-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NPAJaFTBfic886FuTOfIsGBVVqu/PPXgZC8KU7/iUpb9Xt8U9EmrN3LN2f0r1suw yLjBHqmxImBLbAX4HMcuYw== 0000018349-96-000018.txt : 19960816 0000018349-96-000018.hdr.sgml : 19960816 ACCESSION NUMBER: 0000018349-96-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYNOVUS FINANCIAL CORP CENTRAL INDEX KEY: 0000018349 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 581134883 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10312 FILM NUMBER: 96612071 BUSINESS ADDRESS: STREET 1: ONE ARSENAL PLACE STE 301 STREET 2: 901 FRONT AVE CITY: COLUMBUS STATE: GA ZIP: 31901 BUSINESS PHONE: 7066492267 MAIL ADDRESS: STREET 1: P.O.BOX 120 CITY: COLUMBUS STATE: GA ZIP: 31902 FORMER COMPANY: FORMER CONFORMED NAME: CB&T BANCSHARES INC DATE OF NAME CHANGE: 19890912 10-Q 1 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 June 30, 1996 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) 649-2197 (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 July 31, 1996, 116,287,735 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) June 30, 1996 and December 31, 1995 3 Consolidated Statements of Income (unaudited) Three and Six Months Ended June 30, 1996 and 1995 4 Consolidated Statements of Cash Flows (unaudited) Six Months Ended June 30, 1996 and 1995 5 Notes to Consolidated Financial Statements (unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II. Other Information Item 6. (a) Exhibits 16 (b) Report on Form 8-K 16 Signature Page 17 Exhibit Index 18 (11) Statement re Computation of Per Share Earnings 19 (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)
June 30, December 31, (In thousands, except share and per share data) 1996 1995 ASSETS Cash and due from banks $ 353,624 382,696 Interest earning deposits with banks 1,017 1,093 Federal funds sold 30,354 123,832 Investment securities available for sale 1,207,384 1,106,298 Investment securities held to maturity 367,490 380,918 Loans 5,816,645 5,526,842 Less unearned income (12,884) (14,812) Less reserve for loan losses (88,056) (81,384) Loans, net 5,715,705 5,430,646 Premises and equipment, net 235,405 220,197 Other assets 287,882 281,915 Total assets $ 8,198,861 7,927,595 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Deposits: Non-interest bearing $ 1,106,360 1,141,716 Interest bearing 5,815,526 5,586,163 Total deposits 6,921,886 6,727,879 Federal funds purchased and securities sold under 308,591 229,477 agreement to repurchase Long-term debt 100,323 106,815 Other liabilities 121,475 142,079 Total liabilities 7,452,275 7,206,250 Minority interest in consolidated subsidiary 29,974 27,790 Shareholders' equity: Common stock - $1.00 par value; authorized 600,000,000 shares; issued 116,182,332 in 1996 and 115,921,043 in 1995; outstanding 116,104,437 in 1996 and 115,855,148 in 1995 116,182 115,921 Surplus 90,664 88,381 Less treasury stock - 77,895 and 65,895 shares in 1996 (1,285) (1,022) and 1995, respectively Less unamortized restricted stock (2,347) (2,663) Net unrealized gain (loss) on investment securities (10,708) 5,774 available for sale Retained earnings 524,106 487,164 Total shareholders' equity 716,612 693,555 Total liabilities and shareholders' equity $ 8,198,861 7,927,595
See accompanying notes to consolidated financial statements. SYNOVUS FINANCIAL CORP. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, (In thousands, except per share data) 1996 1995 1996 1995 Interest income: Loans, including fees $ 138,966 131,239 274,597 254,743 Investment securities: U.S. Treasury and U.S. Government agencies 17,850 14,230 34,996 28,128 Mortgage-backed securities 4,576 4,019 9,145 8,134 State and municipal 1,695 1,825 3,508 3,693 Other investments 342 329 666 691 Federal funds sold 455 1,643 1,153 2,213 Interest earning deposits with banks 11 33 26 60 Total interest income 163,895 153,318 324,091 297,662 Interest expense: Deposits 66,321 64,037 132,602 119,670 Federal funds purchased and securities sold under agreement to repurchase 3,365 2,698 6,583 6,316 Long-term debt 1,522 2,074 3,090 4,337 Total interest expense 71,208 68,809 142,275 130,323 Net interest income 92,687 84,509 181,816 167,339 Provision for losses on loans 8,233 5,739 14,666 10,984 Net interest income after provision for losses on loans 84,454 78,770 167,150 156,355 Non-interest income: Data processing