FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1999
Commission File Number 1-10312
SYNOVUS FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
Georgia 58-1134883
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
901 Front Avenue
P. O. Box 120
Columbus, Georgia 31902
(Address of principal executive offices)
(706) 649-2401
(Registrants' telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
At April 30, 1999, 271,059,039 shares of the Registrant's Common Stock,
$1.00 par value, were outstanding.
SYNOVUS FINANCIAL CORP.
INDEX
Page
Part I. Financial Information Number
Item 1. Financial Statements
Consolidated Balance Sheets (unaudited)
March 31, 1999 and December 31, 1998 3
Consolidated Statements of Income (unaudited)
Three Months Ended March 31, 1999 and 1998 4
Consolidated Statements of Cash Flows (unaudited)
Three Months Ended March 31, 1999 and 1998 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation 10
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 21
Part II Other Information
Item 6 (a) Exhibits 22
(b) Reports on Form 8-K 22
Signature Page 23
Exhibit Index 24
(11) Statement re Computation of Per Share Earnings 25
(27) Financial Data Schedule (for SEC purposes only,
not enclosed herewith)
PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
SYNOVUS FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands, except share and per share data) 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 281,004 348,365
Interest earning deposits with banks 1,049 1,383
Federal funds sold 24,968 52,695
Mortgage loans held for sale 107,912 156,231
Investment securities available for sale 1,575,845 1,514,054
Investment securities held to maturity 294,555 303,613
Loans 7,638,152 7,420,529
Less unearned income (9,473) (8,537)
Less reserve for loan losses (111,483) (110,822)
- --------------------------------------------------------------------------------------------------------
Loans, net 7,517,196 7,301,170
- --------------------------------------------------------------------------------------------------------
Premises and equipment, net 385,432 375,395
Other assets 434,832 445,103
- --------------------------------------------------------------------------------------------------------
Total assets $ 10,622,793 10,498,009
========================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing $ 1,313,575 1,362,401
Interest bearing 7,150,913 7,180,397
- --------------------------------------------------------------------------------------------------------
Total deposits 8,464,488 8,542,798
Federal funds purchased and securities sold under agreement to
repurchase 667,425 496,013
Long-term debt 136,406 127,015
Other liabilities 201,985 209,489
- --------------------------------------------------------------------------------------------------------
Total liabilities 9,470,304 9,375,315
- --------------------------------------------------------------------------------------------------------
Minority interest in consolidated subsidiary 54,715 52,093
Shareholders' equity:
Common stock - $1.00 par value; Authorized 600,000,000
shares; issued 271,116,558 in 1999 and 270,393,657 in 1998;
outstanding 270,941,295 in 1999 and 270,218,393 in 1998 271,117 270,394
Surplus 50,739 42,006
Less treasury stock - 175,264 shares in 1999 and 1998 (1,285) (1,285)
Less unamortized restricted stock (2,106) (2,545)
Accumulated other comprehensive income 3,345 10,216
Retained earnings 775,964 751,815
- --------------------------------------------------------------------------------------------------------
Total shareholders' equity 1,097,774 1,070,601
- --------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 10,622,793 10,498,009
========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
- 3 -
SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
- --------------------------------------------------------------------------------
(In thousands, except per share data) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Interest income:
Loans, including fees $ 170,801 158,642
Investment securities:
U.S. Treasury and U.S. Government agencies 18,790 20,183
Mortgage-backed securities 6,003 4,002
State and municipal 2,101 1,687
Other investments 626 549
Mortgage loans held for sale 2,477 1,112
Federal funds sold 386 764
Interest earning deposits with banks 21 16
- --------------------------------------------------------------------------------
Total interest income 201,205 186,955
- --------------------------------------------------------------------------------
Interest expense:
Deposits 75,228 75,912
Federal funds purchased and securities
sold under agreement to repurchase 7,301 3,104
Long-term debt 1,946 1,877
- --------------------------------------------------------------------------------
Total interest expense 84,475 80,893
- --------------------------------------------------------------------------------
Net interest income 116,730 106,062
Provision for losses on loans 7,153 7,594
- --------------------------------------------------------------------------------
Net interest income after provision
for losses on loans 109,577 98,468
- --------------------------------------------------------------------------------
Non-interest income:
Data processing services 104,537 89,243
Service charges on deposit accounts 16,470 14,349
Fees for trust services 5,250 3,810
Credit card fees 3,152 2,515
Securities gains (losses), net 447 145
Other operating income 29,531 22,258
- --------------------------------------------------------------------------------
Total non-interest income 159,387 132,320
- --------------------------------------------------------------------------------
Non-interest expense:
Salaries and other personnel expense 105,051 94,692
Net occupancy and equipment expense 45,386 35,916
Other operating expenses 41,432 34,033
Minority interest in subsidiary's net income 2,489 1,974
- --------------------------------------------------------------------------------
Total non-interest expense 194,358 166,615
- --------------------------------------------------------------------------------
Income before income taxes 74,606 64,173
Income tax expense 26,417 22,960
- --------------------------------------------------------------------------------
Net income $ 48,189 41,213
================================================================================
Net income per share :
Basic $ 0.18 0.16
================================================================================
Diluted 0.18 0.15
================================================================================
Weighted average shares outstanding:
Basic 270,647 262,924
Diluted 275,079 267,479
================================================================================
Dividends declared per share $ 0.09 0.07
================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
- 4 -
SYNOVUS FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
- --------------------------------------------------------------------------------
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net Income $ 48,189 41,213
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for losses on loans 7,153 7,594
Depreciation, amortization, and accretion, net 16,274 13,076
Deferred income tax benefit (583) (1,922)
Decrease (Increase) in interest receivable 96 (595)
Increase in interest payable 4,382 4,955
Minority interest in subsidiary's net income 2,489 1,974
