain or loss is included with the gain or loss on the sale or maturity
of the designated asset or liability. Changes in the fair value of any
undesignated swaps, floors, and caps are included in other income in the
consolidated statements of income.
Premiums paid for purchased interest rate floor and collar agreements are
amortized to interest income over the terms of the floors and collars.
Unamortized premiums are included in other assets in the consolidated balance
sheets. Amounts receivable or payable under collar and floor agreements are
accrued as an addition to or reduction of interest income.
Data Processing Services
TSYS' bankcard data processing revenues are derived from long-term
processing contracts with banks and nonbank institutions and are recognized as
revenues at the time the services are performed. TSYS' service contracts
generally contain terms ranging from 3 to 10 years.
Income Taxes
Synovus uses the asset and liability method to account for income taxes.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. Synovus
files a consolidated federal income tax return with its wholly-owned and
majority-owned subsidiaries.
F-8
Stock - Based Compensation
Synovus accounts for its fixed stock-based compensation in accordance with
the provisions set forth in Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. In
accordance with APB Opinion No. 25, compensation expense is recorded on the
grant date only to the extent that the current market price of the underlying
stock exceeds the exercise price on the grant date.
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," which permits entities to recognize as expense, over
the vesting period, the fair value of all stock-based awards on the date of the
grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock-based grants made in 1995 and
future years as if the fair-value-based method had been applied as defined in
SFAS No. 123. Synovus has elected to continue to apply the provisions set forth
in APB Opinion No. 25 and follow the disclosure provisions of SFAS No. 123.
Postretirement Benefits
Synovus sponsors a defined benefit health care plan for substantially all
employees and early retirees. The expected costs of retiree health care and
other postretirement benefits are being expensed over the period that employees
provide service.
Share and Per Share Restatement
All share and per share data has been restated to reflect the April 1997
three-for-two stock split, which was effected on April 8, 1997, in the form of a
50% stock dividend and the April 1996 three-for-two stock split, which was
effected on April 8, 1996, in the form of a 50% stock dividend. Net income per
share data has also been restated to reflect the adoption at December 31, 1997
of SFAS No. 128, "Earnings Per Share", as described in Note 14.
Disclosure About the Fair Value of Financial Instruments
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale, at one time, Synovus' entire holdings of a particular
financial instrument. Because no market exists for a portion of Synovus'
financial instruments, fair value estimates are also based on judgments
regarding future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. Significant assets and liabilities that are not
considered financial instruments include deferred tax accounts, premises and
equipment, and goodwill. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant effect on
fair value estimates and have not been considered in any of the estimates.
Recent Accounting Pronouncements
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities". SFAS No. 125
was amended by SFAS No. 127, which defers the effective date of certain
provisions of SFAS No. 125 until January 1, 1998. This statement provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities based on consistent application of a
financial-components approach that focuses on control. It distinguishes
transfers of financial assets that are sales from transfers that are secured
borrowings. Effective January 1, 1997, Synovus adopted the applicable provisions
of SFAS No. 125 on a prospective basis. The impact of SFAS No. 125 on Synovus'
financial statements was not material.
Additionally, the impact of the SFAS No. 125 provisions that are effective
January 1, 1998 are not expected to be material to Synovus' financial
statements.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income". This statement establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. SFAS No. 130 requires all items that are required to be
recognized under accounting standards as components of comprehensive income 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
Synovus consists of items previously recorded directly in equity under SFAS No.
52, "Foreign Currency Translation", and SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". SFAS No. 130 is effective for both
interim and annual financial statement periods beginning after December 15,
1997.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information". SFAS No. 131 supercedes SFAS No. 14,
"Financial Reporting in Segments of a Business Enterprise", and establishes new
standards for the disclosures made by public business enterprises to report
information about operating segments in annual financial statements and requires
those enterprises to report selected information about operating segments in
interim financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. SFAS No. 131 is effective for both interim and annual financial
statement periods beginning after December 15, 1997. Synovus does not expect
that SFAS No. 131 will require significant changes to its current segment
financial information.
Other
Certain amounts in 1996 and 1995 have been reclassified to conform with the
presentation adopted in 1997.
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1 Business Combinations
On October 24, 1996, Synovus completed the acquisition of two full-service
banking centers in Rome, Georgia. Synovus acquired approximately $49 million in
deposits and $12 million in loans from the two banking centers. The acquisition
was accounted for as a purchase.
On April 28, 1995, Synovus completed the acquisition of Citizens &
Merchants Corporation (CMC), the parent company of the $52 million asset,
Citizens & Merchants State Bank, Douglasville, Georgia. Synovus issued 1,409,556
shares of common stock for all the issued and outstanding shares of CMC. This
transaction has been accounted for as a pooling of interests, except that the
financial statements for periods prior to the acquisition were not restated
since the effect was not material.
On February 28,1995, Synovus completed the acquisition of NBSC Corporation
(NBSC), the parent company of the $1.1 billion asset, The National Bank of South
Carolina, Columbia, South Carolina. Synovus issued 17,841,033 shares of common
stock for all the issued and outstanding shares of NBSC. This acquisition has
been accounted for as a pooling of interests and, accordingly, the financial
statements for all periods presented have been restated to include the financial
condition and results of operations of this entity.
On January 31, 1995, Synovus completed the acquisition of the $43 million
asset Peach State Bank (PSB), Riverdale, Georgia. Synovus issued 599,621
treasury shares for all of the issued and outstanding shares of PSB. This
acquisition was accounted for as a purchase.
- --------------------------------------------------------------------------------
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 2 Investment Securities
The carrying and estimated fair values of investment securities are summarized
as follows:
<TABLE>
<CAPTION>
December 31, 1997
---------------------------------------------------
Investment Securities Available for Sale Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C>
U. S. Treasury and U. S. Government agencies $1,166,562 9,508 (857) 1,175,213
Mortgage-backed securities ................. 129,575 1,156 (334) 130,397
State and municipal ........................ 910 49 -- 959
Other investments .......................... 17,174 1,745 (452) 18,467
- --------------------------------------------------------------------------------------------------
Total ................................. $1,314,221 12,458 (1,643) 1,325,036
==================================================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C>
U. S. Treasury and U. S. Government agencies $1,132,122 5,262 (5,462) 1,131,922
Mortgage-backed securities ................. 131,313 652 (1,072) 130,893
State and municipal ........................ 965 57 (8) 1,014
Other investments .......................... 11,865 719 (330) 12,254
- --------------------------------------------------------------------------------------------------
Total ................................. $1,276,265 6,690 (6,872) 1,276,083
==================================================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
---------------------------------------------------
Investment Securities Held to Maturity Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C>
U. S. Treasury and U. S. Government agencies $ 63,372 395 (108) 63,659
Mortgage-backed securities ................. 123,519 1,030 (533) 124,016
State and municipal ........................ 124,569 4,190 (146) 128,613
Other investments .......................... 18,677 142 -- 18,819
- --------------------------------------------------------------------------------------------------
Total ................................. $ 330,137 5,757 (787) 335,107
==================================================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C>
U. S. Treasury and U. S. Government agencies $ 84,366 381 (635) 84,112
Mortgage-backed securities ................. 156,319 16,685 (16,745) 156,259
State and municipal ........................ 114,883 2,521 (541) 116,863
Other investments .......................... 7,440 20 -- 7,460
- --------------------------------------------------------------------------------------------------
Total ................................. $ 363,008 19,607 (17,921) 364,694
==================================================================================================
</TABLE>
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The amortized cost and estimated fair value of investment securities at
December 31, 1997 are shown below by expected maturity. Mortgage-backed and
other securities which have prepayment provisions are assigned to maturity
categories based on their estimated average lives. Actual maturities can differ
from expected maturities because borrowers have the right but not the obligation
to call or prepay selected obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Investment Securities Investment Securities
Held to Maturity Available for Sale
December 31, 1997 December 31, 1997
--------------------- -----------------------
Amortized Estimated Amortized Estimated
(In thousands) Cost Fair Value Cost Fair Value
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U. S. Treasury and U. S. Government
agencies:
Within 1 year .............. $ 35,711 35,702 358,148 354,382
1 to 5 years ............... 26,661 26,960 771,054 779,211
5 to 10 years .............. 1,000 997 37,360 41,620
More than 10 years ......... -- -- -- --
- ---------------------------------------------------------------------------------------
$ 63,372 63,659 1,166,562 1,175,213
=======================================================================================
Mortgage-backed securities:
Within 1 year .............. $ 36,825 36,957 13,749 13,822
1 to 5 years ............... 50,586 50,847 52,895 53,202
5 to 10 years .............. 24,376 24,431 23,719 23,863
More than 10 years ......... 11,732 11,781 39,212 39,510
- ---------------------------------------------------------------------------------------
123,519 124,016 129,575 130,397
=======================================================================================
State and municipal:
Within 1 year .............. $ 12,659 12,775 -- --
1 to 5 years ............... 33,959 34,799 612 634
5 to 10 years .............. 41,948 43,319 -- --
More than 10 years ......... 36,003 37,720 298 325
- ---------------------------------------------------------------------------------------
124,569 128,613 910 959
=======================================================================================
Other investments:
Within 1 year .............. $ 571 577 1,089 1,089
1 to 5 years ............... 25 25 9,111 9,069
5 to 10 years .............. 5 5 526 594
More than 10 years ......... 18,076 18,212 6,448 7,715
- ---------------------------------------------------------------------------------------
$ 18,677 18,819 17,174 18,467
=======================================================================================
Total investment securities:
Within 1 year ............. $ 85,766 86,011 372,986 369,293
1 to 5 years .............. 111,231 112,631 833,672 842,116
5 to 10 years ............. 67,329 68,752 61,605 66,077
More than 10 years ........ 65,811 67,713 45,958 47,550
- ---------------------------------------------------------------------------------------
330,137 335,107 1,314,221 1,325,036
=======================================================================================
</TABLE>
A summary of sales transactions in the investment securities available for sale
portfolio for 1997, 1996, and 1995 is as follows:
<TABLE>
<CAPTION>
Gross Gross
Realized Realized
(In thousands) Proceeds Gains Losses
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
1997................... $ 67,932 151 (174)
1996................... 106,207 514 (690)
1995................... 136,502 1,164 (796)
</TABLE>
There were no sales transactions in the investment securities held to
maturity portfolio during the three years ended December 31, 1997. Securities
with a carrying value of $1,049,984,000 and $968,431,000 at December 31, 1997
and 1996, respectively, were pledged to secure certain deposits and repurchase
agreements as required by law.
- --------------------------------------------------------------------------------
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 3 Loans
Loans outstanding, by classification, are summarized as follows:
<TABLE>
<CAPTION>
(In thousands)
December 31, 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Commercial:
Commercial, financial, and agricultural .... $2,273,031 2,036,689
Real estate-construction ................... 835,162 730,785
Real estate-mortgage ....................... 1,302,941 1,234,981
- --------------------------------------------------------------------------------
Total commercial ................... 4,411,134 4,002,455
- --------------------------------------------------------------------------------
Retail:
Real estate-mortgage ....................... 1,039,420 977,432
Consumer loans-credit card ................. 306,360 290,470
Consumer loans-other ....................... 819,112 768,072
Mortgage loans held for sale ............... 39,558 37,036
- --------------------------------------------------------------------------------
Total retail ....................... 2,204,450 2,073,010
- --------------------------------------------------------------------------------
Total loans ........................ $6,615,584 6,075,465
================================================================================
</TABLE>
Activity in the reserve for loan losses is summarized as follows:
<TABLE>
<CAPTION>
(In thousands)
December 31, 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year ............... $ 94,683 81,384 75,018
Loan loss reserves of acquired subsidiaries -- 188 1,001
Provision for losses on loans .............. 32,296 31,766 25,787
Recoveries of loans previously charged off . 7,889 6,525 4,510
Loans charged off .......................... (31,818) (25,180) (24,932)
- --------------------------------------------------------------------------------
Balance at end of year ..................... $103,050 94,683 81,384
================================================================================
</TABLE>
The table below illustrates the impaired loans and related amounts included
in the reserve for loan losses at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
--------------------- ---------------------
Allocated Allocated
Loan Loan Loss Loan Loan Loss
(In thousands) Balance Reserve Balance Reserve
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Impaired loans, nonaccruing, with loan loss reserve .. $ 3,673 1,151 8,320 3,895
Impaired loans, nonaccruing, with no loan loss reserve 5,258 -- 9,572 --
Impaired loans, accruing, with loan loss reserve ..... 5,424 2,401 2,136 1,084
Impaired loans, accruing, with no loan loss reserve .. 701 -- 10,365 --
Impaired loans, accruing, partially charged off ...... 10,594 1,386 5,485 850
- --------------------------------------------------------------------------------------------------------
Total ........................................ $25,650 4,938 35,878 5,829
========================================================================================================
</TABLE>
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The loan loss reserve amounts for impaired loans were primarily determined
using the fair value of the loans' collateral. The average recorded investment
in impaired loans was approximately $30,000,000, $40,000,000, and $87,000,000
for the years ended December 31, 1997, 1996, and 1995, respectively, and the
related amount of interest income recognized during the period that such loans
were impaired was approximately $1,905,000, $1,702,000, and $5,695,000 in 1997,
1996, and 1995, respectively.
Loans on nonaccrual status amounted to approximately $17,909,000,
$23,655,000, and $21,469,000 at December 31, 1997, 1996, and 1995, respectively.
If nonaccruing loans had been on a full accruing basis, interest income on these
loans would have been increased by approximately $2,175,000, $2,400,000, and
$2,606,000 in 1997, 1996, and 1995, respectively.
A substantial portion of Synovus' loans are secured by real estate in
markets in which subsidiary banks are located throughout Georgia, Alabama, South
Carolina, and Northwest Florida. Accordingly, the ultimate collectibility of a
substantial portion of Synovus' loan portfolio and the recovery of a substantial
portion of the carrying amount of real estate owned are susceptible to changes
in market conditions in these areas.
At December 31, 1997, Synovus Mortgage Corp. serviced mortgage loans for
unaffiliated investors in the amount of $1,788,594,000.
The following table presents information for mortgage loans held for sale
as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- ------------------------------------------------------------------------
<S> <C> <C>
Beginning balance ............................ $ 37,036 24,863
Loans originated during the year.............. 366,320 297,117
Loans sold during the year ................... (363,798) (284,944)
- ------------------------------------------------------------------------
Ending balance ............................... $ 39,558 37,036
========================================================================
</TABLE>
In the ordinary course of business, Synovus has direct and indirect loans
outstanding to certain executive officers, directors, and principal holders of
equity securities (including their associates). Management believes that such
loans are made substantially on the same terms, including interest rate and
collateral, as those prevailing at the time for comparable transactions with
other customers. The following is a summary of such loans outstanding and the
activities in these loans for the year ended December 31, 1997.
<TABLE>
<CAPTION>
(In thousands)
- ------------------------------------------------------------------------
<S> <C>
Balance at December 31, 1996 .............................. $ 142,214
Adjustment for executive officer and director changes...... (17,300)
- ------------------------------------------------------------------------
Adjusted balance at December 31, 1996 ..................... 124,914
New loans ................................................. 65,616
Repayments ................................................ (49,078)
- ------------------------------------------------------------------------
Balance at December 31, 1997 .............................. $ 141,452
========================================================================
</TABLE>
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 4 Other Assets
Included in other assets are four significant balances: purchased and
originated mortgage servicing rights, computer software costs, contract
acquisition costs, net, and investment in joint ventures, net.
Synovus adopted SFAS No. 122, "Accounting for Mortgage Servicing Rights",
as of July 1, 1995, and has capitalized all mortgage servicing rights since the
adoption date. As of December 31, 1997 and 1996, Synovus had approximately
$20,137,000 and $17,212,000, respectively, in capitalized mortgage servicing
rights. There was no valuation allowance as of December 31, 1997 and 1996.
The following table summarizes TSYS' computer software at December 31, 1997
and 1996:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C>
TS2 .................................................................... $33,049 33,049
Other internally developed software, including enhancements to TS2...... 4,833 5,524
Purchased computer software ............................................ 39,466 25,865
- --------------------------------------------------------------------------------------------
77,348 64,438
Less accumulated amortization .......................................... 34,215 24,718
- --------------------------------------------------------------------------------------------
Computer software, net ................................................. $43,133 39,720
============================================================================================
</TABLE>
Capitalized software development costs, related to the bankcard data
processing, for the years ended December 31, 1997, 1996, and 1995 were $997,000,
$178,000, and $2,617,000, respectively. Amortization expense related to
purchased computer software costs was $11,668,000, $8,630,000, and $7,358,000
for the years ended December 31, 1997, 1996, and 1995, respectively.
Contract acquisition costs, net, at TSYS were $27,274,000 and $18,646,000
at December 31, 1997 and 1996, respectively. Investment in joint ventures, net,
was $21,338,000 and $15,348,000 at December 31, 1997 and 1996, respectively.
- --------------------------------------------------------------------------------
Note 5 Deposits
The following table presents deposits as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- ------------------------------------------------------------------------
<S> <C> <C>
Non-interest bearing demand deposits.......... $1,256,639 1,189,973
Interest bearing demand deposits ............. 1,128,407 1,022,398
Money market accounts ........................ 1,278,020 1,136,795
Savings accounts ............................. 446,497 462,023
Time deposits under $100,000 ................. 2,285,305 2,268,942
Time deposits over $100,000 .................. 1,313,059 1,122,904
- ------------------------------------------------------------------------
$7,707,927 7,203,035
========================================================================
</TABLE>
Interest expense for the years ended December 31, 1997, 1996, and 1995 on
time deposits over $100,000 was $68,425,000, $62,074,000, and $57,259,000,
respectively.
- --------------------------------------------------------------------------------
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 6 Long-Term Debt
Long-term debt at December 31, 1997 and 1996 consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Parent Company:
6.125% senior notes, due October 15, 2003, with semi-annual interest payments and principal to be paid
at maturity................................................................................................$ 75,000 75,000
8.75% debenture, due May 15, 2004, with annual principal payments of $120 and $1,240 at maturity ............... 1,960 2,200
- -----------------------------------------------------------------------------------------------------------------------------------
Total Parent Company Debt .............................................................. 76,960 77,200
- -----------------------------------------------------------------------------------------------------------------------------------
Subsidiaries:
Federal Home Loan Bank advances with various interest payments and principal payments due at
various maturity dates through 2004 and interest rates ranging from 5.03% to 6.29% at
December 31, 1997....................................................................................... 45,300 15,960
9.23% note payable, due October 31, 2003, with annual principal and interest payments .......................... 282 317
8.00% capital lease obligation payable, due in monthly principal and interest payments through 2002 ............ 211 244
Other notes payable and capital lease obligations payable, with a weighted average interest
rate of 5.33%, maturing at various dates through 2000 .................................................. 3,421 3,562
- -----------------------------------------------------------------------------------------------------------------------------------
Total Subsidiaries Debt ................................................................ 49,214 20,083
- -----------------------------------------------------------------------------------------------------------------------------------
Total Long-Term Debt ...................................................................$ 126,174 97,283
===================================================================================================================================
</TABLE>
The more significant debt agreements held by the Parent Company provide for
certain limitations on: payments of cash dividends, issuance of additional debt,
creation of liens upon property, disposition of common stock or assets, and
investments in subsidiaries. As of December 31, 1997, the most restrictive of
these limit payment of cash dividends to a maximum of $165,236,000.
The Federal Home Loan Bank advances are secured by certain mortgage loans
receivable as well as all of the stock of the Federal Home Loan Bank owned by
various Synovus bank affiliates.
The capital lease obligations payable and certain notes payable are secured
by land, buildings, and equipment with a net carrying value at December 31,
1997, of approximately $470,000.
Synovus has an unsecured line of credit, with an unaffiliated bank, for $20
million with an interest rate of 50 basis points above the "short-term index",
as defined. There were no advances on this line of credit outstanding at any
time in the years ended December 31, 1997 or 1996.
Required annual principal payments on long-term debt for the five years
subsequent to December 31, 1997, are as follows:
<TABLE>
<CAPTION>
Parent
(In thousands) Company Subsidiaries Total
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
1998.......................................... $120 12,508 12,628
1999.......................................... 120 382 502
2000.......................................... 120 30,306 30,426
2001.......................................... 120 289 409
2002.......................................... 120 5,271 5,391
- ------------------------------------------------------------------------------
</TABLE>
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 7 Income Taxes
For the years ended December 31, 1997, 1996, and 1995, income tax expense
(benefit) consists of:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- --------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal ........................ $87,235 82,996 65,009
State .......................... 5,682 6,195 4,048
- --------------------------------------------------------------------
92,917 89,191 69,057
- --------------------------------------------------------------------
Deferred:
Federal ........................ 632 (8,005) (3,792)
State .......................... 118 (1,478) (379)
- --------------------------------------------------------------------
750 (9,483) (4,171)
- --------------------------------------------------------------------
Total income tax expense $93,667 79,708 64,886
====================================================================
</TABLE>
Income tax expense as shown in the consolidated statements of income
differed from the amounts computed by applying the U.S. Federal income tax rate
of 35% to pretax income as a result of the following:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Taxes at statutory federal income tax rate ............. $90,616 76,759 62,814
Tax-exempt income ...................................... (2,438) (2,859) (2,956)
State income taxes, net of federal income tax benefit... 3,770 3,066 2,385
Minority interest ...................................... 3,200 2,657 1,867
Other, net ............................................. (1,481) 85 776
- ----------------------------------------------------------------------------------------
Total income tax expense ............... $93,667 79,708 64,886
========================================================================================
Effective tax rate ..................... 36.18% 36.34 36.15
========================================================================================
</TABLE>
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The tax effects of temporary differences that gave rise to significant
portions of the deferred income tax assets and liabilities at December 31, 1997
and 1996 are presented below:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred income tax assets:
Provision for losses on loans .................................... $ 41,016 38,226
Net unrealized loss on investment securities available for sale... -- 69
Other ............................................................ 12,721 12,400
- ------------------------------------------------------------------------------------------------
Total gross deferred income tax assets ........... 53,737 50,695
- ------------------------------------------------------------------------------------------------
Deferred income tax liabilities:
Computer software development costs .............................. (13,695) (14,314)
Differences in depreciation ...................................... (6,257) (5,612)
Capitalization of mortgage purchasing rights ..................... (5,163) (2,965)
Net unrealized gain on investment securities available for sale... (4,110) --
Purchase accounting adjustments .................................. (2,402) (1,571)
Restricted stock awards .......................................... (1,206) (1,180)
Other, net ....................................................... (4,181) (3,401)
- -------------------------------------------------------------------------------------------------
Total gross deferred income tax liabilities .............. (37,014) (29,043)
- -------------------------------------------------------------------------------------------------
Net deferred income tax assets ................... $ 16,723 21,652
=================================================================================================
</TABLE>
There was no valuation allowance for deferred tax assets for the years
ended December 31, 1997 and 1996. In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies in
making this assessment. Based upon the level of historical taxable income and
projections for future taxable income over the periods in which the deferred tax
assets are deductible, management believes it is more likely than not that
Synovus will realize the benefits of these deductible differences at December
31, 1997.
- --------------------------------------------------------------------------------
Note 8 Employee Benefit Plans
Synovus applies APB Opinion No. 25 in accounting for its stock option plans
and, accordingly, compensation costs for the 1997, 1996, and 1995 option plans
have not been recognized in the accompanying financial statements. However,
Synovus issued discounted options prior to 1995, the compensation cost of which
has been included in income as described below.
Under various stock option plans, Synovus has granted options for 8,623,931
shares of common stock to officers of Synovus and its subsidiaries. Synovus has
expensed $321,000, $813,000, and $1,016,000 in 1997, 1996, and 1995,
respectively, related to the compensation element of these plans. The remaining
deferred compensation expense related to these option plans is not material and
will be amortized as these options vest through year-end 2000. The options
outstanding at December 31, 1997 had a weighted average exercise price of
$14.13.
The per share weighted average fair value of stock options granted during
1997, 1996, and 1995 was $8.56, $13.11, and $14.44, respectively, using the
Black Scholes option-pricing model with the following weighted average
assumptions: expected life of 4 years, expected dividend yield of 1.4%, risk
free interest rate of 6.5%, and an expected volatility of 22%, for all years.
In addition to the stock options described above, Synovus has awarded
non-transferable, restricted shares of Synovus common stock to various key
executives under key executive restricted stock bonus plans. The market value of
the common stock at the date of issuance is included as a reduction of
shareholders' equity in the consolidated balance sheets and is amortized as
compensation expense using the straight-line method over the vesting period of
the awards. Aggregate compensation expense with respect to the foregoing Synovus
restricted stock awards was approximately $1,856,000, $1,090,000, and $779,000
in 1997, 1996, and 1995, respectively.
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Summary information regarding outstanding restricted stock bonus plans at
December 31, 1997 is presented below:
<TABLE>
<CAPTION>
Year awards Market value
granted at award date Vesting period
- ------------------------------------------------------
<S> <C> <C>
1994 $ 870,000 5 years
1995 2,054,000 5 years
1996 3,771,000 5 years
1997 246,000 5 years
</TABLE>
In 1992, TSYS also awarded 959,200 non-transferable, restricted shares of
its common stock to various key executives under restricted stock bonus plans.
The aggregate market value of the awards issued was $3,134,050, and is being
amortized on a straight-line basis over the five to six year vesting periods of
the awards.
In accordance with APB Opinion No. 25, approximately $1,409,000, $738,000,
and $205,000 in compensation expense has been recorded in 1997, 1996, and 1995,
respectively, for the restricted stock awards granted in those years. Had
Synovus determined compensation cost based on the fair value at the grant date
for its stock options and restricted stock awards under SFAS No. 123, Synovus'
net income would have been reduced to the pro forma amounts indicated below:
Years ended December 31,
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Net income:
As reported .......................... $ 165,236 139,604 114,583
Pro forma ............................ 160,778 137,650 114,107
Earnings per share:
As reported, basic ................... .95 .80 .66
As reported, assuming dilution........ .93 .79 .66
Pro forma, basic ..................... .92 .79 .66
Pro forma, assuming dilution ......... .90 .78 .66
</TABLE>
Pro forma net income reflects only options and awards granted in 1997,
1996, and 1995. The full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net income amounts
presented above. The pro forma net income amount above does not include
compensation cost that would be recorded over the options' vesting periods of 2
to 5 years or compensation cost for options granted prior to January 1, 1995.
Stock option activity during the years ended December 31, 1997, 1996, and
1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at beginning of period ... 6,450,792 5,076,594 4,222,998
Options granted .............................. 2,899,608 1,944,524 1,856,529
Options exercised ............................ (680,418) (530,444) (981,923)
Options canceled ............................. (46,051) (39,882) (21,010)
- ---------------------------------------------------------------------------------------
Options outstanding at end of period.... 8,623,931 6,450,792 5,076,594
=======================================================================================
Options exercisable at end of period.... 2,163,964 1,751,888 1,668,051
=======================================================================================
Options' prices per share:
Options granted during the period ....$21.42 to 27.56 4.33 to 10.11 3.17 to 8.50
Options exercised during the period...$ 2.02 to 21.42 2.02 to 5.20 1.83 to 4.81
Options outstanding at end of period..$ 2.02 to 27.56 2.02 to 10.11 2.02 to 8.50
</TABLE>
Prior to January 1, 1995, Synovus had noncontributory, trusteed pension
plans (collectively referred to as "Plan") covering substantially all employees
over 201/2 years of age. Pension expense, related to this plan, recorded in the
accompanying financial statements was approximately $652,000 and $3,195,000, in
1996 and 1995, respectively.
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
In 1995, Synovus adopted a defined-contribution, money purchase plan to
replace the terminated pension plan referred to above. In addition, Synovus
generally provides noncontributory, trusteed, profit sharing and 401(k) plans
which cover all eligible employees. Annual discretionary contributions to these
profit sharing and 401(k) plans are set each year by the respective Boards of
Directors of each subsidiary, but cannot exceed amounts allowable as a deduction
for federal income tax purposes. Aggregate contributions to these money
purchase, profit sharing, and 401(k) plans for the years ended December 31,
1997, 1996, and 1995 were $30,795,000, $30,125,000, and $23,238,000,
respectively.
Synovus has stock purchase plans for directors and employees whereby
Synovus makes contributions equal to one-half of employee and director voluntary
contributions. The funds are used to purchase outstanding shares of Synovus
common stock. TSYS has established director and employee stock purchase plans,
modeled after Synovus' plans except that the funds are used to purchase
outstanding shares of TSYS common stock. Synovus and TSYS contributed
$3,765,000, $3,069,000, and $2,623,000 to these plans in 1997, 1996, and 1995,
respectively.
Synovus has also entered into employment agreements with certain executive
officers for past and future services which provide for current compensation in
addition to salary in the form of deferred compensation payable at retirement or
in the event of death, total disability, or termination of employment. The
aggregate cost of these salary continuation plans and employment agreements was
not material to the consolidated financial statements.
Synovus provides certain medical benefits to qualified retirees through a
postretirement medical benefits plan. The benefit expense and accrued benefit
cost was not material to Synovus' consolidated financial statements.
- --------------------------------------------------------------------------------
Note 9 Fair Value of Financial Instruments
The following table presents the carrying amounts and estimated fair values
of Synovus' on-balance sheet financial instruments at December 31, 1997 and
1996. The estimated fair value of a financial instrument is the amount at which
the instrument could be exchanged in a current transaction between willing
parties.
<TABLE>
<CAPTION>
1997 1996
--------------------- --------------------
Carrying Estimated Carrying Estimated
(In thousands) Value Fair Value Value Fair Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks ................................... $ 388,134 388,134 404,952 404,952
Interest earning deposits with banks ...................... 1,272 1,272 2,040 2,040
Federal funds sold ........................................ 93,392 93,392 38,249 38,249
Investment securities available for sale .................. 1,325,036 1,325,036 1,276,083 1,276,083
Investment securities held to maturity .................... 330,137 335,107 363,008 364,694
Loans ..................................................... 6,506,822 6,473,710 5,970,547 5,848,317
Purchased and originated mortgage servicing rights ........ 20,137 27,931 17,212 20,499
Financial liabilities:
Non-interest bearing deposits ............................. 1,256,639 1,256,639 1,189,973 1,189,973
Interest bearing deposits ................................. 6,451,288 6,455,341 6,013,062 6,017,256
Federal funds purchased and securities sold under agreement
to repurchase ........................................ 305,868 305,868 339,200 339,200
Long-term debt ............................................ 126,174 125,420 97,283 94,818
</TABLE>
The carrying amounts and estimated fair values relating to off-balance
sheet financial instruments are summarized in Note 10.
Cash and due from banks, interest earning deposits with banks, and federal
funds sold are repriced on a short-term basis; as such, the carrying value
closely approximates market.
Fair value of loans is estimated for portfolios of loans with similar
financial characteristics. Loans are segregated by type, such as commercial,
mortgage, home equity, credit card, and other consumer loans. Fixed rate
commercial loans are further segmented into certain collateral code groupings.
Commercial and other consumer loans with adjustable interest rates are assumed
to be at fair value. Mortgage loans are further segmented into fixed and
adjustable rate interest terms. Home equity and credit card loans have
adjustable interest rates and are, therefore, assumed to be at fair value. The
fair value of loans, except mortgage loans, is calculated by discounting
contractual cash flows using estimated market discount rates which reflect the
credit and interest rate risk inherent in the loan. For mortgage loans, fair
value is estimated by discounting contractual cash flows adjusted for certain
prepayment assumptions, estimated using discount rates based on secondary market
sources adjusted to reflect differences in servicing and credit costs.