services 70,330 55,853 137,624 106,290 Service charges on deposit accounts 13,182 11,695 25,602 22,575 Fees for trust services 2,678 2,283 5,417 4,721 Credit card fees 2,298 1,836 3,812 3,379 Securities gains (losses), net (138) 228 (65) (15) Other operating income 14,251 9,169 26,658 17,590 Total non-interest income 102,601 81,064 199,048 154,540 Non-interest expense: Salaries and other personnel expense 74,644 62,035 147,271 122,220 Net occupancy and equipment expense 29,644 24,416 57,925 48,024 Other operating expenses 29,879 30,438 61,026 59,268 Minority interest in subsidiary's net income 1,521 1,157 2,670 2,077 Total non-interest expense 135,688 118,046 268,892 231,589 Income before income taxes 51,367 41,788 97,306 79,306 Income tax expense 18,259 15,188 34,571 28,636 Net income $ 33,108 26,600 62,735 50,670 Net income per share $ 0.29 0.23 0.54 0.44 Weighted average shares outstanding 116,000 114,779 115,950 114,288 Dividends declared per share $ 0.11 0.09 0.22 0.18
See accompanying notes to consolidated financial statements. SYNOVUS FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, (In thousands) 1996 1995 Operating Activities Net Income $ 62,735 50,670 Adjustments to reconcile net income to net cash provided by operating activities: Provision for losses on loans 14,666 10,984 Depreciation, amortization, and accretion, net 21,109 18,815 Deferred income tax (benefit) expense (481) 581 Increase in interest receivable (4,792) (6,275) (Decrease) increase in interest payable (1,855) 9,378 Minority interest in subsidiary's net income 2,670 2,077 Increase in mortgage loans held for sale (5,582) (10,529) Other, net (12,596) (23,881) Net cash provided by operating activities 75,874 51,820 Investing Activities Cash acquired from acquisitions --- 4,431 Net decrease in interest earning deposits with banks 76 798 Net decrease (increase) in federal funds sold 93,478 (75,418) Proceeds from maturities of investment securities available for sale 213,681 56,570 Proceeds from sales of investment securities available for sale 71,692 80,035 Purchases of investment securities available for sale (413,826) (104,364) Proceeds from maturities of investment securities held to maturity 45,001 28,470 Purchases of investment securities held to maturity (31,881) (25,347) Net increase in loans (294,143) (225,573) Purchase of premises and equipment (33,264) (18,979) Disposal of premises and equipment 1,079 885 Proceeds from sale of other real estate 3,643 3,122 Additions to internally developed computer software (3,432) (3,559) Net cash used in investing activities (347,896) (278,929) Financing Activities Net increase in demand and savings deposits 132,349 22,164 Net increase in certificates of deposit 61,658 477,471 Net increase (decrease) in federal funds purchased and securities sold under agreement to repurchase 79,114 (249,560) Principal repayments on long-term debt (6,492) (17,875) Proceeds from issuance of long-term debt --- 1,898 Purchase of treasury stock (263) (827) Dividends paid to shareholders (25,532) (21,246) Proceeds from issuance of common stock 2,116 1,386 Net cash provided by financing activities 242,950 213,411 Decrease in cash and cash equivalents (29,072) (13,698) Cash and cash equivalents at beginning of period 382,696 344,637 Cash and cash equivalents at end of period $ 353,624 330,939
Continued on next page. SYNOVUS FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Unaudited) Supplemental cash flow information: For the six months ended June 30, 1996 and 1995, Synovus Financial Corp. (Synovus) paid income taxes of $46.2 million and $34.0 million, and interest of $144.1 million and $120.9 million, respectively. Supplemental information of noncash investing and financing activities: Loans of approximately $2.5 million and $3.5 million were foreclosed and transferred to other real estate during the six months ended June 30, 1996 and 1995, respectively. Depreciation, amortization, and accretion, net, for the six months ended June 30, 1996 and 1995 includes amortization of internally developed computer software of $1.7 million. Internally developed computer software has a net carrying value of $29.5 million and $32.0 million at June 30, 1996 and 1995, respectively. See accompanying notes to consolidated financial statements. 