Decrease (Increase) in mortgage loans held for
sale 48,319 (51,039)
Other, net 13,100 14,414
- --------------------------------------------------------------------------------
Net cash provided by operating activities 139,419 29,670
- --------------------------------------------------------------------------------
Investing Activities
Cash acquired from acquisition 1,842 ---
Net decrease in interest earning deposits with banks 334 344
Net increase (decrease) in federal funds sold 27,727 (27,468)
Proceeds from maturities and principal collections
of investment securities available for sale 153,386 116,878
Proceeds from sales of investment securities
available for sale 16,374 21,882
Purchases of investment securities
available for sale (242,570) (179,507)
Proceeds from maturities and principal collections
of investment securities held to maturity 15,819 27,489
Purchases of investment securities held
to maturity (6,876) (10,546)
Net increase in loans (223,179) (50,314)
Purchases of premises and equipment (26,051) (17,378)
Disposals of premises and equipment 1,618 65
Proceeds from sales of other real estate 1,740 3,824
Additions to contract acquisition costs (1,903) (5,457)
Additions to computer software (10,163) (7,149)
- --------------------------------------------------------------------------------
Net cash used in investing activities (291,902) (127,337)
- --------------------------------------------------------------------------------
Financing Activities
Net (decrease) increase in demand and savings deposits (80,581) 110,296
Net increase in certificates of deposit 2,271 71,579
Net increase (decrease) in federal funds purchased
and securities sold under agreement to repurchase 171,412 (91,057)
Principal repayments on long-term debt (509) (8,314)
Proceeds from issuance of long-term debt 9,900 ---
Dividends paid to shareholders (19,807) (19,300)
Proceeds from issuance of common stock 2,436 908
- --------------------------------------------------------------------------------
Net cash provided by financing activities 85,122 64,112
- --------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (67,361) (33,555)
Cash and cash equivalents at beginning of period 348,365 388,134
- --------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 281,004 354,579
================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
- 5 -
SYNOVUS FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations, and cash flows in conformity with
generally accepted accounting principles. All adjustments consisting of normally
occurring accruals which, in the opinion of management, are necessary for a fair
presentation of the financial position and results of operations for the periods
covered by this report have been included. The accompanying unaudited
consolidated financial statements should be read in conjunction with the Synovus
Financial Corp. (Synovus) consolidated financial statements and related notes
appearing in Synovus' 1998 annual report previously filed on Form 10-K.
On April 23, 1998, Synovus declared a three-for-two stock split which was
effected on May 21, 1998 in the form of a 50% stock dividend. All share, per
share, and shareholders' equity amounts for all periods presented in the
accompanying consolidated financial statements have been restated to reflect the
stock split.
Note B - Supplemental Cash Flow Information
For the three months ended March 31,1999 and 1998, Synovus paid income
taxes (received a net income tax refund) of ($2.2) million and $1.8 million, and
interest of $80.1 million and $75.9 million, respectively.
Noncash investing activities consisted of loans of approximately $1.7
million and $2.2 million, which were foreclosed and transferred to other real
estate during the three months ended March 31, 1999 and 1998, respectively.
Note C - Comprehensive Income
Other comprehensive income (loss) for Synovus consists of unrealized gains
(losses) on securities available for sale and foreign currency translation
adjustments. Comprehensive income consists of net income plus other
comprehensive income (loss). Comprehensive income for the three months ended
March 31, 1999 and 1998 was $41,318,000 and $41,484,000, respectively.
Note D - Business Combinations
On January 31, 1999, Synovus completed the acquisition of the remaining 80%
interest in Canterbury Trust Company, Inc., which provides trust, custody,
investment and consulting services to large institutional clients. The
acquisition was accounted for as a purchase resulting in goodwill of $5.5
million which will be amortized on a straight-line basis over fifteen years.
On December 18, 1998, Synovus completed the acquisition of the $178 million
asset Georgia Bank & Trust (GB&T), located in Calhoun, Georgia. Synovus issued
1,811,058 shares of common stock for all the issued and outstanding shares of
GB&T.
- 6 -
On November 30, 1998, Synovus completed the acquisition of the $55 million
asset Bank of Georgia, located in Watkinsville, Georgia. Synovus issued 850,269
shares of common stock for all the issued and outstanding shares of Bank of
Georgia.
On September 1, 1998, Synovus completed the acquisition of the $348 million
asset Community Bank Capital Corporation (CBCC). CBCC is the parent company of
the Bank of North Georgia, located in Alpharetta, Georgia. Synovus issued
3,774,531 shares of common stock for all the issued and outstanding shares of
CBCC.
The aforementioned three acquisitions have been accounted for as poolings
of interests, except that the financial information preceding the dates of
acquisition have not been restated to include the financial position and results
of operations of these acquired entities since the effect was not material. The
impact of these three acquisitions was an increase in net income of
approximately $2.5 million for the three months ended March 31, 1999. Net income
for the three months ended March 31, 1998 would have been increased by $1.9
million if the previous periods had been restated.
Note E - Operating Segments
Synovus has two reportable segments: banking operations and computerized
data processing. The banking operations segment is predominately involved in
commercial banking activities and also provides retail banking, trust, mortgage,
and brokerage services. The data processing segment consists of TSYS'
operations, which include credit, debit, commercial and private-label
processing. All inter-segment services provided are charged at the same rates as
those charged to unaffiliated customers. Such services are included in the
revenues and net income of the respective segments and are eliminated to arrive
at consolidated totals.
Segment information as of and for the three months ended March 31, 1999
and 1998 is presented below:
<TABLE>
<CAPTION>
Data
(In thousands) Banking Processing
Operations (c) Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Revenues 1999 $244,568 117,424 (1,400)(a) $360,592
1998 221,696 98,347 (768)(a) 319,275
Income before taxes 1999 57,764 19,331 (2,489)(b) 74,606
1998 50,807 15,340 (1,974)(b) 64,173
Income tax expense 1999 20,035 6,382 -- 26,417
1998 17,870 5,090 -- 22,960
Net income 1999 37,729 12,949 (2,489)(b) 48,189
1998 32,937 10,250 (1,974)(b) 41,213
Total assets 1999 10,272,571 368,286 (18,064)(d) 10,622,793
1998 9,124,274 305,843 (53,440)(d) 9,376,677
</TABLE>
(a) Principally, computerized data processing service revenues
provided to the banking segment.
