-----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, GEre+CwfVCSqhwle1ePvZjWHles4sPa1qb2SYv8pjC2t6AB32MHgIQjD3P4nOTKH FXTNJdt6Kv0YVWiBYAXRWw== 0000018349-97-000019.txt : 19970515 0000018349-97-000019.hdr.sgml : 19970515 ACCESSION NUMBER: 0000018349-97-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 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: 97605414 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 March 31, 1997 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 April 30, 1997, 174,640,833 shares of the Registrant's Common Stock, $1.00 par value, were outstanding. SYNOVUS FINANCIAL CORP. INDEX Page Number Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets (unaudited) March 31, 1997 and December 31, 1996 3 Consolidated Statements of Income (unaudited) Three Months Ended March 31, 1997 and 1996 4 Consolidated Statements of Cash Flows (unaudited) Three Months Ended March 31, 1997 and 1996 5 Notes to Consolidated Financial Statements (unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 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) March 31, December 31, (In thousands, except share and per share data) 1997 1996 ---------- --------- ASSETS Cash and due from banks $ 349,373 404,952 Interest earning deposits with banks 1,990 2,040 Federal funds sold 8,167 38,249 Investment securities available for sale 1,284,565 1,276,083 Investment securities held to maturity 351,963 363,008 Loans 6,192,441 6,075,465 Less unearned income (8,820) (10,235) Less reserve for loan losses (97,837) (94,683) - ---------------------------------------------------------------------------------------------------- Loans, net 6,085,784 5,970,547 - ---------------------------------------------------------------------------------------------------- Premises and equipment, net 255,776 247,191 Other assets 312,850 310,274 - ---------------------------------------------------------------------------------------------------- Total assets $8,650,468 8,612,344 ==================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Deposits: Non-interest bearing $1,165,946 1,189,973 Interest bearing 6,022,176 6,013,062 - ---------------------------------------------------------------------------------------------------- Total deposits 7,188,122 7,203,035 Federal funds purchased and securities sold under agreement to repurchase 386,885 339,200 Long-term debt 100,897 97,283 Other liabilities 142,173 154,641 - ---------------------------------------------------------------------------------------------------- Total liabilities 7,818,077 7,794,159 ==================================================================================================== Minority interest in consolidated subsidiary 35,842 34,435 Shareholders' equity: Common stock - $1.00 par value; Authorized 600,000,000 shares; issued 174,704,535 in 1997 and 174,635,319 in 1996; outstanding 174,587,691 in 1997 and 174,518,477 in 1996 174,705 174,635 Surplus 40,367 40,312 Less treasury stock - 116,844 and 116,842 shares in 1997 and 1996, respectively (1,285) (1,285) Less unamortized restricted stock (4,415) (5,344) Net unrealized loss on investment securities available for sale (8,469) (112) Retained earnings 595,646 575,544 - ---------------------------------------------------------------------------------------------------- Total shareholders' equity 796,549 783,750 - ---------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $8,650,468 8,612,344 ====================================================================================================
See accompanying notes to consolidated financial statements. SYNOVUS FINANCIAL CORP. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended March 31, -------------------------- (In thousands, except per share data) 1997 1996 -------- ------- Interest income: Loans, including fees $146,023 135,631 Investment securities: U.S. Treasury and U.S. Government agencies 19,640 17,146 Mortgage-backed securities 4,540 4,569 State and municipal 1,596 1,813 Other investments 312 324 Federal funds sold 276 698 Interest earning deposits with banks 27 15 - -------------------------------------------------------------------------------------------------- Total interest income 172,414 160,196 - -------------------------------------------------------------------------------------------------- Interest expense: Deposits 67,855 66,281 Federal funds purchased and securities sold under agreement to repurchase 4,908 3,218 Long-term debt 1,496 1,568 - -------------------------------------------------------------------------------------------------- Total interest expense 74,259 71,067 - -------------------------------------------------------------------------------------------------- Net interest income 98,155 89,129 Provision for losses on loans 7,001 6,433 - -------------------------------------------------------------------------------------------------- Net interest income after provision for losses on loans 91,154 82,696 - -------------------------------------------------------------------------------------------------- Non-interest