SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended 1999 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 (I.R.S. Employer Identification No.)
incorporation or organization)
One Arsenal Place, 901 Front Avenue
Suite 301, Columbus, Georgia 31901
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (706) 649-2387
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
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 11, 2000, 282,246,801 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 $3,481,000,000 (based upon the
closing per share price of such stock on said date).
Portions of the 1999 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 16, 2000 are incorporated in Part III of
this report.
The undersigned registrant hereby amends Item 1 of its Annual Report on
Form 10-K for the year ended December 31, 1999 by revising the fourth paragraph
under the heading "Supervision, Regulation and Other Factors-Recent Legislation"
Section.
Item 1. Business
Business and Business Segments
Synovus is a $12.5 billion asset multi-financial services company which
is a registered bank holding company. Synovus conducts a broad range of
financial services through its banking and non-banking subsidiaries at more than
200 locations. Synovus is based in Columbus, Georgia and its stock is traded on
the New York Stock Exchange under the symbol "SNV."
Synovus is engaged in two reportable business segments: banking (which
is primarily involved in commercial banking activities and also provides retail
banking, trust services, mortgage banking, securities brokerage and insurance
services ), and transaction processing (which includes credit, debit, commercial
and retail card processing and related services and debt collection and
bankruptcy management services). See Note 12 of Notes to Consolidated Financial
Statements on page F-20 of Synovus' 1999 Annual Report to Shareholders which is
specifically incorporated herein by reference.
Banking and Bank-Related Subsidiaries and Services
Synovus currently has 38 wholly owned first and second tier banking
subsidiaries located in four states (the "Banks"). Of the 38 bank subsidiaries,
25 are located in Georgia and earn 61% of banking operations' revenues, seven
are located in Alabama and earn 19% of banking operations' revenues, one is
located in South Carolina and earns 13% of banking operations' revenues and five
are located in Florida and earn 7% of banking operations' revenues.
The Banks offer commercial banking services, including commercial,
financial, agricultural and real estate loans, and retail banking services,
including accepting customary types of demand and savings deposits, making
individual, consumer, 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, leasing services
automated banking and electronic switch services, automated fund transfers and
bank credit card services, including MasterCard and Visa services.
The bank-related subsidiaries of Synovus are: (1) Synovus Securities,
Inc.(R), Columbus, Georgia, 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(R), Columbus, Georgia, one of
the southeast's largest providers of trust services; (3) Synovus Mortgage
Corp.(R), Birmingham, Alabama, which offers mortgage services; (4) Synovus
Insurance Services, Columbus, Georgia, which offers insurance agency services;
and (5) 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.
Transaction 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' subsidiary, Columbus
Bank and Trust Company(R), Total System Services, Inc.(R), ("TSYS") is now one
of the world's largest information technology processors of credit, debit,
commercial and retail cards. Based in Columbus, Georgia, and traded on the New
York Stock Exchange under the symbol "TSS," TSYS provides the electronic link
between buyers and sellers with a comprehensive on-line system of data
processing services marketed as THE TOTAL SYSTEM(R) servicing issuing
institutions throughout the United States, Canada, Mexico, Honduras and the
Caribbean, representing more than 206 million cardholder accounts on file as of
December 31, 1999. TSYS provides card production, statement preparation,
electronic commerce services, portfolio management services, account
acquisition, credit evaluation, risk management and customer service to clients.
Synovus owns 80.8 percent of TSYS.
TSYS has four wholly owned subsidiaries: (1) Columbus Depot Equipment
Company(sm), which sells and leases computer related equipment associated with
TSYS' transaction processing services; (2) TSYS Total Solutions,(R) Inc., which
provides mail and correspondence processing services, teleservicing, data
documentation capabilities, offset printing, customer service, collections and
account solicitation services; (3) Columbus Productions, Inc.(sm), which
provides full-service commercial printing and related services; and (4) TSYS
Canada, Inc., which provides programming support and assistance with the
conversion of card portfolios to TS2(R).
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 offers
fully integrated merchant transaction and related electronic information
services to financial and nonfinancial institutions and their merchant
customers.