In accordance with SFAS No. 107, "Disclosures About Fair Value of Financial
Instruments", the fair value of deposits with no stated maturity, such as
non-interest bearing demand deposits, interest bearing demand deposits, money
market accounts, and savings accounts, is equal to the amount payable on demand
as of that respective date. The fair value of time deposits is based on the
discounted value of contractual cash flows. The discount rate is estimated using
the rates currently offered for deposits of similar remaining maturities.
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Short-term debt that matures within ten days is assumed to be at fair
value. The fair value of short-term and long-term debt with fixed interest rates
is calculated by discounting contractual cash flows using estimated market
discount rates.
- --------------------------------------------------------------------------------
Note 10 Commitments
Off-Balance Sheet Financial Instruments
Synovus is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers,
reduce its own exposure to fluctuations in interest rates, and to conduct
lending activities. These financial instruments include commitments to extend
credit, standby and commercial letters of credit, and interest rate swaps,
purchased floors, and purchased collars. These instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amounts
recognized in the consolidated financial statements.
Synovus' exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit, and
standby and commercial letters of credit is represented by the contract amount
of those instruments. Synovus uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments. For interest rate swap, collar, and floor agreements held at year
end, Synovus had insignificant credit risk.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, total commitment amounts do not necessarily
represent future cash requirements.
Loan commitments and letters of credit at December 31, 1997 and 1996
include the following:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
- ------------------------------------------------------------------------
<S> <C> <C>
Standby letters of credit .................... $ 291,142 321,891
Undisbursed construction loans ............... 398,400 341,457
Unused credit card lines ..................... 642,010 659,423
Other loan commitments ....................... 850,218 817,206
Commitments to sell mortgage loans............ 64,148 23,000
- ------------------------------------------------------------------------
Total ................................... $2,245,918 2,162,977
========================================================================
</TABLE>
Due to the short-term nature of the outstanding loan commitments, and the
likelihood that, when funded, these loans will be indexed to the then current
market rates, the off-balance sheet value closely approximates fair value.
Interest rate swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amounts. Entering into off-balance sheet interest rate
contracts involves not only interest rate risk but also, the risk of
counterparties' failure to fulfill their legal obligations. Notional principal
amounts often are used to express the volume of these transactions, but the
amounts potentially subject to credit risk are much smaller.
The consolidated notional amount of interest rate swap, floor, and collar
contracts was $515,000,000 and $450,000,000 as of December 31, 1997 and 1996,
respectively, with a carrying amount of $415,000 and $410,000 at December 31,
1997 and 1996, respectively. The estimated net unrealized gain (loss) on these
interest rate contracts was $502,000 and ($1,935,000) at December 31, 1997 and
1996, respectively.
These interest rate contracts are being utilized to hedge approximately
$669,500,000 in prime rate floating loans in Georgia and South Carolina and
$20,000,000 in fixed rate liabilities in Georgia.
F-21
<TABLE>
<CAPTION>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Weighted Weighted Weighted
December 31, 1997 Notional Average Average Average Maturity Unrealized Unrealized Net Unrealized
(In thousands) Amount Receive Rate Pay Rate<F1> In Months Gains Losses Gains Losses)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Receive Fixed Swaps - LIBOR $ 280,000 5.96% 5.82 26 $ 548 (1,072) (524)
Receive Fixed Swaps - Prime 70,000 9.10 8.50 39 1,136 -- 1,136
- ------------------------------------------------------------------------------------------------------------------------------------
Total Receive Fixed Swaps 350,000 6.59 6.35 28 1,684 (1,072) 612
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Notional Average Cap Average Average Maturity Unrealized Unrealized Net Unrealized
Amount Rate Floor Rate In Months Gains Losses Gains Losses)
- ------------------------------------------------------------------------------------------------------------------------------------
Purchased Interest Rate Collars 80,000 9.16 7.91 22 -- (48) (48)
Weighted Weighted
Notional Average Floor Average Maturity Unrealized Unrealized Net Unrealized
Amount Rate In Months Gains Losses Gains(Losses)
- ------------------------------------------------------------------------------------------------------------------------------------
Purchased Interest Rate Floors 85,000 7.87 36 -- (62) (62)
Weighted
Notional Average Maturity Unrealized Unrealized Net Unrealized
Amount In Months Gains Losses Gains(Losses)
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 515,000 29 $1,684 (1,182) 502
======= ===== ===== ===
Weighted Weighted Weighted
December 31, 1996 Notional Average Average Average Maturity Unrealized Unrealized Net Unrealized
(In thousands) Amount Receive Rate Pay Rate<F1> In Months Gains Losses Gains(Losses)
- ------------------------------------------------------------------------------------------------------------------------------------
Receive Fixed Swaps - LIBOR $ 235,000 5.79% 5.53 32 $ -- (2,200) (2,200)
Receive Fixed Swaps - Prime 70,000 9.10 8.25 51 630 -- 630
- ------------------------------------------------------------------------------------------------------------------------------------
Total Receive Fixed Swaps 305,000 6.55 6.15 36 630 (2,200) (1,570)
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Notional Average Cap Average Average Maturity Unrealized Unrealized Net Unrealized
Amount Rate Floor Rate In Months Gains Losses Gains(Losses)
- ------------------------------------------------------------------------------------------------------------------------------------
Purchased Interest Rate Collars 80,000 9.16 7.91 34 -- (445) (445)
Weighted Weighted
Notional Average Average Maturity Unrealized Unrealized Net Unrealized
Amount Floor Rate In Months Gains Losses Gains(Losses)
- ------------------------------------------------------------------------------------------------------------------------------------
Purchased Interest Rate Floors 65,000 7.83 48 80 -- 80
Weighted
Notional Average Maturity Unrealized Unrealized Net Unrealized
Amount In Months Gains Losses Gains(Losses)
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 450,000 38 $ 710 (2,645) (1,935)
======= === ===== =====
<FN>
<F1>Variable pay rate based upon contract rates in effect at December 31, 1997 and 1996
</FN>
</TABLE>
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Lease Commitments
Synovus and its subsidiaries have entered into long-term operating leases
for various branch locations, corporate facilities, data processing equipment,
and furniture. Management expects that, as these leases expire, they will be
renewed or replaced by other leases. At December 31, 1997, minimum rental
commitments under all such noncancelable leases aggregated $163,812,000, of
which the following approximate amounts are due for the next five years:
<TABLE>
<CAPTION>
Equipment
Real and
(In thousands) Property Furniture Total
- ------------------------------------------------------------------------
<S> <C> <C> <C>
1998................................ $5,538 42,384 47,922
1999................................ 7,974 39,743 47,717
2000................................ 10,421 24,164 34,585
2001................................ 9,169 9,007 18,176
2002................................ 5,137 307 5,444
</TABLE>
In 1997, TSYS entered into an operating lease agreement for the purpose of
financing construction costs for TSYS' new corporate campus. Under the
agreement, the lessor has purchased the properties, is paying for the
construction and development costs, and has leased the facilities to TSYS
commencing upon its completion for a term of three years. The lease provides for
substantial residual value guarantees and includes purchase options at original
cost of the property. The amount of the residual value guarantees relative to
the assets under this lease is projected to be $87.0 million. Once the leased
assets are placed into service, TSYS will estimate its liability under the
residual value guarantees and will record additional rent expense if necessary
on a straight-line basis over the lease term.
Rental expense on equipment, including cancelable leases, was $51,925,000,
$44,819,000, and $33,445,000 in 1997, 1996, and 1995, respectively. Rental
expense on facilities was $7,124,000, $6,920,000, and $6,144,000 in 1997, 1996,
and 1995, respectively.
Contract Commitments
In the normal course of its business, TSYS maintains processing contracts
with its customers. These processing contracts contain commitments, including,
but not limited to, minimum standards and time frames against which TSYS'
performance is measured. In the event TSYS does not meet its contractual
commitments with its customers, TSYS may incur penalties and/or certain
customers may have the right to terminate their contracts with TSYS. TSYS does
not believe that it will fail to meet its contractual commitments to an extent
that will result in a material adverse effect on its financial condition or
results of operations.
Legal Proceedings
Synovus is subject to various legal proceedings and claims which arise in
the ordinary course of its business. Any litigation is vigorously defended by
Synovus and, in the opinion of management, based on consultation with external
legal counsel, any outcome of such litigation would not materially affect
Synovus' consolidated financial position or results of operations.
Currently, multiple lawsuits seeking class action treatment are pending
against one of Synovus' Alabama banking subsidiaries that involve: (1) the sale
of credit life insurance made in connection with consumer credit transactions;
(2) payments of service fees or interest rebates to automobile dealers in
connection with the assignment of automobile credit sales contracts to that
Synovus subsidiary; and (3) the forced placement of insurance to protect that
Synovus subsidiary's interest in collateral for which consumer credit customers
have failed to obtain or maintain insurance. These lawsuits seek unspecified
damages, including punitive damages. Two of the actions in which the sale of
credit life insurance is at issue have been certified as class actions and have
been deemed to include consumer credit customers of the subsidiary over a
20-year period. Synovus intends to vigorously contest these lawsuits and all
other litigation to which Synovus and its subsidiaries are parties. Based upon
information presently available, and in light of legal, equitable, and factual
defenses available to Synovus and its subsidiaries, contingent liabilities
arising from the threatened and pending litigation are not considered material.
It should be noted; however, that large punitive damage awards, bearing little
relation to the actual damages sustained by plaintiffs, have been awarded in
Alabama.
- --------------------------------------------------------------------------------
Note 11 Supplemental Financial Data
Components of other operating expenses in excess of 1% of total revenues
for any of the respective periods are as follows:
(In thousands) 1997 1996 1995
- --------------------------------------------------------------------------
Stationery, printing, and supplies............ $ 25,913 24,104 23,692
- --------------------------------------------------------------------------
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 12 Industry Segments
Synovus operates principally in the banking industry through its subsidiary
banks and its wholly-owned mortgage, trust, and broker/dealer companies. Synovus
also operates in the computerized data processing industry through its
majority-owned subsidiary, TSYS, which primarily provides bankcard data
processing for unaffiliated financial institutions and for Synovus. All
inter-segment services provided are charged at the same rates as unaffiliated
customers, are included in the revenues and net income of the respective
segments, and are eliminated to arrive at consolidated totals.
Industry segment information for the years ended December 31, 1997, 1996,
and 1995 is presented below.
<TABLE>
<CAPTION>
General Total Banking Data
(In thousands) Banking Corporate Operations Processing Eliminations Consolidated
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues ........................ 1997 $856,277 -- 856,277 361,499 (2,857)<F1> 1,214,919
1996 779,764 -- 779,764 311,648 (2,731)<F1> 1,088,681
1995 709,774 -- 709,774 249,708 (2,860)<F1> 956,622
Net income ...................... 1997 140,309 (13,408) 126,901 47,478 (9,143)<F2> 165,236
1996 121,808 (14,049) 107,759 39,437 (7,592)<F2> 139,604
1995 105,692 (13,506) 92,186 27,730 (5,333)<F2> 114,583
Identifiable assets ............. 1997 8,973,074 63,894 9,036,968 296,858 (73,495) 9,260,331
1996 8,372,958 42,578 8,415,536 245,759 (48,951) 8,612,344
1995 7,719,615 51,478 7,771,093 199,000 (42,498) 7,927,595
Capital expenditures <F3>........ 1997 32,945 352 33,297 33,139 -- 66,436
1996 34,565 676 35,241 28,565 -- 63,806
1995 22,835 269 23,104 25,108 -- 48,212
Depreciation and
amortization on
premises, equipment,
and software ............ 1997 18,313 411 18,724 23,604 -- 42,328
1996 16,344 360 16,704 19,108 -- 35,812
1995 13,999 332 14,331 17,126 -- 31,457
<FN>
<F1> Principally, data processing service revenues provided to the banking segment.
<F2> Minority interest in the data processing segment.
<F3> Excludes expenditures related to data processing subsidiary's capitalization of internal software development costs.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 13 Condensed Financial Information of Synovus Financial Corp.
(Parent Company only)
Condensed Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
December 31, 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash ......................................................................... $ 5,025 25
Investment in consolidated bank subsidiaries, at equity (including TSYS) ..... 933,145 836,466
Investment in consolidated nonbank subsidiaries, at equity ................... 6,581 7,799
Notes receivable from subsidiaries ........................................... 35,964 25,613
Other assets ................................................................. 25,201 19,076
- -------------------------------------------------------------------------------------------------------------------
Total assets .................................................... $ 1,005,916 888,979
===================================================================================================================
Liabilities and Shareholders' Equity
Long-term debt ............................................................... $ 76,960 77,200
Other liabilities ............................................................ 25,300 28,029
- -------------------------------------------------------------------------------------------------------------------
Total liabilities ............................................... 102,260 105,229
- -------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Common stock ......................................................... 175,322 174,635
Surplus .............................................................. 48,917 40,312
Less treasury stock .................................................. (1,285) (1,285)
Less unamortized restricted stock .................................... (3,734) (5,344)
Net unrealized gain (loss) on investment securities available for sale 6,651 (112)
Retained earnings .................................................... 677,785 575,544
- -------------------------------------------------------------------------------------------------------------------
Total shareholders' equity ...................................... 903,656 783,750
- -------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity ...................... $ 1,005,916 888,979
===================================================================================================================
</TABLE>
F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Condensed Statements of Income
(In thousands)
<TABLE>
<CAPTION>
Years ended December 31, 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Dividends received from bank subsidiaries (including TSYS) ............................. $ 97,376 61,925 76,464
Management fees ........................................................................ 1,806 1,642 2,511
Interest income ........................................................................ 1,853 1,678 2,149
Other income ........................................................................... 2,394 3,144 2,616
- -------------------------------------------------------------------------------------------------------------------------------
Total income ................................................................... 103,429 68,389 83,740
- -------------------------------------------------------------------------------------------------------------------------------
Expenses:
Interest expense ....................................................................... 4,785 4,818 6,046
Other expenses ......................................................................... 23,718 25,129 23,904
- -------------------------------------------------------------------------------------------------------------------------------
Total expenses ................................................................. 28,503 29,947 29,950
- -------------------------------------------------------------------------------------------------------------------------------
Income before income taxes and equity in undistributed income of subsidiaries... 74,926 38,442 53,790
Allocated income tax benefit ................................................................... (9,086) (9,526) (9,246)
- -------------------------------------------------------------------------------------------------------------------------------
Income before equity in undistributed income of subsidiaries ................... 84,012 47,968 63,036
Equity in undistributed income of subsidiaries ................................................. 81,224 91,636 51,547
- -------------------------------------------------------------------------------------------------------------------------------
Net income ..................................................................... $165,236 139,604 114,583
===============================================================================================================================
</TABLE>
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Condensed Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Years ended December 31, 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income .............................................................. $ 165,236 139,604 114,583
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed earnings of subsidiaries ........ (81,224) (91,636) (51,547)
Net income of equity method investment .................. (44) (92) (78)
Depreciation, amortization, and accretion, net .......... 847 768 739
Net increase (decrease) in other liabilities ............ (2,729) 3,930 5,723
Net (increase) decrease in other assets ................. (3,877) 4,140 8,799
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities ....... 78,209 56,714 78,219
- ---------------------------------------------------------------------------------------------------------------------
Investing Activities
Net investment in subsidiaries .......................................... (5,093) (9,821) (9,835)
Cash from merged parent company operations .............................. -- -- 515
Net (increase) decrease in notes receivable from subsidiaries .......... (700) (1,021) 1,200
Net (increase) decrease in short-term notes receivable from subsidiaries (8,392) 3,261 (4,765)
Purchase of premises and equipment, net ................................. (190) (396) (266)
- ---------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities ........... (14,375) (7,977) (13,151)
- ---------------------------------------------------------------------------------------------------------------------
Financing Activities
Dividends paid to shareholders .......................................... (62,948) (51,123) (42,042)
Principal repayments on long-term debt .................................. (240) (240) (25,620)
Purchase of treasury stock .............................................. -- (263) (1,303)
Proceeds from issuance of common stock .................................. 4,354 2,867 3,705
- ---------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities ........... (58,834) (48,759) (65,260)
- ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash ..................................................... 5,000 (22) (192)
Cash at beginning of period ..................................................... 25 47 239
- ---------------------------------------------------------------------------------------------------------------------
Cash at end of period ........................................................... $ 5,025 25 47
=====================================================================================================================
</TABLE>
For the years ended December 31, 1997, 1996, and 1995, the Parent Company
paid income taxes of $93 million, $90 million, and $68 million, and interest in
the amounts of $5 million, $5 million, and $6 million, respectively.
The amount of dividends paid to the Parent Company from the subsidiary
banks is limited by various banking regulatory agencies. The amount of cash
dividends available from subsidiary banks for payment in 1998, without prior
approval from the banking regulatory agencies, is approximately $92,881,000. In
prior years, Synovus' banks have received permission and have paid cash
dividends to the Parent Company in excess of these regulatory limitations.
As a result of the regulatory limitations, at December 31, 1997,
approximately $840,264,000 of the Parent Company's investment in net assets of
subsidiary banks of $933,145,000, as shown in the accompanying condensed balance
sheets, was restricted from transfer by subsidiary banks to the Parent Company
in the form of cash dividends.
Synovus is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory, and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on Synovus'
consolidated financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, Synovus must meet specific
capital guidelines that involve quantitative measures of Synovus' assets,
liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. Synovus' capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require Synovus on a consolidated basis, and the Parent Company and subsidiary
banks, individually, to maintain minimum amounts and ratios of total and Tier I
capital to risk-weighted assets as defined, and of Tier I capital to average
assets, as defined. Management believes, as of December 31, 1997, that Synovus
meets all capital adequacy requirements to which it is subject.
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
As of December 31, 1997, the most recent notification from The Federal
Reserve Bank of Atlanta categorized the significant Synovus subsidiaries as well
capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized Synovus and its subsidiaries must maintain
minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set
forth in the table below. Management is not aware of the existence of any
conditions or events occurring subsequent to December 31, 1997 which would
affect Synovus' or its subsidiaries' well capitalized classifications.
Actual capital amounts and ratios for Synovus are presented in the table
below on a consolidated basis and for each significant subsidiary, as defined.
<TABLE>
<CAPTION>
To be Well
Capitalized Under
For Capital Prompt Corrective
(In thousands) Actual Adequacy Purposes Action Provisions
------------------ ------------------ -----------------
December 31, 1997 1996 1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Synovus Financial Corp.
Tier I capital .................... $903,468 777,708 292,770 266,279 439,155 399,418
Total risk-based capital .......... 997,061 863,261 585,540 532,557 731,925 665,697
Tier I capital ratio .............. 12.34% 11.68 4.00 4.00 6.00 6.00
Total risk-based capital ratio .... 13.62 12.97 8.00 8.00 10.00 10.00
Leverage ratio .................... 10.02 9.36 4.00 4.00 5.00 5.00
Columbus Bank and Trust Company
Tier I capital .................... $353,106 298,610 72,420 65,598 108,630 98,397
Total risk-based capital .......... 371,986 316,045 144,840 131,196 181,050 163,994
Tier I capital ratio .............. 19.50% 18.21 4.00 4.00 6.00 6.00
Total risk-based capital ratio .... 20.55 19.27 8.00 8.00 10.00 10.00
Leverage ratio .................... 18.26 17.12 4.00 4.00 5.00 5.00
The National Bank of South Carolina
Tier I capital .................... $102,739 94,373 42,620 38,455 63,930 57,682
Total risk-based capital .......... 116,075 106,396 85,240 76,909 106,550 96,137
Tier I capital ratio .............. 9.64% 9.82 4.00 4.00 6.00 6.00
Total risk-based capital ratio .... 10.89 11.07 8.00 8.00 10.00 10.00
Leverage ratio .................... 8.00 7.88 4.00 4.00 5.00 5.00
</TABLE>
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 14 Earnings Per Share
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share". SFAS
No. 128 supersedes Accounting Principles Board Opinion No. 15 "Earnings Per
Share" and specifies the computation, presentation, and disclosure requirements
for earnings per share (EPS) for entities with publicly held common stock or
potential issuable common stock. SFAS No. 128 replaces the presentation of
primary EPS with a presentation of basic EPS and replaces fully diluted EPS with
EPS assuming dilution. 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 both interim and annual financial
statement periods ending after December 15, 1997. Synovus has adopted SFAS No.
128, and in accordance with the provisions of SFAS No. 128, all earnings per
share data has been restated for the periods presented.
The following table displays a reconciliation of the numerator and
denominator used in calculating basic earnings per share and earnings per share
assuming dilution.
<TABLE>
<CAPTION>
Year ended, Year ended, Year ended,
December 31, 1997 December 31, 1996 December 31, 1995
-------------------------------- ------------------------------ -----------------------------
Net Average Net Income Net Average Net Income Net Average Net Income
Income Shares per Share Income Shares per Share Income Shares per Share
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Net income ................ $165,236 174,814 .95 139,604 174,199 .80 114,583 172,432 .66
Effect of dilutive options. -- 2,296 -- 1,690 -- 1,030
- ------------------------------------------------------------------------------------------------------------------------------------
EPS - assuming dilution ..... $165,236 177,110 .93 139,604 175,889 .79 114,583 173,462 .66
====================================================================================================================================
</TABLE>
Options to purchase 844,892 shares of common stock at $27.56 per share were
outstanding during the second half of 1997 but were not included in the
computation of diluted earnings per share because the options' exercise price
was greater than the average market price of the common shares. The options,
which expire on June 30, 2005, were still outstanding at the end of 1997.
F-29
KPMG Peat Marwick LLP[LOGO]
303 Peachtree Street, N.E.
Suite 2000
Atlanta, GA 30308
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Synovus Financial Corp.:
We have audited the accompanying consolidated balance sheets of Synovus
Financial Corp. and 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. These consolidated financial statements are the responsibility of Synovus'
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Synovus
Financial Corp. and subsidiaries at December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/KPMG Peat Marwick LLP
January 23, 1998
Member Firm of Klyneld Peat Marwick Goerdeler
F-30
FINANCIAL HIGHLIGHTS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Percent
Years ended December 31, 1997 1996 Change
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance Sheets
Assets ...................................................... $ 9,260,331 8,612,344 7.5%
Loans, net .................................................. 6,506,822 5,970,547 9.0
Deposits .................................................... 7,707,927 7,203,035 7.0
Shareholders' equity ........................................ 903,656 783,750 15.3
Book value per share ........................................ 5.16 4.49 14.9
Cash dividends declared per share ........................... .36 .29 24.1
Equity to assets ............................................ 9.76% 9.10
Reserve for loan losses to loans ............................ 1.56 1.56
- ------------------------------------------------------------------------------------------------------------
Statements of Income
Net income before special FDIC assessment ................... $ 165,236 142,400 16.0%
Net income after special FDIC assessment .................... 165,236 139,604 18.4
Net income per share (basic) before special FDIC assessment.. .95 .82 15.6
Net income per share (basic) after special FDIC assessment... .95 .80 17.9
- ------------------------------------------------------------------------------------------------------------
Performance Ratios
Return on assets before special FDIC assessment ............. 1.87% 1.75
Return on assets after special FDIC assessment ............. 1.87 1.72
Return on equity before special FDIC assessment ............. 19.80 19.49
Return on equity after special FDIC assessment ............. 19.80 19.11
Net interest margin ......................................... 5.26 5.19
Net overhead ratio before special FDIC assessment ........... 1.27 1.37
Net overhead ratio after special FDIC assessment ............ 1.27 1.43
</TABLE>
- --------------------------------------------------------------------------------
F-31
FINANCIAL REVIEW
Summary
Synovus Financial Corp. (Synovus) has continued improving its performance
making 1997 the most successful year in its history. Net income for 1997 was
$165.2 million, an increase of 18.4% over the 1996 earnings of $139.6 million.
Net income per share increased to $0.95 in 1997, up 17.9% from the $0.80 earned
in 1996. Return on assets continued to improve in 1997 increasing 15 basis
points to 1.87%, compared to 1.72% in 1996. Return on equity also improved to
19.80% in 1997, compared to 19.11% in 1996.
These record results are attributable to significant improvements in
Synovus' banking operations and at Total System Services, Inc. (TSYS), Synovus'
majority-owned bankcard processing subsidiary. During 1997, net interest income
and non-interest income grew 10.0% and 15.0%, respectively, over 1996, while
non-interest expense increased 11.2% and the provision for loan losses increased
1.7%.
Synovus' banking operations results, which exclude TSYS, continued to
improve during 1997. Net income for Synovus' banking operations increased 17.8%
to $126.9 million, from $107.8 million in 1996. Return on assets for Synovus'
banking operations improved in 1997 increasing 12 basis points to 1.48%,
compared to 1.36% in 1996. Return on equity allocated to Synovus' banking
operations also improved to 18.80% in 1997, compared to 17.88% in 1996.
On September 30, 1996, legislation was approved to recapitalize the Savings
Association Insurance Fund. Due to this recapitalization, Synovus paid a special
assessment to the Federal Deposit Insurance Corporation (FDIC) of approximately
$2.8 million on an after-tax basis, which represents approximately $.02 per
share for the year of 1996. Synovus' consolidated statement of income for 1996
includes this special assessment.
The following paragraph discusses the financial results for 1997, compared
with 1996, before the FDIC special assessment. Net income for 1997 was $165.2
million, up $22.8 million, or 16.0%, from the same period a year ago. Net income
per share increased 15.6% during the year, from $0.82 in 1996 to $0.95 in 1997.
Synovus' core operations strong performance resulted in a return on average
assets of 1.87% and a return on average equity of 19.80% for 1997. This compared
to a return on average assets and a return on average equity of 1.75% and
19.49%, respectively, in 1996.
Synovus' total assets ended the year at $9.3 billion, a growth rate of 7.5%
for 1997, resulting from net loan growth of $536.3 million, or 9.0%. This asset
growth was primarily funded by a $504.9 million, or 7.0%, increase in total
deposits. The increases in both loans and deposits reflect a strong Southeastern
economic environment as well as market share gains. Shareholders' equity grew
15.3% to $903.7 million, which represented 9.76% of total assets. The following
discussion reviews the results of operations and assesses the financial
condition of Synovus. This discussion should be read in conjunction with the
preceding consolidated financial statements and accompanying notes.
On March 10, 1997, Synovus declared a three-for-two stock split effected
April 8, 1997, to shareholders of record on March 21, 1997. Share and per share
data for all periods presented have been restated to reflect the additional
shares outstanding resulting from the stock split.
- --------------------------------------------------------------------------------
Table 1
<TABLE>
<CAPTION>
Five Year Selected Financial Data (In thousands, except per share data)
Years Ended December 31,
- -----------------------------------------------------------------------------------------------------------------------------
1997 1996<F2> 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C> <C>
Net interest income .......................................$ 412,389 374,874 341,875 301,231 263,213
Provision for losses on loans ............................. 32,296 31,766 25,787 25,387 24,924
Income before extraordinary item .......................... 165,236 139,604 114,583 89,452 80,379
Net income ................................................ 165,236 139,604 114,583 89,452 77,467
Per share data:
Income before extraordinary item - basic ............. .95 .80 .66 .53 .48
Income before extraordinary item - assuming dilution.. .93 .79 .66 .53 .48
Net income - basic ................................... .95 .80 .66 .53 .47
Net income - assuming dilution ....................... .93 .79 .66 .53 .46
Cash dividends declared .............................. .36 .29 .24 .20 .17
Long-term debt ............................................ 126,174 97,283 106,815 139,811 143,481
Average total equity ...................................... 834,726 730,541 639,426 566,562 505,027
Average total assets ......................................$8,815,423 8,135,587 7,498,299 6,782,659 6,141,794
Ratios:
Return on assets before extraordinary item ............ 1.87% 1.72 1.53 1.32 1.31
Return on assets after extraordinary item ............. 1.87 1.72 1.53 1.32 1.26
Return on equity before extraordinary item ............ 19.80 19.11 17.92 15.79 15.92
Return on equity after extraordinary item ............. 19.80 19.11 17.92 15.79 15.34
Dividend payout ratio<F1> ............................. 38.10 36.62 36.69 36.90 35.10
Average equity to average assets ...................... 9.47 8.98 8.53 8.35 8.22
<FN>
<F1> Determined by dividing dividends declared by net income, including pooled
subsidiaries.
<F2> 1996 selected financial data reflects the impact of the special FDIC
assessment. Without the special FDIC assessment, net income would have been
$142,400 and net income per share would have been $.82.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
F-32
Acquisitions
On October 24, 1996, Synovus completed the acquisition of two full-service
banking centers in Rome, Georgia. Synovus acquired approximately $49 million in
deposits and $12 million in loans from the two banking centers. The acquisition
was accounted for as a purchase.
The 1995 merger activity resulted in Synovus' entry into South Carolina and
an expanded presence in Georgia. The merger with NBSC Corporation of Columbia,
South Carolina, represents the largest in our history. NBSC brings a veteran
management team and an opportunity to provide products and services to the
growing markets in South Carolina.
In addition, the mergers with Douglasville, Georgia, based Citizens &
Merchants Corporation and Riverdale, Georgia, based Peach State Bank continue to
provide Synovus with access to the growth in the Atlanta suburbs.
A list of the bank acquisitions completed during the past three years
follows:
(Dollars in thousands)
<TABLE>
<CAPTION>
Acquired Shares Financial
Company and Location Date Assets Issued Statement Presentation
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Two branches October 24, 1996 $ 46,464 N/A Purchase
Rome, Georgia
Citizens & Merchants Corporation April 28, 1995 $ 52,000 1,409,556 Pooling (Non-restated)
Douglasville, Georgia
NBSC Corporation February 28, 1995 $1,100,000 17,841,033 Pooling (Restated)
Columbia, South Carolina
Peach State Bank January 31, 1995 $ 43,000 599,621 Purchase
Riverdale, Georgia
</TABLE>
This information is discussed in further detail in Note 1 of the financial
statements.
- --------------------------------------------------------------------------------
Table 2
<TABLE>
<CAPTION>
Net Interest Income
(In thousands)
Years Ended December 31,
- ---------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income ................................. $725,673 663,303 615,788
Taxable-equivalent adjustment ................... 4,418 4,595 5,107
- ---------------------------------------------------------------------------------------
Interest income, taxable-equivalent ... 730,091 667,898 620,895
Interest expense ................................ 313,284 288,429 273,913
- ---------------------------------------------------------------------------------------
Net interest income, taxable-equivalent $416,807 379,469 346,982
=======================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Earning Assets, Sources of Funds, and Net Interest Income
Average total assets for 1997 were $8.8 billion, or 8.4% over 1996 average
total assets of $8.1 billion. Average earning assets for 1997 were $7.9 billion,
which represented 90% of average total assets. A $472.9 million, or 6.9%,
increase in average deposits for 1997 provided the primary funding for a $547.3
million, or 9.6%, increase in average net loans. Average shareholders' equity
for 1997 was $834.7 million.