income: Data processing services 78,952 67,294 Service charges on deposit accounts 13,145 12,420 Fees for trust services 3,231 2,739 Credit card fees 2,278 1,514 Securities gains (losses), net (32) 73 Other operating income 14,657 12,407 - -------------------------------------------------------------------------------------------------- Total non-interest income 112,231 96,447 - -------------------------------------------------------------------------------------------------- Non-interest expense: Salaries and other personnel expense 84,115 72,627 Net occupancy and equipment expense 33,001 28,281 Other operating expenses 28,376 31,147 Minority interest in subsidiary's net income 1,639 1,149 - -------------------------------------------------------------------------------------------------- Total non-interest expense 147,131 133,204 - -------------------------------------------------------------------------------------------------- Income before income taxes 56,254 45,939 Income tax expense 20,447 16,312 - -------------------------------------------------------------------------------------------------- Net income $ 35,807 29,627 ================================================================================================== Net income per share $ 0.21 0.17 ================================================================================================== Weighted average shares outstanding 174,560 173,852 ================================================================================================== Dividends declared per share $ 0.0900 0.0733 ==================================================================================================
See accompanying notes to consolidated financial statements. SYNOVUS FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, -------------------------- (In thousands) 1997 1996 -------- -------- Operating Activities Net Income $ 35,807 29,627 Adjustments to reconcile net income to net cash provided by operating activities: Provision for losses on loans 7,001 6,433 Depreciation, amortization, and accretion, net 12,038 10,221 Deferred income tax (benefit) expense (641) 483 Increase in interest receivable (1,733) (1,386) Increase (decrease) in interest payable 2,413 (189) Minority interest in subsidiary's net income 1,639 1,149 Decrease (increase) in mortgage loans held for sale 8,939 (12,492) Other, net 8,757 (181) - ------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 74,220 33,665 - ------------------------------------------------------------------------------------------------------ Investing Activities Net decrease in interest earning deposits with banks 50 186 Net decrease in federal funds sold 30,082 109,068 Proceeds from maturities and principal collections of investment securities available for sale 49,085 113,988 Proceeds from sales of investment securities available for sale 33,747 40,594 Purchases of investment securities available for sale (105,188) (245,295) Proceeds from maturities and principal collections of investment securities held to maturity 23,351 25,477 Purchases of investment securities held to maturity (12,430) (30,456) Net increase in loans (131,177) (119,679) Purchase of premises and equipment (18,152) (15,901) Disposal of premises and equipment 54 802 Proceeds from sale of other real estate 810 1,971 Additions to contract acquisition costs (14,614) (1,189) Additions to computer software (6,472) (1,612) - ------------------------------------------------------------------------------------------------------ Net cash used in investing activities (150,854) (122,046) - ------------------------------------------------------------------------------------------------------ Financing Activities Net increase (decrease) in demand and savings deposits 22,115 (17,962) Net (decrease) increase in certificates of deposit (37,028) 66,316 Net increase in federal funds purchased and securities sold under agreement to repurchase 47,685 12,214 Principal repayments on long-term debt (1,386) (6,259) Proceeds from issuance of long-term debt 5,000 --- Purchase of treasury stock --- (263) Dividends paid to shareholders (15,705) (12,753) Proceeds from issuance of common stock 374 575 - ------------------------------------------------------------------------------------------------------ Net cash provided by financing activities 21,055 41,868 - ------------------------------------------------------------------------------------------------------ Decrease in cash and cash equivalents (55,579) (46,513) Cash and cash equivalents at beginning of period 404,952 382,696 - ------------------------------------------------------------------------------------------------------ Cash and cash equivalents at end of period $349,373 336,183 ======================================================================================================