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. On March 11, 1996, Synovus declared a three-for-two stock split which was effected on April 8, 1996 in the form of a 50% stock dividend. All share, per share data, and shareholders' equity account balances for all periods presented in the accompanying consolidated financial statements have been restated to give effect to the stock split. Note B - Pending Acquisition On May 24, 1996, Synovus entered into an Agreement with NationsBank providing for the acquisition of two full-service banking centers in Rome, Georgia. Synovus will acquire approximately $58.5 million in deposits and $14.5 million in loans from the two banking centers. The acquisition will be accounted for as a purchase and is expected to be completed in the fourth quarter of 1996. Note C - Recent Accounting Pronouncement On October 23, 1995, SFAS No. 123, "Accounting for Stock-Based Compensation", was issued. SFAS No. 123 allows companies to retain the current approach set forth in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", for recognizing stock-based compensation expense in the basic financial statements; however, companies are encouraged to adopt a new accounting method based on the estimated fair value of employee compensation. Companies that do not adopt the new fair value based method will be required to provide expanded disclosures. SFAS No. 123 is effective for the fiscal year ending December 31, 1996, and Synovus intends to provide such information in expanded disclosures in the footnotes to the financial statements. Note D - Other Certain amounts in 1995 have been reclassified to conform with presentation adopted in 1996. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Summary Net income for the six months ended June 30, 1996, was $62.7 million, up $12.1 million, or 23.8%, from the same period a year ago. Net income per share increased to $.54 in the first half of 1996 as compared to $.44 for the first half of 1995. This performance resulted in a return on average assets of 1.58% and a return on average equity of 17.75% for the six months ended June 30, 1996. This compares to a return on average assets of 1.40% and a return on average equity of 16.69% for the first six months of 1995. Net income for the three months ended June 30, 1996, was $33.1 million, up $6.5 million, or 24.5% from the same period a year ago. Net income per share increased to $.29 in the second quarter of 1996 as compared to $.23 for the second quarter of 1995. This performance resulted in a return on average assets of 1.65% and a return on average equity of 18.65% for the three months ended June 30, 1996. This compares to a return on average assets of 1.44% and a return on average equity of 17.04% for the second quarter of 1995. On March 11, 1996, Synovus declared a three-for-two stock split which was effected on April 8, 1996 in the form of a 50% stock dividend. All share, per share data, and shareholders' equity account balances for all periods presented in the accompanying consolidated financial statements have been restated to give effect to the stock split. Balance Sheet During the first six months of 1996, total assets increased $271.3 million, or 3.4%, compared to December 31, 1995. Net loans increased $285.1 million, or 5.2%, and investment securities increased $87.7 million, or 5.9%. Providing the necessary funding for the balance sheet growth during the first half of 1996, Synovus' deposit base grew $194.0 million, or 2.9%, and net federal funds purchased increased $172.6 million. Loans Synovus continues to increase its internal loan portfolio through a constant focus on meeting the needs of customers in the markets served while maintaining adherence to sound lending practices. As a result of this continued focus, four affiliates headquartered in Columbia, South Carolina; Columbus, Georgia; Birmingham, Alabama; and Valparaiso, Florida experienced significant loan growth of $78.7 million, $44.3 million, $27.6 million, and $22.8 million, respectively, during the six months ended June 30, 1996. Indicative of the economic growth within the communities Synovus serves, loan growth resulted from increases during the first half of 1996 in all loan categories as detailed below. In addition, during April of 1996, Synovus' lead bank, Columbus Bank and Trust Company, purchased $34 million in credit card loans.