- 7 -
(b) Minority interest in the computerized data processing segment.
(c) Includes equity in income of joint ventures, which is
included in other operating income.
(d) Primarily TSYS' cash deposits with the banking operations segment.
Note F - 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) payment
of service fees or interest rebates to automobile dealers in connection with the
assignment of automobile credit sales contracts to that Synovus subsidiary; (2)
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; and (3) the receipt of commissions by that Synovus
subsidiary in connection with the sale of credit life insurance to its consumer
credit customers and the charging of an interest surcharge and a processing fee
in connection with consumer loans made by that subsidiary. These lawsuits seek
unspecified damages, including punitive damages. 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.
On November 10, 1998, a class action complaint was filed against
NationsBank of Delaware, N.A., in the United States District Court for the
Southern District of Mississippi. On March 23, 1999, the named plaintiff amended
the complaint and named TSYS, and certain credit bureaus, as defendants
in the case. The named plaintiff alleges, among other things, that the
defendants failed to report properly the credit standing of each member of the
putative class. The named plaintiff has defined the class as all persons and
entities within the United States who obtained credit cards from NationsBank,
and whose accounts were purchased by or transferred to U.S. BankCard, and whose
accounts were improperly reported to credit bureaus or credit agencies
incorrectly. The amended complaint alleges negligence, violation of the Fair
Credit Reporting Act, breach of the duty of good faith and fair dealing, and
seeks declaratory relief, injunctive relief, and the imposition of punitive
damages. TSYS intends to vigorously contest this lawsuit, which seeks
unspecified damages. This litigation has just commenced and discovery has not
yet begun; thus, TSYS is not in a position to determine the possible
exposure, if any, to TSYS.
Note G - Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 standardizes the accounting
for derivative instruments, including certain derivative instruments embedded in
other contracts. Under the standard, entities are required to carry all
derivative instruments on the balance sheet at fair value. The accounting for
changes in the fair value (i.e., gains or losses) of a derivative instrument
depends on whether it has been designated and qualifies as part of a hedging
relationship and, if so, on the reason for holding it. If certain conditions are
met, entities may elect to designate a derivative instrument as a hedge of
exposures to changes in fair values, cash flows, or foreign currencies. If
- - 8 -
the hedged exposure is a fair value exposure, the gain or loss on the
derivative instrument is recognized in earnings in the period of change together
with the offsetting loss or gain on the hedged item attributable to the risk
being hedged. If the hedged exposure is a cash flow exposure, the effective
portion of the gain or loss on the derivative instrument is reported initially
as a component of other comprehensive income (outside earnings) and subsequently
reclassified into earnings when the forecasted transaction affects earnings. Any
amounts excluded from the assessment of hedge effectiveness as well as the
ineffective portion of the gain or loss is reported in earnings immediately. If
the derivative instrument is not designated as a hedge, the gain or loss is
recognized in earnings in the period of change.
For Synovus, SFAS No. 133 is effective January 1, 2000. On adoption, the
provisions of SFAS No. 133 must be applied prospectively. Synovus is in the
process of assessing the impact that SFAS No. 133 will have on its financial
statements.
Note H - Other
Certain amounts in 1998 have been reclassified to conform to the
presentation adopted in 1999.
-9-
ITEM 2 - MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Summary
As revenues for the three months ended March 31, 1999 increased 15.8% over
the first quarter of 1998, net income for the quarter was $48.2 million, up
16.9% from the same period a year ago. Diluted net income per share increased to
$.18 for the first three months of 1999 as compared to $.15 for the same period
in 1998. Return on average assets was 1.88% and return on average equity was
18.54% for the three months ended March 31, 1999. This compares to a return on
average assets of 1.81% and a return on average equity of 18.16% for the first
three months of 1998.
During the third and fourth quarters of 1998, Synovus completed three bank
acquisitions which were accounted for as poolings of interests; however,
financial information preceding the dates of acquisition have not been restated
since the effect was not material. Net income for the three months ended March
31, 1999 includes $2.5 million related to these acquisitions. Net income for
these three banks during the three months ended March 31, 1998 was $1.9 million.
On April 23, 1998, Synovus declared a three-for-two stock split which was
effected on May 21, 1998 in the form of a 50% stock dividend. All share, per
share, and shareholders' equity amounts for all periods presented have been
restated to reflect the stock split.
Acquisitions
On January 31, 1999, Synovus completed the acquisition of the remaining 80%
interest in Canterbury Trust Company, Inc., which provides trust, custody,
investment and consulting services to large institutional clients. The
acquisition was accounted for under the purchase method resulting in goodwill of
$5.5 million which will be amortized on a straight-line basis over fifteen
years.
On March 19, 1999, Synovus announced a letter of intent to acquire the $306
million asset Merit Holding Corporation for stock. Merit Holding Corporation, a
multi-bank holding company based in Tucker, Georgia, was formed in 1994 from the
merger of two community banks, Mountain National Bank in Tucker, Georgia, and
Charter Bank & Trust Co. in Marietta, Georgia. Mountain National Bank operates
three full-service offices in Tucker, Stone Mountain, and Norcross, Georgia, in
addition to Merit Leasing Corporation, a wholly owned, full-service equipment
leasing company. Charter Bank & Trust Co. operates three full-service offices,
two in Cobb County and one in North Fulton County.
On March 31, 1999, Synovus announced a letter of intent to acquire Ready
Bank of Fort Walton Beach Holding Company, the parent company of the $73 million
asset Ready Bank of West Florida. Ready Bank has two banking centers in Fort
Walton Beach and Crestview, Florida. Ready Bank will be merged into Vanguard
Bank & Trust, Valparaiso, Florida, an existing affiliate of Synovus.
The two above mentioned acquisitions are expected to be completed during
the third quarter of 1999 and will be accounted for under the pooling of
interests method.