Synovus has one wholly owned subsidiary, TSYS Total Debt Management,
Inc., that provides debt collection and bankruptcy management services. TSYS
Total Debt Mangement, Inc. is included in the transaction processing services
segment.
Seasonality. 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.
Major Customers. A significant amount of TSYS' revenues are derived
from long-term contracts with significant customers, including certain major
customers. For the year ended December 31, 1999, Bank of America Corporation
accounted for 16% of TSYS' total revenues. As a result, the loss of Bank of
America Corporation, 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 completed the sale of
its Universal Card Services to CITIBANK, now a part of Citigroup after
CITIBANK's merger with Travelers Group, Inc. CITIBANK accounted for
approximately 13% of total revenues for the year ended December 31, 1999. On
February 26, 1999, CITIBANK notified TSYS of its decision to terminate Universal
Card Services' processing agreement with TSYS for consumer credit card
accounts at the end of its original term on August 1, 2000. Consumer credit card
accounts represented 66.6% of CITIBANK's revenues to TSYS for the year ended
December 31, 1999. Management believes that CITIBANK will not be a major
customer for the year 2000 and that the loss of revenues from CITIBANK for the
months of August through December 2000, combined with decreased expenses from
the reduction in hardware and software costs and the redeployment of personnel,
should not have a material adverse effect on TSYS' financial condition or
results of operations for the year ending December 31, 2000.
See "Non-Interest Income" under the "Financial Review" Section on pages
F-29 through F-31, "Non-Interest Expense" under the "Financial Review" Section
on pages F-31 and F-32, and Note 10 of Notes to Consolidated Financial
Statements on pages F-17 through F-19 of Synovus' 1999 Annual Report to
Shareholders which are specifically incorporated herein by reference.
Service Marks
Synovus owns the federally registered service marks of Synovus
Financial Corp., Synovus, the stylized S logo, Synovus Mortgage Corp., Synovus
Securities, Inc. and Synovus Trust Company. Synovus also owns additional
registered service marks and 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.
TSYS owns the federally registered service marks TSYS, TS2, Total
System Services, Inc., THE TOTAL SYSTEM and TSYS Total Solutions, to which TSYS
believes strong customer identification attaches. TSYS also owns additional
registered service marks and other service marks. Management does not believe
the loss of such marks would have a material impact on the business of TSYS.
Acquisitions
Synovus has pursued a strategy of acquiring banks and financial service
companies which are used to augment Synovus' internal growth. See Note 1 of
Notes to Consolidated Financial Statements on page F-10 and "Acquisitions" under
the "Financial Review" Section on page F-26 of Synovus' 1999 Annual Report to
Shareholders which are specifically incorporated herein by reference.
Supervision, Regulation and Other Factors
General. Synovus is a registered multi-bank holding company subject to
supervision and regulation by the Board of Governors of the Federal Reserve
System ("Board") under the Bank Holding Company Act ("BHC Act"), and by the
Georgia Banking Department under the bank holding company laws of the State of
Georgia (the "Georgia Act"). As a bank holding company, Synovus is required to
furnish the 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 BHC Act 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 Banking Department for approval of the acquisition.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 ("Interstate Banking Act"), effective September 29, 1995, bank holding
companies were permitted to acquire banks in any state. Under the Interstate
Banking Act, effective June 1, 1997, banks may merge or consolidate across state
lines, unless either of the states involved elected to prohibit such merger or
consolidation prior to May 31, 1997. Finally, under the Interstate Banking Act,
states may authorize banks from other states to engage in branching across state
lines.
In addition, a bank holding company is, with certain exceptions,
prohibited by the BHC Act from engaging in, or acquiring or retaining direct or
indirect control of the voting shares of any company engaged in non-banking
activities. One of the principal exceptions to this prohibition is for
activities expressly found by the Board, prior to November 11, 1999, to be so
closely related to banking, or managing or controlling banks, as to be a proper
incident thereto.