June 30, December 31, (In thousands) 1996 1995 Commercial: Commercial, financial, and agricultural $1,984,748 1,931,004 Real estate-construction 649,152 578,712 Real estate-mortgage 1,192,903 1,160,089 Total commercial 3,826,803 3,669,805 Retail: Real estate-mortgage 840,178 824,998 Credit card 258,815 222,204 Installment-other 860,404 784,972 Mortgage loans held for sale 30,445 24,863 Total retail 1,989,842 1,857,037 Total loans 5,816,645 5,526,842 Unearned income (12,884) (14,812) Total loans, net of unearned income $5,803,761 5,512,030
Asset Quality Synovus continues to underwrite loans that provide further diversification within the loan portfolios of the markets served while emphasizing customer relationships in small and middle market businesses. Commercial credits are routinely monitored for cash flows, liquidity, financial condition, and collateral adequacy. Management continues to focus on maintaining a high quality loan portfolio by knowing the markets served, as well as the individual borrowers, and continuing emphasis on loan officer training. As measured by general asset quality indicators, Synovus' asset quality remains strong. During the first six months of 1996, nonperforming assets, consisting of nonaccrual loans, restructured loans, and other real estate, increased $1.8 million, while net loans increased $285.1 million. Synovus' nonperforming assets ratio was .64% as of June 30, 1996, which was unchanged from December 31, 1995. The reserve for loan losses is maintained, through periodic additions to the reserve, at an appropriate level based on management's analysis of the potential risk inherent within the loan portfolio. When determining the amount of loan loss provision, several relevant factors are considered. These relevant factors include the level of nonperforming loans, impaired loan balances, historical loan loss experience, the amount of loan losses charged against the reserve in the given period, and the current and anticipated economic conditions. Synovus' reserve for loan losses increased $6.7 million, or 8.2%, from $81.4 million at December 31, 1995 to $88.1 million at June 30, 1996. Loans 90 days past due and still accruing increased $1.6 million, or 14.3%, since December 31, 1995. Management believes that the value of the underlying collateral securing commercial loans is sufficient to cover the principal and interest payments 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. Synovus, as well as the overall industry, has experienced an increase in credit card and installment loan past dues. Management continues to resolve these past dues either through collection or charge-off. After consideration of the current trend issues described above, with respect to both Synovus and the banking industry as a whole, management believes that the reserve for loan losses adequately reflects the reserves needed for any charge-offs related to the resolution of these loans. The reserve to nonperforming loans and loans 90 days past due and still accruing was 224.1% at June 30, 1996, compared to 235.1% at year-end 1995. Management continues to focus on asset quality with an emphasis on proactive management of problem assets, early detection of potential problem assets, and timely charge-offs.
June 30, December 31, (In thousands) 1996 1995 Nonperforming loans $ 26,240 23,202 Other real estate 10,875 12,071 Nonperforming assets $ 37,115 35,273 Loans 90 days past due and still accruing $ 13,049 11,417 Reserve for loan losses $ 88,056 81,384 Reserve for loan losses as a % of loans 1.52% 1.48 As a % of loans and other real estate: Nonperforming loans 0.45% 0.42 Other real estate 0.19 0.22 Nonperforming assets 0.64% 0.64 Reserve to nonperforming loans 335.58% 350.76
Capital Resources and Liquidity Synovus continues to maintain its capital at levels which 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 and liquidity guidelines. Synovus' total risk-based capital was $799.1 million at June 30, 1996, compared to $751.4 million at December 31, 1995. The ratio of total risk-based capital to risk-weighted assets was 12.60% at June 30, 1996 compared to 12.57% at December 31, 1995. Synovus' leverage ratio at the end of the second quarter of 1996 was 8.92% compared to 8.71% at the end of 1995. Synovus equity-to-assets ratio decreased one basis point to 8.74% at June 30, 1996, when compared to year-end 1995. Internal capital generation continues to support asset growth, as reflected in the 8.85% equity-to-asset ratio exclusive of unrealized gain (loss) on investment securities available for sale, compared to 8.69% at year-end 1995. Synovus' liquidity position and sources of funds have improved since December 31, 1995, due to an increase in liquid assets, primarily investment securities, and a reduction in pledging requirements. Synovus' maturity mix of investment securities and loan portfolios have not changed significantly during the first six months of 1996. Synovus' management monitors liquidity in coordination with the appropriate committees at each affiliate bank. Management must ensure that appropriate 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 that maturities of assets can provide adequate funding to meet estimated customer withdrawals and future loan requests. Additionally, Synovus and its affiliate banks have access to short-term borrowings, such as federal funds, through correspondent banking relationships and a $20 million line of credit held by Synovus. The consolidated statements of cash flows detail Synovus' cash flows from operating, investing, and financing activities. Operating activities provided net cash of $75.9 million during the first six months of 1996, while $243.0 million was provided by financing activities. Investing activities utilized $347.9 million of this amount, resulting in a decrease in cash and cash equivalents of $29.1 million. Earning Assets, Sources of Funds, and Net Interest Income Average total assets for the first six months of 1996 were $8.0 