For 1996, average total assets increased $637.3 million, or 8.5%. Average
earning assets for 1996 were $7.3 billion, which represented 90% of average
total assets. For more detailed information on Synovus' average statements of
condition for the years ended 1997, 1996, and 1995, refer to Table 3.
Net interest income (interest income less interest expense) is the largest
component of Synovus' net income. This major source of income represents the
earnings of Synovus' primary business of gathering funds from deposit sources
and investing those funds in loans and securities. Synovus' long term objective
is to manage those assets and liabilities to provide the largest possible amount
of income while balancing interest rate, credit, liquidity, and capital risks.
Net interest income is presented in this discussion on a tax-equivalent
basis, so that the income from assets exempt from federal income taxes is
adjusted based on a statutory marginal federal tax rate of 35% in all years (See
Table 2). The net interest margin is defined as taxable-equivalent net interest
income divided by average total interest earning assets and provides an
indication of the efficiency of the earnings from balance sheet activities. The
net interest margin is affected by changes in the spread between interest
earning asset yields and interest bearing costs (spread rate), and by the
percentage of interest earning assets funded by non-interest bearing
liabilities.
Net interest income for 1997 was a record $412.4 million, up $37.5 million,
or 10%, from 1996. On a taxable-equivalent basis, net interest income was $416.8
million, up $37.3 million, or 9.8%, over 1996. During 1997, average interest
earning assets increased $620.0 million, or 8.5%, with the majority of this
increase attributable to loan growth. Increases in the level of time and money
market deposits were the main contributor to the $488.8 million, or 7.9%, growth
in average interest bearing liabilities.
F-33
The 5.26% net interest margin achieved in 1997 is a 7 basis point increase
over the 5.19% reported for 1996. This increase is the result of higher
investment yields, loan growth, increased loan yields and a relatively flat cost
of funds. The reinvestment yield for securities was relatively strong in 1997
due to higher market rates. Another influence impacting the net interest margin
is the percentage of earning assets funded by non-interest bearing liabilities.
Funding for Synovus' earning assets comes from interest bearing liabilities,
non-interest bearing liabilities, and shareholders' equity. Earning assets
funded by non-interest bearing liabilities continue to provide a positive impact
on the net interest margin.
The 1997 net interest margin steadily increased in each quarter of 1997.
The first quarter net interest margin was 5.21% and increased 7 basis points,
during 1997, to the fourth quarter net interest margin of 5.28%.
During 1996, net interest income and tax-equivalent net interest income
increased 9.7% and 9.4%, respectively. Average interest earning assets grew 8.4%
while interest bearing liabilities increased 7.5%. This growth, along with a 4
basis point improvement in the net interest margin to 5.19% from 5.15%,
contributed to Synovus' earnings. The net interest margin also increased as a
result of an 8.9% increase in average non-interest bearing demand deposits. The
increase in the spread rate of 4 basis points was the result of an 11 basis
point decrease in the rate on interest bearing liabilities partially offset by a
7 basis point decrease in the yield on earning assets. The decrease in earning
asset yield was due to lower loan yields as a result of a lower average prime
rate in 1996.
Due to the growth in net interest income and the strong net interest
margin, the margin increased from a first quarter of 5.13% to 5.24% in the
fourth quarter of 1996. This increase in 1996 resulted primarily from a shift of
deposits into money market and transaction oriented accounts, and the movement
of some promotional certificates of deposit into other deposit accounts.
F-34
- --------------------------------------------------------------------------------
Table 3
Consolidated Average Balances, Interest, and Yields
(In thousands)
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------- -------------------------- --------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Interest earning assets:
Taxable loans, net<F1><F2> ...............$ 6,306,722 615,874 9.77% $5,750,099 559,809 9.74% $5,288,863 522,258 9.87%
Tax-exempt loans, net <F2><F3>............ 32,965 3,447 10.46 33,719 3,589 10.64 38,044 4,230 11.12
Reserve for loan losses .................. (95,648) -- -- (87,046) -- (80,034) --
-------------------- ------------------- -------------------
Loans, net ....................... 6,244,039 619,321 9.92 5,696,772 563,398 9.89 5,246,873 526,488 10.03
-------------------- ------------------- -------------------
Taxable investment securities<F4> ........ 1,535,060 98,806 6.44 1,462,733 92,404 6.32 1,270,063 77,198 6.08
Tax-exempt investment securities <F3><F4>. 115,284 9,805 8.51 111,886 10,171 9.09 120,064 11,096 9.24
-------------------- ------------------- -------------------
Total investment securities ...... 1,650,344 108,611 6.58 1,574,619 102,575 6.51 1,390,127 88,294 6.35
-------------------- ------------------- -------------------
Interest earning deposits with banks ...... 1,394 73 5.24 1,221 59 4.83 1,828 107 5.85
Federal funds sold ........................ 32,053 2,086 6.51 35,213 1,866 5.30 101,334 6,006 5.93
-------------------- ------------------- -------------------
Total interest earning assets .... 7,927,830 730,091 9.21 7,307,825 667,898 9.14 6,740,162 620,895 9.21
-------------------------------------------------------------------------------------
Cash and due from banks ..................... 310,437 312,997 298,328
Premises and equipment, net ................. 259,908 234,351 209,415
Other real estate ........................... 11,093 11,527 13,582
Other assets<F5> ............................ 306,155 268,887 236,812
---------- ---------- ----------
Total assets ..................... $8,815,423 $8,135,587 $7,498,299
========== ========== ==========
Liabilities and Shareholders' Equity
Interest bearing liabilities:
Interest bearing demand deposits .........$ 1,055,227 27,343 2.59 $ 940,303 23,440 2.49 $ 887,694 23,947 2.70
Money market accounts .................... 1,216,729 53,126 4.37 1,034,336 41,011 3.96 915,710 36,817 4.02
Savings deposits ......................... 458,362 11,923 2.60 469,714 12,305 2.62 475,962 13,746 2.89
Time deposits ............................ 3,455,046 194,868 5.64 3,333,501 190,593 5.72 3,113,375 179,251 5.76
Federal funds purchased and
securities sold under agreement
to repurchase .................... 349,929 18,836 5.38 288,107 14,973 5.20 216,342 12,092 5.59
Other borrowed funds ..................... 120,759 7,188 5.95 101,289 6,107 6.03 125,317 8,060 6.43
----------------------------------------------------------------------------------------------------------------------------------
Total interest bearing
liabilities .................... 6,656,052 313,284 4.70 6,167,250 288,429 4.67 5,734,400 273,913 4.78
----------------------------------------------------------------------------------------------------------------------------------
Spread rate ......................... 4.51% 4.47% 4.43%
==== ==== ====
Non-interest bearing demand deposits ........ 1,140,107 1,074,676 986,582
Other liabilities ........................... 184,538 163,120 137,891
Shareholders' equity ........................ 834,726 730,541 639,426
---------- --------- --------
Total liabilities and
shareholders' equity ......$ 8,815,423 $8,135,587 $7,498,299
========== ========= =========
Net interest income/margin ................. 416,807 5.26% 379,469 5.19% 346,982 5.15%
==== ==== ====
Taxable-equivalent adjustment .............. (4,418) (4,595) (5,107)
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income, actual ................ $412,389 $374,874 $341,875
====================================================================================================================================
<FN>
<F1> Average loans are shown net of unearned income. Nonperforming loans are
included.
<F2> Interest income includes loan fees as follows: 1997 - $25,744, 1996 -
$23,929, 1995 - $20,825.
<F3> Reflects taxable-equivalent adjustments, using the statutory federal income
tax rate of 35%, in adjusting interest on tax-exempt loans and investment
securities to a taxable-equivalent basis.
<F4> Includes certain investment securities available for sale, at their
respective average amortized cost. For the years ended December 31, 1997,
1996, and 1995, the average amortized cost of these securities amounted to
$1,308,234, $1,206,522, and $881,063 respectively.
<F5> In 1997, 1996, and 1995, there were $974, $3,370, and $7,674, respectively,
of average net unrealized losses on investment securities available for
sale.
</FN>
</TABLE>
F-35
- --------------------------------------------------------------------------------
Table 4
Rate/Volume Analysis
(In thousands)
<TABLE>
<CAPTION>
1997 Compared to 1996 1996 Compared to 1995
- ---------------------------------------------------------------------------------------------------------------
Change Due to<F1> Change Due to <F1>
- ---------------------------------------------------------------------------------------------------------------
Yield/ Net Yield/ Net
Volume Rate Change Volume Rate Change
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Taxable loans, net .................. $54,191 1,874 56,065 45,546 (7,995) 37,551
Tax-exempt loans, net<F2>............ (81) (61) (142) (481) (160) (641)
Taxable investment securities........ 4,569 1,833 6,402 11,711 3,495 15,206
Tax-exempt investment securities<F2>. 309 (675) (366) (756) (169) (925)
Interest earning deposits with banks. 8 6 14 (36) (12) (48)
Federal funds sold................... (167) 387 220 (3,919) (221) (4,140)
- ---------------------------------------------------------------------------------------------------------------
Total interest income........ 58,829 3,364 62,193 52,065 (5,062) 47,003
- ---------------------------------------------------------------------------------------------------------------
Interest paid on:
Interest bearing demand
deposits.......................... 2,865 1,038 3,903 1,419 (1,926) (507)
Money market accounts................ 7,232 4,883 12,115 4,769 (575) 4,194
Savings deposits..................... (297) (85) (382) (180) (1,261) (1,441)
Time deposits........................ 6,948 (2,673) 4,275 12,674 (1,332) 11,342
Federal funds purchased and
securities sold under
agreement to repurchase....... 3,213 650 3,863 4,011 (1,130) 2,881
Other borrowed funds ................ 1,174 (93) 1,081 (1,545) (408) (1,953)
- ---------------------------------------------------------------------------------------------------------------
Total interest expense........ 21,135 3,720 24,855 21,148 (6,632) 14,516
- ---------------------------------------------------------------------------------------------------------------
Net interest income..........$ 37,694 (356) 37,338 30,917 1,570 32,487
===============================================================================================================
<FN>
<F1> The change in interest due to both rate and volume has been allocated to
the rate component.
<F2> Reflects taxable-equivalent adjustments using the statutory federal income
tax rate of 35% in adjusting interest on tax-exempt loans and investment
securities to a taxable-equivalent basis.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
Non-Interest Income
Non-interest income consists of a wide variety of fee generating services
viewed as traditional banking services as well as those revenues earned by TSYS,
Synovus' bankcard data processing company. During 1997, total non-interest
income increased $63.9 million, or 15.0%. Revenues from bankcard data processing
services offered by TSYS were the largest contributor increasing $49.9 million,
or 16.0%, over 1996. Service charges on banking operations' deposit accounts
increased $3.8 million, or 7.2%. Fees for trust services increased $1.2 million,
or 10.6%, over 1996. Other operating income increased $11.4 million, or 17.6%,
in 1997 due to increased product revenues from securities sales, credit card
fees, mortgage related income, fees on letters of credit, and public finance
bond activities.
TSYS contributed approximately 75% of Synovus' total non-interest income in
1997 with the majority of this reported as data processing services income. Data
processing services income is derived principally from the servicing of
individual bankcard accounts for the card-issuing customers of TSYS. TSYS'
growth is evidenced by the average number of total cardholder accounts processed
by TSYS, which was approximately 87.2 million in 1997, compared to 72.0 million
in 1996, and 53.1 million in 1995. TSYS currently processes 92.8 million
cardholder accounts across the United States, Puerto Rico, Canada, and Mexico.
On August 16, 1995, TSYS and Visa U.S.A. Inc. (Visa) announced an agreement
in principle to merge their merchant and point-of-sale processing operations. On
May 1, 1996, the joint venture, known as Vital Processing Services L.L.C.
(Vital), became operational and began offering fully integrated merchant
transaction and related electronic information services to financial and
non-financial institutions and their merchant customers. Vital is structured
with its own management team and separate Board of Directors and has its
corporate headquarters in Tempe, Arizona, with other locations in Columbus,
Georgia, and Atlanta, Georgia. TSYS and Visa are equal owners in the joint
venture.
Since 1994, TSYS has been providing processing services for commercial
cards, which include purchasing cards, corporate cards, and fleet cards for
employees. At December 31, 1997, TSYS was processing approximately 5.0 million
commercial card accounts, a 58.0% increase over the approximately 3.1 million
being processed at year-end 1996, representing a 61.1% increase over the 2.0
million at year-end 1995. Commercial card revenue is included in revenues from
bankcard processing.
A significant amount of TSYS' revenues are derived from certain major
customers who are processed under long-term contracts. For the years ended
December 31, 1997, 1996, and 1995, two customers, AT&T and NationsBank, together
accounted for approximately 25%, 29%, and 34% of total revenues,
F-36
respectively. During 1997, TSYS announced an extension of its long-term
processing contract with NationsBank, to the year 2005. Recently, AT&T announced
its intention to sell its credit card business to Citibank. TSYS and AT&T have a
contract with a term until August 2000, and, at AT&T's instruction, TSYS is
proceeding with converting the customer's accounts to TS2 in 1998; approximately
1.2 million of these accounts were converted in January 1998. The loss of either
of AT&T or NationsBank, or other significant customers, could have a material
adverse effect on TSYS' financial condition and results of operations.
During the first quarter of 1997, TSYS successfully completed the
conversion of Bank of America's cardholder accounts to TS2. In October 1997,
TSYS completed the conversion of NationsBank's cardholder accounts to TS2 from
our general card-holder processing system. As a result, TSYS now has
approximately 19.2 million accounts being processed on TS2 at year-end 1997,
compared to 6.3 million at year-end 1996 and 1.1 million at year-end 1995.
During the third quarter of 1997, one of TSYS' subsidiaries, Lincoln
Marketing, Inc. changed its name to TSYS Total Solutions, Inc. The new name
reflects the full range of solutions that TSYS offers in the marketplace. To
increase efficiency and eliminate unnecessary duplication, two of TSYS'
subsidiaries were combined; effective January 1, 1998, Mailtek and TSI were
merged into one company retaining the name TSYS Total Solutions, Inc.
In 1997, TSYS announced the signing of two large Canadian clients, Canadian
Tire Acceptance Limited and Royal Bank, to long-term processing agreements. To
better serve its Canadian clients, TSYS has created a new subsidiary, TSYS
Canada, Inc. (TCI). TCI has opened an office in Canada, initially employing
approximately 20 people.
Synovus continues to emphasize the importance of growth in non-interest
related sources of income in its banking operations via "The New Bank"
initiatives. Designed to identify and integrate the people, programs, and
systems Synovus will need for the 21st century, this vital strategy incorporates
new technologies, new products and services, and will position Synovus to
deliver even greater service to its customers and, ultimately, increased value
to our shareholders. Non-interest income reported by Synovus' banking operations
increased $12.8 million, or 11.7%, in 1997 and $15.5 million, or 16.4%, in 1996.
Service charges on deposit accounts have historically been one of the
primary sources of other income for Synovus' banking operations. In 1997,
service charges on deposit accounts increased $3.8 million, or 7.2%, as a result
of increases in the number of accounts serviced and increased volume related to
activity based fees.
On January 1, 1995, Synovus formed Synovus Trust Company, a new subsidiary
in which to consolidate all of Synovus' Georgia trust operations. This
subsidiary is bringing continued efficiencies and expertise to this banking
service. Trust fees for 1997 increased $1.2 million, or 10.6%, over 1996. Fees
for trust services are derived from performing estate administration, personal
trust, corporate trust, and employee benefit plan administration. At December
31, 1997 and 1996, total market value of assets administered by Synovus Trust
Company and subsidiary bank trust operations was approximately $5.5 billion and
$4.8 billion, respectively.
Non-interest income in 1997 and 1996 has also been positively impacted by
increases in revenues from mortgage banking and related servicing. Synovus
Mortgage Corp. enhances the mortgage products offered by the banking
subsidiaries and generates additional fee income through mortgage servicing.
Synovus Mortgage Corp. provides expertise in the areas of products and pricing
to the subsidiary banks and serves as an outlet for placing these mortgage loans
into the secondary market while retaining the related servicing rights. Mortgage
loan origination volume and increased revenue from the growth in the portfolio
of loans serviced for others were the major factors driving the mortgage revenue
increases.
In 1996, total non-interest income increased $84.5 million, or 24.8%.
Revenues from bankcard data processing services offered by TSYS were the largest
contributor, increasing $60.4 million, or 25.6%, over 1995. Service charges on
banking operations' deposit accounts increased $5.8 million, or 12.3%, primarily
as a result of continued growth in the number of accounts serviced and increased
fee structure. Fees for trust services increased $1.8 million, or 18.5%, over
1995. Other operating income increased $15.3 million, or 37.6%, in 1996
primarily due to increased product revenues from securities sales, fees on
letters of credit, and public finance bond activities.
Non-Interest Expense
Non-interest expense increased $61.3 million, or 11.2%, in 1997 over 1996.
Management analyzes non-interest expense in two separate components: banking
operations and TSYS. The table below summarizes this data for the years ended
December 31, 1997, 1996, and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------------------------------------
(In thousands) Banking TSYS Banking TSYS Banking TSYS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Salaries and other personnel expense... $192,095 147,439 173,653 124,259 157,533 94,946
Net occupancy and equipment expense.... 41,687 94,685 39,023 82,118 35,080 64,549
Other operating expenses .............. 65,941 59,446 69,161 53,368 72,721 47,291
Minority interest ..................... 9,143 -- 7,592 -- 5,333 --
- ------------------------------------------------------------------------------------------------------
Total non-interest expense ....... $308,866 301,570 289,429 259,745 270,667 206,786
======================================================================================================
</TABLE>
Non-interest expense related to TSYS increased $41.8 million, or 16.1%, in
1997 over 1996 with a significant portion of this increase being employment
expenses. The average number of employees increased from 2,498 in 1996 to 2,895
in 1997. This growth in employees, along with salary increases, resulted in a
$23.2 million, or 18.7%, increase in employment expenses.
As a percentage of revenues, TSYS' operating expenses increased in 1997 to
83.4%, compared to 83.3% and 82.8% for 1996 and 1995, respectively. The
principal increases in operating expenses resulted from: the addition of
personnel and equipment; the cost of materials associated with the services
provided by all companies, particularly the supplies related to processing the
increased number of accounts on THE TOTAL SYSTEM; and certain costs associated
with the conversion of customers to TS2.
F-37
A significant portion of TSYS' operating expenses relates to salaries and
other personnel costs. During 1997, the average number of employees increased to
2,895, compared to 2,498 in 1996 and 2,087 in 1995. In addition to the growth in
number of employees, the increase in salaries and other personnel costs is
attributable to normal salary increases and related employee benefits.
Employment costs capitalized for internally developed software and conversions
were $4.4 million, $4.9 million, and $8.4 million in 1997, 1996, and 1995,
respectively. These decreases in capitalization have also contributed to
increases in employment expense, particularly in comparing 1996 to 1995. Since
completion of development of the core TS2 processing system, employment expenses
capitalized relate primarily to enhancements to TS2 and costs associated with
the conversion to TS2 of customers under long-term contracts.
TSYS continues to monitor and assess its building and equipment needs as it
positions itself for future growth and expansion. TSYS has begun construction of
a new campus which will serve as TSYS' corporate headquarters; will house
administrative, client contact, and programming team members; and will allow for
significant growth. TSYS has entered into an operating lease agreement for the
purpose of financing the construction of the new corporate campus. Under the
agreement, the lessor has purchased the properties, is paying the construction
and development costs and has leased the facilities to TSYS commencing upon its
completion, expected to be in 1999. The lease term will be three years. The
lease will provide for substantial residual value guarantees and will include
purchase options at the original cost of the property. Real estate taxes,
insurance, maintenance, and operating expenses applicable to the leased property
will be obligations of TSYS.
In addition, TSYS began expansion of its operations center in north
Columbus during 1997. This expansion, while not finalized, will include
additional space for the card production services now located in downtown
Columbus. The expansion is also expected to include additional space for
statement printing and data processing functions. A separate building was
completed on the North Center property in 1997 to serve as TSI's headquarters.
In 1995, a new, 110,000 square-foot building was purchased to accommodate
current office space needs and provide space for future growth in technical
staff.
In 1997, non-interest expense for Synovus' banking operations increased
$19.4 million, or 6.9%. The largest contributor to this expense increase was
employment expense and related primarily to additional employees hired in 1997.
The average number of employees in banking operations increased from 4,197 in
1996 to 4,526 in 1997. This growth was primarily due to growth within the
banking subsidiaries, as they continue to develop new products and provide
additional services to their customers. Other factors causing an increase in
non-interest expense include normal salary increases, training related to "The
New Bank" initiatives, and performance-based employee retirement plan expenses.
The banking operations efficiency ratio improved from 58.36% in 1996 to 56.54%
in 1997. These improvements were primarily the result of increased revenues, a
reduction in FDIC insurance premium expense, and expense control.
Quality service for Synovus' customers, provided in the most efficient
manner, continues to be a priority. During 1997, Synovus continued its
"modernization" effort, under which all banking support functions are being
reviewed for potential improvements. Synovus is investing in improved
technology, primarily through its decision to outsource primary bank data
processing services to Marshall & Illsley Data Services. In 1997, certain
consulting and training expenses have been incurred to focus efforts on
improving sales platform processing, standardizing certain support processes,
and more fully integrating Synovus' specialized banking services within the
branch system. These types of costs are expected to continue throughout 1998
with an emphasis on employee training and improved incentive compensation
related to the more significant "New Bank" strategies. Synovus believes that
these efforts will provide greatly improved product delivery abilities and
increased productivity of the support functions.
Through separate task forces, Synovus is continuing its ongoing projects to
assure its processing systems are Year 2000 compliant for its banking activities
and at TSYS. The task forces are composed of dedicated resources as well as
members from other areas within the banks and TSYS. The overall project plans
for the banks and TSYS have been reviewed by their Boards of Directors with
progress toward completion monitored regularly. The primary components of the
plans include: awareness - assuring a common understanding of the issue
throughout Synovus; assessment - identification of non-compliant hardware,
equipment, and software as well as suppliers and vendors; renovation -
renovation, replacement or retirement of programs; validation - testing
modifications of programs including coordination of testing with third parties
and vendors; and implementation - moving validated code to production. Both
companies are progressing according to their plans with system renovation
expected to be completed in 1998. Validation will begin in 1998 and is expected
to be completed by mid-1999. The cost to bring Synovus' systems into Year 2000
compliance are being expensed as incurred and are not expected to have a
material effect on the results of operations for 1998 or 1999. For the banks,
the conversion of the core processing systems to Marshall & Ilsley (M&I) will
provide for Year 2000 compliance for those applications which include loans,
deposits, and sales platforms. M&I expects their systems to be Year 2000
compliant by year-end 1998; Synovus management is monitoring their progress. The
remaining personal computer hardware platforms and software programs as well as
other ancillary systems such as ATMs, fax machines, copiers, and phone systems
are being reviewed with no significant applications or infrastructure to be
modified being identified. At TSYS, the core system of TS2 was designed to be
Year 2000 compliant. The modification phase for the balance of TSYS processing
systems is underway in accordance with their overall plan. TSYS is also
communicating regularly with their clients on their progress and future plans.
The failure of Synovus and TSYS to be Year 2000 compliant could have a material
adverse effect on each company's financial condition and results of operations.
In 1996, total non-interest expense increased $71.7 million, or 15.0 %,
over 1995. Expenses incurred at TSYS increased $53.0 million, or 25.6%, in 1996
over 1995. In 1996, the average number of employees at TSYS increased from 2,087
in 1995 to 2,498 in 1996. Employee additions were necessary to serve the growing
cardholder base. Remaining increases in employment expenses were due to normal
salary increases, related benefits, and employees being awarded the maximum
401(k) contribution of 5% due to TSYS' excellent financial performance in 1996.
Non-interest expense for Synovus' banking operations increased $18.8
million, or 6.9%, in 1996 over 1995. New hires, salary increases and related
benefits, and a $.7 million expense related to the termination of the previous
employee retirement plan account for most of this increase. Increases in
non-interest expense were partially offset by a $6.4 million decrease in FDIC
premium expense, prior to the special FDIC assessment, in 1996 compared to 1995
due to the lowering, in 1996, of the FDIC assessment rate on deposits. FDIC
premium expense decreased in 1996 even though a special assessment of $4.5
million, $2.8 million after tax, was imposed by the FDIC to recapitalize the
Savings Association Insurance Fund.
Investment Securities
Synovus' investment securities portfolio consists of debt and equity
securities categorized as either available for sale or held to maturity.
Investment securities provide Synovus with a source of liquidity and a
relatively stable source of income. The investment securities portfolio also
provides management with a tool to balance interest rate risk and credit risk
related to the loans on the balance sheet. At December 31, 1997, approximately
$1.05 billion of these investment securities were pledged as required collateral
for certain deposits and repurchase agreements. See Table 14 for maturity and
average yield information for the available for sale and held to maturity
investment securities.
F-38
Synovus' investment strategy focuses on the use of the investment
securities portfolio to manage the interest rate risk created by the natural
mismatch inherent in the loan and deposit portfolios. With the strong loan
demand at Synovus' subsidiary banks, there is little need for investment
securities solely to augment income or utilize unpledged deposits. As such,
Synovus' investment securities are primarily U.S. Treasuries, U.S. Government
agencies, and Government agency sponsored mortgage-backed securities, all of
which have a high degree of liquidity and limited credit risk. A mortgage-backed
security depends on the underlying pool of mortgage loans to provide a cash flow
"pass-through" of principal and interest. At December 31, 1997, substantially
all of the collateralized mortgage obligations and mortgage-backed, pass-through
securities held by Synovus were issued or backed by Federal agencies.
As of December 31, 1997 and 1996, the estimated fair value of investment
securities as a percentage of their amortized cost was 101.0% and 100.1%,
respectively. The investment securities portfolio had gross unrealized gains of
$18.2 million and gross unrealized losses of $2.4 million, for a net unrealized
gain of $15.8 million as of December 31, 1997. As of December 31, 1996, the
investment securities portfolio had a net unrealized gain of $1.5 million. In
accordance with SFAS No. 115, shareholders' equity contained a net unrealized
gain of $6.7 million and a net unrealized loss of $.1 million recorded on the
available for sale portfolio as of December 31, 1997 and 1996, respectively.
During 1997, the average balance of investment securities increased to
$1.65 billion, compared to $1.57 billion in 1996. Synovus earned a
taxable-equivalent rate of 6.58% and 6.51% for 1997 and 1996, respectively, on
its investment securities portfolio. As of December 31, 1997 and 1996, average
investment securities represented 20.8% and 21.5%, respectively, of average
interest earning assets. The decrease in the percentage of average investment
securities to average interest earning assets was due to management's desire to
utilize the majority of Synovus' funding growth to fund higher yielding loan
growth.
Table 5 presents the carrying value of investment securities held to
maturity and investment securities available for sale at December 31, 1997,
1996, and 1995.
- --------------------------------------------------------------------------------
Table 5
Investment Securities
(In thousands)
<TABLE>
<CAPTION>
December 31,
- -----------------------------------------------------------------------------------------------
1997 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Securities Held to Maturity:
U.S. Treasury and U.S. Government agencies ..... $ 63,372 84,366 81,772
Mortgage-backed securities ..................... 123,519 156,319 171,275
State and municipal ............................ 124,569 114,883 121,761
Other investments .............................. 18,677 7,440 6,110
- -----------------------------------------------------------------------------------------------
Total investment securities held to maturity . $ 330,137 363,008 380,918
===============================================================================================
Investment Securities Available for Sale:
U.S. Treasury and U.S. Government agencies ..... $1,175,213 1,131,922 1,004,286
Mortgage-backed securities ..................... 130,397 130,893 88,196
State and municipal ............................ 959 1,014 1,322
Other investments .............................. 18,467 12,254 12,494
- -----------------------------------------------------------------------------------------------
Total investment securities available for sale $1,325,036 1,276,083 1,106,298
===============================================================================================
Total Investment Securities:
U.S. Treasury and U.S. Government agencies ..... $1,238,585 1,216,288 1,086,058
Mortgage-backed securities ..................... 253,916 287,212 259,471
State and municipal ............................ 125,528 115,897 123,083
Other investments .............................. 37,144 19,694 18,604
- -----------------------------------------------------------------------------------------------
Total investment securities .................. $1,655,173 1,639,091 1,487,216
===============================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Loans
Loans are the primary interest earning asset for Synovus. When analyzing
prospective loans, management assesses both interest rate objectives and credit
quality objectives in determining whether to extend a given loan and the
appropriate pricing for that loan. Operating under a decentralized structure,
management emphasizes lending in subsidiaries' respective communities. As
illustrated in Table 6, Synovus strives toward maintaining a diversified loan
portfolio to spread risk and reduce exposure to economic downturns that may
occur in different segments of the economy, geographic locations, or in
particular industries. Demonstration of that strategy results in the fact that
Synovus does not have any concentration of loans to any single industry or
borrower, no foreign loans, and has no highly leveraged transaction credits as
of the end of 1997.
Representing 78.8% of average earning assets and 70.8% of average total
assets, net loans increased $547.3 million, or 9.6%, during 1997. Synovus has
continued to experience growth in loan balances and market share gains through
successful business development and additional products and services offered to
the current customer base. The mix of loan products being offered focuses on
meeting the needs of customers in the markets served while maintaining adherence
to sound lending practices. As a result of this emphasis, loans have continued
to grow throughout Synovus' subsidiary markets, with the most significant growth
at four subsidiaries headquartered in Columbus, Georgia; Columbia, South
Carolina; Birmingham, Alabama; and Jasper, Alabama. These four banks experienced
loan growth of $106.3 million, $98.6 million, $61.0 million, and $25.8 million,
respectively for the year ended December 31, 1997 over the same period in 1996.
F-39
Synovus has enjoyed a relatively strong average loan-to-deposit ratio over
the past three years. The average loan-to-deposit ratio for 1997, 1996, and 1995
was 86.5%, 84.4%, and 83.5%, respectively.
The growth in commercial loans was primarily centered in the larger markets
in Alabama, South Carolina, and Georgia. These markets have experienced economic
growth in 1997, especially with respect to real estate and working capital
loans. Commercial loans increased in 1997 due to economic growth in many of the
Southeastern communities Synovus' subsidiary banks serve. The growth in mortgage
loans held for sale is mostly attributable to underwriting mortgage loans that
are sold to third party investors, while retaining the servicing of those loans
at Synovus Mortgage Corp. Synovus' mortgage loans held for sale are
pre-committed extensions and are generally held less than thirty days, after
which the loans are sold in the market to an unaffiliated investor. The increase
in retail real estate mortgage loans from 1996 to 1997 results primarily from an
increased emphasis on the mortgage loan products offered by certain subsidiaries
as well as a favorable interest rate market for residential mortgage loans.
Synovus has reduced nonperforming assets as a percentage of loans during
1997 as a result of constant attention and focus on loan quality while at the
same time meeting the customers' needs. Loan officers work with each customer to
determine which loan products will optimally meet their individual and specific
lending needs. This focus on underwriting loans that benefit the customer, while
maintaining credit quality standards, causes Synovus to be optimistic about the
future growth and quality of the loan portfolio.
- --------------------------------------------------------------------------------
Table 6 shows the composition of the loan portfolio at the end of the past
five years.