Because Synovus is a registered multi-bank holding company, its
subsidiary banks are also subject to examination, supervision and regulation by
the Board. The banks which are chartered under the banking laws of the States of
Georgia, Florida and Alabama are subject to examination, supervision and
regulation by the Georgia Banking Department, Florida Banking Department and the
Alabama Banking Department, respectively. The banks which are chartered under
the banking laws of the United States are subject to examination, supervision
and regulation by the Office of the Comptroller of the Currency ("OCC"). In
addition, the deposits of Synovus' subsidiary banks are insured by the Federal
Deposit Insurance Corporation ("FDIC") to the extent provided by law, and are
subject to examination, supervision and regulation by the FDIC.
The Georgia Banking Department, Florida Banking Department, Alabama
Banking Department, OCC and the FDIC regulate all areas of the banks' banking
and trust operations, including, where appropriate, reserves, investments,
loans, mergers, the issuance of securities, payment of dividends, interest
rates, extension of credit to officers and directors, establishment of branches,
maintenance of capital and other aspects of their operations.
Also, the payment of management fees by banking subsidiaries of a bank
holding company is subject to supervision and regulation by the Georgia Banking
Department, Florida Banking Department, Alabama Banking Department, the OCC, the
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.
Recent Legislation. On November 12, 1999, President Clinton signed into
law legislation that allows bank holding companies to engage in a wider range of
non-banking activities, including greater authority to engage in securities and
insurance activities. Under the Gramm-Leach-Bliley Act (the "Act"), a bank
holding company that elects to become a financial holding company may engage in
any activity that the Board, in consultation with the Secretary of the Treasury,
determines by regulation or order is: (1) financial in nature; (2) incidental to
any such financial activity; or (3) complementary to any such financial activity
and does not pose a substantial risk to the safety or soundness of depository
institutions or the financial system generally. This Act makes significant
changes in U.S. banking law, principally by repealing certain restrictive
provisions of the 1933 Glass-Steagall Act. The Act specifies certain activities
that are deemed to be financial in nature, including lending, exchanging,
transferring, investing for others, or safeguarding money or securities;
underwriting and selling insurance; providing financial, investment, or economic
advisory services; underwriting, dealing in or making a market in, securities;
and any activity currently permitted for bank holding companies by the Board
under Section 4(c)(8) of the BHC Act. The Act does not authorize banks or their
affiliates to engage in commercial activities that are not financial in nature.
A bank holding company may elect to be treated as a financial holding company
only if all depository institution subsidiaries of the holding company are
well-capitalized, well-managed and have at least a satisfactory rating under the
Community Reinvestment Act.
National banks are also authorized by the Act to engage, through
"financial subsidiaries," in any activity that is permissible for a financial
holding company (as described above) and any activity that the Secretary of the
Treasury, in consultation with the Board, determines is financial in nature or
incidental to any such financial activity, except: (1) insurance underwriting;
(2) real estate development or real estate investment activities (unless
otherwise permitted by law); (3) insurance company portfolio investments; and
(4) merchant banking. The authority of a national bank to invest in a financial
subsidiary is subject to a number of conditions, including, among other things,
requirements that the bank must be well-managed and well-capitalized (after
deducting from the bank's capital outstanding investments in financial
subsidiaries). The Act provides that state banks may invest in financial
subsidiaries (assuming they have the requisite investment authority under
applicable state law) subject to the same conditions that apply to national bank
investments in financial subsidiaries.
The Act also contains a number of other provisions that will affect
Synovus' operations and the operations of all financial institutions. One of the
new provisions relates to the financial privacy of consumers, authorizing
federal banking regulators to adopt rules that will limit the ability of banks
and other financial entities to disclose non-public information about consumers
to non-affiliated entities. These limitations will likely require more
disclosure to consumers, and in some circumstances, will require consent by the
consumer before information is allowed to be provided to a third party.
On March 29, 2000, Synovus filed a declaration with the Board to become
a financial holding company. It is anticipated that the declaration will become
effective on May 1, 2000, although there are no assurances that such will be the
case.
At this time, it is not possible to predict the impact of the Act on
Synovus' financial condition or results of operations.