billion, up 9.2% over the first six months of 1995 average of $7.3 billion. Average earning assets were up 9.1% in the first half of 1996 over the same period a year ago and represented 91% of average total assets. When compared to the same period last year, average deposits and average shareholders' equity increased $543.8 million and $98.7 million, respectively. This growth provided the funding for the $423.4 million growth in average net loans, along with a $205.5 million increase in average investment securities. Net interest income was $181.8 million for the six months ended June 30, 1996, up $14.5 million, or 8.7%, over the $167.3 million reported in the six months ended June 30, 1995. Net interest income, on a tax-equivalent basis, for the first half of 1996 increased $14.2 million, or 8.4%, over the same period in 1995. Net interest income was $92.7 million for the second quarter of 1996, up $8.2 million, or 9.7%, over the $84.5 million reported for the second quarter of 1995. Net interest income, on a tax-equivalent basis, for the second quarter of 1996 increased $8.0 million, or 9.4%, over the second quarter of 1995. The year-to-date net interest margin was 5.16%, down three basis points from the same period last year. This decrease resulted from a five basis point increase in the cost of interest bearing liabilities and a three basis point decrease in the yield on interest earning assets. These factors were partially offset by an increased benefit from non-interest bearing accounts. The increase in the cost of interest bearing liabilities was primarily due to the change in the mix of interest bearing liabilities as customers began moving their deposits back to higher paying time deposits from lower paying transaction accounts during 1995 as their expectations of the market rates changed. Approximately half of the loan portfolio floats with changes in the prime rate. While the average prime rate decreased 63 basis points in the first half of 1996, the negative impact of this decrease was mitigated by purchases of investment securities at higher earning rates, improvement in loan fee income, and fundamental loan growth in the current year. The tax-equivalent adjustment required to make yields on tax-exempt loans and investment securities comparable to taxable loans and investment securities is shown in the following table. The taxable-equivalent adjustment is based on a 35% federal income tax rate in both 1996 and 1995.
Three Months Ended Six Months Ended June 30, June 30, (in thousands) 1996 1995 1996 1995 Interest income $163,895 153,318 324,091 297,662 Taxable-equivalent adjustment 1,230 1,368 2,546 2,776 Interest income, taxable-equivalent 165,125 154,686 326,637 300,438 Interest expense 71,208 68,809 142,275 130,323 Net interest income, taxable-equivalent $ 93,917 85,877 184,362 170,115
Provision for Loan Losses During the first six months of 1996, the provision for loan losses increased $3.7 million, or 33.5%, over the same period in 1995. The increase in the provision was necessary primarily to maintain the level of loan loss reserve coverage of outstanding loans, due to strong growth in the loan portfolio, which included the purchase of $34 million in credit card loans during April of 1996. The reserve to net loans ratio as of June 30, 1996, was 1.52%, compared to 1.54% as of June 30, 1995 and 1.48% as of December 31, 1995. Additionally, net charge-offs, primarily in credit card and installment loans, grew somewhat during the first half of 1996. Net charge-offs to average loans for the six months ended June 30, 1996, were .28% compared to .17% during the first six months of 1995. The amount of net charge-offs during the first six months of 1996 was $8.0 million compared to $4.5 million during the first six months of 1995. Management continues to focus on early detection of problem loans and timely resolution of those identified loans. During the second quarter of 1996, the provision for loan losses increased $2.5 million, or 43.5%, over the same period in 1995. Net charge-offs to average loans for the quarter ended June 30, 1996, were .28% compared to .22% during the second quarter of 1995. Non-Interest Income Total non-interest income during the first six months of 1996 increased $44.5 million, or 28.8%, over the same period in 1995. This increase in non-interest income resulted primarily from higher data processing revenues, which increased $31.3 million, or 29.5%, during the six months ended June 30, 1996, over the same period in 1995. Other increases in non-interest income during the period include a $3.0 million, or 13.4%, increase in service charges on deposit accounts, principally due to increased volume and fee structures on deposit accounts. The increase in other operating income, of $9.1 million, was primarily due to increases in revenues from mortgage banking and related servicing fees, specialty printing services revenue, and income from Total System Services, Inc. (TSYS) joint ventures. TSYS is a majority-owned, publicly traded subsidiary of Synovus. Total non-interest income during the quarter ended June 30, 1996, increased $21.5 million, or 26.6%, over the second quarter of 1995, for primarily the same reasons as indicated above. 