Table 6
Loans by Type
(In thousands)
<TABLE>
<CAPTION>
December 31,
- -------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial:
Commercial, financial, and agricultural..........$2,273,031 2,036,689 1,931,004 1,783,928 1,567,310
Real estate-construction ........................ 835,162 730,785 578,712 472,131 414,801
Real estate-mortgage ............................ 1,302,941 1,234,981 1,160,089 1,030,524 890,297
Total commercial......................... 4,411,134 4,002,455 3,669,805 3,286,583 2,872,408
Retail:
Real estate-mortgage ............................ 1,039,420 977,432 824,998 865,642 760,530
Consumer loans-credit card....................... 306,360 290,470 222,204 171,475 150,653
Consumer loans-other............................. 819,112 768,072 784,972 756,402 664,554
Mortgage loans held for sale..................... 39,558 37,036 24,863 9,465 23,409
- -------------------------------------------------------------------------------------------------------------------------
Total retail............................. 2,204,450 2,073,010 1,857,037 1,802,984 1,599,146
- -------------------------------------------------------------------------------------------------------------------------
Total loans.............................. 6,615,584 6,075,465 5,526,842 5,089,567 4,471,554
Unearned income.................................. (5,712) (10,235) (14,812) (14,691) (18,148)
- -------------------------------------------------------------------------------------------------------------------------
Total loans, net of unearned income......$6,609,872 6,065,230 5,512,030 5,074,876 4,453,406
=========================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Table 7
Loan Maturity Distribution and Interest Sensitivity
(In thousands)
<TABLE>
<CAPTION>
December 31, 1997
- ---------------------------------------------------------------------------------------------------
One Over One Year Over
Year Through Five Five
Or Less Years Years Total
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Selected loan categories:
Commercial, financial, and agricultural $1,351,631 795,991 125,409 2,273,031
Real estate-construction .............. 549,557 244,777 40,828 835,162
- ---------------------------------------------------------------------------------------------------
Total ......................... $1,901,188 1,040,768 166,237 3,108,193
===================================================================================================
Loans due after one year:
Having predetermined interest rates ........................................... $ 682,084
Having floating interest rates ............................................... 524,921
- ---------------------------------------------------------------------------------------------------
Total ................................................................ $1,207,005
===================================================================================================
</TABLE>
F-40
- --------------------------------------------------------------------------------
Commercial, financial, and agricultural loans include industrial revenue
bonds and other loans that are granted primarily on the strength of the
borrower's ability to generate repayment cash flows from income sources as well
as the borrower's general credit standing, even though such loans and bonds may
be secured by real estate or other assets. Real estate construction and mortgage
loans represent extensions of credit used as interim or permanent financing of
commercial properties that are secured by real estate as well as 1-4 family
first mortgage loans.
Generally, retail lending decisions are made based upon the cash flow or
earning power of the borrower that represents the primary source of repayment.
However, in many lending transactions collateral is taken to provide an
additional measure of security. Transactions secured by collateral result in a
secondary source of repayment in that the collateral may be liquidated. Synovus
determines the need for collateral on a case-by-case basis. Factors considered
include the current and prospective credit-worthiness of the customer, terms of
the loan, and economic conditions.
Provision for Losses on Loans and Net Charge-Offs
Despite Synovus' credit standards, internal controls, and continuous loan
review process, the inherent risk in the nature of lending results in periodic
charge-offs. The provision for loan losses is the charge to operating earnings
necessary to maintain an adequate reserve for loan losses. Through the provision
for loan losses, Synovus maintains a reserve for loan losses that management
believes is adequate to absorb losses within the loan portfolio. However, future
additions to the reserve may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination procedures, periodically review Synovus' subsidiary banks'
reserve for loan losses. Based on their judgments about information available to
them at the time of their examination, such agencies may require Synovus'
subsidiary banks to recognize additions to their reserve for loan losses.
In order to determine the adequacy of the reserve for loan losses and to
determine the need for potential charges to the reserve, a formal analysis is
completed quarterly to assess the risk within the loan portfolio. This
assessment, conducted by lending officers and each bank's loan administration
department as well as an independent holding company loan administration
department, includes analysis of historical performance, the level of
nonperforming loans, specific analysis of certain problem loans, loan activity
since the last quarter, consideration of current economic conditions, and other
pertinent information. The resulting conclusions are reviewed and approved by
senior management.
In accordance with SFAS No. 114, "Accounting by Creditors for Impairment of
a Loan", management, considering current information and events regarding the
borrowers' ability to repay their obligations, considers a loan to be impaired
when the ultimate collectibility of all amounts due, according to the
contractual terms of the loan agreement, is in doubt. When a loan becomes
impaired, management calculates the impairment based on the present value of
expected future cash flows discounted at the loan's effective interest rate. If
the loan is collateral dependent, the fair value of the collateral is used to
measure the amount of impairment. The amount of impairment and any subsequent
changes are recorded, through a charge to earnings, as an adjustment to the
reserve for loan losses. When management considers a loan, or a portion thereof,
as uncollectible, it is charged against the reserve for loan losses.
Synovus' provision for loan losses during 1997 was $32.3 million, up 1.7%,
compared to $31.8 million in 1996. Nonperforming assets as a percent of loans
and other real estate are at their lowest level in more than twenty years at
.44% and the reserve is 557.9% of nonperforming loans. The slight increase in
the provision for loan losses is primarily a result of management's ongoing
assessment of the loan portfolio, especially with respect to credit card
borrowings, loan growth, and the potential for increased loan weaknesses in
light of the slowing economy. Net charge-offs were $23.9 million compared to
$18.7 million in 1996. As a percentage of average net loans, the net charge-off
ratio was .38% in 1997 compared to .32% in 1996. The slight increase in the
charge-off ratio is primarily due to the credit card charge-offs experienced in
1997. Synovus, along with credit card issuers in general, has experienced a
trend of higher than normal credit card charge-offs, largely as the result of
bankruptcies. Synovus has increased collection efforts and adjusted underwriting
standards in order to address this problem. Credit card charge-offs represented
approximately 50% of the total year to date charge-offs while credit card loans
represented approximately 5% of Synovus' loan portfolio. The charge-off ratio on
all other loans was approximately .17% in 1997 compared to .21% in 1996. A
summary, by loan category, of loans charged off, recoveries of loans previously
charged off, and additions to the reserve through provision expense is presented
in Table 8.
F-41
- --------------------------------------------------------------------------------
Table 8
Reserve for Loan Losses
<TABLE>
<CAPTION>
(In thousands)
Years Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reserve for loan losses at beginning of year .............. $94,683 81,384 75,018 67,270 61,336
Reserve for loan losses of acquired subsidiaries .......... -- 188 1,001 1,535 --
Loans charged off during the year:
Commercial:
Commercial, financial, and agricultural ... 7,229 7,790 13,746 13,809 13,097
Real estate-construction .................. 412 217 239 240 228
Real estate-mortgage ...................... 2,183 2,356 1,840 1,849 1,753
- ---------------------------------------------------------------------------------------------------------------
Total commercial .................. 9,824 10,363 15,825 15,898 15,078
- ---------------------------------------------------------------------------------------------------------------
Retail:
Real estate-mortgage ...................... 1,750 1,032 209 210 200
Consumer loans-credit card ................ 14,306 7,798 6,627 6,658 6,315
Consumer loans-other ...................... 5,938 5,987 2,271 2,282 2,164
Mortgage loans held for sale .............. -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
Total retail ...................... 21,994 14,817 9,107 9,150 8,679
- ---------------------------------------------------------------------------------------------------------------
Total loans charged off ........... 31,818 25,180 24,932 25,048 23,757
- ---------------------------------------------------------------------------------------------------------------
Recoveries of loans previously charged off during the year:
Commercial:
Commercial, financial, and agricultural ... 3,353 1,699 1,217 1,585 1,287
Real estate-construction .................. 99 173 50 65 52
Real estate-mortgage ...................... 1,206 1,312 92 120 97
- ---------------------------------------------------------------------------------------------------------------
Total commercial .................. 4,658 3,184 1,359 1,770 1,436
- ---------------------------------------------------------------------------------------------------------------
Retail:
Real estate-mortgage ...................... 197 352 115 149 121
Consumer loans-credit card ................ 737 776 1,237 1,611 1,308
Consumer loans-other ...................... 2,297 2,213 1,799 2,344 1,902
Mortgage loans held for sale .............. -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
Total retail ...................... 3,231 3,341 3,151 4,104 3,331
- ---------------------------------------------------------------------------------------------------------------
Total loans recovered ............. 7,889 6,525 4,510 5,874 4,767
- ---------------------------------------------------------------------------------------------------------------
Net loans charged off during the year ..................... 23,929 18,655 20,422 19,174 18,990
- ---------------------------------------------------------------------------------------------------------------
Additions to reserve through provision expense ............ 32,296 31,766 25,787 25,387 24,924
- ---------------------------------------------------------------------------------------------------------------
Reserve for loan losses at end of year .................... $103,050 94,683 81,384 75,018 67,270
===============================================================================================================
Reserve for loan losses to loans .......................... 1.56% 1.56 1.48 1.48 1.51
===============================================================================================================
Ratio of net loans charged off during the year to average
net loans outstanding during the year ............. .38% .32 .38 .41 .45
===============================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
An allocation of the reserve for loan losses has been made according to the
respective amounts deemed necessary to provide for the possibility of incurred
losses within the various loan categories. Although other relevant factors are
considered, the allocation is primarily based on previous charge-off experience
adjusted for risk characteristic changes among each category. Additional reserve
amounts are allocated by evaluating the loss potential of individual loans that
management has considered impaired. The reserve for loan loss allocation is
based on subjective judgment and estimates, and therefore is not necessarily
indicative of the specific amounts or loan categories in which charge-offs may
ultimately occur. Refer to Table 9 for a five year comparison of the allocation
of the reserve for loan losses.
F-42
Table 9
Allocation of Reserve for Loan Losses
(In thousands)
<TABLE>
<CAPTION>
December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
Reserve %* Reserve %* Reserve %* Reserve %* Reserve %*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial:
Commercial, financial, and
agricultural ................ $ 41,544 34% $38,171 34% $32,810 35 $32,343 36% $28,539 35%
Real estate-construction ............ 1,766 13 1,163 12 570 10 562 9 496 9
Real estate-mortgage ................ 5,562 20 5,110 20 4,392 21 4,329 20 3,820 20
- ------------------------------------------------------------------------------------------------------------------------------------
Total commercial ............ 48,872 67 44,444 66 37,772 66 37,234 65 32,855 64
- ------------------------------------------------------------------------------------------------------------------------------------
Retail:
Real estate-mortgage ................ 632 16 581 16 499 15 492 17 434 17
Consumer loans-credit card .......... 14,646 5 11,619 5 6,627 4 6,658 3 6,315 3
Consumer loans-other ................ 17,421 12 15,088 13 14,610 14 14,277 15 12,159 15
Mortgage loans held for sale ........ -- -- -- -- -- 1 -- -- -- 1
- ------------------------------------------------------------------------------------------------------------------------------------
Total retail ................ 32,699 33 27,288 34 21,736 34 21,427 35 18,908 36
- ------------------------------------------------------------------------------------------------------------------------------------
Unallocated ......................... 21,479 -- 22,951 -- 21,876 -- 16,357 -- 15,507 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total reserve for loan losses $103,050 100% $94,683 100% $81,384 100 $75,018 100% $67,270 100%
====================================================================================================================================
* Loan balance in each category expressed as a percentage of total loans.
</TABLE>
- --------------------------------------------------------------------------------
Nonperforming Assets
Nonperforming assets consist of nonaccrual loans, loans restructured due to
debtors' financial difficulties, and real estate acquired through foreclosure
and repossession. Nonaccrual loans consist of those loans on which recognition
of interest income has been discontinued. Loans may be restructured as to rate,
maturity, or other terms as determined on an individual credit basis. Demand and
time loans, whether secured or unsecured, are generally placed on nonaccrual
status when principal and/or interest is 90 days or more past due, or earlier if
it is known or expected that the collection of all principal and/or interest is
unlikely. Any loan past due 90 days or more, and based on a determination of
collectibility not classified as nonaccrual, is classified as a past due loan.
Nonaccrual loans are reduced by the direct application of interest receipts to
loan principal, for accounting purposes only. Any payments in excess of the
interest that would have been earned had the loan been an accruing loan, are
applied to the principal balance. In all circumstances, the determination of
when to place loans on nonaccrual status is also based on evaluation of the
individual characteristics of each particular loan, which may result in policy
deviations in some circumstances. Table 10 presents the amount of interest
income that would have been recorded on nonaccrual loans if the loans had been
current and performing in accordance with their original terms.
Synovus' nonperforming assets decreased $7.3 million to $28.8 million with
a corresponding nonperforming asset ratio improving to .44% as of December 31,
1997 compared to .59% as of year-end 1996. Synovus reduced nonperforming assets
while increasing loans $540.1 million, or 8.9%, during 1997. During 1997, the
reserve for loan losses increased $8.4 million, or 8.8%, to $103.1 million.
Based on management's analysis of potential risk within the loan portfolio,
additions are periodically made to maintain the reserve for loan losses at an
appropriate level. Loans 90 days past due and still accruing increased $5.1
million during 1997. Management believes that sufficient collateral value
securing these loans exists to cover contractual interest and principal payments
on the loans and management further believes the resolution of these
delinquencies will not cause a material increase in nonperforming assets.
F-43
- --------------------------------------------------------------------------------
Table 10
Nonperforming Assets
(In thousands)
<TABLE>
<CAPTION>
December 31,
- ------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans .......................................... $17,909 23,655 21,469 26,497 30,296
Restructured loans ........................................ 563 1,625 1,733 1,900 224
- ------------------------------------------------------------------------------------------------------------
Nonperforming loans ....................... 18,472 25,280 23,202 28,397 30,520
90 days past due and still accruing loans ................. 20,881 15,805 11,417 7,383 9,870
- ------------------------------------------------------------------------------------------------------------
Total ..................................... $39,353 41,085 34,619 35,780 40,390
============================================================================================================
Nonperforming assets:
Nonperforming loans <F1>........................... $18,472 25,280 23,202 28,397 30,520
Other real estate ................................. 10,335 10,782 12,071 12,355 15,838
- ------------------------------------------------------------------------------------------------------------
Total ..................................... $28,807 36,062 35,273 40,752 46,358
============================================================================================================
Nonperforming assets to total loans and other real estate.. .44% .59 .64 .80 1.04
============================================================================================================
Reserve for loan losses to nonperforming loans ............ 557.87% 374.54 350.76 264.18 220.41
============================================================================================================
Nonaccrual Restructured Total
---------- ------------ -----
Year ended December 31, 1997:
Interest at contracted rates <F2>...................................... $3,072 60 3,132
Interest recorded as income ........................................... 897 51 948
- ------------------------------------------------------------------------------------------------------------
Reduction of interest income during 1997....................................... $2,175 9 2,184
============================================================================================================
<FN>
<F1> Nonperforming assets exclude loans 90 days past due and still accruing.
<F2> Interest income that would have been recorded if the loans had been current
and performing in accordance with their original terms.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
Each one of Synovus' loans is assigned a rating, either individually or as
part of a homogeneous pool, based on an internally developed grading system. An
organizationally independent department also reviews grade assignments on an
ongoing basis. Management continuously monitors nonperforming, impaired, and
past due loans, in order to prevent further deterioration regarding the
condition of these loans. Management is not aware of any material loans
classified for regulatory purposes as loss, doubtful, substandard, or special
mention that have been excluded from nonperforming assets or impaired loans.
Impaired loans at December 31, 1997 and 1996 are $25.7 million and $35.9
million, respectively. Management further believes nonperforming assets and
impaired loans include any material loans in which doubts exist as to the
collectibility of amounts due according to the contractual terms of the loan
agreement.
Deposits
Deposits provide the most significant funding source for Synovus' interest
earning assets. Table 11 shows the relative composition of average deposits for
1997, 1996, and 1995. Refer to Table 12 for the maturity distribution of time
deposits of $100,000 or more. These larger deposits represented 17.0% and 15.6%
of total deposits at December 31, 1997 and 1996, respectively. Synovus' large
denomination time deposits are generally from customers within the local market
areas of its subsidiary banks, and, therefore, provide a greater degree of
stability than is typically associated with this source of funds. Time deposits
over $100,000 at December 31, 1997, 1996, and 1995 were $1.3 billion, $1.1
billion, and $1.0 billion, respectively. Interest expense for the years ended
December 31, 1997, 1996, and 1995 on these large denomination deposits was $68.4
million, $62.1 million, and $57.3 million, respectively.
For 1997, Synovus' average deposits increased $472.9 million, or 6.9%, to
$7.3 billion from $6.9 billion in 1996. Average interest bearing deposits for
1997, which include interest bearing demand deposits, money market accounts,
saving deposits, and time deposits, increased $407.5 million, or 7.1%, from
1996. This strong deposit growth occurred throughout several of the Synovus
subsidiary banks that used targeted time and money market deposit programs to
increase their deposits during 1997. Average non-interest bearing demand
deposits increased $65.4 million, or 6.1%, during 1997. Average interest bearing
deposits increased $385.1 million, or 7.1%, from 1995 to 1996, while
non-interest bearing demand deposits increased $88.1 million, or 8.9%. See Table
3 for further information on average deposits, including the average rates paid
for 1997, 1996, and 1995.
F-44
- --------------------------------------------------------------------------------
Table 11
Average Deposits
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
- -----------------------------------------------------------------------------
1997 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Non-interest bearing demand deposits.. $1,140,107 1,074,676 986,582
Interest bearing demand deposits ..... 1,055,227 940,303 887,694
Money market accounts ................ 1,216,729 1,034,336 915,710
Savings deposits ..................... 458,362 469,714 475,962
Time deposits ........................ 3,455,046 3,333,501 3,113,375
- -----------------------------------------------------------------------------
Total average deposits ....... $7,325,471 6,852,530 6,379,323
=============================================================================
</TABLE>
- --------------------------------------------------------------------------------
Table 12
Maturity Distribution of Time Deposits of $100,000 or More
(In thousands)
<TABLE>
<CAPTION>
December 31, 1997
- ----------------------------------------------------------------------------------
<S> <C>
3 months or less ................................................... $596,776
Over 3 months through 6 months...................................... 206,859
Over 6 months through 12 months..................................... 303,824
Over 12 months ..................................................... 205,600
- ----------------------------------------------------------------------------------
Total outstanding .......................................... $1,313,059
==================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Interest Rate Risk Management
Managing interest rate risk is the primary goal of Synovus' asset/liability
management function. Synovus attempts to achieve consistent growth in net
interest income while limiting volatility arising from changes in interest
rates. Synovus seeks to accomplish this goal by balancing the maturity and
repricing characteristics of balance sheet assets and liabilities along with the
selective use of off-balance sheet financial instruments. Synovus'
asset/liability mix is sufficiently balanced so that the effect of interest
rates moving in either direction is not expected to be significant over time.
Simulation modeling is the primary tool used by Synovus to measure its
interest rate sensitivity. On at least a quarterly basis, the remainder of the
current year and the next full fiscal year are simulated to determine the
sensitivity of net interest income to changes in interest rates. The magnitude
and velocity of rate changes among the various asset and liability groups
exhibit different characteristics for each possible interest rate scenario.
Simulation modeling enables Synovus to capture the effect of these differences
as well as the effect of changes in asset and liability volumes.
Synovus maintains policies designed to limit the maximum acceptable
negative impact on net interest income over a twelve month time horizon from a
gradual change in interest rates of up and down 200 basis points. The current
policy limits this change to 8% of projected net interest income under a stable
interest rate environment. As of December 31, 1997, Synovus was well within its
policy guidelines with simulations indicating that Synovus is positioned such
that its net interest income will slightly increase in a rising rate environment
and decrease by no more than 4% in a declining rate environment.
Another tool utilized by Synovus' management is cumulative gap analysis,
which seeks to measure the repricing differentials, or gap, between rate
sensitive assets and liabilities over various time periods. Table 13 reflects
the gap positions of Synovus' consolidated balance sheet on December 31, 1997
and 1996, at various repricing intervals. The projected deposit repricing
volumes reflect adjustments based on management's assumptions of the expected
rate sensitivity relative to the prime rate for core deposits without
contractual maturity (i.e., interest bearing checking, savings, and money market
accounts). Management believes that these adjustments allow for a more accurate
profile of Synovus' interest rate risk position. The projected investment
securities repricing reflects expected prepayments on mortgage-backed securities
and expected cash flows on securities subject to accelerated redemption options.
These assumptions are made based on the interest rate environment as of December
31, 1997 and are subject to change as the general level of interest rates
change. Management would anticipate a modest lengthening of average investment
maturities in a rising rate environment and a more limited shortening in a
declining rate environment. While these potential changes are not depicted in
the static gap analysis, simulation modeling allows for the proper analysis of
these and other relevant potential changes. This gap analysis indicates that
Synovus was moderately asset sensitive at December 31, 1997, with a cumulative
one-year gap of 3.7%. Management believes that adjusted gap analysis is a useful
tool for measuring interest rate risk only when used in conjunction with its
simulation model.
F-45
- --------------------------------------------------------------------------------
Table 13
Interest Rate Sensitivity
(In millions)
<TABLE>
<CAPTION>
December 31, 1997
- ----------------------------------------------------------------------------------------------------------------------------------
0-3 4-12 1-5 Over 5
Months Months Years Years
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment securities<F1> ................................................................ $ 129.0 379.6 910.5 225.3
Loans, net of unearned income ............................................................ 3,537.1 1,041.2 1,879.8 151.8
Other .................................................................................... 94.7 -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Interest sensitive assets ........................................................ 3,760.8 1,420.8 2,790.3 377.1
- ----------------------------------------------------------------------------------------------------------------------------------
Deposits ................................................................................. 2,190.2 2,017.2 1,708.6 535.3
Other borrowings ......................................................................... 339.8 0.5 12.3 79.4
- ----------------------------------------------------------------------------------------------------------------------------------
Interest sensitive liabilities ................................................... 2,530.0 2,017.7 1,720.9 614.7
Interest rate swaps .............................................................. (325.0) -- 325.0 --
Interest sensitivity gap ................................................. $ 905.8 (596.9) 1,394.4 (237.6)
==================================================================================================================================
Cumulative interest sensitivity gap ...................................... $ 905.8 308.9 1,703.3 1,465.7
==================================================================================================================================
Cumulative interest sensitivity gap as a percentage of total interest
sensitive assets...................................................... 10.8% 3.7 20.4 17.6
==================================================================================================================================
<FN>
<F1> Excludes the effect of SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities", consisting of net unrealized gains in the
amount of $10.8 million in 1997 and net unrealized losses of $.2 million in
1996.
</FN>
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------------
0-3 4-12 1-5 Over 5
Months Months Years Years
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment securities<F1> ............................................................... $ 102.3 327.6 929.4 280.0
Loans, net of unearned income ........................................................... 3,108.9 1,016.2 1,628.9 311.2
Other ................................................................................... 40.3 -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Interest sensitive assets ....................................................... 3,251.5 1,343.8 2,558.3 591.2
- ----------------------------------------------------------------------------------------------------------------------------------
Deposits ................................................................................ 2,298.9 1,435.1 654.7 1,624.4
Other borrowings ........................................................................ 352.4 .3 6.2 77.6
- ----------------------------------------------------------------------------------------------------------------------------------
Interest sensitive liabilities .................................................. 2,651.3 1,435.4 660.9 1,702.0
- ----------------------------------------------------------------------------------------------------------------------------------
Interest rate swaps ............................................................. (305.0) -- 305.0 --
- ----------------------------------------------------------------------------------------------------------------------------------
Interest sensitivity gap ................................................ $ 295.2 (91.6) 2,202.4 (1,110.8)
==================================================================================================================================
Cumulative interest sensitivity gap ..................................... $ 295.2 203.6 2,406.0 1,295.2
==================================================================================================================================
Cumulative interest sensitivity gap as a percentage of total interest
sensitive assets..................................................... 3.8% 2.6 31.1 16.7
==================================================================================================================================
<FN>
<F1> Excludes the effect of SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities", consisting of net unrealized gains in the
amount of $10.8 million in 1997 and net unrealized losses of $.2 million in
1996.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
F-46
Table 14
Maturities of Investment Securities and Average Yields
(In thousands)
<TABLE>
<CAPTION>
Investment Securities Investment Securities
Held to Maturity Available for Sale
December 31, 1997 December 31, 1997
Amortized Average Estimated Average
Cost Yield Fair Value Yield
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government agencies:
Within 1 year ..................... $ 35,711 6.35% 354,382 6.32
1 to 5 years ...................... 26,661 6.54 779,211 6.48
5 to 10 years ..................... 1,000 6.22 41,620 5.95
More than 10 years ................ -- -- -- --
- ----------------------------------------------------------------------------------------
Total ............. 63,372 6.43 1,175,213 6.41
- ----------------------------------------------------------------------------------------
Mortgage-backed securities:
Within 1 year ..................... 36,825 6.13 13,822 6.40
1 to 5 years ...................... 50,586 6.15 53,202 6.23
5 to 10 years ..................... 24,376 7.15 23,863 6.56
More than 10 years ................ 11,732 6.73 39,510 6.98
- ----------------------------------------------------------------------------------------
Total ............. 123,519 6.40 130,397 6.54
- ----------------------------------------------------------------------------------------
State and municipal:
Within 1 year ..................... 12,659 9.06 -- --
1 to 5 years ...................... 33,959 8.64 634 9.65
5 to 10 years ..................... 41,948 7.91 -- --
More than 10 years ................ 36,003 8.84 325 8.47
- ----------------------------------------------------------------------------------------
Total ............. 124,569 8.49 959 9.26
- ----------------------------------------------------------------------------------------
Other investments:
Within 1 year ..................... 571 7.87 1,089 7.25
1 to 5 years ...................... 25 7.34 9,069 7.28
5 to 10 years ..................... 5 6.94 594 4.73
More than 10 years ................ 18,076 5.25 7,715 2.13
- ----------------------------------------------------------------------------------------
Total ............. 18,677 5.33 18,467 5.05
- ----------------------------------------------------------------------------------------
Total investment securities:
Within 1 year ..................... 85,766 6.67 369,293 6.33
1 to 5 years ...................... 111,231 7.00 842,116 6.48
5 to 10 years ..................... 67,329 7.61 66,077 6.16
More than 10 years ................ 65,811 7.48 47,550 6.20
- ----------------------------------------------------------------------------------------
Total ............. $330,137 7.13 $1,325,036 6.41%
- ----------------------------------------------------------------------------------------
</TABLE>
The calculation of weighted average yields for securities is based on the
amortized cost and effective yields of each security. The yield on state and
municipal securities is computed on a taxable-equivalent basis using the
statutory federal income tax rate of 35% for 1997. Maturity information is
calculated based upon expected maturity. Mortgage-backed and other securities
which have prepayment provisions are assigned to maturity categories based on
their estimated average lives.
- --------------------------------------------------------------------------------
F-47
Off-Balance Sheet Derivatives for Interest Rate Risk Management
As part of the overall interest rate risk management activities, Synovus
utilizes off-balance sheet derivatives to modify the repricing characteristics
of on-balance sheet assets and liabilities. The primary instruments utilized by
Synovus are interest rate swaps where Synovus receives a fixed rate of interest
and pays a floating rate tied to either the prime rate or 3 month libor. These
swaps are utilized to convert on-balance sheet floating rate loans to fixed rate
assets, and to convert certain fixed rate liabilities to floating rate
liabilities thereby reducing Synovus' overall asset sensitivity.
Synovus also purchased interest rate floors and collars to manage its
overall interest rate risk position. Interest rate floors serve to effectively
convert floating-rate loans to fixed-rate when the prime rate falls below a
pre-specified level. These instruments are utilized to reduce asset sensitivity
in falling rate environments but not in rising rate environments. Interest rate
collars convert floating-rate loans to fixed-rate when the prime rate moves
outside of a pre-specified range. These instruments reduce overall asset
sensitivity in both falling and rising interest rate environments.
All off-balance sheet derivatives utilized by Synovus represent end-user
activities designed as hedges, all of which are linked to specific assets or
liabilities as part of overall interest rate risk management practices.
Management feels that the utilization of these instruments provides greater
financial flexibility and is a very efficient tool for managing interest rate
risk.
The notional amount of off-balance sheet derivatives utilized by Synovus as
of December 31, 1997 and 1996, was $515 million and $450 million, respectively.
The notional amounts represent the amount on which calculations of interest
payments to be exchanged are based. Although Synovus is not exposed to credit
risk equal to the notional amounts, there is exposure to potential credit risks
equal to the fair or replacement values of the swaps if the counterparty fails
to perform. This credit risk is normally a very small percentage of the notional
amount and fluctuates as interest rates change. Synovus minimizes this risk by
subjecting the transaction to the same approval process as on-balance sheet
credit activities, by dealing with only highly-rated counterparties, and by
obtaining collateral agreements for exposure above certain predetermined limits.
F-48
<TABLE>
<CAPTION>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Weighted Weighted Weighted
December 31, 1997 Notional Average Average Average Maturity Unrealized Unrealized Net Unrealized
(In thousands) Amount Receive Rate Pay Rate<F1> In Months Gains Losses Gains(Losses)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Receive Fixed Swaps - LIBOR $ 280,000 5.96% 5.82 26 $ 548 (1,072) (524)
Receive Fixed Swaps - Prime 70,000 9.10 8.50 39 1,136 -- 1,136
- ------------------------------------------------------------------------------------------------------------------------------------
Total Receive Fixed Swaps 350,000 6.59 6.35 28 1,684 (1,072) 612
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Notional Average Cap Average Average Maturity Unrealized Unrealized Net Unrealized
Amount Rate Floor Rate In Months Gains Losses Gains(Losses)
- ------------------------------------------------------------------------------------------------------------------------------------
Purchased Interest Rate Collars 80,000 9.16 7.91 22 -- (48) (48)
Weighted Weighted
Notional Average Floor Average Maturity Unrealized Unrealized Net Unrealized
Amount Rate In Months Gains Losses Gains(Losses)
- ------------------------------------------------------------------------------------------------------------------------------------
Purchased Interest Rate Floors 85,000 7.87 36 -- (62) (62)
Weighted
Notional Average Maturity Unrealized Unrealized Net Unrealized
Amount In Months Gains Losses Gains(Losses)
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 515,000 29 $1,684 (1,182) 502
======= ===== ===== ===
Weighted Weighted Weighted
December 31, 1996 Notional Average Average Average Maturity Unrealized Unrealized Net Unrealized
(In thousands) Amount Receive Rate Pay Rate<F1> In Months Gains Losses Gains(Losses)
- ------------------------------------------------------------------------------------------------------------------------------------
Receive Fixed Swaps - LIBOR $ 235,000 5.79% 5.53 32 $ -- (2,200) (2,200)
Receive Fixed Swaps - Prime 70,000 9.10 8.25 51 630 -- 630
- ------------------------------------------------------------------------------------------------------------------------------------
Total Receive Fixed Swaps 305,000 6.55 6.15 36 630 (2,200) (1,570)
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Notional Average Cap Average Average Maturity Unrealized Unrealized Net Unrealized
Amount Rate Floor Rate In Months Gains Losses Gains(Losses)
- ------------------------------------------------------------------------------------------------------------------------------------
Purchased Interest Rate Collars 80,000 9.16 7.91 34 -- (445) (445)
Weighted Weighted
Notional Average Average Maturity Unrealized Unrealized Net Unrealized
Amount Floor Rate In Months Gains Losses Gains(Losses)
- ------------------------------------------------------------------------------------------------------------------------------------
Purchased Interest Rate Floors 65,000 7.83 48 80 -- 80
Weighted
Notional Average Maturity Unrealized Unrealized Net Unrealized
Amount In Months Gains Losses Gains(Losses)
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 450,000 38 $ 710 (2,645) (1,935)
======= === ===== =====
<FN>
<F1>Variable pay rate based upon contract rates in effect at December 31, 1997
and 1996
</FN>
</TABLE>
The above table represents the December 31, 1997 and 1996 status of all
off-balance sheet interest rate contracts. There were no maturities, offsets, or
terminations in 1997 or 1996. Off-balance sheet interest rate contracts
contributed additional net interest income of $719,000 and one basis point to
the net interest margin for 1996. The impact of off-balance sheet interest rate
contracts for 1997 and 1995 was immaterial.