Continued on next page. SYNOVUS FINANCIAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Unaudited) Supplemental cash flow information: For the three months ended March 31, 1997 and 1996, Synovus Financial Corp. (Synovus) paid income taxes of $4.8 million and $5.8 million, and interest of $71.8 million and $71.3 million, respectively. Supplemental information of noncash investing and financing activities: Loans of approximately $1.4 million and $1.7 million were foreclosed and transferred to other real estate during the three months ended March 31, 1997 and 1996, respectively. Depreciation, amortization, and accretion, net, for the three months ended March 31, 1997 and 1996 included amortization of internally developed computer software of $.8 million, for both periods. Internally developed computer software had a net carrying value of $27.4 million and $30.1 million at March 31, 1997 and 1996, 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 10, 1997, Synovus declared a three-for-two stock split which was effected on April 8, 1997 in the form of a 50% stock dividend. All share and shareholders' equity amounts for all periods presented in the accompanying consolidated financial statements have been restated to give effect to the stock split. Note B - Recent Accounting Pronouncements In June 1996, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". SFAS No. 125 was amended by SFAS No. 127, which defers the effective date of certain provisions of SFAS No. 125 until January 1, 1998. This statement provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities based on consistent application of a financial-components approach that focuses on control. It distinguishes transfers of financial assets that are sales from transfers that are secured borrowings. Effective January 1, 1997, Synovus adopted the provisions of SFAS No. 125 on a prospective basis. The impact of SFAS No. 125 on Synovus' financial statements was not material. In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share". SFAS No. 128 supersedes Accounting Principles Board Opinion No. 15 "Earnings Per Share" and specifies the computation, presentation, and disclosure requirements for earnings per share (EPS) for entities with publicly held common stock or potential issuable common stock. SFAS No. 128 replaces the presentation of primary EPS with a presentation of basic EPS and fully diluted EPS with diluted EPS. It also requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator for the basic EPS computation to the numerator and denominator of the diluted EPS computation. SFAS No. 128 is effective for financial statements for both interim and annual periods ending after December 15, 1997. The expected impact on Synovus' financial statements of the provisions of SFAS No. 128 is not expected to be material. In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information about Capital Structure". SFAS No. 129 is effective for financial statements for periods ending after December 15, 1997. Synovus does not expect that SFAS No. 129 will require significant revision of prior disclosures since SFAS No. 129 lists required disclosures that had been included in a number of previously existing separate statements or opinions. Note C - Other Certain amounts in 1996 have been reclassified to conform with the presentation adopted in 1997. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Summary Net income for the three months ended March 31, 1997, was $35.8 million, up $6.2 million, or 20.9%, from the same period a year ago. Net income per share increased to $.21 in the first three months of 1997 as compared to $.17 for the same period in 1996. This performance resulted in a return on average assets of 1.70% and a return on average equity of 18.23% for the three months ended March 31, 1997. This compares to a return on average assets of 1.51% and a return on average equity of 16.84% for the first three months of 1996. On March 10, 1997, Synovus declared a three-for-two stock split which was effected on April 8, 1997 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 three months of 1997, total assets increased $38.1 million, or 0.4%, compared to December 31, 1996. Net loans increased $115.2 million, or 1.9%, which was partially offset by a $55.6 million decrease in cash and due from banks. Federal funds purchased and securities sold under agreement to repurchase increased $47.7 million and shareholders' equity increased $12.8 million, which provided the necessary funding for the balance sheet growth during the first quarter of 1997. Deposits were relatively flat when compared to December 31, 1996, decreasing $14.9 million. Loans Synovus continues to increase its 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, loans have continued to grow throughout Synovus' affiliate markets, with the most significant growth at five affiliates headquartered in Columbia, South Carolina; Columbus, Georgia; Valparaiso, Florida; and Newnan, Georgia. These five banks experienced significant loan growth of $31.9 million, $16.6 million, $9.4 million, and $8.3 million, respectively, during the three months ended March 31, 1997. Indicative of the economic growth within the communities