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 $29.8 million, or 30.5%, in the first six months of 1996, compared to the first six months of 1995. Comparing the second quarter of 1996 to the second quarter of 1995, revenue from bankcard data processing services increased $13.6 million, or 26.4%. Increased revenues from bankcard data processing are attributable to the conversion of cardholder accounts of new customers and growth in the card portfolios of existing customers. Increases in the volume of authorizations and transactions associated with the additional cardholder accounts, as well as growth in new services offered, also contributed to the increased revenues. A significant amount of TSYS' revenues are derived from certain major customers who are processed under long-term contracts. For the three and six months ended June 30, 1996, two customers accounted for approximately 29% and 30% of TSYS' total revenues, respectively. As a result, the loss of one of TSYS' major customers could have a material adverse effect on TSYS' results of operations. The impact of these two customers on Synovus' revenues was approximately 11% for the three and six months ended June 30, 1996. TSYS has converted approximately 4.5 million of Bank of America's cardholder accounts to its new cardholder system, TS2. Conversions to TS2 of remaining portions of Bank of America's cardholder accounts are currently expected to continue into 1997. Management believes all of Bank of America's cardholder accounts will be successfully converted to TS2. During the second quarter, TSYS and Bank of America amended their processing agreement to, among other things, eliminate the financial penalties and termination rights associated with prior conversion delays. The conversion and processing of Bank of America's cardholder accounts is not expected to have a material impact on TSYS' 1996 financial condition or results of operations. Non-Interest Expense Total non-interest expense for the six months ended June 30, 1996, increased $37.3 million, or 16.1%, over the same period in 1995. Total non-interest expense for the second quarter of 1996 increased $17.6 million, or 14.9%, over the second quarter of 1995. Management analyzes non-interest expense in two separate components: banking operations and TSYS. The following table summarizes this data for the first six months of 1996 and 1995.
1996 1995 (In thousands) Banking TSYS Banking TSYS Salaries and other personnel expenses $ 82,478 64,793 77,154 45,066 Net occupancy and equipment expense 18,814 39,111 16,960 31,064 Other operating expenses 37,198 23,828 40,668 18,600 Minority interest in subsidiary's net 2,670 --- 2,077 --- income Total non-interest expense $ 141,160 127,732 136,859 94,730
In the first six months of 1996, non-interest expense for Synovus' banking operations increased $4.3 million, or 3.1%. During the second quarter of 1996 non-interest expense increased $2.3 million, or 3.3%, compared to the second quarter of 1995. The majority of increased expenses were in employment expense and relate primarily to normal salary increases and additional employees. The number of employees as of June 30, 1996 increased to 4,203 compared to 4,037 as of June 30, 1995. The decrease in other operating expenses is due to the lowering of the FDIC assessment rate on deposits from that in place during the first half of 1995. Non-interest expense related to TSYS increased 31.3% and 34.8% for the three and six months ended June 30, 1996, respectively, compared to the same periods in 1995. Increases in expenses are reflected in all categories and are attributable to the addition of personnel and equipment; the cost of materials associated with the services provided by all of TSYS' companies, particularly the supplies related to processing the increased number of accounts; and certain processing provisions and expenses associated with the conversion of customers to TS2. Income Tax Expense Income tax expense for the six months ended June 30, 1996, was $34.6 million compared to $28.6 million for the same period a year ago. Income tax expense for the second quarter of 1996 was $18.3 million compared to $15.2 million in the second quarter of 1995. The effective tax rate for the first six months of 1996 and 1995 was 35.5% and 36.1%, respectively. The decrease in the effective tax rate is due to the effect of certain tax planning strategies and a reduction in the effective state income tax rates. 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. Currently, multiple lawsuits, some seeking class action treatment, are pending against one of Synovus' Alabama banking subsidiaries that involve: (1) the sale of credit life insurance made in connection with consumer credit transactions; (2) payments of service fees or interest rebates to automobile dealers in connection with the assignment of automobile credit sales contracts to that Synovus subsidiary; and (3) the forced placement of insurance to protect that Synovus subsidiary's interest in collateral for which consumer credit customers have failed to obtain or maintain insurance. These lawsuits seek unspecified damages, including punitive damages, and purport to be class actions which, if certified, may involve many of such subsidiary's consumer credit transactions in Alabama for a number of years. Synovus intends to vigorously contest these lawsuits and all other litigation to which Synovus and its subsidiaries are parties. Based upon information presently available, and in light of legal and other defenses available to Synovus and its subsidiaries, contingent liabilities arising from the threatened and pending litigation are not considered material. It should be noted; however, that large punitive damage awards, bearing little relation to the actual damages sustained by plaintiffs, have been awarded in Alabama. PART II - OTHER INFORMATION ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Submission of Matters to a Vote of Security Holders The annual shareholders' meeting was held on April 25, 1996. Following is a summary of the two proposals that were submitted to the shareholders for approval. The first proposal was to elect seven nominees for Class II directors of Synovus to serve until the 1999 Annual Meeting of Shareholders. The seven nominees for election as Class II directors named below were elected by the number of affirmative votes set forth opposite their names below, with the number of votes withholding authority to vote for such nominees also being shown. As the election of each of the nominees for Class II directors was approved by a plurality of the total votes entitled to be cast by the holders of shares represented at the meeting, each of the nominees for Class II directors was elected.