F-49
Market Risk
Market risk reflects the risk of economic loss resulting from adverse
changes in market prices and interest rates. This risk of loss can be reflected
in either diminished current market values or reduced potential net interest
income in future periods.
Synovus' market risk arises primarily from interest rate risk inherent in
its lending and deposit taking activities. The structure of Synovus' loan and
deposit portfolios is such that a significant decline in the prime rate may
adversely impact net market values and interest income. Management seeks to
manage this risk through the utilization of various tools, primarily investment
securities and off-balance sheet derivative financial instruments. The
composition and size of the investment portfolio is managed so as to reduce the
interest rate risk in the deposit and loan portfolios while at the same time
maximizing the yield generated from the portfolio. Off-balance sheet derivatives
are also utilized to reduce the risk in the deposit and loan portfolios. One of
the primary instruments utilized by Synovus is the receive fixed interest rate
swap which allows the company to effectively convert on-balance sheet floating
rate loans to fixed rate assets. Synovus also utilizes interest rate floors and
collars. These instruments allow the company to further reduce its exposure to
declining interest rates.
The table below presents in tabular form the contractual balances and the
estimated fair value of Synovus' on-balance sheet financial instruments and the
notional amount and estimated fair value of the company's off-balance sheet
derivative financial instruments at their expected maturity dates as of December
31, 1997. The expected maturity categories take into consideration historical
prepayment experience as well as management's expectations based on the interest
rate environment as of December 31, 1997. For core deposits without contractual
maturity (i.e., interest bearing checking, savings, and money market accounts),
the table presents principal cash flows based on management's judgment
concerning their most likely runoff or repricing behaviors. The table below
presents notional amounts and weighted-average interest rates by contractual
maturity date for off-balance sheet derivative financial instruments. Notional
amounts represent the amount on which calculations of interest payments to be
exchanged are based. Weighted average variable rates are based on implied
forward rates in the yield curve as of December 31, 1997.
- --------------------------------------------------------------------------------
Table 15
<TABLE>
<CAPTION>
Market Risk Information Fair
(In thousands) Principal/Notional Amount Maturing in: Value
Rate-sensitive assets: 1998 1999 2000 2001 2002 Thereafter Total 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed interest rate loans $1,220,679 602,417 491,143 354,114 354,922 351,318 3,374,593 3,238,431
Average interest rate 9.08% 9.10 9.15 8.90 9.11 8.73 9.04
Variable interest rate loans $2,422,982 265,284 166,837 64,755 113,590 201,831 3,235,279 3,235,279
Average interest rate 9.29% 9.28 9.19 8.92 9.15 9.16 9.26
Fixed interest rate securities $ 457,484 364,898 275,970 205,693 93,678 197,009 1,594,732 1,610,517
Average interest rate 6.26% 6.56 6.57 6.71 6.49 7.10 6.56
Variable interest rate securities $ 1,268 1,138 1,135 1,168 1,223 43,694 49,626 49,626
Average interest rate 6.26% 6.26 6.26 6.26 6.26 6.75 6.69
Other interest bearing assets $ 94,664 -- -- -- -- -- 94,664 94,664
Average interest rate 5.08% -- -- -- -- -- 5.08
Rate-sensitive liabilities:
- ----------------------------------------------------------------------------------------------------------------------------------
Savings and interest bearing checking $1,378,194 273,145 273,145 229,308 229,308 469,824 2,852,924 2,859,623
Average interest rate 3.85% 3.27 3.27 3.06 3.06 2.60 3.41
Fixed interest rate time deposits $2,667,716 417,972 175,394 38,076 52,878 87,777 3,439,813 3,437,167
Average interest rate 5.56% 6.11 6.42 5.76 6.03 5.51 5.68
Variable interest rate time deposits $ 110,925 45,574 2,018 5 7 22 158,551 158,551
Average interest rate 5.37% 5.36 6.54 6.49 6.36 6.50 5.38
Fixed interest rate borrowings $ 8,917 488 5,490 500 5,845 30,443 51,683 50,929
Average interest rate 4.78% 8.08 5.28 8.22 5.79 6.12 5.95
Variable interest rate borrowings $ 355,359 -- 25,000 -- -- -- 380,359 380,359
Average interest rate 5.49% -- 5.65 -- -- -- 5.50
Rate-sensitive derivative financial
instruments:
- ----------------------------------------------------------------------------------------------------------------------------------
Payable variable interest rate
swaps-LIBOR $185,000 50,000 25,000 20,000 280,000 279,476
Average pay rate 5.83% 5.77 5.85 5.78
Average receive rate 5.87% 5.49 7.12 6.50
Pay variable interest rate swaps-Prime $ 20,000 50,000 70,000 71,136
Average pay rate 8.50% 8.50
Average receive rate 8.94% 9.19
Interest rate collars purchased-Prime $ 30,000 50,000 80,000 79,952
Average cap rate 9.00% 9.25
Average floor rate 7.75% 8.00
Interest rate floors purchased-Prime $ 45,000 40,000 85,000 84,938
Average strike rate 7.86% 7.88
- --------------------------------------------------------------------------------
</TABLE>
F-50
Liquidity
Liquidity represents the availability of funding to meet the needs of
depositors, borrowers, and creditors at a reasonable cost, on a timely basis,
and without adverse consequences. The Synovus Asset/Liability Management
Committee actively analyzes and manages Synovus' liquidity position in
coordination with similar committees at each subsidiary bank. These
subsidiaries, with the help of management, maintain liquidity in the form of
cash on deposit, federal funds, securities available for sale, and cash derived
from prepayments and maturities of both their investment and loan portfolios.
Liquidity is also enhanced by the acquisition of new deposits and the well
established core deposits of Synovus' 227 banking offices in four states. The
subsidiary banks monitor deposit flow and evaluate alternate pricing structures
to retain and grow deposits. Certain Synovus subsidiary banks maintain
correspondent banking relationships with various national and regional financial
organizations. These relationships provide access to short-term borrowings
through federal funds which allows Synovus to meet immediate liquidity needs if
required.
Synovus serves a diversity of markets. Some of these are rapidly growing
areas where loan demand outpaces the generation of deposits. However, through
the loan participations between Synovus' subsidiary banks, these loans can be
funded by subsidiaries having lower local loan demand. Additionally, lending is
focused within the local markets served by Synovus, enabling the development of
comprehensive banking relationships.
Selected Synovus subsidiary banks maintain an additional liquidity source
through their membership in the Federal Home Loan Bank. These banks have access
to significant funding capacity through the utilization of Federal Home Loan
Bank advances.
Additionally, the Parent Company requires cash for various operating needs
including dividends to shareholders, business combinations, capital infusions
into subsidiaries, the servicing of debt, and the payment of general corporate
expenses. The primary source of liquidity for the Parent Company is dividends
from the subsidiary banks. In addition, the Parent Company has access to a $20
million line of credit. The Parent Company enjoys an excellent reputation and
credit standing in the market place and has the ability to raise substantial
amounts of funds in the form of either short or long-term borrowings. The Parent
Company's current principal debt, senior notes totaling $75 million at a rate of
6.125%, has been rated "A" by Standard and Poors Corp., "A3" by Moody's Investor
Service and "AA-" by Thomson Bankwatch. For a complete description of these
borrowings and other borrowings by other Synovus subsidiaries, see Note 6 to
Synovus' consolidated financial statements.
The consolidated statements of cash flows detail Synovus' cash flows from
operating, investing, and financing activities. Net cash provided by operating
activities was $257.2 million for the year ended December 31, 1997, while
financing activities provided $441.9 million. Investing activities used $715.8
million of this amount, resulting in a net decrease in cash and cash equivalents
of $16.8 million.
Management is not aware of any trends, events, or uncertainties that will
have, or that are reasonably likely to have a material impact on Synovus'
liquidity, capital resources, or operations. Further, management is not aware of
any current recommendations by regulatory agencies which, if they were to be
implemented, would have such effect.
Capital Resources and Dividends
Synovus has always placed great emphasis on maintaining a strong capital
base and continues to exceed regulatory capital requirements. Management is
committed to maintaining a capital level sufficient to assure shareholders,
customers, and regulators that Synovus is financially sound, and to enable
Synovus to sustain an appropriate degree of leverage to provide a desirable
level of profitability. Synovus has the ability to generate internal capital
growth sufficient to support the asset growth it has experienced. Total
shareholders' equity of $903.7 million represented 9.76% of total assets at
December 31, 1997.
Regulators use a risk-adjusted calculation to aid them in their
determination of capital adequacy by weighting assets based on the credit risk
associated with on- and off-balance sheet assets. The majority of these
risk-weighted assets are on-balance sheet assets for Synovus in the form of
loans. A small portion of risk-weighted assets are considered off-balance sheet
assets and are primarily made up of letters of credit, loan commitments, and to
a lesser extent interest rate contracts, that Synovus enters into in the normal
course of business. Capital is categorized into two types: Tier I and Tier II.
The capital guidelines used by regulators require an 8% total risk-based capital
ratio of which 4% must be Tier I capital. Additionally, the regulatory agencies
define a well-capitalized bank as one that has a leverage ratio of at least 5%,
a Tier 1 capital ratio of at least 6%, and a total risk-based capital ratio of
at least 10%. At the end of 1997, Synovus and all subsidiary banks were in
excess of the minimum capital requirements with a consolidated Tier 1 capital
ratio of 12.34% and a total risk-based capital ratio of 13.62%, compared to Tier
I and total risk-based capital ratios of 11.68% and 12.97%, respectively, in
1996 as shown in Table 16.
In addition to the risk-based capital standards, a minimum leverage ratio
of 4% is required for the highest-rated bank holding companies that are not
undertaking significant expansion programs. An additional 1% to 2% may be
required for other companies, depending upon their regulatory ratings and
expansion plans. The leverage ratio is defined as Tier I capital divided by
quarterly average assets, net of certain intangibles. As of December 31, 1997,
Synovus had a leverage ratio of 10.02%, which significantly exceeds the
regulatory requirements.
Synovus' capital level also exceeds all requirements under the Federal
Reserve Board's guidelines. The Federal Reserve Board requires a minimum primary
capital ratio of 5.50% and a total capital ratio of 6.00% for bank holding
companies and banks. At December 31, 1997, Synovus' primary and total capital
ratios as defined by the Federal Reserve Board were 10.80% and 10.82%,
respectively, compared to 10.07% and 10.09%, respectively, at year-end 1996.
During the third quarter of 1994, Synovus announced its plan to acquire up
to 1,687,500 shares of Synovus common stock in the open market. Through December
31, 1997, 815,850 shares of Synovus common stock have been purchased under this
plan at an average price of $10.45. Of these shares, 599,621 shares were used in
1995 to acquire Peach State Bank. Approximately 117,000 shares were issued to
employees for vested stock option exercises. The remaining shares under this
plan along with other treasury shares acquired before this plan amount to
116,843 as of December 31, 1997. These shares will be used to fund incentive
stock award plans and other employee benefit plans.
Synovus' 80.7% ownership of TSYS is an important aspect of the market price
of Synovus common stock and should be considered in a comparison of the relative
market price of Synovus common stock to other financial service companies. As of
December 31, 1997, there were approximately 31,000 shareholders of record of
Synovus common stock, some of which are holders in nominee name for the benefit
of a number of different shareholders. Table 17 displays high and low quotations
of Synovus common stock which are based on actual transactions.
F-51
- --------------------------------------------------------------------------------
Table 16
<TABLE>
<CAPTION>
Capital Ratios<F1>
(In thousands
December 31,
1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tier I capital:
Shareholders' equity ............................................... $ 903,656 783,750
Adjustment for SFAS No. 115 ........................................ (6,651) 112
Plus: Minority interest............................................. 42,641 34,435
Less: Disallowed intangibles........................................ (36,178) (40,589)
- --------------------------------------------------------------------------------------------------------
Total Tier I capital........................................ 903,468 777,708
- --------------------------------------------------------------------------------------------------------
Tier II capital:
Eligible portion of the reserve for loan losses..................... 91,633 83,353
Subordinated and other qualifying debt.............................. 1,960 2,200
- --------------------------------------------------------------------------------------------------------
Total Tier II capital....................................... 93,593 85,553
- --------------------------------------------------------------------------------------------------------
Total risk-based capital.................................................... $ 997,061 863,261
========================================================================================================
Total risk-adjusted assets.................................................. $7,319,248 6,656,966
========================================================================================================
Tier I capital ratio........................................................ 12.34% 11.68
Total risk-based capital ratio.............................................. 13.62 12.97
Leverage ratio.............................................................. 10.02 9.36
Regulatory minimums:
Tier I capital ratio ............................................... 4.00%
Total risk-based capital ratio...................................... 8.00
Leverage ratio ..................................................... 4.00
<FN>
<F1> Risk-based capital ratios, for both years presented, were prepared using
risk-based capital rules finalized in November, 1994, which exclude the
impact of SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities".
</FN>
</TABLE>
- --------------------------------------------------------------------------------
Table 17
Market and Stock Price Information
<TABLE>
<CAPTION>
High Low
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
1997
Quarter ended December 31, 1997 ................................... $33 9/16 20
Quarter ended September 30, 1997 .................................. 29 21 1/2
Quarter ended June 30, 1997 ....................................... 28 3/8 21 3/4
Quarter ended March 31, 1997 ...................................... 26 19 5/8
1996
Quarter ended December 31, 1996 ................................... $22 1/4 17 3/8
Quarter ended September 30, 1996 .................................. 18 1/8 14 5/8
Quarter ended June 30, 1996 ....................................... 16 14 1/8
Quarter ended March 31, 1996 ...................................... 15 1/4 11 5/8
</TABLE>
- --------------------------------------------------------------------------------
Dividends
It is Synovus' objective to pay out approximately one-third of earnings to
shareholders in cash dividends. Synovus' dividend payout ratio in 1997, 1996,
and 1995 was 38.10%, 36.62%, and 36.69%, respectively. The total dollar amount
of dividends declared increased 23.1% in 1997 to $62.9 million, from $51.1
million in 1996. Cash dividends have been paid on the common stock of Synovus
(including its predecessor companies) in every year since 1891. It is the
present intention of the Synovus Board of Directors to continue to pay cash
dividends on its common stock in accordance with the previously mentioned
objective. Table 18 presents the declared and paid dates from recent dividends,
as well as per share dividend amounts.
F-52
- --------------------------------------------------------------------------------
Table 18
Dividends
<TABLE>
<CAPTION>
Per Share
Date Declared Date Paid Amount
- -----------------------------------------------------------------------------------
<S> <C> <C>
November 10, 1997 January 2, 1998 $ .0900
September 15, 1997 October 1, 1997 .0900
May 12, 1997 July 1, 1997 .0900
March 10, 1997 April 1, 1997 .0900
November 18, 1996 January 2, 1997 .0733
September 9, 1996 October 1, 1996 .0733
May 13, 1996 July 1, 1996 .0733
March 11, 1996 April 1, 1996 .0733
</TABLE>
- --------------------------------------------------------------------------------
Commitments
Synovus believes it has sufficient capital, liquidity, and future cash
flows from operations to meet operating needs over the next year. Table 19, Note
6, and Note 10 to Synovus' consolidated financial statements provide additional
information on Synovus' short-term and long-term borrowings.
In the normal course of its business, TSYS maintains processing contracts
with its customers. These processing contracts contain commitments, including,
but not limited to, minimum standards and time frames against which TSYS'
performance is measured. In the event TSYS does not meet its contractual
commitments with its customers, TSYS may incur penalties and/or certain
customers may have the right to terminate their contracts with TSYS. TSYS does
not believe that it will fail to meet its contractual commitments to an extent
that will result in a material adverse effect on its financial condition or
results of operations.
Synovus is subject to various legal proceedings and claims that arise in
the ordinary course of its business. Any litigation is vigorously defended by
Synovus and, in the opinion of management, based on consultation with external
legal counsel, any outcome of such litigation would not materially affect
Synovus' consolidated financial position or results of operations.
Currently, multiple lawsuits seeking class action treatment are pending
against one of Synovus' Alabama banking subsidiaries that involve: (1) the sale
of credit life insurance made in connection with consumer credit transactions;
(2) payments of service fees or interest rebates to automobile dealers in
connection with the assignment of automobile credit sales contracts to that
Synovus subsidiary; and (3) the forced placement of insurance to protect that
Synovus subsidiary's interest in collateral for which consumer credit customers
have failed to obtain or maintain insurance. These lawsuits seek unspecified
damages, including punitive damages. Two of the actions in which the sale of
credit life insurance is at issue have been certified as class actions and have
been deemed to include consumer credit customers of the subsidiary over a
20-year period. Synovus intends to vigorously contest these lawsuits and all
other litigation to which Synovus and its subsidiaries are parties. Based upon
information presently available, and in light of legal, equitable, and factual
defenses available to Synovus and its subsidiaries, contingent liabilities
arising from the threatened and pending litigation are not considered material.
It should be noted; however, that large punitive damage awards, bearing little
relation to the actual damages sustained by plaintiffs, have been awarded in
Alabama.
-------------------------------------------------------------------------------
Table 19
Short-Term Borrowings
(In thousands)
The following table sets forth certain information regarding federal funds
purchased and securities sold under agreement to repurchase, the principal
components of short-term borrowings.
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Month end balance for year ended December 31, ........................... $305,868 339,200 229,477
Weighted average interest rate at December 31, .......................... 5.73% 6.22 5.65
Maximum month end balance during the year ............................... $514,027 421,672 362,035
Average amount outstanding during the year .............................. $349,929 288,107 216,342
Weighted average interest rate during the year .......................... 5.38% 5.20 5.59
</TABLE>
F-53
- --------------------------------------------------------------------------------
Income Tax Expense
As reported in the consolidated statements of income, Synovus' income tax
expense increased to $93.7 million in 1997, up from $79.7 million in 1996, and
$64.9 million in 1995. The effective tax rate was 36.2%, 36.3%, and 36.2% in
1997, 1996, and 1995, respectively. The increases in both 1997 and 1996 were
primarily the result of increases in pre-tax income and in the relative
percentage of taxable income to total income. The increase in 1997 was affected
by a decrease in certain research and experimentation credits. See Note 7 to
Synovus' consolidated financial statements for a detailed analysis of income
taxes.
Inflation
Inflation has an important impact on the growth of total assets in the
banking industry and may create a need to increase equity capital at higher than
normal rates in order to maintain an appropriate equity to assets ratio. Synovus
has been able to maintain a high level of equity through retention of an
appropriate percentage of its net income. Synovus copes with the effects of
inflation by managing its interest rate sensitivity gap position through its
asset/liability management program and by periodically adjusting its pricing of
services and banking products to take into consideration current costs.
Parent Company
The Parent Company's assets, primarily its investment in subsidiaries, are
funded, for the most part, by shareholders' equity. It also utilizes short-term
and long-term debt. The Parent Company is responsible for providing the
necessary funds to strengthen the capital of its subsidiaries if necessary,
acquire new subsidiaries, pay corporate operating expenses, and pay dividends to
its shareholders. These operations are funded by dividends and fees received
from subsidiaries, and borrowings from outside sources.
In connection with dividend payments to the Parent Company from its
subsidiary banks, certain rules and regulations of the various state and federal
banking regulatory agencies limit the amount of dividends which may be paid.
Approximately $92.9 million in dividends, inclusive of 1998 net income, could be
paid in 1998 to the Parent Company from its subsidiary banks without prior
regulatory approval. Synovus anticipates receiving regulatory approval to allow
certain subsidiaries to pay dividends in excess of their respective regulatory
limits.
Forward-Looking Statements
Certain statements contained in this Annual Report which are not statements
of historical fact constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act (the "Act"). In addition, certain
statements in future filings by Synovus with the Securities and Exchange
Commission, in press releases, and in oral and written statements made by or
with the approval of Synovus which are not statements of historical fact
constitute forward-looking statements within the meaning of the Act. Examples of
forward-looking statements include, but are not limited to: (i) projections of
revenues, income or loss, earnings or loss per share, the payment or non-payment
of dividends, capital structure and other financial items; (ii) statements of
plans and objectives of Synovus or it's management or Board of Directors,
including those relating to products or services; (iii) statements of future
economic performance; and (iv) statements of assumptions underlying such
statements. Words such as "believes," "anticipates," "expects," "intends,"
"targeted," and similar expressions are intended to identify forward-looking
statements but are not the exclusive means of identifying such statements.
Forward-looking statements involve risks and uncertainties which may cause
actual results to differ materially from those in such statements. Factors that
could cause actual results to differ from those discussed in the forward-looking
statements include, but are not limited to: (i) the strength of the U.S. economy
in general and the strength of the local economies in which operations are
conducted; (ii) the effects of and changes in trade, monetary and fiscal
policies, and laws, including interest rate policies of the Federal Reserve
Board; (iii) inflation, interest rate, market and monetary fluctuations; (iv)
the timely development of and acceptance of new products and services and
perceived overall value of these products and services by users; (v) changes in
consumer spending, borrowing, and saving habits; (vi) technological changes;
(vii) acquisitions; (viii) the ability to increase market share and control
expenses; (ix) the effect of changes in laws and regulations (including laws and
regulations concerning taxes, banking, securities, and insurance) with which
Synovus and its subsidiaries must comply; (x) the effect of changes in
accounting policies and practices, as may be adopted by the regulatory agencies
as well as the Financial Accounting Standards Board; (xi) changes in Synovus'
organization, compensation, and benefit plans; (xii) the costs and effects of
litigation and of unexpected or adverse outcomes in such litigation; and (xiii)
the success of Synovus at managing the risks involved in the foregoing.
Such forward-looking statements speak only as of the date on which such
statements are made, and Synovus undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made to reflect the occurrence of unanticipated events.
F-54
- --------------------------------------------------------------------------------
Summary of Quarterly Financial Data (Unaudited)
(In thousands, except per share data)
Presented below is a summary of the unaudited consolidated quarterly financial
data for the years ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
Fourth Third Second First
Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997
Interest income ........................................... $187,803 185,047 180,409 172,414
===========================================================================================================================
Net interest income ....................................... 106,783 104,843 102,608 98,155
===========================================================================================================================
Provision for losses on loans ............................. 9,412 7,604 8,279 7,001
===========================================================================================================================
Income before income taxes ................................ 73,292 67,130 62,227 56,254
===========================================================================================================================
Net income ................................................ 47,006 43,101 39,322 35,807
===========================================================================================================================
Net income per share, basic ............................... .27 .25 .23 .21
===========================================================================================================================
Net income per share, assuming dilution ................... .26 .24 .22 .20
===========================================================================================================================
1996
Interest income ........................................... $170,603 168,609 163,895 160,196
===========================================================================================================================
Net interest income ....................................... 97,426 95,632 92,687 89,129
===========================================================================================================================
Provision for losses on loans ............................. 9,089 8,011 8,233 6,433
===========================================================================================================================
Income before income taxes ................................ 66,132 55,528 51,713 45,939
===========================================================================================================================
Net income ................................................ 41,661 35,208 33,108 29,627
===========================================================================================================================
Net income per share, basic ............................... .24 .20 .19 .17
===========================================================================================================================
Net income per share, assuming dilution ................... .24 .20 .19 .17
===========================================================================================================================
</TABLE>
F-55
[LOGO](R)
SYNOVUS(Registration Mark)
FINANCIAL CORP.
JAMES H. BLANCHARD
CHAIRMAN OF THE BOARD
March 13, 1998
Dear Shareholder:
The Annual Meeting of the Shareholders of Synovus Financial Corp. will be
held on April 23, 1998 in the South Hall of the Columbus, Georgia Convention &
Trade Center, beginning at 10:00 o'clock A.M., E.T., for the purposes set forth
in the accompanying Notice of Annual Meeting of Shareholders and Proxy
Statement.
We encourage you to attend the Annual Meeting of Shareholders and let us
give you a review of 1997. Whether you own a few or many shares of stock and
whether or not you plan to attend in person, it is important that your shares be
voted on matters that come before the meeting. To make sure your shares are
represented, we urge you to complete the enclosed Proxy Card, including the
Certificate of Beneficial Owner, and mail it to us promptly.
Thank you for helping us make 1997 a good year. We look forward to your
continued support in 1998 and another good year.
Sincerely yours,
/s/James H. Blanchard
JAMES H. BLANCHARD
Synovus Financial Corp. Post Office Box 120 Columbus, Georgia 31902-0120
SYNOVUS(R)
FINANCIAL CORP.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 23, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
Synovus Financial Corp. ("Synovus") will be held in the South Hall of the
Columbus, Georgia Convention & Trade Center, on April 23, 1998, at 10:00 o'clock
A.M., E.T., for:
(1) The election of eight nominees as Class I directors of Synovus to
serve until the 2001 Annual Meeting of Shareholders; and
(2) The transaction of such other business as may properly come before the
Annual Meeting.
Information relating to the above matters is set forth in the accompanying
Proxy Statement.
Only shareholders of record at the close of business on February 12, 1998
will be entitled to notice of and to vote at the Annual Meeting.
/s/G. SANDERS GRIFFITH, III
G. SANDERS GRIFFITH, III
Secretary
Columbus, Georgia
March 13, 1998
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING IN PERSON, PLEASE
VOTE, DATE AND SIGN THE ENCLOSED PROXY, COMPLETE AND SIGN THE CERTIFICATE OF
BENEFICIAL OWNER, AND RETURN THEM PROMPTLY IN THE ENCLOSED RETURN ENVELOPE,
WHICH DOES NOT REQUIRE ANY POSTAGE IF MAILED IN THE UNITED STATES.
SYNOVUS(R)
FINANCIAL CORP.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 23, 1998
I. INTRODUCTION
A. Purposes of Solicitation -- Terms of Proxies.
The Annual Meeting of the Shareholders ("Annual Meeting") of Synovus
Financial Corp. ("Synovus") will be held on April 23, 1998 for the purposes set
forth in the accompanying Notice of Annual Meeting of Shareholders and in this
Proxy Statement. The enclosed Proxy is solicited BY AND ON BEHALF OF SYNOVUS'
BOARD OF DIRECTORS in connection with such Annual Meeting, or any adjournment
thereof. The costs of the solicitation of Proxies by Synovus' Board of Directors
will be paid by Synovus. Forms of Proxies and Proxy Statements will also be
distributed through brokers, banks, nominees, custodians and other like parties
to the beneficial owners of shares of the $1.00 par value common stock of
Synovus ("Synovus Common Stock"), and Synovus will reimburse such parties for
their reasonable out-of-pocket expenses therefor. Synovus' mailing address is
Post Office Box 120, Columbus, Georgia 31902-0120.
The shares represented by the Proxy in the accompanying form, which when
properly executed, returned to Synovus' Board of Directors and not revoked, will
be voted in accordance with the instructions specified in such Proxy. If a
choice is not specified in a Proxy, the shares represented by such Proxy will be
voted "FOR" the election of the eight nominees for election as Class I directors
of Synovus named herein.
Each Proxy granted may be revoked in writing at any time before the
authority granted thereby is exercised. Attendance at the Annual Meeting will
constitute a revocation of the Proxy for such Annual Meeting if the maker
thereof elects to vote in person.
This Proxy Statement and the enclosed Proxy are being first mailed to
shareholders on or about March 13, 1998.
B. Shareholder Proposals.
From time to time, Synovus' shareholders may present proposals which may be
proper subjects for inclusion in Synovus' Proxy Statement for consideration at
Synovus' Annual Meeting. To be considered for inclusion, shareholder proposals
must be submitted on a timely basis. Proposals for Synovus' 1999 Annual Meeting
must be received by Synovus no later than November 13, 1998, and any such
proposals, as well as any questions related thereto, should be directed to
Secretary, Synovus Financial Corp., 901 Front Avenue, Suite 301, Columbus,
Georgia 31901.
C. Director Nominees or Other Business for Presentation at the Annual Meeting.
Shareholders who wish to present director nominations or other business at
the Annual Meeting are required to notify the Secretary of their intent at least
60 days but not more than 120 days before the meeting and the notice must
provide information as required in the bylaws. A copy of these bylaw
requirements will be provided upon request in writing to Secretary, Synovus
Financial Corp., 901 Front Avenue, Suite 301, Columbus, Georgia 31901. This
requirement does not affect the deadline for submitting shareholder proposals
for inclusion in the Proxy Statement nor does it preclude discussion by any
shareholder of any business properly brought before the Annual Meeting.
D. Securities Entitled to Vote and Record Date.
Only shareholders of record at the close of business on February 12, 1998
are entitled to vote at the Annual Meeting, or any adjournment thereof. As of
that date, there were 175,265,721 shares of Synovus Common Stock outstanding and
entitled to vote. Synovus owned 116,839 shares of Synovus Common Stock on
February 12, 1998 as treasury shares, which are not considered to be outstanding
and are not entitled to be voted at the Annual Meeting. In accordance with the
amendment to Synovus' Articles of Incorporation which was adopted by the
shareholders of Synovus and became effective on April 24, 1986 (the "Voting
Amendment"), a holder of Synovus Common Stock will be entitled to ten votes on
each matter submitted to a vote of shareholders for each share of Synovus Common
Stock beneficially owned on February 12, 1998 which: (1) has had the same
beneficial owner since February 12, 1994; (2) was acquired by reason of
participation in a dividend reinvestment plan offered by Synovus and is held by
the same beneficial owner for whom it was acquired under such plan; (3) is held
by the same beneficial owner to whom it was issued as a result of an acquisition
of a company or business by Synovus where the resolutions adopted by Synovus'
Board of Directors approving such issuance specifically reference and grant such
rights; (4) was acquired under any employee, officer and/or director benefit
plan maintained for one or more employees, officers and/or directors of Synovus
and/or its subsidiaries, and is held by the same beneficial owner for whom it
was acquired under any such plan; (5) is held by the same beneficial owner to
whom it was issued by Synovus, or to whom it was transferred by Synovus from
treasury shares, and the resolutions adopted by Synovus' Board of Directors
approving such issuance and/or transfer specifically reference and grant such
rights; (6) was acquired as a direct result of a stock split, stock dividend or
other type of share distribution if the share as to which it was distributed was
acquired prior to, and has been held by the same beneficial owner since,
February 12, 1994; (7) has been beneficially owned continuously by the same
shareholder for a period of 48 consecutive months prior to the record date of
any meeting of shareholders at which the share is eligible to be voted; or (8)
is owned by a holder who, in addition to shares which are beneficially owned
under the provisions of (1)-(7) above, is the beneficial owner of less than
759,375 shares of Synovus Common Stock (which amount has been appropriately
adjusted to reflect the three-for-two stock splits effected in the form of 50%
stock dividends paid on October 1, 1986, October 3, 1988, April 1, 1993, April
8, 1996 and April 8, 1997, respectively, and with such amount to be
appropriately adjusted to properly reflect any other change in Synovus Common
Stock by means of a stock split, a stock dividend, a recapitalization or
otherwise occurring after April 24, 1986). Shareholders of shares of Synovus
Common Stock not described above are entitled to one vote per share for each
such share. The actual voting power of each holder of shares of Synovus Common
Stock will be based on information possessed by Synovus at the time of the
Annual Meeting.