Synovus serves, loan growth resulted from increases during the first three months of 1997 in most loan categories as detailed below. March 31, December 31, 1997 1996 --------- ------------ (In thousands) Commercial: Commercial, financial, and agricultural $2,103,706 2,036,689 Real estate - construction 753,909 730,785 Real estate - mortgage 1,262,914 1,234,981 - ---------------------------------------------------------------------------- Total commercial 4,120,529 4,002,455 - ---------------------------------------------------------------------------- Retail: Real estate - mortgage 979,512 977,432 Consumer loans - credit card 285,121 290,470 Consumer loans - other 779,182 768,072 Mortgage loans held for sale 28,097 37,036 - ---------------------------------------------------------------------------- Total retail 2,071,912 2,073,010 - ---------------------------------------------------------------------------- Total loans 6,192,441 6,075,465 Unearned income (8,820) (10,235) - ---------------------------------------------------------------------------- Total loans, net of unearned income $6,183,621 6,065,230 ============================================================================
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 three months of 1997, nonperforming assets, consisting of nonaccrual loans, restructured loans, and other real estate, increased $1.8 million, while net loans increased $115.2 million. Synovus' nonperforming assets ratio was .61% as of March 31, 1997, which increased two basis points from December 31, 1996. 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 $3.1 million, or 3.3%, from $94.7 million at December 31, 1996 to $97.8 million at March 31, 1997. Loans 90 days past due and still accruing increased $1.4 million, from $15.8 million at December 31, 1996 to $17.2 million at March 31, 1997. 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 loan charge-offs; however, management does not consider these trends to be significant to the overall credit quality of Synovus. Management continues to resolve past dues either through collection or charge-off. Credit card loans represent 4.6% of Synovus' total loan portfolio. After consideration of the factors described above, 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 221.8% at March 31, 1997, compared to 230.5% at year-end 1996. 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. March 31, December 31, 1997 1996 --------- ------------ (In thousands) Nonperforming loans $26,861 25,280 Other real estate 11,042 10,782 - ----------------------------------------------------------------------- Nonperforming assets $37,903 36,062 ======================================================================= Loans 90 days past due and still accruing $17,241 15,805 ======================================================================= Reserve for loan losses $97,837 94,683 ======================================================================= Reserve for loan losses as a % of loans 1.58% 1.56 ======================================================================= As a % of loans and other real estate: Nonperforming loans 0.43% 0.42 Other real estate 0.18 0.17 - ----------------------------------------------------------------------- Nonperforming assets 0.61% 0.59 ======================================================================= Reserve to nonperforming loans 364.23% 374.54 =======================================================================
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 $888.7 million at March 31, 1997, compared to $863.3 million at December 31, 1996. The ratio of total risk-based capital to risk-weighted assets was 13.05% at March 31, 1997 compared to 12.97% at December 31, 1996. Synovus' leverage ratio at the end of the first quarter of 1997 was 9.43% compared to 9.36% at the end of 1996. Synovus' equity-to-assets ratio increased eleven basis points to 9.21% at March 31, 1997, when compared to year-end 1996. Internal capital generation continues to support asset growth, as reflected in the first quarter 1997 equity-to-asset ratio exclusive of net unrealized loss on investment securities available for sale of 9.29%, compared to 9.10% at year-end 1996. Synovus' liquidity position and sources of funds have not changed materially since December 31, 1996. Synovus' liquidity ratio at March 31, 1997 was 39.04% compared to 39.29% at December 31, 1996. Synovus' maturity mix of investment securities and loan portfolios have not changed significantly during the first three months of 1997. 