- 10 -
Balance Sheet
During the first three months of 1999, total assets increased $124.8
million, resulting from net loan growth of $216 million. Providing the necessary
funding for the balance sheet growth during the first three months of 1999,
Synovus' federal funds purchased and securities sold under agreement to
repurchase grew $171.4 million and shareholders' equity increased $27.2 million.
Asset Quality
As measured by its asset quality indicators, Synovus' asset quality remains
strong. During the first three months of 1999, non-performing assets, consisting
of nonaccrual loans, restructured loans, and other real estate, decreased
$384,000, while net loans increased $216 million. Synovus' nonperforming assets
ratio was .39% as of March 31, 1999, which decreased two basis points from
December 31, 1998. Annualized net charge-offs to average loans for the three
months ended March 31, 1999 were .35% compared to .30% during the first three
months of 1998 and .37% for the entire year in 1998. The lower net charge-offs
during the first quarter of 1998 were in part due to a slightly higher volume of
recoveries. Net credit card charge-offs represented 49% of total net charge-offs
for the first quarter of 1999, compared to 50% for the entire year in 1998.
Synovus' overall credit risk profile has continued to improve with credit card
loans representing only 3% of total outstandings at March 31, 1999 compared to
3.5% and 4.4% at December 31, 1998 and March 31, 1998, respectively.
Loans 90 days past due and still accruing were $25.2 million, or .33% of
total loans, compared to $24.6 million, or .33% of total loans, at March 31,
1999 and December 31, 1998, respectively. Management believes that the value of
the underlying collateral securing commercial and consumer loans is generally
sufficient to cover the principal and interest on these loans and management
does not expect a material increase in nonperforming assets in future periods as
a result of the resolution of these delinquencies.
The reserve for loan losses was $111.5 million, or 1.46% of net loans, at
March 31, 1999, compared to $110.8 million, or 1.50% of net loans, at December
31, 1998. The provision for loan losses for the three months ended March 31,
1999 was $7.2 million, compared to $7.6 million for the same period in 1998. The
lower provision expense is due to the positive trends in Synovus' overall credit
risk profile.
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
(In thousands)
<S> <C> <C>
Nonperforming loans $ 20,652 20,985
Other real estate 9,297 9,348
- --------------------------------------------------------------------------------
Non-performing assets $ 29,949 30,333
================================================================================
Loans 90 days past due and still accruing $ 25,164 24,628
================================================================================
Reserve for loan losses $ 111,483 110,822
================================================================================
Reserve for loan losses as a % of loans 1.46% 1.50
================================================================================
As a % of loans and other real estate:
Nonperforming loans 0.27% 0.28
Other real estate 0.12 0.13
- --------------------------------------------------------------------------------
Non-performing assets 0.39% 0.41
================================================================================
Reserve to nonperforming loans 539.81% 528.12
================================================================================
</TABLE>
- 11 -
Capital Resources and Liquidity
Synovus continues to maintain its capital at levels that exceed the minimum
regulatory guidelines. Additionally, based on internal calculations and previous
regulatory exams, each of Synovus' subsidiary banks is currently in compliance
with regulatory capital guidelines. Synovus' total risk-based capital was $1.223
billion at March 31, 1999, compared to $1.187 billion at December 31, 1998. The
ratio of total risk-based capital to risk-weighted assets was 13.62% at March
31, 1999 compared to 13.75% at December 31, 1998. Synovus' leverage ratio at the
end of the first quarter of 1999 was 10.71% compared to 10.76% at the end of
1998. Synovus' equity-to-assets ratio increased thirteen basis points to 10.33%
at March 31, 1999, when compared to year-end 1998.
Internal capital generation continues to support asset growth, as reflected
in the first quarter 1999 equity-to-asset ratio exclusive of net unrealized
gains on investment securities available for sale of 10.29%, compared to 10.09%
at year-end 1998.
Synovus' liquidity position and sources of funds have not changed
significantly since December 31, 1998. Synovus' liquidity ratio at March 31,
1999 was 33.75% compared to 40.18% at December 31, 1998, with the decrease being
primarily due to strong loan growth. Additionally, the maturity mix of
investment securities and loans has not changed significantly during the first
three months of 1999.
Synovus' management monitors liquidity in coordination with the appropriate
committees at each subsidiary bank. Management must ensure that adequate
liquidity, at a reasonable cost, is available to meet the cash flow needs of
depositors, borrowers, and creditors. Management constantly monitors and
maintains appropriate levels of assets and liabilities so as to provide adequate
funding sources to meet estimated customer withdrawals and future loan requests.
Additionally, Synovus subsidiary banks have access to overnight federal
funds lines with various financial institutions, which total approximately $1.5
billion, that can be drawn upon for short-term liquidity needs. Synovus also
holds a $25 million line of credit.
In 1997, Total System Services, Inc. (TSYS), Synovus' 80.8% owned
subsidiary, began construction of a campus-type facility which will serve as
TSYS' corporate headquarters. TSYS entered into an operating lease agreement
relating to the new corporate campus. Under the agreement, the lessor has
purchased the land, is paying for construction and development costs, and has
leased the property to TSYS commencing upon its completion. The lease provides
for a substantial residual value guarantee, up to $87 million, and includes
purchase options at the original cost of the property. Real estate taxes,
insurance, maintenance, and operating expenses applicable to the leased property
are obligations of TSYS. TSYS began moving personnel into the new campus
facility in December 1998, and should complete the move of a substantial number
of its personnel into the new facility by the end of the third quarter of 1999.
With the move to the campus, TSYS will not renew leases on certain facilities.
TSYS expects the increase in occupancy and equipment expense related to
occupying the campus to be approximately $5.3 million in 1999, net of the
relinquished lease obligations.
The consolidated statements of cash flows detail Synovus' cash flows from
operating, investing, and financing activities. Operating activities provided
net cash of $138.7 million during the first three months of 1999, while $85.8
million was provided by financing activities. Investing activities utilized
$291.9 million of this amount, resulting in a decrease in cash and cash
- 12-
equivalents of $67.4 million.