As Synovus Common Stock is registered with the Securities and Exchange
Commission ("SEC") and is traded on the New York Stock Exchange ("NYSE"),
Synovus Common Stock is subject to the provisions of an NYSE rule which, in
general, prohibits a company's common stock and equity securities from being
authorized or remaining authorized for trading on the NYSE if the company issues
securities or takes other corporate action that would have the effect of
nullifying, restricting or disparately reducing the voting rights of existing
shareholders of the company. However, such rule contains a "grandfather"
provision, under which Synovus' Voting Amendment falls, which, in general,
permits grandfathered disparate voting rights plans to continue to operate as
adopted.
The number of votes that each shareholder will be entitled to exercise at
the Annual Meeting will depend upon whether each share held by the shareholder
meets the requirements which entitle one share of Synovus Common Stock to ten
votes on each matter submitted to a vote of shareholders. Shareholders of
Synovus Common Stock must complete the Certification on the Proxy in order for
any of the shares represented by the Proxy to be entitled to ten votes per
share.
SHAREHOLDERS AND BENEFICIAL OWNERS WHO DO NOT COMPLETE THE CERTIFICATIONS ON
THEIR PROXY CARDS AND WHO WOULD, IF THEY HAD COMPLETED SUCH CERTIFICATIONS, BE
ENTITLED TO TEN VOTES PER SHARE, WILL BE ENTITLED TO ONLY ONE VOTE PER SHARE.
E. Columbus Bank and Trust Company and Total System Services, Inc.
Synovus is the owner of all of the issued and outstanding shares of voting
common stock of Columbus Bank and Trust Company(R)("Columbus Bank"). Columbus
Bank owns individually 80.7% of the outstanding shares of Total System Services,
Inc.(R) ("TSYS(R)"), a bankcard data processing company having 129,331,775
shares of $.10 par value voting common stock ("TSYS Common Stock") outstanding
on February 12, 1998.
II. ELECTION OF DIRECTORS
A. Information Concerning Directors and Nominees.
(1) Number and Classification of Directors.
In accordance with the vote of shareholders taken at Synovus' 1995 Annual
Meeting, the number of members of Synovus' Board of Directors was set at 20.
Synovus' Board of Directors is currently comprised of 19 members. Synovus has
one open directorship which was vacated by a Class III director. This vacant
directorship could be filled in the future at the discretion of Synovus' Board
of Directors. Any person appointed by Synovus' Board to fill the vacant Class
III directorship would serve the remainder of the Class III term, which expires
at the 2000 Annual Meeting. The 19 members who comprise Synovus' Board of
Directors are divided into three classes of directors: Class I directors, Class
II directors and Class III directors, with each of such Classes of directors
serving staggered 3-year terms. At Synovus' 1996 Annual Meeting, Class II
directors were elected to serve 3-year terms to expire at Synovus' 1999 Annual
Meeting and at Synovus' 1997 Annual Meeting, Class III directors were elected to
serve 3-year terms to expire at Synovus' 2000 Annual Meeting. The terms of
office of the Class I directors expire at Synovus' 1998 Annual Meeting. Given
the division of Synovus' Board of Directors into three classes, shareholders who
do not favor the policies of Synovus' Board of Directors would require at least
two Annual Meetings of Shareholders to replace a majority of the members of the
Board.
(2) Nominees for Class I Directors and Vote Required.
Synovus' Board of Directors has selected eight nominees which it proposes
for election to Synovus' Board as Class I directors. The nominees for Class I
directors of Synovus will be elected to serve 3-year terms that will expire at
Synovus' 2001 Annual Meeting. The eight nominees for Class I directors of
Synovus are: James H. Blanchard, Stephen L. Burts, Jr., C. Edward Floyd,
Gardiner W. Garrard, Jr., V. Nathaniel Hansford, H. Lynn Page, Robert V. Royall
and James D. Yancey. Proxies cannot be voted at the 1998 Annual Meeting for a
greater number of persons than the number of nominees named.
Under Georgia law, a majority of the issued and outstanding shares of
Synovus Common Stock entitled to vote must be represented at the 1998 Annual
Meeting to constitute a quorum. However, as is allowed by Georgia law, under
Synovus' bylaws and the Voting Amendment, a majority of the votes entitled to be
cast by the holders of all of the issued and outstanding shares of Synovus
Common Stock entitled to vote must be represented at the 1998 Annual Meeting in
order to constitute a quorum. Under both Georgia law and Synovus' bylaws, all
shares represented at the meeting, including shares abstaining and withholding
authority, are counted for purposes of determining whether a quorum exists. The
nominees for election as directors at the Annual Meeting who receive the
greatest number of votes (a plurality), a quorum being present, shall become
directors at the conclusion of the tabulation of votes. Thus, once a quorum has
been established, abstentions and broker non-votes have no effect upon the
election of directors. The shares represented by Proxies executed for Synovus'
1998 Annual Meeting in such manner as not to withhold authority to vote for the
election of any nominee for Synovus' Board of Directors shall be voted "FOR" the
election of the eight nominees for Class I directors on Synovus' Board named
herein.
If any nominee for Class I director of Synovus becomes unavailable for any
reason before Synovus' 1998 Annual Meeting, the shares represented by executed
Proxies may be voted for such substitute nominee as may be determined by the
holders of such Proxies. It is not anticipated that any nominee will be
unavailable for election.
SYNOVUS' BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE
EIGHT NOMINEES FOR ELECTION AS CLASS I DIRECTORS ON SYNOVUS' BOARD SET FORTH
HEREIN.
B. Information Concerning Directors and Nominees for Class I Directors.
(1) General Information.
The following table sets forth the name, age, principal occupation and
employment (which, except as noted, has been for the past five years) of each of
the eight nominees for election as Class I directors of Synovus and the
remaining directors who will continue to serve on Synovus' Board of Directors,
his or her director classification, length of service as a director of Synovus,
any family relationships with other directors or executive officers of Synovus,
and any Board of Directors of which he or she is a member with respect to any
company with a class of securities registered with the SEC pursuant to Section
12 of the Securities Exchange Act of 1934, as amended ("Exchange Act"), or any
company which is subject to the requirements of Section 15(d) of that Act,
including TSYS, or any company registered with the SEC as an investment company
under the Investment Company Act of 1940 ("Public Company").
<TABLE>
<CAPTION>
Synovus Year
Director First Principal Occupation
Classifi- Elected and Other Directorships
Name Age cation Director of Public Companies
- ------------------------- ----- -------- ---------- -------------------------------------
<S> <C> <C> <C> <C>
Richard E. Anthony<F1> 51 II 1993 Vice Chairman of the Board,
Synovus Financial Corp.; Chairman
of the Board, First Commercial Bank
of Birmingham (Banking Subsidiary
of Synovus)
Joe E. Beverly 56 II 1983 Chairman of the Board, Commercial
Bank, Thomasville, Georgia
(Banking Subsidiary of Synovus);
Director; Flowers Industries, Inc.
James H. Blanchard<F2> 56 I 1972 Chairman of the Board and Chief
Executive Officer, Synovus Financial
Corp.; Chairman of the Executive
Committee, Total System Services,
Inc.; Director, BellSouth Corporation
Richard Y. Bradley<F3> 59 III 1991 Partner, Bradley & Hatcher (Law
Firm); Director, Total System
Services, Inc.
Stephen L. Burts, Jr.<F4> 45 I 1992 President, Synovus Financial Corp.
Walter M. Deriso, Jr.<F5> 51 II 1997 Vice Chairman of the Board,
Synovus Financial Corp.; Chairman
of the Board, Security Bank and
Trust Company, Albany, Georgia
(Banking Subsidiary of Synovus)
C. Edward Floyd, M.D. 63 I 1995 Vascular Surgeon
Gardiner W. Garrard, Jr. 57 I 1972 President, The Jordan Company
(Real Estate Development); Director,
Total System Services, Inc.
V. Nathaniel Hansford 54 I 1985 Professor and Dean Emeritus
--School of Law, University of
Alabama
John P. Illges, III 63 III 1997 Senior Vice President and Financial
Consultant, The Robinson-Humphrey
Company, Inc. (Stockbroker);
Director, Total System Services, Inc.
Mason H. Lampton 50 II 1993 Chairman of the Board and President,
The Hardaway Company (Construction Company);
Director, Total System Services, Inc.
Elizabeth C. Ogie<F6> 47 II 1993 Director, W.C. Bradley Co. (Metal
Manufacturer and Real Estate)
John T. Oliver, Jr.<F7> 68 II 1993 Vice Chairman of the Executive
Committee, Synovus Financial Corp.;
Chairman of the Board, First National
Bank of Jasper (Banking Subsidiary
of Synovus)
H. Lynn Page 57 I 1978 Vice Chairman of the Board (Retired)
and Director, Synovus Financial
Corp., Columbus Bank and Trust
Company and Total System Services,
Inc.
Robert V. Royall 63 I 1995 Chairman of the Board, The National
Bank of South Carolina (Banking
Subsidiary of Synovus); Director, Blue
Cross Blue Shield of South Carolina;
Secretary of Commerce, State of
South Carolina
Melvin T. Stith<F8> 51 II 1998 Dean, College of Business, Florida
State University; Director, Rexall Sundown,
Inc. and Correctional Services Corp.
William B. Turner<F6><F9> 75 III 1972 Chairman of the Executive
Committee, Columbus Bank and
Trust Company and Synovus
Financial Corp.; Advisory Director, W.
C. Bradley Co. (Metal Manufacturer
and Real Estate); Director,
Total System Services, Inc.
George C. Woodruff, Jr. 69 III 1972 Real Estate and Personal
Investments
James D. Yancey<F10> 56 I 1978 Vice Chairman of the Board, Synovus
Financial Corp. and Columbus Bank
and Trust Company; Director, Total
System Services, Inc. and Shoney's, Inc.
<FN>
- -------------
<F1> Richard E. Anthony was elected Vice Chairman of Synovus in September 1995.
Prior to 1995, Mr. Anthony served, and continues to serve, as President of
Synovus Financial Corp. of Alabama and Chairman of the Board of First
Commercial Bank of Birmingham, both of which companies are subsidiaries of
Synovus.
<F2> James H. Blanchard was elected Chairman of the Board of Synovus in April
1986. Prior to 1986, Mr. Blanchard served in various capacities with
Synovus, Columbus Bank and/or TSYS, including President of Synovus.
<F3> Richard Y. Bradley formed Bradley & Hatcher in September 1995. From 1991
until 1995, Mr. Bradley served as President of Bickerstaff Clay Products
Company, Inc.
<F4> Stephen L. Burts, Jr. was elected President of Synovus in March 1992. Prior
to 1992, Mr. Burts served in various capacities with Synovus and/or
Columbus Bank, including Executive Vice President and Treasurer.
<F5> Walter M. Deriso, Jr. was elected Vice Chairman of Synovus in January
1997. Prior to 1997, Mr. Deriso served as President of Security Bank and
Trust Company.
<F6> Elizabeth C. Ogie is William B. Turner's niece.
<F7> John T. Oliver, Jr. was elected Vice Chairman of the Executive Committee of
Synovus in September 1995. Prior to 1995, Mr. Oliver served, and continues
to serve, as Chairman of the Board of Synovus Financial Corp. of Alabama
and First National Bank of Jasper, both of which companies are subsidiaries
of Synovus.
<F8> Melvin T. Stith was elected as a director of Synovus effective January 1,
1998 by Synovus' Board of Directors to fill the unexpired term of a vacant
Class II board seat.
<F9> William B. Turner was elected Chairman of the Executive Committee of
Synovus in April 1986. Prior to 1986, Mr. Turner served in various
capacities with Synovus and/or Columbus Bank, including Chairman of the
Board of both Synovus and Columbus Bank.
<F10>James D. Yancey was elected Vice Chairman of the Board of Synovus in March
1992. Prior to 1992, Mr. Yancey served in various capacities with Synovus
and/or Columbus Bank, including Vice Chairman of the Board and President of
both Synovus and Columbus Bank.
</FN>
</TABLE>
(2) Synovus Common Stock Ownership of Directors and Management.
The following table sets forth, as of December 31, 1997, the number of
shares of Synovus Common Stock beneficially owned by each of Synovus' directors
and Synovus' five most highly compensated executive officers. To the best of
Synovus' knowledge, all shares of Synovus Common Stock beneficially owned by
such persons qualify for ten votes per share, subject to the completion by such
persons of the Certifications contained on their Proxy Cards. Information
relating to beneficial ownership of Synovus Common Stock is based upon
information furnished by each person or entity using "beneficial ownership"
concepts set forth in the rules of the SEC under Section 13(d) of the Exchange
Act.
<TABLE>
<CAPTION>
Shares of Shares of
Synovus Shares of Synovus
Common Synovus Common Percentage of
Stock Common Stock Stock Total Shares Outstanding
Beneficially Beneficially Beneficially of Synovus Shares of
Owned with Owned with Owned with Common Synovus
Sole Voting Shared Voting Sole Voting Stock Common Stock
and Invest- and Invest- but no Invest- Beneficially Beneficially
ment Power ment Power ment Power Owned as of Owned as of
Name as of 12/31/97 as of 12/31/97 as of 12/31/97 12/31/97 12/31/97
- ---------------------- ------------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Richard E. Anthony 353,043<F1> 133,130 20,293 506,466 .29%
Joe E. Beverly 329,812<F2> 3,037 25,786 358,635 .20
James H. Blanchard 1,210,708<F3> --- 219,217 1,429,925 .82
Richard Y. Bradley 12,520 84,330 --- 96,850 .06
Stephen L. Burts, Jr. 209,309<F4> 670 24,298 234,277 .13
Walter M. Deriso, Jr. 27,666<F5> 2,560 --- 30,226 .02
C. Edward Floyd, M.D. 729,104 96,847 --- 825,951 .47
Gardiner W. Garrard, Jr. 135,461 920,382 --- 1,055,843 .60
G. Sanders Griffith, III 113,240<F6> --- 59,779 173,018 .10
V. Nathaniel Hansford 134,783 220,761 --- 355,544 .20
John P. Illges, III 202,132 342,437<F7> --- 544,569 .31
Mason H. Lampton 51,286 193,473<F8> --- 244,759 .14
Elizabeth C. Ogie 24,495 20,338,006<F9><F10> --- 20,362,501 11.62
John T. Oliver, Jr. 617,636<F11> 61,953 32,652 712,241 .41
H. Lynn Page 560,546 7,677 --- 568,223 .32
Robert V. Royall 337,346<F12> 112,631 --- 449,977 .26
Melvin T. Stith 779 --- --- 779 .0004
William B. Turner 53,735 20,255,054<F10> --- 20,308,789 11.59
George C. Woodruff, Jr. 86,376 82,500<F13> --- 168,876 .10
James D. Yancey 762,078<F14> 41,118 39,630 842,826 .48
<FN>
- ---------------------------
<F1> Includes 107,354 shares of Synovus Common Stock with respect to which Mr.
Anthony has options to acquire.
<F2> Includes 44,060 shares of Synovus Common Stock with respect to which Mr.
Beverly has options to acquire.
<F3> Includes 176,993 shares of Synovus Common Stock with respect to which Mr.
Blanchard has options to acquire.
<F4> Includes 72,164 shares of Synovus Common Stock with respect to which Mr.
Burts has options to acquire.
<F5> Includes 6,750 shares of Synovus Common Stock with respect to which Mr.
Deriso has options to acquire.
<F6> Includes 61,649 shares of Synovus Common Stock with respect to which Mr.
Griffith has options to acquire.
<F7> Includes 41,778 shares of Synovus Common Stock held by a charitable
foundation of which Mr. Illges is trustee.
<F8> Includes 176,458 shares of Synovus Common Stock held in a trust for which
Mr. Lampton is not the trustee. Mr. Lampton disclaims beneficial ownership
of such shares.
<F9> Includes 80,799 shares of Synovus Common Stock held by a charitable
foundation of which Mrs. Ogie is a trustee.
<F10>Includes 1,712,137 shares of Synovus Common Stock held by a charitable
foundation of which Mrs. Ogie and Mr. Turner are among the trustees, and
18,529,705 shares of Synovus Common Stock beneficially owned by TB&C
Bancshares, Inc., of which Mrs. Ogie and Mr. Turner are officers, directors
and shareholders.
<F11>Includes 118,382 shares of Synovus Common Stock with respect to which Mr.
Oliver has options to acquire, and 68,140 shares of Synovus Common Stock
held by a charitable foundation of which Mr. Oliver is trustee.
<F12>Includes 139,454 shares of Synovus Common Stock with respect to which Mr.
Royall has options to acquire.
<F13>Includes 82,500 shares of Synovus Common Stock with respect to which Mr.
Woodruff is a trustee.
<F14>Includes 106,311 shares of Synovus Common Stock with respect to which Mr.
Yancey has options to acquire.
</FN>
</TABLE>
The following table sets forth information, as of December 31, 1997 with
respect to the beneficial ownership of Synovus Common Stock by all directors and
executive officers of Synovus as a group. To the best of Synovus' knowledge, all
shares of Synovus Common Stock beneficially owned by all directors and executive
officers of Synovus qualify for ten votes per share, subject to the completion
by such persons of the Certifications contained on the reverse sides of their
Proxy Cards.
<TABLE>
<CAPTION>
Percentage of
Shares of Outstanding Shares of
Synovus Common Stock Synovus Common Stock
Name of Beneficially Owned Beneficially Owned
Beneficial Owner as of 12/31/97 as of 12/31/97
- ----------------------- ------------------------ ----------------------------
<S> <C> <C>
All directors
and executive
officers of Synovus
as a group 29,155,300 16.56%
(includes
23 persons)
</TABLE>
For a detailed discussion of the beneficial ownership of TSYS Common Stock
by Synovus' named executive officers and directors and by all directors and
executive officers of Synovus as a group, see Section V(C) hereof captioned
"TSYS Common Stock Ownership of Directors and Management."
C. Board Committees and Attendance.
The business and affairs of Synovus are under the direction of Synovus'
Board of Directors. During 1997, Synovus' Board of Directors held six regular
meetings and one special meeting. During 1997, each of Synovus' incumbent
directors attended at least 75% of the aggregate meetings of Synovus' Board of
Directors and the Committees thereof on which he or she sat.
Synovus' Board of Directors has three principal committees -- an Audit
Committee, a Compensation Committee and an Executive Committee. There is no
Nominating Committee of Synovus' Board of Directors.
Audit Committee. The members of the Audit Committee of Synovus' Board of
Directors are: Gardiner W. Garrard, Jr., Chairman, John P. Illges, III and
George C. Woodruff, Jr. The primary functions engaged in by Synovus' Audit
Committee include: (i) annually recommending to Synovus' Board the independent
certified public accountants ("Independent Auditors") to be engaged by Synovus
for the next fiscal year; (ii) reviewing the plan and results of the annual
audit by Synovus' Independent Auditors; (iii) reviewing and approving the range
of management advisory services provided by Synovus' Independent Auditors; (iv)
reviewing Synovus' internal audit function and the adequacy of the internal
accounting control systems of Synovus and its subsidiaries; (v) reviewing the
results of regulatory examinations of Synovus and its subsidiaries; (vi)
periodically reviewing the financial statements of Synovus and the consolidated
financial statements of Synovus and its subsidiaries; and (vii) considering such
other matters with regard to the internal and independent audit of Synovus and
its subsidiaries as, in its discretion, it deems to be necessary or desirable,
periodically reporting to Synovus' Board as to the exercise of its duties and
responsibilities and, where appropriate, recommending matters in connection with
the audit function with respect to which Synovus' Board should consider taking
action. During 1997, Synovus' Audit Committee held three meetings.
Compensation Committee. The members of the Compensation Committee of
Synovus' Board of Directors are: Mason H. Lampton, Chairman, and V. Nathaniel
Hansford. The primary functions engaged in by Synovus' Compensation Committee
include: (i) evaluating the remuneration of senior management and board members
of Synovus and its subsidiaries and the compensation and fringe benefit plans in
which officers, employees and directors of Synovus and its subsidiaries are
eligible to participate; and (ii) recommending to Synovus' Board whether or not
it should modify, alter, amend, terminate or approve such remuneration,
compensation or fringe benefit plans. During 1997, Synovus' Compensation
Committee held four meetings.
Executive Committee. The members of Synovus' Executive Committee are:
William B. Turner, Chairman, James H. Blanchard, Gardiner W. Garrard, Jr.,
George C. Woodruff, Jr., James D. Yancey, John T. Oliver, Jr. and Richard Y.
Bradley. During the intervals between meetings of Synovus' Board of Directors,
Synovus' Executive Committee possesses and may exercise any and all the powers
of Synovus' Board of Directors in the management and direction of the business
and affairs of Synovus with respect to which specific direction has not been
previously given by Synovus' Board of Directors. During 1997, Synovus' Executive
Committee held four meetings.
D. Executive Officers.
The following table sets forth the name, age and position with Synovus of
each present executive officer of Synovus.
<TABLE>
<CAPTION>
Name Age Position with Synovus
- ----------------------- --- -------------------------------------------------
<S> <C> <C>
James H. Blanchard 56 Chairman of the Board and Chief Executive Officer
William B. Turner 75 Chairman of the Executive Committee
John T. Oliver, Jr. 68 Vice Chairman of the Executive Committee
James D. Yancey 56 Vice Chairman of the Board
Richard E. Anthony 51 Vice Chairman of the Board
Walter M. Deriso, Jr. 51 Vice Chairman of the Board
Stephen L. Burts, Jr. 45 President
G. Sanders Griffith, III 44 Senior Executive Vice President, General
Counsel and Secretary
Thomas J. Prescott 43 Executive Vice President and
Chief Financial Officer
Jay C. McClung 49 Executive Vice President, Credit Administration
Calvin Smyre 50 Executive Vice President, Corporate Affairs
</TABLE>
Synovus' executive officers serve at the pleasure of Synovus' Board of
Directors. All of the executive officers of Synovus are members of Synovus'
Board of Directors, except G. Sanders Griffith, III, Thomas J. Prescott, Jay C.
McClung and Calvin Smyre.
G. Sanders Griffith, III serves as Senior Executive Vice President, General
Counsel and Secretary of Synovus, positions he has held since October 1995. From
1988 until 1995, Mr. Griffith served in various capacities with Synovus,
including Executive Vice President, General Counsel and Secretary. Thomas J.
Prescott was elected Executive Vice President and Chief Financial Officer of
Synovus in December 1996. From 1987 until 1996, Mr. Prescott served in various
capacities with Synovus, including Executive Vice President and Treasurer. Jay
C. McClung was elected Executive Vice President of Synovus in January 1995. From
1986 until 1995, Mr. McClung served in various capacities with Columbus Bank,
including Senior Vice President. Calvin Smyre was elected Executive Vice
President of Synovus in November 1996. From 1976 until 1996, Mr. Smyre served in
various capacities with Columbus Bank and/or Synovus, including Senior Vice
President of Synovus.
III. EXECUTIVE COMPENSATION
(1) Summary Compensation Table.
The following table summarizes the cash and noncash compensation for each
of the last three fiscal years for the chief executive officer of Synovus and
for the other four most highly compensated executive officers of Synovus.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation Awards
-------------------------------------------------------- --------------------------------
Other Restricted Securities All
Annual Stock Underlying Other
Name and Compen- Award(s) Options/ Compen-
Principal Position Year Salary Bonus sation <F1> <F2> SARs sation <F3>
- --------------------- -------- ------------- ------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
James H. Blanchard 1997 $616,125 $462,094 $ -0- $ -0- 410,075 $298,654
Chairman of the 1996 589,375 442,031 2,000 350,622 196,481 322,527
Board and Chief 1995 475,000 356,250 2,000 454,664 130,987 240,351
Executive Officer
James D. Yancey 1997 445,000 442,000 2,000 -0- 349,755 235,573
Vice Chairman 1996 410,000 266,500 2,000 375,367 78,095 264,256
of the Board 1995 345,000 224,250 2,000 263,579 69,429 201,192
Stephen L. Burts, Jr. 1997 343,000 310,800 2,000 -0- 182,143 133,583
President 1996 328,000 196,800 2,000 231,008 48,059 130,106
1995 272,500 168,500 1,833 162,206 42,726 110,172
Richard E. Anthony 1997 310,000 282,000 2,000 -0- 52,245 109,977
Vice Chairman of the 1996 267,625 159,500 2,000 187,684 39,048 101,004
Board 1995<F4> -- -- -- -- -- --
G. Sanders Griffith, III 1997 268,000 242,850 -0- -0- 169,653 81,279
Senior Executive Vice 1996 256,250 153,750 -0- 180,459 37,545 82,742
President, General 1995 235,000 141,000 -0- 126,716 33,380 74,033
Counsel and Secretary
<FN>
- ---------------------
<F1> Amount for 1997 includes matching contributions under the Director Stock
Purchase Plan of $2,000 each for Messrs. Yancey, Burts and Anthony.
Perquisites and other personal benefits are excluded because the aggregate
amount does not exceed the lesser of $50,000 or 10% of annual salary and
bonus for the named executives.
<F2> Amount consists of market value of award on date of grant. As of December
31, 1997, Messrs. Blanchard, Yancey, Burts, Anthony and Griffith held
51,037, 39,630, 24,298, 20,293 and 19,559 restricted shares, respectively,
with a value of $1,671,462, $1,297,883, $795,760, $664,596 and $640,557,
respectively. On July 1, 1996, restricted stock was awarded in the amount
of 24,315, 26,031, 16,020, 13,016 and 12,515 shares to Messrs. Blanchard,
Yancey, Burts, Anthony and Griffith, respectively, with the following
vesting schedule: 20% on July 1, 1997; 20% on July 1, 1998; 20% on July 1,
1999; 20% on July 1, 2000; and 20% on July 1, 2001. On September 5, 1995,
restricted stock was awarded in the amount of 39,923, 23,144, 14,243,
11,573 and 11,127 shares to Messrs. Blanchard, Yancey, Burts, Anthony and
Griffith, respectively, with the following vesting schedule: 20% on
September 4, 1996; 20% on September 4, 1997; 20% on September 4, 1998; 20%
on September 4, 1999; and 20% on September 4, 2000. Dividends are paid on
all restricted shares.
<F3> The 1997 amount includes director fees of $57,600, $60,200, $31,004 and
$25,400 for Messrs. Blanchard, Yancey, Burts and Anthony, respectively, in
connection with their service as directors of Synovus and certain of its
subsidiaries; contributions or other allocations to defined contribution
plans of $28,624 for each executive; allocations pursuant to defined
contribution excess benefit agreements of $160,680, $98,663, $67,946,
$55,443 and $46,827 for each of Messrs. Blanchard, Yancey, Burts, Anthony
and Griffith, respectively; premiums paid for group term life insurance
coverage of $510 for each executive; the economic benefit of life insurance
coverage related to split-dollar life insurance policies of $1,625, $1,049,
$39 and $39 for each of Messrs. Blanchard, Yancey, Burts and Griffith,
respectively; and the dollar value of the benefit of premiums paid for
split-dollar life insurance policies (unrelated to term life insurance
coverage) projected on an actuarial basis of $49,615, $46,527, $5,460 and
$5,279 for each of Messrs. Blanchard, Yancey, Burts and Griffith,
respectively.
<F4> Disclosure is not required for 1995.
</FN>
</TABLE>
(2) Stock Option Exercises and Grants.
The following tables provide certain information regarding stock options
granted and exercised in the last fiscal year and the number and value of
unexercised options at the end of the fiscal year.
<TABLE>
<CAPTION>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
- -----------------------------------------------------------------------------------------
% of Total Potential
Options/ Realized Value at
SARs Exercise Assumed Annual Rates of
Options/ Granted to or Stock Price Appreciation
SARs Employees Base For Option Term<F1>
Granted in Fiscal Price Expiration ---------------------
Name (#) Year ($/Share) Date 5%($) 10% ($)
- ------------------------------ ------------ -------------- -------------- --------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
James H. Blanchard 160,075<F2> 7.56% $27.56 06/30/07 $2,106,587 $5,045,564
250,000<F3> 11.80 21.75 11/02/07 2,595,000 6,217,500
James D. Yancey 99,755<F2> 4.71 27.56 06/30/07 1,312,776 $3,144,278
250,000<F3> 11.80 21.75 11/02/07 2,595,000 6,217,500
Stephen L. Burts, Jr. 57,143<F2> 2.70 27.56 06/30/07 752,002 1,801,147
125,000<F3> 5.90 21.75 11/02/07 1,297,500 3,108,750
Richard E. Anthony 52,245<F2> 2.47 27.56 06/30/07 687,544 1,646,762
G. Sanders Griffith, III 44,653<F2> 2.11 27.56 06/30/07 587,633 1,407,463
125,000<F3> 5.90 21.75 11/02/07 1,297,500 3,108,750
- -----------
<FN>
<F1> The dollar gains under these columns result from calculations using the
identified growth rates and are not intended to forecast future price
appreciation of Synovus Common Stock.
<F2> Options granted on July 1, 1997 at fair market value to executives as part
of the Synovus 1994 Long-Term Incentive Plan. Options become exercisable on
July 1, 1999 and are transferable to family members.
<F3> Options granted on November 3, 1997 at fair market value to executives as
part of the Synovus 1994 Long-Term Incentive Plan, with the following
vesting schedule: 10% on November 3, 1998; 10% on November 3, 1999; 10% on
November 3, 2000; 10% on November 3, 2001; and 60% on November 3, 2002. The
options are transferable to family members.
</FN>
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
Number of Securities Value of
Underlying Unexercised Unexercised In-the-Money
Shares Value Options/SARs at FY-End (#) Options/SARs at FY-End ($)<F1>
Acquired on Realized -------------------------- -------------------------------
Name Exercise (#) ($) <F1> Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------------ ------------ --------- --------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
James H. Blanchard -0- $ -0- 176,993 / 606,556 $4,146,625/ $7,181,886
James D. Yancey -0- -0- 106,311 / 427,850 2,496,812/ 4,698,960
Stephen L. Burts, Jr. 7,763 146,542 72,164 / 230,202 1,747,533/ 2,552,351
Richard E. Anthony -0- -0- 107,354 / 91,293 2,653,480/ 986,771
G. Sanders Griffith, III 7,595 155,713 61,649 / 207,198 1,502,833/ 2,294,837
<FN>
- ----------
<F1> Market value of underlying securities at exercise or year-end, minus the
exercise or base price.
</FN>
</TABLE>
(3) Compensation of Directors.
Compensation. During 1997, each of Synovus' directors received a $15,000
annual retainer, and fees of $800 for each meeting of Synovus' Board of
Directors and each Executive Committee meeting they personnally attended.