Pooling of Interests Accounting. The Financial Accounting Standards
Board ("FASB") has published a proposal, the FASB Exposure Draft on Business
Combinations and Intangible Assets, that would, if adopted, eliminate the
availability of pooling of interests accounting treatment for most, if not all,
mergers and acquisitions. Under purchase accounting, an amount equal to the
difference between the value of the consideration paid and the value of the net
assets acquired is characterized as "goodwill," recorded as an asset of the
acquiring company, and amortized as a charge against earnings over a period of
years. If adopted as presently proposed, this change in accounting standards
would be effective for acquisitions agreed to and announced after the end of
2000 or earlier in certain circumstances. Synovus' most significant acquisitions
in recent years have been structured and accounted for as poolings of interest.
Implementation of this proposal is not expected to affect the accounting for
past or pending acquisitions, but it could affect the real or perceived
financial value of acquisitions initiated after the end of 2000.
Dividends. Under the laws of the State of Georgia, Synovus, as a
business corporation, may declare and pay dividends in cash or property unless
the payment or declaration would be contrary to restrictions contained in its
Articles of Incorporation, and unless, after payment of the dividend, it would
not be able to pay its debts when they become due in the usual course of its
businesses or its total assets would be less than the sum of its total
liabilities. Synovus is also subject to certain contractual and regulatory
capital restrictions that limit the amount of cash dividends that Synovus may
pay.
The primary sources of funds for Synovus' payment of dividends to its
shareholders are dividends and fees to Synovus from its banking and nonbanking
affiliates. Various federal and state statutory provisions and regulations limit
the amount of dividends that the subsidiary banks of Synovus may pay. Pursuant
to the regulations of the Georgia Banking Department, a Georgia bank must have
approval of the Georgia Banking Department to pay cash dividends if, at the time
of such payment: (i) the ratio of such banking affiliate's equity capital
(defined to include the aggregate par value of all outstanding common stock,
paid-in surplus, retained earnings, capital resources, reserves for loan losses,
aggregate par value of outstanding preferred stock which is not redeemable and
other outstanding instruments which are required to be converted into common
stock) to its adjusted total assets is less than 6%; (ii) the aggregate amount
of dividends to be declared or anticipated to be declared during the current
calendar year exceeds 50% of its net after-tax profit for the previous calendar
year; or (iii) its total classified assets in its most recent regulatory
examination exceeded 80% of its equity capital (as defined above) as reflected
in such examination. In general, the approval of the Alabama Banking Department
and the Florida Banking Department, as applicable, is required if the total of
all dividends declared by an Alabama or Florida bank, as the case may be, in any
year would exceed the total of its net profits (as defined) for that year
combined with its retained net profits for the preceding two years less any
required transfers to surplus. In addition, the approval of the OCC is required
for a national bank to pay dividends in excess of the bank's retained net income
(as defined) for the current year plus retained net income for the preceding two
years.
Federal and state banking regulations applicable to Synovus and its
banking subsidiaries require minimum levels of capital which limit the amounts
available for payment of dividends. See "Parent Company" under the "Financial
Review" Section on page F-46, and Note 13 of Notes to Consolidated Financial
Statements on pages F-20 through F-22 of Synovus' 1999 Annual Report to
Shareholders which are specifically incorporated herein by reference.
Capital Requirements. Synovus is required to comply with the capital
adequacy standards established by the Board and its banking subsidiaries must
comply with similar capital adequacy standards established by the OCC and FDIC
as applicable. There are two basic measures of capital adequacy for bank holding
companies and their banking subsidiaries that have been promulgated by the
Board, the FDIC and the OCC: a risk-based measure and a leverage measure. All
applicable capital standards must be satisfied for a bank holding company or a
bank to be considered in compliance. See "Capital Resources" and "Dividends"
under the "Financial Review" Section on pages F-44 and F-45 and Note 13 of Notes
to Consolidated Financial Statements on pages F-20 through F-22 of Synovus' 1999
Annual Report to Shareholders which are specifically incorporated herein by
reference.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including issuance of a capital directive, the termination
of deposit insurance by the FDIC, a prohibition on the taking of brokered
deposits, and certain other restrictions on its business. As described below,
substantial additional restrictions can be imposed upon FDIC- insured depository
institutions that fail to meet applicable capital requirements. See "Prompt
Corrective Action."
Commitments to Subsidiary Banks. Under the Board's policy, Synovus is
expected to act as a source of financial strength to its subsidiary banks and to
commit resources to support its subsidiary banks in circumstances when it might
not do so absent such policy. In addition, any capital loans by Synovus to any
of its subsidiary banks would also be subordinate in right of payment to
depositors and to certain other indebtedness of such bank.