Earning Assets, Sources of Funds, and Net Interest Income
Average total assets for the first three months of 1999 were $10.4 billion,
up 12.9% over the first three months average of 1998, which was $9.2 billion.
The 1998 non-restated bank acquisitions accounted for $640.3 million of the
total increase in average assets. Average earning assets were up 13.3% in the
first three months of 1999 over the same period a year ago and represented 91.2%
of average total assets. When compared to the same period last year, average
deposits increased $653.8 million, average shareholders' equity increased $133.8
million, and average federal funds purchased and securities sold under agreement
to repurchase increased $382.7 million. This growth provided the funding for the
$879.1 million growth in average net loans, the $175 million increase in average
investment securities, partially offset by the $13.9 million decrease in average
federal funds sold.
Net interest income was $116.7 million for the three months ended March 31,
1999, up $10.6 million, or 10.1%, over the $106.1 million reported in the three
months ended March 31, 1998. Net interest income, on a tax-equivalent basis, for
the first three months of 1999 increased $10.8 million, or 10.1%, over the same
period in 1998.
The year-to-date net interest margin was 5.08%, down fifteen basis points
from the same period last year. This decrease resulted from a forty-nine basis
point decrease in the yield on earning assets, which was partially offset by a
thirty-one basis point decrease in the effective cost of funds. The decreased
yield on earning assets was due to lower yields on investment securities and
loans. The decreased loan yields were primarily due to a seventy-five basis
point decrease in the prime rate from the first quarter of 1998 to the first
quarter of 1999. The decreased effective cost of funds was due to lower average
rates paid on interest-bearing funding.
The tax-equivalent adjustment that is required in making yields on
tax-exempt loans and investment securities comparable to taxable loans and
investment securities is shown in the following table for the three months ended
March 31, 1999 and 1998. The taxable-equivalent adjustment is based on a 35%
federal income tax rate.
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Interest income $201,205 186,955
Taxable-equivalent adjustment 1,361 1,197
- --------------------------------------------------------------------------------
Interest income, taxable-equivalent 202,566 188,152
Interest expense 84,475 80,893
- --------------------------------------------------------------------------------
Net interest income, taxable-equivalent $118,091 107,259
================================================================================
</TABLE>
Non-Interest Income
Total non-interest income during the first three months of 1999 increased
$27.1 million, or 20.5%, over the same period in 1998. This increase in
non-interest income resulted primarily from higher data processing revenues,
which increased $15.3 million, or 17.1%, during the three months ended March 31,
1999, over the same period in 1998. Synovus started building The New Bank in
1996; a strategy based on the belief that our customers' expectations and
financial needs were changing rapidly and dramatically. One of The New Bank
components is modernized, more responsive financial products like annuities,
trust services, mortgage, and brokerage. Synovus banks are offering these
services now. During the first quarter of 1999, the banking
- 13 -
operations segment experienced significant increases in mortgage revenues
(up $1.5 million or 33.9%), fees for trust services (up $1.4 million or 38%),
credit card fees (up $.6 million or 25.3%), and brokerage revenues (up $.8
million or 27.6%). Additionally, other operating income for the first quarter of
1999 included a $2 million gain from the sale of a corporate investment.
Data processing services revenue is derived principally from the servicing
of individual bankcard accounts for the card-issuing customers of TSYS. TSYS'
revenues from bankcard data processing services increased $15.3 million, or
17.1%, for the three months ended March 31, 1999, compared to the same period in
1998. Increased revenues from bankcard data processing services are attributable
to the growth in the card portfolios of existing customers, as well as
cardholder accounts of new customers. Increases in the volumes of authorizations
and transactions associated with the additional cardholder accounts also
contributed to the increased revenues. Processing contracts with large
customers, representing a significant portion of TSYS' total revenues, generally
provide for discounts on certain services based on increases in the level of
cardholder accounts processed. As a result, bankcard data processing revenues
and the related margins are influenced by the customer mix relative to the size
of customer bankcard portfolios, as well as the number of individual cardholder
accounts processed for each customer.
In May 1998, TSYS signed a long-term processing agreement with Sears,
Roebuck and Co. to convert and process its private-label credit card portfolio.
In April 1999, the conversion of the Sears portfolio was completed. The accounts
converted in 1999, combined with the 7.5 million converted in the fourth quarter
of 1998, bring the total accounts for Sears to 64 million.
A significant amount of TSYS' revenues is derived from long-term contracts
with large customers, including certain major customers. For the three months
ended March 31, 1999, two major customers accounted for approximately 33% of
total revenues, compared to 29% for the three months ended March 31, 1998. The
loss of either one of TSYS' major customers, or other major or significant
customers, could have a material adverse effect on TSYS' financial condition and
results of operations.
Near the end of the first quarter of 1998, AT&T, a major customer of TSYS,
completed the sale of its Universal Card Services (UCS) to CITIBANK, now a part
of Citigroup after CITIBANK's merger with Travelers Group, Inc. On February
26,1999, CITIBANK notified TSYS of its decision to terminate UCS' processing
agreement with TSYS for consumer credit card accounts at the end of its original
term on August 1, 2000. TSYS' management believes that CITIBANK will continue to
be a major customer in 1999, but will not be a major customer in 2000, and that
the loss of revenues from UCS for the months of August through December 2000
should not have a material adverse effect on TSYS' financial condition or
results of operations for the year ending December 31, 2000.
Effective September 30, 1998, NationsBank and Bank of America merged. TSYS
has long-term processing contracts with each of these customers, with
NationsBanks' ending in 2005 and Bank of America's ending in 2007, and is in the
process of assessing implications of the merger on the existing contracts with
each customer. The combination of NationsBank and Bank of America under a single
processing agreement with TSYS will reduce TSYS' revenues in 1999 and future
years because together NationsBank and Bank of America will be entitled to
receive greater discounts than either would have been entitled to receive
standing alone.