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. Total System Services, Inc. (TSYS) formally unveiled the design plan for its proposed corporate campus at a press conference following a preview of the design at its annual shareholders' meeting on April 14, 1997. The campus will serve as TSYS' corporate headquarters and will house administrative, client contact, and programming team members and will allow for significant growth. Construction of the first phase is scheduled to begin July 1, 1997, or at such time as the land is available. Also, TSYS plans to expand its operations center in 1997. This expansion, will include additional space for the card production services now located in downtown Columbus, Georgia, as well as additional space for statement printing and data processing functions. Preliminary cost estimates for these construction projects, while not finalized, are expected to be $50 million to $100 million. Financing for these projects is expected to be through the internal generation of funds and the use of funds from external sources, possibly through the issuance of industrial revenue bonds. TSYS is a majority-owned, publicly traded subsidiary of Synovus. The consolidated statements of cash flows detail Synovus' cash flows from operating, investing, and financing activities. Operating activities provided net cash of $74.2 million during the first three months of 1997, while $21.1 million was provided by financing activities. Investing activities utilized $150.9 million of this amount, resulting in a decrease in cash and cash equivalents of $55.6 million. Earning Assets, Sources of Funds, and Net Interest Income Average total assets for the first quarter of 1997 were $8.5 billion, up 8.1% over the first quarter of 1996 average of $7.9 billion. Average earning assets were up 8.4% in the first quarter of 1997 over the same quarter a year ago and represented 91% of average total assets. When compared to the same period last year, average deposits, average federal funds purchased and securities sold under agreement to repurchase, and average shareholders' equity increased $418.6 million, $125.5 million, and $89.0 million, respectively. This growth provided the funding for the $526.5 million growth in average net loans, along with a $103.5 million increase in average investment securities. Net interest income was $98.2 million for the first quarter of 1997, up $9.0 million, or 10.1%, over the $89.1 million reported for the first quarter of 1996. Net interest income, on a tax-equivalent basis, for the first quarter of 1997 increased $8.9 million, or 9.8%, over the first quarter of 1996. The net interest margin was 5.21% for the current quarter, up eight basis points from the same period last year. This increase resulted from a twelve basis point decrease in the cost of interest bearing liabilities, offset by a three basis point decrease in the yield on interest earning assets. The decrease in the cost of interest bearing liabilities was primarily due to higher cost certificates of deposit maturing and being reinvested in lower yield deposit instruments. Approximately half of the loan portfolio floats with changes in the prime rate. The average prime rate decreased seven basis points from the first three months of 1996 to the first three months of 1997. The negative impact of this decrease was mitigated by reinvesting maturing securities into higher earning investments 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 1997 and 1996. Three Months Ended March 31, ----------------------- 1997 1996 -------- ------- (In thousands) Interest income $172,414 160,196 Taxable-equivalent adjustment 1,149 1,316 - ---------------------------------------------------------------------- Interest income, taxable-equivalent 173,563 161,512 Interest expense 74,259 71,067 - ---------------------------------------------------------------------- Net interest income, taxable-equivalent $ 99,304 90,445 ======================================================================
Provision for Loan Losses During the first three months of 1997, the provision for loan losses increased $568,000, or 8.8%, over the same period in 1996. Net charge-offs to average loans for the quarter ended March 31, 1997, were .25% compared to .29% during the first three months of 1996. Non-Interest Income Total non-interest income during the first three months of 1997 increased $15.8 million, or 16.4%, over the same period in 1996. This increase in non-interest income resulted primarily from higher data processing revenues, which increased $11.7 million, or 17.3%, during the three months ended March 31, 1997, over the same period in 1996. The increase in other operating income was primarily due to increases in revenues from mortgage banking and related servicing fees and income from TSYS joint ventures. 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 $11.8 million, or 18.7%, in the first quarter of 1997, compared to the first quarter of 1996. 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. During the first quarter of 1997, TSYS successfully completed the conversions of all of Bank of America's cardholder accounts to TS2. Near the end of the first quarter of 1997, TSYS announced an extension of its long-term processing contract with NationsBank, a major customer, to the year 2005. A significant amount of TSYS' revenues is derived from certain major customers who are processed under long-term contracts. For the quarters ended March 31, 1997 and 1996, two customers accounted for approximately 27% and 32% of TSYS' total revenues, respectively. As a result, the loss of one of TSYS' major customers could have a material adverse effect on TSYS' financial condition and results of operations. Non-Interest Expense Total non-interest expense for the three months ended March 31, 1997, increased $13.9 million, or 10.5%, over the same period in 1996. 