In the event of Synovus' bankruptcy, any commitment by Synovus to a
federal bank regulatory agency to maintain the capital of a banking subsidiary
will be assumed by the bankruptcy trustee and entitled to a priority of payment.
In addition, the Federal Deposit Insurance Act provides that any financial
institution whose deposits are insured by the FDIC generally shall be liable for
any loss incurred by the FDIC in connection with the default of, or any
assistance provided by the FDIC to, a commonly controlled financial institution.
Prompt Corrective Action. The Federal Deposit Insurance Corporation Act
of 1991 ("FDICIA") establishes a system of prompt corrective action to resolve
the problems of undercapitalized institutions. Under this system the federal
banking regulators are required to rate supervised institutions on the basis of
five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to a
narrow exception, FDICIA requires the banking regulator to appoint a receiver or
conservator for an institution that is critically undercapitalized. The federal
banking agencies have specified by regulation the relevant capital level for
each category.
Pursuant to FDICIA, the Board, the FDIC, the OCC and the Office of
Thrift Supervision ("OTS") have adopted regulations setting forth a five-tier
scheme for measuring the capital adequacy of the financial institutions they
supervise. Under the regulations, an institution would be placed in one of the
following capital categories: (i) well capitalized (an institution that has a
Total Capital ratio of at least 10%, a Tier 1 Capital ratio of at least 6% and a
Tier 1 Leverage Ratio of at least 5%); (ii) adequately capitalized (an
institution that has a Total Capital ratio of at least 8%, a Tier 1 Capital
ratio of at least 4% and a Tier 1 Leverage Ratio of at least 4%); (iii)
undercapitalized (an institution that has a Total Capital ratio of under 8%, a
Tier 1 Capital ratio of under 4% or a Tier 1 Leverage Ratio of under 4%); (iv)
significantly undercapitalized (an institution that has a Total Capital ratio of
under 6%, a Tier 1 Capital ratio of under 3% or a Tier 1 Leverage Ratio of under
3%); and (v) critically undercapitalized (an institution whose tangible equity
is not greater than 2% of total tangible assets). The regulations permit the
appropriate Federal banking regulator to downgrade an institution to the next
lower category if the regulator determines (i) after notice and opportunity for
hearing or response, that the institution is in an unsafe or unsound condition
or (ii) that the institution has received (and not corrected) a less-
than-satisfactory rating for any of the categories of asset quality, management,
earnings or liquidity in its most recent examination. Supervisory actions by the
appropriate Federal banking regulator depend upon an institution's
classification within the five categories. Synovus' management believes that
Synovus and its significant bank subsidiaries have the requisite capital levels
to qualify as well capitalized institutions under the FDICIA regulations. See
Note 13 of Notes to Consolidated Financial Statements on pages F-20 through F-22
of Synovus' 1999 Annual Report to Shareholders which is specifically
incorporated herein by reference.
FDICIA generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any management
fee to its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to
restrictions on borrowing from the Federal Reserve System. In addition,
undercapitalized depository institutions are subject to growth limitations and
are required to submit capital restoration plans. A depository institution's
holding company must guarantee the capital plan, up to an amount equal to the
lesser of 5% of the depository institution's assets at the time it becomes
undercapitalized or the amount of the capital deficiency when the institution
fails to comply with the plan. Federal banking agencies may not accept a capital
plan without determining, among other things, that the plan is based on
realistic assumptions and is likely to succeed in restoring the depository
institution's capital. If a depository institution fails to submit an acceptable
plan, it is treated as if it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject
to a number of requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, requirements to reduce
total assets and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized depository institutions are subject to appointment
of a receiver or conservator.