- 14 -
Non-Interest Expense
Total non-interest expense (excluding the minority interest in TSYS' net
income) for the three months ended March 31, 1999, increased $27.2 million, or
16.5%, over the same period in 1998. Management analyzes non-interest expense in
two separate components: banking operations and TSYS. The following table
summarizes this data for the first three months of 1999 and 1998.
<TABLE>
<CAPTION>
1999 1998
--------------------- --------------------
(In thousands) Banking TSYS Banking TSYS
----------- --------- ---------- --------
<S> <C> <C> <C> <C>
Salaries and other personnel expenses $56,583 48,468 51,481 43,210
Net occupancy and equipment expense 12,665 32,721 11,549 24,367
Other operating expenses 24,439 16,993 17,845 16,189
- ---------------------------------------------------------------------------------------------
Total non-interest expense $93,687 98,182 80,875 83,766
=============================================================================================
</TABLE>
Banking operations' non-interest expense increased $12.8 million or 15.8%
for the three months ended March 31, 1999, compared to the same period in 1998.
Salaries and other personnel expenses, the largest component of non-interest
expense, increased $5.1 million or 9.9%. This increase is due to annual salary
adjustments as well as growth in the number of employees. Other operating
expenses increased $6.6 million or 37%. The growth in other operating expenses
is due primarily to expenses associated with our new information technology
processing system, "TIPS" (Technology Improving Personal Service), which is
provided by Marshall & Illsley Data Services (M&I). Synovus completed the
conversion to the TIPS system during March of 1999, and for the first time, the
computers in all of our autonomous banks speak the same electronic language. The
TIPS system is also enabling us to meet the challenges of The New Bank's
successor, Service Beyond Banking. Providing premium service for our customers
is our constant goal. Service Beyond Banking means that there is one source for
our customers' financial needs. Today, with our TIPS system, we are preparing
our banks to provide comprehensive financial services to every Synovus customer
through the Internet and through a data warehouse that will show us the way to
offer even better, more efficient services to our customers.
Non-interest expense related to TSYS increased 17.2% for the three months
ended March 31, 1999, compared to the same period in 1998. Employment expenses
increased 12.2% for the three months ended March 31, 1999, compared to the same
period in 1998. The change in employment expenses consists of an increase of
$9.8 million associated with growth in the number of employees, normal salary
increases and related benefits, offset by $4.5 million invested in software
development costs and contract acquisition costs. The majority of the software
development costs were related to the development of a commercial card system
for TS2 which began in May 1998 and is expected to be substantially completed by
the end of the fourth quarter of 1999. The average number of employees in the
first quarter of 1999 increased to 3,915, a 22.7% increase over the 3,190 in the
same period of 1998.
Net occupancy and equipment expense at TSYS increased 34.3% for the three
months ended March 31, 1999, over the same period in 1998. Computer equipment
and software rentals, which represent the largest component of net occupancy and
equipment expense, increased $4.2 million, or 33.8%, in the first quarter of
1999, compared to the same period in 1998. Due to rapidly changing technology in
computer equipment, TSYS' equipment needs are achieved primarily through
operating leases. During 1998 and the first quarter of 1999, TSYS made
significant investments in computer software licenses related to the new East
Center data center and to accommodate increased volumes due to the expected
growth in the number of accounts associated with new customers.
- 15 -
Year 2000 Readiness Disclosure
Many computer programs were written with a two digit date field, and, if
these programs are not made Year 2000 compliant, they will be unable to
correctly process date information for the year 2000 and after. Through separate
task forces, Synovus is continuing its ongoing projects to assure its processing
systems will be 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. Each Board of Directors has reviewed the
overall project plans for the banks and TSYS with progress toward completion
monitored regularly. The primary components of the plans include: awareness-
assuring a common understanding of the issues 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.
Banking Operations:
For the banks, the conversion of the core processing systems to M&I should
provide for Year 2000 compliance for those applications, including loans,
deposits, and sales platforms. M&I has completed the Year 2000 renovation for
its banking systems and is currently utilizing this renovated code for all
processing. During the first quarter of 1999, M&I completed the testing phase.
Since March 31, 1999, all Synovus banks are being processed using the M&I Year
2000 renovated code. The remaining personal computer hardware platforms and
software programs as well as other ancillary systems such as ATM's, fax
machines, copiers, and phone systems have been reviewed and all significant
applications or infrastructure which need to be modified have been identified
and their renovation and testing is expected to be completed by June 30, 1999.
In August 1998, M&I received ITAA*2000 certification from the Information
Technology Association of America. The program examines processes and methods
used by companies to perform their year 2000 software conversions. In addition,
M&I's progress and plans are subject to periodic review and evaluation by
banking regulatory agencies. In August, 1998, M&I adopted a "Year 2000
Contingency Strategy" plan which follows all the Federal Financial Institutions
Examination Council's (FFIEC) guidelines. This plan includes an analysis of
"most reasonably likely year 2000 worst case scenarios" and M&I's planned
solutions to those scenarios. Examples of these scenarios and planned solutions
are, a power interruption at a data processing facility mitigated by an onsite
generator, and simultaneous disasters at all data processing locations mitigated
by use of a prearranged third party facility.
Business resumption contingency planning is underway at Synovus in
accordance with the FFIEC guidelines and progressing on schedule. This planning
effort addresses specific issues related to Year 2000 service interruptions.
Operational plans are being developed, and will be completed by June 30, 1999,
which will allow Synovus to operate in the event of the disruption of services
from mission critical service providers, including M&I. Included in the Synovus
business resumption contingency planning are measures that address liquidity and
the ready availability of cash.
Based on currently available information while management anticipates there
could be isolated and short-term disruptions of various services and interfaces
at its business sites, there is no
- 16 -
expectation of extensive or protracted systemic failures that would have
a material adverse effect on the financial condition or results of
operations of Synovus.