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 1997 and 1996. 1997 1996 ----------------- ---------------- (In thousands) Banking TSYS Banking TSYS ------- ------ ------- ------ Salaries and other personnel expenses $47,176 36,939 43,534 29,093 Net occupancy and equipment expense 10,161 22,840 9,335 18,946 Other operating expenses 15,843 12,533 15,953 15,194 Minority interest in subsidiary's net income 1,639 --- 1,149 --- - ------------------------------------------------------------------------------ Total non-interest expense $74,819 72,312 69,971 63,233 ==============================================================================
In the first three months of 1997, non-interest expense for Synovus' banking operations increased $4.8 million, or 6.9%. The primary reasons for this increase relate to normal salary increases and additional employees. The number of employees related to Synovus' banking operations as of March 31, 1997 increased to 4,393 compared to 4,148 as of March 31, 1996. Non-interest expense related to TSYS increased 14.4% for the first quarter of 1997, compared to the same period in 1996. TSYS' increase in non-interest expense is also attributable to the addition of personnel. As of March 31, 1997, the number of employees was 2,787, up 12.7% from 2,473 employees as of March 31, 1996. Income Tax Expense Income tax expense for the three months ended March 31, 1997, was $20.4 million compared to $16.3 million for the same period a year ago. The effective tax rate was 36.3% and 35.5% in 1997 and 1996, respectively. 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, 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 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 The following report on Form 8-K was filed during or subsequent to the first quarter of 1997. (1) The report filed on March 10, 1997, included the following event: On March 10, 1997, Synovus announced a three-for-two stock split to be issued on April 8, 1997 to shareholders of record as of March 21, 1997. Synovus also announced a 22.7% increase in its quarterly dividend. On a pre-split basis, the quarterly dividend was increased to $.1350 from $.1100 and was paid on April 1, 1997 to shareholders of record as of March 21, 1997. 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, 1997 BY: /s/ Thomas J. Prescott Thomas J. Prescott Executive Vice 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 March 31, ---------------------- 1997 1996 ---- ---- Primary Net income $ 35,807 29,627 ================================================================================= Weighted average common shares outstanding 174,560 173,852 Average common shares added, assuming exercise of dilutive stock options 3,928 2,373 - --------------------------------------------------------------------------------- Weighted average common shares, as adjusted 178,488 176,225 ================================================================================= Primary net income per common share $ 0.20 0.17 ================================================================================= Fully Diluted Net income $ 35,807 29,627 ================================================================================= Weighted average common shares outstanding 174,560 173,852 Average common shares added, assuming exercise of dilutive stock options 3,928 2,713 - --------------------------------------------------------------------------------- Weighted average common shares, as adjusted 178,488 176,565 ================================================================================= Fully diluted net income per common share $ 0.20 0.17 =================================================================================
All information presented in Exhibit 11 reflects the three-for-two stock split declared by the Synovus Board of Directors on March 10, 1997, effective April 8, 1997, to shareholders of record on March 21, 1997. EX-27 3
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF SYNOVUS FINANCIAL CORP. FOR THE THREE MONTHS ENDED MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 349,373 1,990 8,167 0 1,284,565 351,963 351,121 6,183,621 97,837 8,650,468 7,188,122 386,885 142,173 100,897 0 0 174,705 621,844 8,650,468 146,023 26,088 303 172,414 67,855 74,259 98,155 7,001 (32) 147,131 56,254 35,807 0 0 35,807 .20 .20 On March 10, 1997, Synovus announced a three-for-two stock split to be issued on April 8, 1997, to shareholders of record as of March 21, 1997. Financial data schedules have not been restated for prior periods for this recapitalization. 5.21 26,861 17,241 26,861 0 94,683 5,587 1,740 97,837 97,837 0 22,951
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