Safety and Soundness Standards. The Federal Deposit Insurance Act, as
amended by FDICIA and the Riegle Community Development and Regulatory
Improvement Act of 1994, requires the federal bank regulatory agencies to
prescribe standards, by regulations or guidelines, relating to internal
controls, information systems and internal audit systems, loan documentation,
credit underwriting, interest rate risk exposure, asset growth, asset quality,
earnings, stock valuation and compensation, fees and benefits and such other
operational and managerial standards as the agencies deem appropriate. The
federal bank regulatory agencies have adopted a set of guidelines prescribing
safety and soundness standards pursuant to FDICIA. The guidelines establish
general standards relating to internal controls and information systems,
internal audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth and compensation, fees and benefits. In general, the
guidelines require, among other things, appropriate systems and practices to
identify and manage the risks and exposures specified in the guidelines. The
guidelines prohibit excessive compensation as an unsafe and unsound practice and
describe compensation as excessive when the amounts paid are unreasonable or
disproportionate to the services performed by an executive officer, employee,
director or principal stockholders. The federal banking agencies determined that
stock valuation standards were not appropriate. In addition, the agencies
adopted regulations that authorize, but do not require, an agency to order an
institution that has been given notice by an agency that it is not satisfying
any of such safety and soundness standards to submit a compliance plan. If,
after being so notified, an institution fails to submit an acceptable compliance
plan, the agency must issue an order directing action to correct the deficiency
and may issue an order directing other actions of the types to which an
undercapitalized institution is subject under the prompt corrective action
provisions of FDICIA. See "Prompt Corrective Action." If an institution fails to
comply with such an order, the agency may seek to enforce such order in judicial
proceedings and to impose civil money penalties.
Depositor Preference Statute. Legislation has been enacted providing
that deposits and certain claims for administrative expenses and employee
compensation against an insured depository institution would be afforded a
priority over other general unsecured claims against such an institution,
including federal funds and letters of credit, in the "liquidation or other
resolution" of such an institution by any receiver.
TSYS. TSYS is subject to being examined, and is indirectly regulated,
by federal and state financial institution regulatory agencies which regulate
the banks, savings institutions and credit unions for which TSYS provides
bankcard data processing services. Matters reviewed and examined by these
federal and state financial institution regulatory agencies have included TSYS'
internal controls in connection with its present performance of bankcard data
processing services, and the agreements pursuant to which TSYS provides such
services.
As the Federal Reserve Bank of Atlanta has approved Synovus' indirect
ownership of TSYS through Columbus Bank and Trust Company, TSYS is subject to
direct regulation by the Board. TSYS was formed with the prior written approval
of, and is subject to regulation and examination by, the Georgia Banking
Department as a subsidiary of Columbus Bank and Trust Company. In addition, as
TSYS and its subsidiaries operate as subsidiaries of Columbus Bank and Trust
Company, they are subject to regulation by the FDIC.
Employees
On December 31, 1999, Synovus had 9,221 full time employees, 4,163 of
whom are employees of TSYS.
Competition
Banking. The commercial banking business is highly competitive and
the Banks compete actively with national and state banks for deposits, loans and
trust accounts, and with savings and loan associations and credit unions for
deposits and loans. In addition, Synovus and its banks and bank related
subsidiaries compete with other financial institutions, including securities
brokers and dealers, personal loan companies, insurance companies, finance
companies, leasing companies and certain governmental agencies, all of which
actively engage in marketing various types of loans, deposit accounts and other
services.
Transaction Processing. TSYS encounters vigorous competition in
providing card processing services from several different sources. The national
market in third party card processors is presently being provided by
approximately seven vendors. TSYS believes that it is the second largest third
party card 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 card associations, data
processing and card computer service firms and other such third party vendors
located throughout the United States. In addition to processing cards for United
States clients, TSYS also holds an approximately 37% market share of the Mexican
card processing market and an approximately 25% market share of the Canadian
card processing market.
TSYS' major competitor in the card processing industry is First Data
Resources, Inc., a wholly owned subsidiary of First Data Corporation, which is
headquartered in Omaha, Nebraska, and provides card 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-26
through F-47, and the "Summary of Quarterly Financial Data" Section which is set
forth on page F-48 of Synovus' 1999 Annual Report to Shareholders, which
includes the information encompassed within "Selected Statistical Information,"
are specifically incorporated herein by reference.
Filings\snv\10k-a.98
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 29, 2000 By:/s/James H. Blanchard
---------------------
James H. Blanchard,
Chairman of the Board and
Principal Executive Officer