TSYS:
At TSYS, the core system of TS2 was designed to be Year 2000 compliant, and
TSYS is continuing its ongoing project to ensure that all of TSYS' processing
systems are Year 2000 compliant. As of December 31, 1998, TSYS had completed the
awareness, assessment, renovation, and validation phases of its Year 2000
project. During 1998, two major milestones were met. The first milestone, 100%
of all critical code converted, was achieved in April 1998. The second, 100% of
all noncritical code renovated, was completed in July 1998. As units were
renovated they were returned to production, and, as of December 31, 1998, TSYS
was fully operating in Year 2000 compliant systems. The validation phase at TSYS
included setting up a test environment, testing core system functionality and
providing test results to clients. It was during this phase that Turn of The
Century, Monthly Cycling, Leap Year and Millennium Year, and Month and
Quarter-end dates were tested. This phase concluded during October, 1998 and
results were sent to customers in November and December 1998. The implementation
phase, which allows clients the opportunity to test their specific code within a
Year 2000 environment, began in 1998 and all aspects of such phase are expected
to be completed by June 30, 1999. Completion of all third party interface
testing is dependent upon those third parties completing their own internal
remediation. TSYS could be adversely affected to the extent third parties with
which it interfaces have not properly addressed their Year 2000 issues.
Another significant aspect of the Year 2000 project is contingency
planning, which is a process to ensure that TSYS can continue operations in the
event that information technology systems, noninformation technology systems,
or vendors are not Year 2000 compliant. In January 1999, TSYS refined its
Business Resumption Contingency Plan, or Y2K Day Plan, which is based on the
TSYS Disaster Recovery Plan. This plan sets forth processes and procedures to
follow in case TSYS experiences a problem with processing Year 2000 data or if
mission-critical service providers suffer disruption. The plan includes the
following:
TSYS programming staff will be on site to immediately remediate any coding
issues encountered. The Year 2000 Communication Center will act as the nerve
center during the century changeover, monitoring processing status, conveying
management decisions, and deploying resources where required.
If a power loss is experienced for any reason at TSYS Data Centers which
house mainframe and associated hardware, all of TSYS' critical systems would be
powered through battery backup and diesel generators without experiencing any
downtime. This process, referred to as TSYS' Uninterrupted Power Supply system,
has enough fuel for 72 hours. TSYS has contracts with two separate fuel
distributors to ensure that its operations could continue indefinitely. The fuel
companies have backup generators in case of a power failure to keep their fuel
pumps operational.
TSYS has service agreements with IBM's Global Services to provide, through
its business unit, Business Recovery Services, hot-site assistance and equipment
for data center and network recovery in case of a natural or man-made disaster.
Also, TSYS has contracts with other companies to receive immediate service
and/or top priority in an emergency situation. Additionally, vendor technicians
for key equipment will be on site for the period of December 31, 1999 through
January 3, 2000.
- 17 -
TSYS management believes that the most likely Year 2000 risks relate to
third parties with which it has material relationships. A failure or disruption
of (i) TSYS' mission-critical computer systems caused by third-party
hardware/software, (ii) third-party service/network/gateway providers, or (iii)
significant clients for an extended period, could adversely affect the financial
condition and results of operations of TSYS. Management believes its internal
review indicates that TSYS' mission-critical systems are Year 2000 ready;
however, failure of a mission critical third-party provider could have a
material adverse effect on TSYS' business, operations and financial results.
However, based on currently available information, while management anticipates
there could be isolated and intermittent disruptions of various services and
interfaces at its business sites related to third parties with which it has
material relationships, there is no expectation of extensive or protracted
systemic failures that would have a material adverse effect on the financial
condition or results of operations of TSYS.
The majority of Synovus' costs in becoming Year 2000 compliant are related
to TSYS. Such costs are being expensed as incurred and are not expected to have
a material effect on Synovus' financial condition or results of operations for
1999. TSYS currently estimates the total cost for the Year 2000 project will
amount to approximately $18 million of direct costs. This amount consists
primarily of the costs associated with personnel dedicated to the Year 2000
project. During the first quarter of 1999, TSYS incurred $1.9 million of direct
costs associated with the Year 2000 project and has incurred $10.9 million since
project inception. The banking operations' Year 2000 remediation costs, other
than those related to the conversion to M&I, are not material. Synovus estimates
that the total cost for its banking operations Year 2000 project will be
approximately $2.5 million (approximately $1.4 million incurred in 1998, $300
thousand incurred in the first quarter of 1999 and $800 thousand to be incurred
during the remainder of 1999). These costs are exclusive of the costs associated
with the conversion to the M&I system and consist primarily of direct personnel
costs. The failure of Synovus or TSYS to be Year 2000 compliant would have a
material adverse effect on Synovus' financial condition and results of
operations.
The costs of the projects and the dates on which Synovus and TSYS believe
they will complete the Year 2000 modifications are based on managements best
estimates, which were derived utilizing numerous assumptions about future
events, including the continued availability of necessary technical resources
and the cooperation of customers and vendors. However, there are no guarantees
that these estimates will be achieved and actual results could differ materially
from those anticipated.
All forward-looking statements regarding Year 2000 readiness, including
estimates, forecasts and expectations, are inherently uncertain as they are
based on various expectations and assumptions concerning future events and are
subject to numerous risks and uncertainties which could cause actual events or
results to differ materially from those projected. Important factors upon which
Synovus' Year 2000 forward-looking statements are premised include: (a)
retention of employees and contractors working on Year 2000 projects; (b) TSYS
customers' remediation of their internal systems to be Year 2000 ready and their
cooperation in timely testing; (c) no material disruption of telecommunication,
data transmission networks, payment networks, government services utilities or
other infrastructure services and no unexpected failure of third-party products;
(d) no unexpected failures by third-parties providing services to Synovus; (e)
no undiscovered subversion of systems or program code affecting Synovus'
systems; and (f) no undiscovered material flaws in Synovus' test processes.
- 18 -
Income Tax Expense
Income tax expense for the three months ended March 31, 1999, was $26.4
million compared to $23.0 million for the same period a year ago. The effective
tax rate for the first three months of 1999 and 1998 was 35.4% and 35.8%,
respectively. The enactment of favorable state tax legislation during the first
quarter contributed to the decline in the effective tax rate.