Withheld Nominee Votes For Authority to Vote Richard E. Anthony 557,669,756 1,095,320 Joe E. Beverly 557,689,023 1,076,053 Mason H. Lampton 557,598,554 1,166,522 John L. Moulton 557,680,744 1,084,332 Elizabeth C. Ogie 557,541,849 1,223,226 John T. Oliver, Jr. 557,731,665 1,033,410 William L. Pherigo 557,684,207 1,080,869
The second proposal was to approve Synovus' Executive Bonus Plan. The number of affirmative votes cast for this proposal represented in person or by proxy at the meeting was 527,699,675, or 95.8%, of the votes cast thereon. A total of 23,310,436 votes were cast against this proposal and a total of 7,754,964 votes abstained from voting. As the affirmative vote of a majority of the votes cast was required for approval, such proposal was approved. ITEM 6 - EXHIBITS AND REPORT 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) Report on Form 8-K No report on Form 8-K was filed during or subsequent to the second quarter of 1996. 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: August 13, 1996 BY: /s/ Stephen L. Burts, Jr. Stephen L. Burts, Jr. President and Chief Financial Officer INDEX TO EXHIBITS Sequentially Exhibit Number Description Numbered Page 11 Statement re Computation of 19 Per Share Earnings. 27 Financial Data Schedule (for SEC purposes only, not enclosed herewith) EX-11 2 EXHIBIT 11 SYNOVUS FINANCIAL CORP. COMPUTATION OF NET INCOME PER COMMON SHARE (In thousands, except per share data) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 Primary Net income $ 33,108 26,600 62,735 50,670 Weighted average common shares outstanding 116,000 114,779 115,950 114,288 Average common shares added, assuming exercise of dilutive stock options 1,772 1,171 1,620 1,097 Weighted average common shares, as adjusted 117,772 115,950 117,570 115,385 Primary net income per common share $ 0.28 0.23 0.53 0.44 Fully Diluted Net income $ 33,108 26,600 62,735 50,670 Adjustments: Interest expense on subordinated debentures --- 34 --- 68 Income tax effect on such interest expense --- (12) --- (24) Net income, as adjusted $ 33,108 26,622 62,735 50,714 Weighted average common shares outstanding 116,000 114,779 115,950 114,288 Average common shares added, assuming exercise of dilutive stock options 1,772 1,260 1,675 1,260 Average common shares to be issued, assuming conversion of subordinated debentures --- 453 --- 453 Weighted average common shares, as adjusted 117,772 116,492 117,625 116,001 Fully diluted net income per common share $ 0.28 0.23 0.53 0.44
EX-27 3
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF SYNOVUS FINANCIAL CORP. FOR THE SIX MONTHS ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 353,624 1,017 30,354 0 1,207,384 367,490 362,750 5,803,761 88,056 8,198,861 6,921,886 308,591 121,475 100,323 0 0 116,182 600,430 8,198,861 274,597 48,315 1,179 324,091 132,602 142,275 181,816 14,666 (65) 268,892 97,306 62,735 0 0 62,735 .53 .53 5.16 26,240 13,049 16,779 0 81,384 10,722 2,728 88,056 3,564 0 84,492
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