Members of the Committees of Synovus' Board of Directors (other than the
Executive Committee) received fees of $500, with the Chairmen of such Committees
receiving fees of $750, for each Committee meeting they personally attended. In
addition, directors of Synovus received an $800 fee for each board meeting from
which their absence was excused and an $800 fee for one meeting without regard
to the reason for their absence.
Director Stock Purchase Plan. Synovus' Director Stock Purchase Plan
("DSPP") is a non-tax-qualified, contributory stock purchase plan pursuant to
which qualifying directors can purchase, with the assistance of contributions
from Synovus, presently issued and outstanding shares of Synovus Common Stock.
Under the terms of the DSPP, qualifying directors can elect to contribute up to
$1,000 per calendar quarter to make purchases of Synovus Common Stock, and
Synovus contributes an additional amount equal to 50% of the director's cash
contribution. Participants in the DSPP are fully vested in, and may request the
issuance to them of, all shares of Synovus Common Stock purchased for their
benefit thereunder.
Consulting Services. H. Lynn Page, a director and the former Vice Chairman
of the Board of Synovus, and Synovus are parties to a Consulting Agreement
pursuant to which Mr. Page was paid $24,000 by Synovus during 1997 for providing
consulting and advisory services to Synovus in connection with portfolio
management and potential opportunities for business expansion.
Joe E. Beverly, a director and the former Vice Chairman of the Board of
Synovus, and Synovus are parties to a Retirement Agreement pursuant to which Mr.
Beverly was paid $24,000 by Synovus during 1997 for providing consulting and
advisory services to Synovus relating to Synovus' affiliate banks.
(4) Employment Contracts and Change in Control Arrangements.
Blanchard Employment Agreement. On October 13, 1977, Synovus entered into
an Employment Agreement with James H. Blanchard ("Blanchard"), Chairman of the
Board of Synovus, whereunder Synovus paid Blanchard a salary of $616,125 during
1997. The base salary paid to Blanchard is determined by the Compensation
Committee of the Board of Directors of Synovus on an annual basis. The Blanchard
Employment Agreement provides that Synovus shall pay deferred compensation of
$468,000 to Blanchard or his beneficiaries over a 10 to 15 year period in the
event of Blanchard's death, total disability or termination of employment,
subject to certain conditions of forfeiture in the event Synovus terminates
Blanchard's employment "for cause" (as defined), in the event of his violation
of his 2-year Covenant Not to Compete, or in the event of his death by suicide.
The Blanchard Employment Agreement is automatically renewable annually and is
subject to termination on 30 days written notice.
Yancey Employment Agreement. On December 8, 1977, effective January 1,
1977, Synovus entered into an Employment Agreement with James D. Yancey
("Yancey"), Vice Chairman of the Board of Synovus and Columbus Bank, whereunder
Synovus paid Yancey a salary of $445,000 during 1997. The base salary paid to
Yancey is determined by the Compensation Committee of the Board of Directors of
Synovus on an annual basis. The Yancey Employment Agreement provides that
Synovus shall pay deferred compensation of $375,000 to Yancey or his
beneficiaries over a 10 to 15 year period in the event of the death, total
disability or termination of employment of Yancey, subject to certain conditions
of forfeiture in the event Synovus terminates Yancey's employment "for cause"
(as defined), in the event of his violation of his 2-year Covenant Not to
Compete, or in the event of his death by suicide. The Yancey Employment
Agreement is automatically renewable annually and is subject to termination on
30 days written notice.
Long-Term Incentive Plans. Messrs. Blanchard, Yancey, Burts, Anthony and
Griffith each hold shares of restricted stock of Synovus and options to purchase
stock of Synovus which were issued pursuant to the Synovus Financial Corp. 1992
and 1994 Long-Term Incentive Plans. Under the terms of the Synovus Financial
Corp. 1992 and 1994 Long-Term Incentive Plans, in the event of a change in
control of Synovus, the vesting of any stock options, stock appreciation and
other similar rights, restricted stock and performance awards will be
accelerated so that all awards not previously exercisable and vested will become
fully exercisable and vested.
Change of Control Agreements. Effective January 1, 1996, Synovus entered
into Change of Control Agreements ("Agreements") with Messrs. Blanchard, Yancey,
Burts, Anthony and Griffith and certain other executive officers. The Change of
Control Agreements provide severance pay and continuation of certain benefits in
the event of a Change of Control. In order to receive benefits under the
Agreements, the executive's employment must be terminated involuntarily, without
cause, whether actual or "constructive" within one year following a Change of
Control or the executive may voluntarily or involuntarily terminate employment
during the thirteenth month following a Change of Control. Generally, a "Change
of Control" is deemed to occur in any of the following circumstances: (1) the
acquisition by any person of 20% or more of the "beneficial ownership" of
Synovus' outstanding voting stock, with certain exceptions for Turner family
members; (2) the persons serving as directors of Synovus as of January 1, 1996
and those replacements or additions subsequently approved by a two-thirds (2/3)
vote of the Board ceasing to comprise at least two-thirds (2/3) of the Board;
(3) a merger, consolidation, reorganization or sale of Synovus' assets unless
(a) the previous beneficial owners of Synovus own more than two-thirds (2/3) of
the new company, (b) no person owns more than 20% of the new company, and (c)
two-thirds (2/3) of the new company's Board were members of the incumbent Board
which approved the business combination; or (4) a "triggering event" occurs as
defined in the Synovus Rights Agreement.
Under the Agreements, severance pay would equal three times current base
salary and bonus, with bonus being defined as the average of the previous three
years measured as a percentage of base salary multiplied by current base salary.
Medical, life, disability and other welfare benefits will be provided at the
expense of Synovus for three years with the level of coverage being determined
by the amount elected by the executive during the open enrollment period
immediately preceding the Change of Control. Executives would also receive a
short-year bonus for the year of separation based on the greater of a half
year's maximum bonus or pro rata maximum bonus to the date of termination and a
cash amount in lieu of a long-term incentive award for the year of separation.
If the executive has already received a long-term incentive award in the
separation year, the amount would equal 1.5 times the market grant and if the
executive has not, the amount would equal 2.5 times the market grant.
Executives who are impacted by the Internal Revenue Service excise tax that
applies to certain change of control agreements would receive additional gross
up payments so that they are in the same position as if there were no excise
tax. The Agreements do not provide for retirement benefits or perquisites.
Notwithstanding anything to the contrary set forth in any of Synovus'
previous filings under the Securities Act of 1933, as amended, or the Exchange
Act that might incorporate future filings, including this Proxy Statement, in
whole or in part, the following Performance Graph and Compensation Committee
Report on Executive Compensation shall not be incorporated by reference into any
such filings.
(5) Stock Performance Graph.
The following graph compares the yearly percentage change in cumulative
shareholder return on Synovus Common Stock with the cumulative total return of
the Standard & Poor's 500 Index and the Keefe, Bruyette & Woods 50 Bank Index
for the last five fiscal years (assuming a $100 investment on December 31, 1992
and reinvestment of all dividends).
[Omitted Stock Performance Graph is represented by the following table.]
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
SYNOVUS FINANCIAL CORP., S&P 500 AND KBW 50 BANK INDEX
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
SNV $100 $123 $123 $198 $340 $528
S&P 500 $100 $110 $112 $153 $189 $252
KBW 50 $100 $106 $100 $160 $227 $332
</TABLE>
(6) Compensation Committee Report on Executive Compensation.
The Compensation Committee (the "Committee") of the Board of Directors of
Synovus is responsible for evaluating the remuneration of senior management and
board members of Synovus and its subsidiaries and the compensation and fringe
benefit plans in which officers, employees and directors of Synovus and its
subsidiaries are eligible to participate. Because Synovus' mission is to create
superior shareholder value by retaining and attracting well-trained and
highly-motivated people who deliver the very best quality customer service, the
Committee's executive compensation policies are designed to attract and retain
highly-motivated and well-trained executives in order to create superior
shareholder value.
Elements of Executive Compensation. The four elements of executive
compensation at Synovus are:
o Base Salary
o Annual Bonus
o Long-Term Incentives
o Other Benefits
The Committee believes that a substantial portion, though not a majority,
of an executive's compensation should be "at-risk" based upon Synovus'
short-term performance (through the annual bonus and the Synovus/TSYS Profit
Sharing Plan and the Synovus/TSYS 401(k) Savings Plan) and long-term performance
(through long-term incentives including stock options and restricted stock
awards). The remainder of each executive's compensation is primarily based upon
the competitive practices of a select group of approximately 18 banks that had
similar "market value added" as Synovus during the previous ten years ("similar
companies"). "Market value added," or "MVA," as used by the Committee in this
context, equals stock price increase during the ten-year period, plus dividends
for the ten-year period, minus increases to paid-in capital during such period.
This subtraction eliminates value added through acquisitions. The Committee
believes the MVA approach accurately reflects Synovus' competitors and
represents the most appropriate market data for the compensation of Synovus
executives. The companies used for comparison under the "MVA" approach are not
the same companies included in the peer group index appearing in the Stock
Performance Graph above.
A description of each element of executive compensation and the factors and
criteria used by the Committee in determining these elements is discussed below:
Base Salary. Base salary is an executive's annual rate of pay without
regard to any other elements of compensation. The primary consideration in
determining an executive's base salary is a market comparison of the base
salaries at similar companies for similar positions based upon the executive's
level of responsibility and experience. Base salaries are targeted at the median
level of the similar companies used in the comparison. In addition to market
comparisons, individual performance (measured by the quality of Synovus'
strategic plan, the executive's management responsibilities and development, and
the executive's industry and civic involvement) is also considered in
determining an executive's base salary, although these factors do not weigh
heavily in determining base salary. Based solely upon market comparisons, the
Committee increased Mr. Blanchard's base salary in 1997. The Committee also
increased the base salaries of Synovus' other executive officers in 1997 based
solely upon market comparisons.
Annual Bonus. Annual bonuses are awarded pursuant to the terms of Synovus'
Executive Bonus Plan and Synovus' Incentive Bonus Plan (collectively the
"plans"). The Committee has the discretion from year-to-year to select
participants in the Executive Bonus Plan, which was approved by the shareholders
of Synovus in 1996. For 1997, the Committee selected Mr. Blanchard and Mr.
Yancey to participate in the Executive Bonus Plan, while the Committee selected
Messrs. Burts, Anthony and Griffith to participate in the Incentive Bonus Plan.
Under the terms of the plans, bonus amounts are paid as a percentage of base pay
based on the achievement of previously established performance goals. The
performance measures for such goals may be chosen by the Committee from among
the following for Synovus, any of its business segments and/or any of its
business units: (i) return on assets; (ii) net income; (iii) operating income;
(iv) nonperforming assets and/or loans as a percentage of total assets and/or
loans; (v) return on capital compared to cost of capital; (vi) earnings per
share and/or earnings per share growth; (vii) return on equity; (viii)
noninterest expense as a percentage of total expense; (ix) loan charge-offs as a
percentage of total loans; (x) productivity and expense control; (xi) number of
cardholder, merchant and/or other customer accounts processed and/or converted
by TSYS; (xii) successful negotiation or renewal of contracts with new and/or
existing customers by TSYS; (xiii) stock price; and (xiv) asset growth. For Mr.
Blanchard and Synovus' other executive officers, the Committee established a
payout matrix based upon the attainment of net income targets during 1997. The
maximum percentage payouts under the plans for 1997 were 75% for Mr. Blanchard,
65% for Mr. Yancey and 60% for Messrs. Burts, Anthony and Griffith. Synovus'
financial performance and individual performance, separate from the performance
goals established at the beginning of the year, can reduce bonus awards
determined by the attainment of the established goals, although this was not the
case for any of Synovus' executive officers. The Committee did, however,
establish a special provision that would double the bonus otherwise payable to
Messrs. Yancey, Burts, Anthony and Griffith based on the attainment of
productivity goals associated with the establishment of the "new bank" at
Synovus. Because the maximum net income target for 1997 under the plans was
exceeded and the overall financial results of Synovus were favorable, Mr.
Blanchard and Synovus' other executive officers were awarded the maximum bonus
amount for which each executive was eligible under the plans' regular payout
matrix. Although the Committee determined that significant progress had been
made toward the establishment of "new bank" goals, the Committee elected to pay
eligible executives one-half of the maximum payout with respect to the "new
bank" goals, and extended the time frame for accomplishing the remaining goals
and payouts until the end of 1998.
Long-Term Incentives. The two types of long-term incentives awarded to
executives to date are stock options and restricted stock awards. Restricted
stock awards are designed to focus executives on the long-term performance of
Synovus. Stock options provide executives with the opportunity to buy and
maintain an equity interest in Synovus and to share in the appreciation of the
value of Synovus Common Stock. Executives are encouraged to hold the shares
received upon the lapse of restrictions on restricted stock awards and upon the
exercise of stock options, linking their interests to those of Synovus'
shareholders. In 1994, the Committee established a payout matrix for future
long-term incentive grants that uses total shareholder return as measured by
Synovus' performance (stock price increases plus dividends) and how Synovus'
total shareholder return compares to the return of the peer group of companies
appearing in the Stock Performance Graph above. For the long-term incentive
awards made in 1997, total shareholder return and peer comparisons were measured
during the 1994 to 1996 performance period. Applying the results of the 1994 to
1996 performance period to the payout matrix, during 1997 the Committee granted
Messrs. Blanchard, Yancey, Burts, Anthony and Griffith stock options of 160,075,
99,755, 57,143, 52,245 and 44,653 shares, respectively. In addition, the
Committee also made a retention grant of Synovus stock options to Messrs.
Blanchard, Yancey, Burts and Griffith of 250,000, 250,000, 125,000 and 125,000
shares, respectively. The Committee made these retention grants because the
Committee believed the retention of these key executives, who have
responsibility for both Synovus and TSYS, was critical for the continued growth
of Synovus and TSYS over the next several years.
Benefits. Benefits offered to executives serve a different purpose than the
other elements of total compensation. In general, these benefits provide either
retirement income or protection against catastrophic events such as illness,
disability and death. Executives generally receive the same benefits offered to
the general employee population, with the only exceptions designed to promote
tax efficiency or to replace other benefits lost due to regulatory limits. The
Synovus/TSYS Profit Sharing Plan and the Synovus/TSYS 401(k) Savings Plan,
including an excess benefit arrangement designed to replace benefits lost due to
regulatory limits (collectively the "Plan"), is the largest component of
Synovus' benefits package for executives. The Plan is directly related to
corporate performance because the amount of contributions to the Plan (to a
maximum of 14% of an executive's compensation) is a function of Synovus'
profitability. For 1997, Mr. Blanchard and Synovus' other executive officers
received a Plan contribution of 10.9% of their compensation based upon the
profitability formula under the Plan. The remaining benefits provided to
executives are primarily based upon the competitive practices of similar
companies.
In 1993, the Internal Revenue Code of 1986, as amended (the "Code"), was
amended to limit the deductibility for federal income tax purposes of annual
compensation paid by a publicly held corporation to its chief executive officer
and four other highest paid executives for amounts greater than $1 million
unless certain conditions are met. Because the Committee seeks to maximize
shareholder value, the Committee has taken steps to ensure the deductibility of
compensation in excess of $1 million. For 1997, Messrs. Blanchard and Yancey
would have been affected by this provision but for the steps taken by the
Committee. The Committee reserves the ability to make awards which do not
qualify for full deductibility under Section 162(m) of the Code, however, if the
Committee determines that the benefits of so doing outweigh full deductibility.
The Committee believes that the executive compensation policies serve the
best interests of the shareholders and of Synovus. A substantial portion of the
compensation of Synovus' executives is directly related to and commensurate with
Synovus' performance. The Committee believes that the performance of Synovus to
date validates the Committee's compensation philosophy.
Mason H. Lampton
V. Nathaniel Hansford
(7) Compensation Committee Interlocks and Insider Participation.
Gardiner W. Garrard, Jr., Mason H. Lampton and V. Nathaniel Hansford served
as members of Synovus' Compensation Committee during 1997. No member of the
Committee is a current or former officer of Synvous or its subsidiaries.
Gardiner W. Garrard, Jr. is President of The Jordan Company. TSYS leases
from The Jordan Company approximately 10,000 square feet of office space in
Columbus, Georgia for $5,900 per month, which lease expires on September 30,
1999. The lease was made on substantially the same terms as those prevailing at
the time for leases of comparable property between unrelated third parties.
Gardiner W. Garrard, Jr., a director of TSYS, Columbus Bank and Synovus, is an
officer, director and shareholder of The Jordan Company. Richard M. Olnick, the
brother-in-law of Gardiner W. Garrard, Jr. and a director of Columbus Bank, is
an officer, director and shareholder of The Jordan Company.
Mason H. Lampton is Chairman of the Board and President of The Hardaway
Company. James H. Blanchard, Chairman of the Board of Synovus, served on the
Board of Directors of The Hardaway Company during 1997.
(8) Transactions with Management.
During 1997, the subsidiary banks of Synovus had outstanding loans directly
to or indirectly accruing to the benefit of certain of the then directors and
executive officers of Synovus, and their related interests. These loans were
made in the ordinary course of business and were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with others. In the opinion of Synovus' management,
such loans do not involve more than normal risks of collectibility or present
other unfavorable features. In the future, the subsidiary banks of Synovus
expect to have banking transactions in the ordinary course of business with
Synovus' directors, executive officers and their related interests.
During 1997, Synovus and its wholly owned subsidiaries and TSYS paid to
Communicorp, Inc. an aggregate of $517,563 and $535,342, respectively. These
payments were made in the ordinary course of business on substantially the same
terms as those prevailing at the time for comparable transactions with unrelated
third parties, and were primarily for various printing and business
communication services provided by Communicorp, Inc. to Synovus and its
wholly owned subsidiaries and TSYS. Communicorp, Inc. is a wholly owned
subsidiary of AFLAC Incorporated. Daniel P. Amos, a director of Synovus and
Columbus Bank during 1997, is Chief Executive Officer and a director of AFLAC
Incorporated.
During 1997, Synovus and its subsidiaries, including Columbus Bank, paid to
W.C. Bradley Co. an aggregate of $5,182, which payments were primarily for
printing services and marketing materials provided by W.C. Bradley Co. These
payments were made in the ordinary course of business on substantially the same
terms as those prevailing at the time for comparable transactions with unrelated
third parties. Synovus' wholly owned subsidiary, Synovus Service Corp., and TSYS
lease various properties in Columbus, Georgia from W.C. Bradley Co. for office
space and storage. The rent paid for the space in 1997 by Synovus Service Corp.,
which is approximately 35,400 square feet, is approximately $88,300. The rent
paid for the space in 1997 by TSYS, which is approximately 71,915 square feet,
is approximately $718,236. The lease agreements were made on substantially the
same terms as those prevailing at the time for comparable leases for similar
facilities with an unrelated third party in Columbus, Georgia.
During 1997, Columbus Bank and W.C. Bradley Co. were equal partners in B&C
Company, a Georgia general partnership formed to acquire, own and operate
aircraft for their mutual benefit and the benefit of their affiliated
corporations and their employees. Columbus Bank and W.C. Bradley Co. each agreed
to remit to B&C Company fixed fees for each hour they flew the aircraft owned
and/or leased by B&C Company, plus certain other amounts for engine startup and
reserves and other items, and agreed to fly such aircraft for a fixed number of
hours each per year. For use of such aircraft during 1997, Columbus Bank paid to
B&C Company an aggregate sum of $1,058,044. This amount represents the charges
incurred by Columbus Bank and its affiliated corporations for use of B&C Company
aircraft, and includes $853,515 for TSYS' use of such aircraft, for which
Columbus Bank was reimbursed by TSYS.
TB&C Bancshares, Inc. is a principal shareholder of Synovus. TB&C
Bancshares, Inc. is a "family bank holding company" organized by William B.
Turner, and his sisters, Sarah T. Butler and Elizabeth T. Corn. TB&C Bancshares,
Inc. is a party to a lease agreement pursuant to which it leases voting and
certain other rights in a total of 8,874,564 shares of Synovus Common Stock held
in trust by Synovus Trust Company, a subsidiary of Columbus Bank, as Trustee of
three trusts for the benefit of Mr. Turner, Mrs. Butler and Mrs. Corn and their
respective descendants. During 1997, TB&C Bancshares, Inc. paid Synovus Trust
Company, as Trustee, $523,008 pursuant to the terms of the lease agreement,
which amount represents the fair market value of the voting rights as determined
by an independent appraiser. William B. Turner, Chairman of the Executive
Committee of Synovus and Columbus Bank and a director of TSYS, is an advisory
director and shareholder of W.C. Bradley Co. and is an officer, director and
shareholder of TB&C Bancshares, Inc. James H. Blanchard, Chairman of the Board
of Synovus, Chairman of the Executive Committee of TSYS and a director of
Columbus Bank, is a director of W.C. Bradley Co. Elizabeth C. Ogie, the niece of
William B. Turner, is a director of W.C. Bradley Co., Columbus Bank and Synovus
and is an officer, director and shareholder of TB&C Bancshares, Inc. W. Walter
Miller, Jr., the brother-in-law of Elizabeth C. Ogie, is a director of W.C.
Bradley Co. and Senior Vice President and a director of TSYS. Stephen T. Butler,
the nephew of William B. Turner, is an officer and director of W.C. Bradley Co.,
an officer, director and shareholder of TB&C Bancshares, Inc. and is a director
of Columbus Bank. Samuel M. Wellborn, III, Chairman of the Board of Columbus
Bank, is a director of W.C. Bradley Co. W.B. Turner, Jr., the son of William B.
Turner, is an officer and director of W.C. Bradley Co., an officer, director and
shareholder of TB&C Bancshares, Inc. and a director of Columbus Bank. John T.
Turner, the son of William B. Turner, is an officer and director of W.C. Bradley
Co., a shareholder of TB&C Bancshares, Inc. and a director of Columbus Bank.
Sarah T. Butler and Elizabeth T. Corn, the sisters of William B. Turner, are
shareholders of W.C. Bradley Co., are officers, directors and shareholders of
TB&C Bancshares, Inc. and may be deemed to be principal shareholders of Synovus
as a result of their relationship with TB&C Bancshares, Inc.
Bradley & Hatcher, a law firm located in Columbus, Georgia, was paid
$55,000 by Synovus Trust Company and $77,144 by TSYS for the performance of
legal services on their behalf during 1997. Richard Y. Bradley, a director of
Synovus, Columbus Bank and TSYS, is a partner of Bradley & Hatcher.
For information about transactions with companies that are affiliates of
Gardiner W. Garrard, Jr., a director of Synovus, See Section III (7) hereof
captioned "Compensation Committee Interlocks and Insider Participation."
IV. PRINCIPAL SHAREHOLDERS
The following table sets forth the number of shares of Synovus Common Stock
held by the only known holders of more than 5% of the outstanding shares of
Synovus Common Stock.
<TABLE>
<CAPTION>
Percentage of
Shares of Outstanding Shares of
Synovus Common Stock Synovus Common Stock
Name and Address Beneficially Owned Beneficially Owned
Beneficial Owner as of 12/31/97 as of 12/31/97
- ----------------------- ------------------------- ---------------------------
<S> <C> <C>
Synovus Trust Company 24,736,502<F1> 14.10%
1148 Broadway
Columbus, Georgia 31901
TB&C Bancshares, Inc.<F2> 18,529,705 10.58
1017 Front Avenue
Columbus, Georgia 31901
William B. Turner<F2> 20,308,789<F3><F4> 11.59
P.O. Box 120
Columbus, Georgia 31902
Sarah T. Butler<F2> 20,345,238<F3><F5> 11.61
P.O. Box 120
Columbus, Georgia 31902
Elizabeth T. Corn<F2> 20,604,928<F3><F6> 11.76
P.O. Box 120
Columbus, Georgia 31902
W.B. Turner, Jr.<F2> 20,274,302<F3><F7> 11.57
P.O. Box 120
Columbus, Georgia 31902
Stephen T. Butler<F2> 20,299,310<F3><F8> 11.59
P.O. Box 120
Columbus, Georgia 31902
Elizabeth C. Ogie<F2> 20,362,501<F3><F9> 11.62
P.O. Box 120
Columbus, Georgia 31902
<FN>
- -----------------------------------
<F1> As of December 31, 1997, the banking and trust company subsidiaries of
Synovus, including Columbus Bank through its wholly owned subsidiary
Synovus Trust Company ("Synovus Trust"), held in various fiduciary
capacities a total of 25,464,996 shares of Synovus Common Stock as to
which they possessed sole or shared voting or investment power. Of this
total, Synovus Trust held 14,942,432 shares as to which it possessed sole
investment power, 14,572,334 shares as to which it possessed sole voting
power, 631,989 shares as to which it possessed shared voting power and
9,694,351 shares as to which it possessed shared investment power. The
other banking subsidiaries of Synovus held 728,494 shares as to which they
possessed sole voting or investment power and no shares as to which
they possessed shared voting or investment power. In addition, as of
December 31, 1997, Synovus Trust and the banking subsidiaries of Synovus
held in various agency capacities an additional 14,728,128 shares of
Synovus Common Stock as to which they possessed no voting or investment
power. Of this additional amount as to which no voting or investment power
was possessed, Synovus Trust and the banking subsidiaries of Synovus held
14,619,057 and 109,071 shares, respectively. Synovus and its subsidiaries
disclaim beneficial ownership of all shares of Synovus Common Stock which
are held by them in various fiduciary and agency capacities.
<F2> TB&C Bancshares, Inc. ("TB&C") is a "family bank holding company" organized
by William B. Turner (the Chairman of Synovus' Executive Committee) and his
sisters, Sarah T. Butler and Elizabeth T. Corn. The six directors of TB&C,
Mr. Turner, Mmes. Butler and Corn, Elizabeth C. Ogie (the daughter of Mrs.
Corn), Stephen T. Butler (the son of Mrs. Butler), and William B. Turner,
Jr. (the son of Mr. Turner), are each construed to be the beneficial owners
of the 18,529,705 shares of Synovus Common Stock beneficially owned by
TB&C. As TB&C owns 10.58% of the outstanding shares of Synovus Common
Stock, TB&C is registered as a bank holding company. To the best of
Synovus' knowledge, the shares of Synovus Common Stock beneficially owned
by TB&C qualify for ten votes per share, subject to the completion by TB&C
of the Certification contained on its Proxy Card.
<F3> Includes 9,655,141 shares of Synovus Common Stock individually owned by
TB&C; 1,712,137 shares held by a charitable foundation of which each of the
directors of TB&C is a trustee; in the case of Mrs. Corn and Mrs. Ogie,
80,799 shares of Synovus Common Stock held by a charitable foundation of
which Mrs. Corn and Mrs. Ogie are trustees; and 8,874,564 shares of Synovus
Common Stock beneficially owned by TB&C pursuant to a lease agreement
between TB&C and Synovus Trust as Trustee of three trusts for the benefit
of Mr. Turner, Mrs. Butler and Mrs. Corn and their respective descendants.
Pursuant to the agreement, TB&C leases from Synovus Trust as Trustee of
such trusts voting and certain other rights with respect to the shares of
Synovus Common Stock held in such trusts.
<F4> In addition to the shares of Synovus Common Stock described in footnote 3
above, Mr. Turner possessed sole voting and investment power with respect
to 53,735 shares and shared voting or investment power with respect to
13,212 shares of Synovus Common Stock.
<F5> In addition to the shares of Synovus Common Stock described in footnote 3
above, Mrs. Butler possessed sole voting and investment power with respect
to 43,620 shares and shared voting or investment power with respect to
59,776 shares of Synovus Common Stock.
<F6> In addition to the shares of Synovus Common Stock described in footnote 3
above, Mrs. Corn possessed sole voting and investment power with respect to
4,153 shares and shared voting or investment power with respect to 278,134
shares of Synovus Common Stock.
<F7> In addition to the shares of Synovus Common Stock described in footnote 3
above, Mr. Turner possessed sole voting and investment power with respect
to 22,988 shares and shared voting or investment power with respect to
9,472 shares of Synovus Common Stock.
<F8> In addition to the shares of Synovus Common Stock described in footnote 3
above, Mr. Butler possesssed sole voting and investment power with respect
to 54,172 shares and shared voting or investment power with respect to
3,296 shares of Synovus Common Stock.
<F9> In addition to the shares of Synovus Common Stock described in footnote 3
above, Mrs. Ogie possessed sole voting and investment power with respect to
24,495 shares and shared voting or investment power with respect to 15,365
shares of Synovus Common Stock.
</FN>
</TABLE>
V. RELATIONSHIPS BETWEEN SYNOVUS, COLUMBUS BANK, TSYS AND CERTAIN OF
SYNOVUS' SUBSIDIARIES AND AFFILIATES
A. Beneficial Ownership of TSYS Common Stock by Columbus Bank.
The following table sets forth, as of December 31, 1997, the number of
shares of TSYS Common Stock beneficially owned by Columbus Bank, the only known
beneficial owner of more than 5% of the issued and outstanding shares of TSYS
Common Stock.
<TABLE>
<CAPTION>
Percentage of
Shares of Outstanding Shares of
TSYS Common Stock TSYS Common Stock
Name and Address Beneficially Owned Beneficially Owned
Beneficial Owner as of 12/31/97 as of 12/31/97
- ----------------------- ------------------------ ------------------------
<S> <C> <C>
Columbus Bank
and Trust Company 104,401,292<F1><F2> 80.7%
1148 Broadway
Columbus, Georgia 31901
<FN>
- -----------------
<F1> Columbus Bank individually owns these shares.
<F2> As of December 31, 1997, Synovus Trust held in various fiduciary capacities
a total of 1,012,449 shares (.78%) of TSYS Common Stock. Of this total,
Synovus Trust held 753,739 shares as to which it possessed sole voting
power, 743,962 shares as to which it possessed sole investment power,
207,410 shares as to which it possessed shared voting power and 210,510
shares as to which it possessed shared investment power. In addition, as of
December 31, 1997, Synovus Trust held in various agency capacities an
additional 1,310,790 shares of TSYS Common Stock as to which it possessed
no voting or investment power. Synovus and Synovus Trust disclaim
beneficial ownership of all shares of TSYS Common Stock which are held by
Synovus Trust in various fiduciary and agency capacities.
</FN>
</TABLE>
Columbus Bank, by virtue of its ownership of 104,401,292 shares, or 80.7%
of the outstanding shares of TSYS Common Stock on December 31, 1997, presently
controls TSYS. Synovus presently controls Columbus Bank.
B. Interlocking Directorates of Synovus, Columbus Bank and TSYS.
Seven of the members of and nominees to serve on Synovus' Board of
Directors also serve as members of the Boards of Directors of TSYS and Columbus
Bank. They are James H. Blanchard, Richard Y. Bradley, Gardiner W. Garrard, Jr.,
John P. Illges, III, H. Lynn Page, William B. Turner and James D. Yancey. George
C. Woodruff, Jr. and Elizabeth C. Ogie serve as members of the Board of
Directors of Columbus Bank, but do not serve as members of the Board of
Directors of TSYS. Mason H. Lampton serves on the Board of Directors of TSYS and
as an Advisory Director of Columbus Bank.
C. TSYS Common Stock Ownership of Directors and Management.
The following table sets forth, as of December 31, 1997, the number of
shares of TSYS Common Stock beneficially owned by each of Synovus' directors and
Synovus' five most highly compensated executive officers.