Legal Proceedings
On November 10, 1998, a class action complaint was filed against
NationsBank of Delaware, N.A., in the United States District Court for the
Southern District of Mississippi. On March 23, 1999, the named plaintiff amended
the complaint and named TSYS, and certain credit bureaus, as defendants in the
case. The named plaintiff alleges, among other things, that the defendants
failed to report properly the credit standing of each member of the putative
class. The named plaintiff has defined the class as all persons and entities
within the United States who obtained credit cards from NationsBank, and whose
accounts were purchased by or transferred to U.S. BankCard, and whose accounts
were improperly reported to credit bureaus or credit agencies incorrectly. The
amended complaint alleges negligence, violation of the Fair Credit Reporting
Act, breach of the duty of good faith and fair dealing, and seeks declaratory
relief, injunctive relief, and the imposition of punitive damages. TSYS intends
to vigorously contest this lawsuit, which seeks unspecified damages. This
litigation has just commenced and discovery has not yet begun; thus, TSYS is not
in a position to determine the possible exposure, if any, to TSYS.
Forward-Looking Statements
Certain statements contained in this filing 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 terms; (ii) statements of
plans and objectives of Synovus or its 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
- 19 -
(including "Year 2000" data systems compliance issues) are more difficult
or expensive than anticipated; (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, the Financial Accounting Standards Board, or
other authoritative bodies; (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.
- 20 -
ITEM 3 - QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Quantitative and qualitative disclosures about market risk were included in
the annual report which was incorporated by reference in Synovus' 1998 10-K.
There have been no significant changes in the contractual balances and the
estimated fair value of Synovus' on-balance sheet financial instruments, the
notional amount and estimated fair value of the company's off-balance sheet
derivative financial instruments, or weighted-average interest rates.
- 21 -
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(11) Statement re Computation of Per Share Earnings
(27) Financial Data Schedule (for SEC purposes only, not
enclosed herewith)
(b) Reports on Form 8-K
The following reports on Form 8-K were filed during or subsequent to the
first quarter of 1999.
(1) The report filed on March 1, 1999, included the following event:
On February 26, 1999, TSYS, Synovus' 80.8% owned processing subsidiary,
announced that it received notice from Universal Card Services Corp.
("UCS"), a unit of CITIBANK, of its decision not to renew its processing
contract for consumer cards beyond the original term ending August 1, 2000.
(2) The report filed on March 17, 1999, included the following event:
On March 15, 1999, Synovus announced a 22.8% increase in the quarterly
cash dividend of common stock.
(3) The report filed on April 28, 1999, included the following event:
On April 27, 1999, the Synovus Board of Directors renewed its
Shareholder Rights Plan to take effect when the existing plan expires on
May 4, 1999. Under the new plan, Rights will be distributed as a dividend
at the rate of one Right for each share of common stock of Synovus held by
shareholders of record at the close of business on May 4, 1999. Each
Right will entitle shareholders to buy, upon occurrence of certain
events, one share of common stock for $225.
- 22 -
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYNOVUS FINANCIAL CORP.
Date: May 14, 1999 BY: /s/ Thomas J. Prescott
Executive Vice President and
Chief Financial Officer
- 23 -
INDEX TO EXHIBITS
Sequentially
Exhibit Number Description Numbered Page
- -------------- ---------------- ---------------------
11 Statement re Computation of 25
Per Share Earnings
27 Financial Data Schedule
(for SEC purposes only, not
enclosed herewith)
- 24 -
EXHIBIT 11
SYNOVUS FINANCIAL CORP.
COMPUTATION OF NET INCOME
PER COMMON SHARE
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31, 1999 Three Months Ended March 31, 1998
--------------------------------------------- ---------------------------------------------
Net Average Net Income Net Average Net Income
Income Shares per Share Income Shares Per Share
--------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $48,189 270,647 $ 0.18 $41,213 262,924 $ 0.16
Effect of dilutive options --- 4,432 --- 4,555
- ------------------------------------------------------------------------ -------------------------
EPS - assuming dilution $48,189 275,079 $ 0.18 41,21 267,479 $ 0.15
====================================================================================================================================
</TABLE>
All information presented in Exhibit 11 reflects the three-for-two stock
split declared by the Synovus Board of Directors on April 23, 1998, effective
May 21, 1998, to shareholders of record on May 7, 1998.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF SYNOVUS FINANCIAL CORP. AS OF AND
FOR THE THREE MONTHS ENDED MARCH 31, 1999, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 281,004
<INT-BEARING-DEPOSITS> 1,049
<FED-FUNDS-SOLD> 24,968
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,575,845
<INVESTMENTS-CARRYING> 294,555
<INVESTMENTS-MARKET> 300,710
<LOANS> 7,736,591
<ALLOWANCE> 111,483
<TOTAL-ASSETS> 10,622,793
<DEPOSITS> 8,464,488
<SHORT-TERM> 667,425
<LIABILITIES-OTHER> 201,985
<LONG-TERM> 136,406
0
0
<COMMON> 271,117
<OTHER-SE> 826,657
<TOTAL-LIABILITIES-AND-EQUITY> 10,622,793
<INTEREST-LOAN> 173,278
<INTEREST-INVEST> 27,520
<INTEREST-OTHER> 407
<INTEREST-TOTAL> 201,205
<INTEREST-DEPOSIT> 75,228
<INTEREST-EXPENSE> 84,475
<INTEREST-INCOME-NET> 116,730
<LOAN-LOSSES> 7,153
<SECURITIES-GAINS> 447
<EXPENSE-OTHER> 194,358
<INCOME-PRETAX> 74,606
<INCOME-PRE-EXTRAORDINARY> 48,189
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48,189
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
<YIELD-ACTUAL> 5.08
<LOANS-NON> 20,652
<LOANS-PAST> 25,164
<LOANS-TROUBLED> 378
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 110,822
<CHARGE-OFFS> 8,204
<RECOVERIES> 1,712
<ALLOWANCE-CLOSE> 111,483
<ALLOWANCE-DOMESTIC> 111,483
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 25,870
</TABLE>