<TABLE>
<CAPTION>
Shares of TSYS Shares of TSYS Percentage of
Common Stock Common Stock Total Outstanding
Beneficially Beneficially Shares Shares of
Owned with Owned with of TSYS TSYS Common
Sole Voting Shared Voting Common Stock Stock
and Investment and Investment Beneficially Beneficially
Power as of Power as of Owned as of Owned as of
Name 12/31/97 12/31/97 12/31/97 12/31/97
- --------------------------- ------------------- --------------------- ------------------- -------------
<S> <C> <C> <C> <C>
Richard E. Anthony ----- ----- ----- ---%
Joe E. Beverly ----- ----- ----- ---
James H. Blanchard 520,800 240,320 761,120 .59
Richard Y. Bradley 14,007 ----- 14,007 .01
Stephen L. Burts,Jr. ----- ----- ----- ---
Walter M. Deriso, Jr. 2,553 2,553 5,106 .004
C. Edward Floyd, M.D. ----- ----- ----- ---
Gardiner W. Garrard, Jr. 6,262 ----- 6,262 .005
G. Sanders Griffith, III 12,948<F1> ----- 12,948 .01
V. Nathaniel Hansford ----- 1,000 1,000 .001
John P. Illges, III 68,053 54,500 122,553 .09
Mason H. Lampton 17,613 78,643<F2> 96,256 .07
Elizabeth C. Ogie 6,800 25,080<F3> 31,880 .02
John T. Oliver, Jr. ----- ----- ----- ---
H. Lynn Page 375,071 101,614 476,685 .37
Robert V. Royall 44,300 ----- 44,300 .03
Melvin T. Stith ----- ----- ----- ---
William B. Turner 103,493 384,000 487,493 .38
George C. Woodruff, Jr. 76,206 ----- 76,206 .06
James D. Yancey 529,596 16,000 545,596 .42
<FN>
- --------------
<F1> Includes 11,156 shares of TSYS Common Stock with respect to which Mr.
Griffith has no investment power.
<F2> Includes 19,200 shares of TSYS Common Stock held in a trust for which Mr.
Lampton is not the trustee. Mr. Lampton disclaims beneficial ownership of such
shares.
<F3>Includes 23,560 shares of TSYS Common Stock held by a charitable foundation
of which Mrs. Ogie is a trustee.
</FN>
</TABLE>
The following table sets forth information, as of December 31, 1997, with
respect to the beneficial ownership of TSYS Common Stock by all directors and
executive officers of Synovus as a group.
<TABLE>
<CAPTION>
Percentage of
Shares of Outstanding Shares of
TSYS Common Stock TSYS Common Stock
Name of Beneficially Owned Beneficially Owned
Beneficial Owner as of 12/31/97 as of 12/31/97
- ------------------------------ ----------------------- ----------------------
<S> <C> <C>
All directors
and executive
officers of Synovus as a
group 2,683,950 2.08%
(includes 23 persons)
</TABLE>
D. Transactions and Agreements Between Synovus, Columbus Bank, TSYS and
Certain of Synovus' Subsidiaries.
During 1997, Columbus Bank and 29 of Synovus' other banking subsidiaries
received bankcard data processing services from TSYS. The bankcard data
processing agreement between Columbus Bank and TSYS can be terminated by
Columbus Bank upon 60 days prior written notice to TSYS or terminated by TSYS
upon 180 days prior written notice to Columbus Bank. During 1997, TSYS derived
$2,609,762 in revenues from Columbus Bank and 29 of Synovus' other banking
subsidiaries from the performance of bankcard data processing services and
$148,036 in revenues from Synovus and its subsidiaries from the performance of
other data processing services. TSYS' charges to Columbus Bank and Synovus'
other banking subsidiaries for bankcard and other data processing services are
comparable to, and are determined on the same basis as, charges by TSYS to
similarly situated unrelated third parties.
Synovus Service Corp. ("SSC"), a wholly owned subsidiary of Synovus,
provides various services to Synovus' subsidiary companies, including TSYS. TSYS
and SSC are parties to Lease Agreements pursuant to which SSC leased from TSYS
office space for lease payments aggregating $26,169 during 1997 and TSYS leased
from SSC office space for lease payments aggregating $31,274 during 1997. The
terms of these transactions are comparable to those which could have been
obtained in transactions with unaffiliated third parties.
Synovus and TSYS and SSC and TSYS are parties to Management Agreements
(having one year, automatically renewable, unless terminated, terms), pursuant
to which Synovus and SSC provide certain management services to TSYS. During
1997, these services included human resource services, maintenance services,
security services, communication services, corporate education services, travel
services, investor relations services, corporate governance services, legal
services, regulatory and statutory compliance services, executive management
services performed on behalf of TSYS by certain of Synovus' officers and
financial services. As compensation for management services provided during
1997, TSYS paid Synovus and SSC management fees of $1,216,089 and $9,232,001,
respectively. Management fees are subject to future adjustments based upon
charges at the time by unrelated third parties for comparable services.
During 1997, Synovus Trust Company served as trustee of various employee
benefit plans of TSYS. During 1997, TSYS paid Synovus Trust Company trustee's
fees under these plans of $187,115.
During 1997, Columbus Depot Equipment Company ("CDEC"), a wholly owned
subsidiary of TSYS, and Columbus Bank and 26 of Synovus' other subsidiaries were
parties to Lease Agreements pursuant to which Columbus Bank and 26 of Synovus'
other subsidiaries leased from CDEC computer related equipment for bankcard and
bank data processing services for lease payments aggregating $97,037. During
1997, CDEC sold Columbus Bank and certain of Synovus' other subsidiaries
computer related equipment for bankcard and bank data processing services for
payments aggregating $18,224. In addition, CDEC was paid $2,100 by Columbus
Bank and certain of Synovus' other subsidiaries for monitoring such equipment.
The terms, conditions, rental rates and/or sales prices provided for in these
Agreements are comparable to corresponding terms, conditions and rates provided
for in leases and sales of similar equipment offered by unrelated third parties.
During 1997, Synovus Data Corp., a wholly owned subsidiary of Synovus, paid
TSYS $224,154 for data links, network services and other miscellaneous items
related to the data processing services which Synovus Data Corp. provides to its
customers, which amount was reimbursed to Synovus Data Corp. by its customers.
During 1997, Synovus Data Corp. paid TSYS $24,900 primarily for computer
processing services. During 1997, TSYS and Synovus Data Corp. were parties to a
Lease Agreement pursuant to which TSYS leased from Synovus Data Corp. portions
of its office building for lease payments aggregating $240,000. The charges for
processing and other services, and the terms of the Lease Agreement, are
comparable to those between unrelated third parties.
During 1997, TSYS and Columbus Bank were parties to Lease Agreements
pursuant to which Columbus Bank leased from TSYS portions of its maintenance and
warehouse facilities for lease payments aggregating $11,628. During 1997, TSYS
and Columbus Bank were also parties to a Lease Agreement pursuant to which TSYS
leased office space from Columbus Bank for lease payments of $4,483 per month.
The terms, conditions and rental rates provided for in these Lease Agreements
are comparable to corresponding terms, conditions and rates provided for in
leases of similar facilities offered by unrelated third parties in the Columbus,
Georgia area.
During 1997, Synovus, Columbus Bank and other Synovus subsidiaries paid to
Columbus Productions, Inc. and TSYS Total Solutions, Inc., wholly owned
subsidiaries of TSYS, an aggregate of $1,000,403 for printing and correspondence
services. The charges for these services are comparable to those between
unrelated third parties.
During 1997, TSYS and its subsidiaries were paid $2,075,315 of interest by
Columbus Bank in connection with deposit accounts with, and commercial paper
purchased from, Columbus Bank. During 1997, a subsidiary of TSYS paid Columbus
Bank $123,420 of interest in connection with a loan from Columbus Bank. These
interest rates are comparable to those in transactions between unrelated third
parties.
TSYS has entered into an agreement with Columbus Bank with respect to the
use of aircraft owned or leased by B&C Company, a Georgia general partnership in
which Columbus Bank and W.C. Bradley Co. were equal partners during 1997. TSYS
paid Columbus Bank $853,515 for its use of the B&C Company aircraft during 1997.
The charges payable by TSYS to Columbus Bank in connection with its use of this
aircraft approximate charges available to unrelated third parties in the State
of Georgia for use of comparable aircraft for commercial purposes.
VI. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Synovus' officers and directors,
and persons who own more than ten percent of Synovus Common Stock, to file
reports of ownership and changes in ownership on Forms 3,4 and 5 with the SEC
and the New York Stock Exchange. Officers, directors and greater than ten
percent shareholders are required by SEC regulations to furnish Synovus with
copies of all Section 16(a) forms they file.
To Synovus' knowledge, based solely on its review of the copies of such
forms received by it, and written representations from certain reporting persons
that no Forms 5 were required for those persons, Synovus believes that during
the fiscal year ended December 31, 1997 all Section 16(a) filing requirements
applicable to its officers, directors, and greater than ten percent beneficial
owners were complied with, except that Mr. Griffith and Mr. Prescott each
reported one transaction late on an amended Form 4.
VII. INDEPENDENT AUDITORS
On March 2, 1998, Synovus' Board of Directors appointed KPMG Peat Marwick
LLP, Certified Public Accountants, as the independent auditors to audit the
consolidated financial statements of Synovus and its subsidiaries for the fiscal
year ending December 31, 1998. The Board of Directors knows of no direct or
material indirect financial interest by KPMG Peat Marwick LLP in Synovus or any
of its subsidiaries, or of any connection between KPMG Peat Marwick LLP and
Synovus or any of its subsidiaries, in any capacity as promoter, underwriter,
voting trustee, director, officer, shareholder or employee.
Representatives of KPMG Peat Marwick LLP, Certified Public Accountants,
will be present at Synovus' 1998 Annual Meeting with the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
VIII. FINANCIAL INFORMATION WITH REFERENCE TO SYNOVUS AND ITS SUBSIDIARIES
CONTAINED IN SYNOVUS' 1997 ANNUAL REPORT
Detailed financial information for Synovus and its subsidiaries for their
1997 fiscal year is included in Synovus' 1997 Annual Report that is being mailed
to Synovus' shareholders together with this Proxy Statement.
IX. OTHER MATTERS
As of the time of the preparation of this Proxy Statement, Synovus' Board
of Directors has not been informed of any matters to be presented by or on
behalf of Synovus' Board of Directors or its management for action at Synovus'
1998 Annual Meeting which are not referred to herein. If any other matters come
before the Annual Meeting or any adjournment thereof, it is the intention of the
persons named in the accompanying Proxy to vote thereon in accordance with their
best judgment.
Synovus' shareholders are urged to vote, date and sign the enclosed Proxy
solicited on behalf of Synovus' Board of Directors and return it at once in the
envelope which is enclosed for that purpose. This should be done whether or not
the shareholder plans to attend Synovus' 1998 Annual Meeting.
By Order of the Board of Directors
/s/JAMES H. BLANCHARD
JAMES H. BLANCHARD
Chairman of the Board, Synovus Financial Corp.
Columbus, Georgia
March 13, 1998
SUBSIDIARIES OF SYNOVUS FINANCIAL CORP.
<TABLE>
<CAPTION>
3/4/98
Georgia Corporations Stock Ownership
- --------------------------------------------------------------------------------
<S> <C>
Columbus Bank and Trust Company<F1> 100%
Commercial Bank 100%
Commercial Bank and Trust Company of Troup County 100%
Security Bank and Trust Company of Albany 100%
Sumter Bank and Trust Company 100%
The Coastal Bank of Georgia 100%
First State Bank and Trust Company of Valdosta 100%
Bank of Hazlehurst 100%
The Cohutta Banking Company 100%
Bank of Coweta 100%
Citizens Bank and Trust of West Georgia 100%
First Community Bank of Tifton 100%
Synovus Technologies, Inc. 100%
CB&T Bank of Middle Georgia 100%
Sea Island Bank 100%
Citizens First Bank<F2> 100%
The Citizens Bank 100%
The Citizens Bank of Cochran 100%
Athens First Bank & Trust Company<F3> 100%
Citizens & Merchants State Bank 100%
Synovus Service Corp. 100%
Alabama Corporations
- ---------------------
Synovus Financial Corp. of Alabama 100%
Community Bank and Trust of Southeast Alabama 100%
First Commercial Bank of Huntsville 100%
The Bank of Tuscaloosa 100%
Sterling Bank 100%
First Commercial Bank of Birmingham<F4> 100%
CB&T Bank of Russell County 100%
Florida Corporations
- ---------------------
Quincy State Bank 100%
The Tallahassee State Bank 100%
Bank of Pensacola 100%
Vanguard Bank and Trust Company 100%
First Coast Community Bank 100%
Arizona Corporations
- ---------------------
Sumbank Life Insurance Company 100%
National Banking Associations
- -----------------------------
The National Bank of Walton County (GA) 100%
Peachtree National Bank (GA) 100%
First National Bank of Jasper (AL) 100%
National Bank of South Carolina (SC) 100%
<FN>
<F1> Columbus Bank and Trust Company has one majority-owned subsidiary,
Total System Services, Inc., a Georgia corporation, and two
wholly-owned subsidiaries, Synovus Trust Company and Synovus
Securities, Inc., both of which are Georgia corporations. Total System
Services, Inc. has four wholly-owned subsidiaries, Columbus Depot
Equipment Company, TSYS Total Solutions, Inc., TSYS Canada, Inc. and
Columbus Productions, Inc., all of which are Georgia corporations.
<F2> Citizens First Bank has one wholly-owned subsidiary, Citizens Service
Company, a Georgia corporation.
<F3> Athens First Bank & Trust Company has one wholly-owned subsidiary,
Athena Service Corporation, a Georgia corporation.
<F4> First Commercial Bank of Birmingham has three wholly-owned
subsidiaries, First Commercial Mortgage Corporation, First Commercial
Credit Corporation and Synvous Mortgage Corp., all of which are Alabama
corporations.
</FN>
</TABLE>
filings\snv\subsid2.snv
3
Accountants' Consent
The Board of Directors
Synovus Financial Corp.:
We consent to the incorporation by reference in the Registration Statements (No.
33-35926, No. 33-56614, No. 33-40738, No. 33-39845, No. 2-93472, No. 2-94639,
No. 33-77900, No. 33-77980, No. 33-79518, No. 33-89782, No. 33-90630, No.
33-90632, No. 33-91690, No. 33-60473, No. 33-60475 and 333-30937) on Form S-8 of
Synovus Financial Corp. of our report dated January 23, 1998, relating to the
consolidated balance sheets of Synovus Financial Corp. and 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, which report appears in the December
31, 1997 annual report on Form 10-K of Synovus Financial Corp.
KPMG PEAT MARWICK LLP
Atlanta, Georgia
March 19, 1998
Accountants' Consent
The Board of Directors
Synovus Financial Corp.:
We consent to the incorporation by reference in the registration statement (No.
333-37403) on Form S-3 of Synovus Financial Corp. of our report dated January
23, 1998, relating to the consolidated balance sheets of Synovus Financial Corp.
and 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, which report
appears in the December 31, 1997 annual report on Form 10-K of Synovus Financial
Corp.
KPMG PEAT MARWICK LLP
Atlanta, Georgia
March 19, 1998
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Synovus Financial Corp. has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SYNOVUS FINANCIAL CORP.
(Registrant)
March 20, 1998 By:/s/James H. Blanchard
---------------------
James H. Blanchard,
Chairman of the Board and
Principal Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James H. Blanchard, James D. Yancey and Stephen
L. Burts, Jr., and each of them, his or her true and lawful attorney(s)-in-fact
and agent(s), with full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all capacities, to sign any
or all amendments to this report and to file the same, with all exhibits and
schedules thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney(s)-in-fact and
agent(s) full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney(s)-in-fact and agent(s), or their
substitute(s), may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange
Act of 1934, as amended, this report has been signed by the following persons in
the capacities and on the dates indicated.
/s/William B. Turner Date: March 20, 1998
- -----------------------------------------------
William B. Turner,
Director and Chairman of
the Executive Committee
/s/James H. Blanchard Date: March 20, 1998
- -----------------------------------------------
James H. Blanchard,
Chairman of the Board and
Principal Executive Officer
17
/s/John T. Oliver, Jr. Date: March 20, 1998
- -----------------------------------------------
John T. Oliver, Jr.,
Director and Vice Chairman
of the Executive Committee
/s/James D. Yancey Date: March 20, 1998
- -----------------------------------------------
James D. Yancey,
Vice Chairman of the Board
/s/Richard E. Anthony Date: March 20, 1998
- -----------------------------------------------
Richard E. Anthony,
Vice Chairman of the Board
/s/Walter M. Deriso, Jr. Date: March 20, 1998
- -----------------------------------------------
Walter M. Deriso, Jr.,
Vice Chairman of the Board
/s/Stephen L. Burts, Jr. Date: March 20, 1998
- -----------------------------------------------
Stephen L. Burts, Jr.,
President
/s/Thomas J. Prescott Date: March 20, 1998
- ------------------------------------------------
Thomas J. Prescott,
Executive Vice President, Treasurer,
Principal Accounting and Financial Officer
/s/Joe E. Beverly Date: March 20, 1998
- ------------------------------------------------
Joe E. Beverly,
Director
/s/Richard Y. Bradley Date: March 20, 1998
- ------------------------------------------------
Richard Y. Bradley,
Director
/s/C. Edward Floyd Date: March 20, 1998
- ------------------------------------------------
C. Edward Floyd,
Director
18
/s/Gardiner W. Garrard, Jr. Date: March 20, 1998
- -----------------------------------------------
Gardiner W. Garrard, Jr.,
Director
/s/V. Nathaniel Hansford Date: March 20, 1998
- -----------------------------------------------
V. Nathaniel Hansford,
Director
/s/John P. Illges, III Date: March 20, 1998
- -----------------------------------------------
John P. Illges, III,
Director
/s/Mason H. Lampton Date: March 20, 1998
- ----------------------------------------------
Mason H. Lampton,
Director
/s/Elizabeth C. Ogie Date: March 20, 1998
- ----------------------------------------------
Elizabeth C. Ogie,
Director
/s/H. Lynn Page Date: March 20, 1998
- ----------------------------------------------
H. Lynn Page,
Director
/s/Robert V. Royall, Jr. Date: March 20, 1998
- ----------------------------------------------
Robert V. Royall, Jr.,
Director
/s/Melvin T. Stith Date: March 20, 1998
- ----------------------------------------------
Melvin T. Stith,
Director
/s/George C. Woodruff, Jr. Date: March 20, 1998
- ----------------------------------------------
George C. Woodruff, Jr.,
Director
filings\SNV\confo.sig
19
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SYNOVUS FINANCIAL CORP. FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 1997, AND IS QUALIFED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 388,134
<INT-BEARING-DEPOSITS> 1,272
<FED-FUNDS-SOLD> 93,392
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,325,036
<INVESTMENTS-CARRYING> 330,137
<INVESTMENTS-MARKET> 335,107
<LOANS> 6,609,872
<ALLOWANCE> 103,050
<TOTAL-ASSETS> 9,260,331
<DEPOSITS> 7,707,927
<SHORT-TERM> 305,868
<LIABILITIES-OTHER> 174,065
<LONG-TERM> 126,174
0
0
<COMMON> 175,322
<OTHER-SE> 728,334
<TOTAL-LIABILITIES-AND-EQUITY> 9,260,331
<INTEREST-LOAN> 618,172
<INTEREST-INVEST> 105,342
<INTEREST-OTHER> 2,159
<INTEREST-TOTAL> 725,673
<INTEREST-DEPOSIT> 287,260
<INTEREST-EXPENSE> 313,284
<INTEREST-INCOME-NET> 412,389
<LOAN-LOSSES> 32,296
<SECURITIES-GAINS> (23)
<EXPENSE-OTHER> 610,436
<INCOME-PRETAX> 258,903
<INCOME-PRE-EXTRAORDINARY> 165,236
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 165,236
<EPS-PRIMARY> .95
<EPS-DILUTED> .93<F1>
<YIELD-ACTUAL> 5.26
<LOANS-NON> 18,472
<LOANS-PAST> 20,881
<LOANS-TROUBLED> 18,472
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 94,683
<CHARGE-OFFS> 31,818
<RECOVERIES> 7,889
<ALLOWANCE-CLOSE> 103,050
<ALLOWANCE-DOMESTIC> 103,050
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 21,479
<FN>
<F1>ON MARCH 10, 1997, SYNOVUS ANNOUNCED A THREE-FOR-TWO STOCK SPLIT TO BE ISSUED
ON APRIL 8, 1997, TO SHAREHOLDERS OF RECORD AS OF MARCH 21, 1997. FINANCIAL
DATA SCHEDULES HAVE NOT BEEN RESTATED FOR PRIOR PERIODS FOR THIS
RECAPITALIZATION.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SYNOVUS FINANCIAL CORP. FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997, AND IS QUALIFED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 JAN-01-1997 JAN-01-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 349,373 374,088 336,065
<INT-BEARING-DEPOSITS> 1,990 848 959
<FED-FUNDS-SOLD> 8,167 46,624 45,436
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 1,284,565 1,322,741 1,307,114
<INVESTMENTS-CARRYING> 351,963 342,099 336,021
<INVESTMENTS-MARKET> 351,121 344,311 339,734
<LOANS> 6,183,621 6,393,290 6,470,944
<ALLOWANCE> 97,837 100,619 101,675
<TOTAL-ASSETS> 8,650,468 8,970,672 8,997,052
<DEPOSITS> 7,188,122 7,422,266 7,399,381
<SHORT-TERM> 386,885 399,138 399,441
<LIABILITIES-OTHER> 142,173 153,363 168,300
<LONG-TERM> 100,897 127,239 126,564
0 0 0
0 0 0
<COMMON> 174,705 174,953 175,101
<OTHER-SE> 621,844 656,206 688,461
<TOTAL-LIABILITIES-AND-EQUITY> 8,650,468 8,970,672 8,997,052
<INTEREST-LOAN> 146,023 299,308 457,270
<INTEREST-INVEST> 26,088 52,655 79,238
<INTEREST-OTHER> 303 860 1,362
<INTEREST-TOTAL> 172,414 352,823 537,870
<INTEREST-DEPOSIT> 67,855 138,386 211,823
<INTEREST-EXPENSE> 74,259 152,060 232,264
<INTEREST-INCOME-NET> 98,155 200,763 305,606
<LOAN-LOSSES> 7,001 15,280 22,884
<SECURITIES-GAINS> (32) (2) (20)
<EXPENSE-OTHER> 147,131 300,166 454,595
<INCOME-PRETAX> 56,254 118,481 185,611
<INCOME-PRE-EXTRAORDINARY> 35,807 75,129 118,230
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 35,807 75,129 118,230
<EPS-PRIMARY> .21 .43 .68
<EPS-DILUTED> .20 .42 .67 <F1>
<YIELD-ACTUAL> 5.21 5.24 5.25
<LOANS-NON> 26,861 24,726 21,113
<LOANS-PAST> 17,241 15,911 17,070
<LOANS-TROUBLED> 26,861 24,726 21,113
<LOANS-PROBLEM> 0 0 0
<ALLOWANCE-OPEN> 94,683 94,683 94,683
<CHARGE-OFFS> 5,587 14,004 22,249
<RECOVERIES> 1,740 4,661 6,357
<ALLOWANCE-CLOSE> 97,837 100,619 101,675
<ALLOWANCE-DOMESTIC> 97,837 100,619 101,675
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 22,951 23,464 16,794
<FN>
<F1>ON MARCH 10, 1997, SYNOVUS ANNOUNCED A THREE-FOR-TWO STOCK SPLIT TO BE ISSUED
ON APRIL 8, 1997, TO SHAREHOLDERS OF RECORD AS OF MARCH 21, 1997. FINANCIAL
DATA SCHEDULES HAVE NOT BEEN RESTATED FOR PRIOR PERIODS FOR THIS
RECAPITALIZATION.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF SYNOVUS FINANCIAL CORP. FOR THE TWELVE MONTHS ENDING DECEMBER 31,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1996 JAN-01-1996 JAN-01-1996 JAN-01-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996 SEP-30-1996 DEC-31-1996
<CASH> 336,183 353,624 348,734 404,952
<INT-BEARING-DEPOSITS> 907 1,017 1,028 2,040
<FED-FUNDS-SOLD> 14,764 30,354 3,712 38,249
<TRADING-ASSETS> 0 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 1,184,778 1,207,384 1,229,339 1,276,083
<INVESTMENTS-CARRYING> 385,782 367,490 357,487 363,008
<INVESTMENTS-MARKET> 388,558 362,750 356,675 364,694
<LOANS> 5,640,202 5,803,761 5,943,679 6,065,230
<ALLOWANCE> 83,818 88,056 92,654 94,683
<TOTAL-ASSETS> 7,983,361 8,198,861 8,335,225 8,612,344
<DEPOSITS> 6,776,233 6,921,886 6,877,537 7,203,035
<SHORT-TERM> 241,691 308,591 421,672 339,200
<LIABILITIES-OTHER> 132,971 121,475 151,536 154,641
<LONG-TERM> 100,556 100,323 109,418 97,283
0 0 0 0
0 0 0 0
<COMMON> 115,999 116,182 116,391 116,424
<OTHER-SE> 587,255 600,430 626,791 667,326
<TOTAL-LIABILITIES-AND-EQUITY> 7,983,361 8,198,861 8,335,225 8,612,344
<INTEREST-LOAN> 135,631 274,597 417,296 562,208
<INTEREST-INVEST> 23,852 48,315 73,751 99,170
<INTEREST-OTHER> 713 1,179 1,653 1,925
<INTEREST-TOTAL> 160,196 324,091 492,700 663,303
<INTEREST-DEPOSIT> 66,281 132,602 199,509 267,349
<INTEREST-EXPENSE> 71,067 142,275 215,252 288,429
<INTEREST-INCOME-NET> 89,129 181,816 277,448 374,874
<LOAN-LOSSES> 6,433 14,666 22,677 31,766
<SECURITIES-GAINS> 73 (65) (36) (176)
<EXPENSE-OTHER> 133,204 268,892 410,398 549,174
<INCOME-PRETAX> 45,939 97,306 153,180 219,312
<INCOME-PRE-EXTRAORDINARY> 45,939 62,735 97,943 139,604
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 29,627 62,735 97,943 139,604
<EPS-PRIMARY> .25 .53 .83 1.20
<EPS-DILUTED> .25 .53 .83 1.19
<YIELD-ACTUAL> 5.13 5.16 5.18 5.19
<LOANS-NON> 27,408 26,240 22,580 25,280
<LOANS-PAST> 11,999 13,049 10,931 15,805
<LOANS-TROUBLED> 88,309 16,779 17,182 25,280
<LOANS-PROBLEM> 0 0 0 0
<ALLOWANCE-OPEN> 81,384 81,384 81,384 81,384
<CHARGE-OFFS> 5,289 10,722 15,794 25,180
<RECOVERIES> 1,290 2,728 4,387 6,525
<ALLOWANCE-CLOSE> 83,818 88,056 92,654 94,683
<ALLOWANCE-DOMESTIC> 12,932 3,564 3,749 94,683
<ALLOWANCE-FOREIGN> 0 0 0 0
<ALLOWANCE-UNALLOCATED> 70,886 84,492 88,905 22,951
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SYNOVUS FINANCIAL CORP. FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 1995, AND IS QUALIFED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995 DEC-31-1995 DEC-31-1995
<PERIOD-START> JAN-01-1995 JAN-01-1995 JAN-01-1995 JAN-01-1995
<PERIOD-END> MAR-31-1995 JUN-30-1995 SEP-30-1995 DEC-31-1995
<CASH> 299,679 330,930 306,687 382,696
<INT-BEARING-DEPOSITS> 2,273 2,251 1,280 1,093
<FED-FUNDS-SOLD> 70,906 128,480 42,543 123,832
<TRADING-ASSETS> 0 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 497,514 851,093 899,625 1,106,298
<INVESTMENTS-CARRYING> 860,645 501,874 521,474 380,918
<INVESTMENTS-MARKET> 847,128 504,779 522,859 386,579
<LOANS> 5,211,208 5,363,417 5,458,618 5,512,030
<ALLOWANCE> 78,954 82,492 84,051 81,384
<TOTAL-ASSETS> 7,308,851 7,569,838 7,624,552 7,927,595
<DEPOSITS> 6,287,756 6,504,954 6,457,593 6,727,879
<SHORT-TERM> 152,144 162,787 219,287 229,477
<LIABILITIES-OTHER> 104,435 108,517 134,314 142,079
<LONG-TERM> 129,377 123,835 122,249 106,815
0 0 0 0
0 0 0 0
<COMMON> 76,038 76,779 77,240 77,281
<OTHER-SE> 534,919 567,903 587,559 616,274
<TOTAL-LIABILITIES-AND-EQUITY> 7,308,851 7,569,838 7,624,552 7,927,595
<INTEREST-LOAN> 123,504 254,743 389,321 525,080
<INTEREST-INVEST> 20,243 40,646 61,952 84,595
<INTEREST-OTHER> 597 2,273 3,832 6,113
<INTEREST-TOTAL> 144,344 297,662 455,105 615,788
<INTEREST-DEPOSIT> 55,633 119,670 186,054 253,761
<INTEREST-EXPENSE> 5,881 10,653 15,450 273,913
<INTEREST-INCOME-NET> 61,514 167,339 253,601 341,875
<LOAN-LOSSES> 5,245 10,984 17,198 25,787
<SECURITIES-GAINS> (243) (15) 0 368
<EXPENSE-OTHER> 113,543 231,578 354,191 477,453
<INCOME-PRETAX> 37,518 79,306 126,503 179,469
<INCOME-PRE-EXTRAORDINARY> 37,518 79,306 126,503 114,583
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 24,070 50,670 80,949 114,583
<EPS-PRIMARY> .21 .44 .71 1.00<F1>
<EPS-DILUTED> .21 .44 .70 .99<F1>
<YIELD-ACTUAL> 5.25 5.19 5.16 5.15
<LOANS-NON> 24,609 24,715 26,550 23,202
<LOANS-PAST> 10,847 11,541 9,758 11,417
<LOANS-TROUBLED> 2,006 15,602 19,221 80,131
<LOANS-PROBLEM> 0 0 0 0
<ALLOWANCE-OPEN> 75,018 75,018 75,018 75,018
<CHARGE-OFFS> 2,840 7,027 12,696 24,932
<RECOVERIES> 1,203 2,516 3,530 4,510
<ALLOWANCE-CLOSE> 78,954 82,492 84,051 81,384
<ALLOWANCE-DOMESTIC> 63,030 65,854 67,099 18,936
<ALLOWANCE-FOREIGN> 0 0 0 0
<ALLOWANCE-UNALLOCATED> 15,924 16,638 16,952 62,448
<FN>
<F1>ON MARCH 11, 1996 SYNOVUS FINANCIAL CORP. ANNOUNCED A THREE-FOR-TWO STOCK SPLIT
EFFECTIVE APRIL 8, 1996 TO SHREHOLDERS OF RECORD AS OF MARCH 21, 1996. PER
SHARE DATA HAS BEEN RETROACTIVELY RESTATED TO REFLECT THE ADDITIONAL SHARES
OUTSTANDING RESULTING FROM THE STOCK SPLIT.
</FN>
</TABLE>
