-----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, CcQgk38RfhNbvIWQIY2uVadQah0+ISYP63tWSAAST2okoULCm4QIlKBQkE9elNXe lqtBMPcuBCBrlMwGl4b9Fw== 0000018349-00-000011.txt : 20000323 0000018349-00-000011.hdr.sgml : 20000323 ACCESSION NUMBER: 0000018349-00-000011 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000322 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-K SEC ACT: SEC FILE NUMBER: 001-10312 FILM NUMBER: 575534 BUSINESS ADDRESS: STREET 1: 901 FRONT AVENUE STREET 2: STE 301 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-K 1 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended 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. Registrant's Documents Incorporated by Reference Part Number and Item Document Incorporated Number of Form 10-K Into by Reference Which Incorporated - --------------------- ---------------------- Pages F-10, F-17 through Part I, Item 1, Business F-22, and F-26 through F-48 of Registrant's 1999 Annual Report to Shareholders Pages F-14, and F-17 through F-19 Part I, Item 2, Properties of Registrant's 1999 Annual Report to Shareholders Pages F-17 through F-19 of Part I, Item 3, Legal Registrant's 1999 Annual Report Proceedings to Shareholders Pages F-10, F-26, and Part II, Item 5, Market F-44 and F-45 of Registrant's for Registrant's Common 1999 Annual Report to Equity and Related Shareholders Stockholder Matters Page F-25 of Registrant's Part II, Item 6, 1999 Annual Report to Selected Shareholders Financial Data Pages F-26 through F-48 Part II, Item 7, of Registrant's Management's Discussion 1999 Annual Report to and Analysis of Financial Shareholders Condition and Results of Operations Pages F-42 and F-43 of Registrant's Part II, Item 7A, Quantitative 1999 Annual Report to Shareholders and Qualitative Disclosures About Market Risk Pages F-2 through F-24, and F-48 Part II, Item 8, of Registrant's 1999 Financial Statements and Annual Report to Shareholders Supplementary Data Pages 3 through 5, 7 and 8, and 27 Part III, Item 10, and 28 of Registrant's Proxy Directors and Executive Statement in connection with Officers of the Registrant its Annual Shareholders' Meeting to be held April 20, 2000 Pages 7, 15 through 18, and Part III, Item 11, 21 of Registrant's Proxy Executive Compensation Statement in connection with its Annual Shareholders' Meeting to be held April 20, 2000 Pages 8 and 9, and 22 through Part III, Item 12, 26 of Registrant's Proxy Statement Security Ownership of in connection with its Annual Certain Beneficial Owners Shareholders' Meeting to be held and Management April 20, 2000 Pages 21 and 22, and 24 through 27 Part III, Item 13, of Registrant's Proxy Statement in Certain Relationships connection with its Annual Shareholders' and Related Transactions Meeting to be held April 20, 2000 Pages F-2 through F-24 Part IV, Item 14, of Registrant's 1999 Exhibits, Financial Statement Annual Report to Shareholders Schedules and Reports on Form 8-K Table of Contents Item No. Caption Page No. - -------- ------- -------- Part I Safe Harbor Statement 1 1. Business 2 2. Properties 12 3. Legal Proceedings 13 4. Submission of Matters to a Vote of 13 Security Holders Part II 5. Market for Registrant's Common Equity 13 and Related Stockholder Matters 6. Selected Financial Data 13 7. Management's Discussion and Analysis 13 of Financial Condition and Results of Operations 7A. Quantitative and Qualitative Disclosures About Market Risk 14 8. Financial Statements and Supplementary Data 14 9. Changes In and Disagreements With 14 Accountants on Accounting and Financial Disclosure Part III 10. Directors and Executive Officers of the Registrant 14 11. Executive Compensation 14 12. Security Ownership of Certain 14 Beneficial Owners and Management 13. Certain Relationships and Related 15 Transactions Part IV 14. Exhibits, Financial Statement Schedules, 15 and Reports on Form 8-K Part I Safe Harbor Statement Certain statements contained in this Annual Report on Form 10-K and the exhibits hereto which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act (the "Act"). In addition, certain statements in future filings by Synovus Financial Corp.(R) ("Synovus(R)") with the Securities and Exchange Commission, in press releases, and in oral and written statements made by or with the approval of Synovus which are not statements of historical fact constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, income or loss, earnings or loss per share, the payment or non-payment of dividends, capital structure and other financial items; (ii) statements of plans and objectives of Synovus or it's management or Board of Directors, including those relating to banking and non-banking products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as "believes," "anticipates," "expects," "intends," "targeted," and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: (i) the strength of the U.S. economy in general and the strength of the local economies in which operations are conducted; (ii) the effects of and changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; (iii) inflation, interest rate, market and monetary fluctuations; (iv) the timely development of and acceptance of new products and services and perceived overall value of these products and services by users; (v) changes in consumer spending, borrowing and saving habits; (vi) technological changes (including "Year 2000" data systems compliance issues) are more difficult or expensive than anticipated; (vii) acquisitions; (viii) the ability to increase market share and control expenses; (ix) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which Synovus and its subsidiaries must comply; (x) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, the Financial Accounting Standards Board or other authoritative bodies; (xi) changes in Synovus' organization, compensation and benefit plans; (xii) the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; and (xiii) the success of Synovus at managing the risks involved in the foregoing. Such forward-looking statements speak only as of the date on which such statements are made, and Synovus undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made to reflect the occurrence of unanticipated events. - ------------------ Synovus Financial Corp., Synovus, Synovus Securities, Inc., Synovus Mortgage Corp., Synovus Trust Company, Columbus Bank and Trust Company and CB&T are federally registered service marks of Synovus Financial Corp. TSYS, TS2, Total System Services, Inc., THE TOTAL SYSTEM and TSYS Total Solutions are federally registered service marks of Total System Services, Inc. 1 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. 2 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 3 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, 4 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 5 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 6 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. At this time, Synovus has one banking subsidiary representing approximately 4% of Synovus' total assets which has a less than satisfactory rating for compliance, which is one of the components for qualifying as a well-managed depository institution. Thus, Synovus does not currently meet the eligibility requirements to become a financial holding company. Synovus has implemented a corrective action plan for this banking subsidiary and intends to file a written declaration with the Board to become a financial holding company as soon as it meets all eligibility requirements. 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 7 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 8 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. 9 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. 10 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 11 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. Item 2. Properties Synovus and its subsidiaries own, in some cases subject to mortgages or other security interests, or lease all of the real property and/or buildings on which it is located. All of such buildings are in a good state of repair and are appropriately designed for the purposes for which they are used. See Note 6 and Note 10 of Notes to Consolidated Financial Statements on page F-14, and pages F-17 through F-19, of Synovus' 1999 Annual Report to Shareholders which are specifically incorporated herein by reference. Columbus Bank and Trust Company owns an approximately 225,000 square foot building known as the Uptown Center in Columbus, Georgia which provides office space for most of its operations. TSYS owns a 377,000 square foot production center which is located on a 40.4 acre tract of land in north Columbus, Georgia. Primarily a production center, this facility houses TSYS' primary data processing computer operations, statement preparation, mail handling, microfiche production, purchasing and card production, as well as other related operations. TSYS owns a 110,000 square foot building on a 23-acre site in Columbus, Georgia, which accommodates current and future office space needs. TSYS also owns a 104,000 square foot building on an 18-acre site in Columbus which functions as a second data center. During 1997, TSYS entered into an operating lease for the purpose of financing its 540,000 square foot new campus-type facility on approximately 46 acres of land in downtown Columbus, Georgia. The campus facility serves as TSYS' corporate headquarters and houses 12 administrative, client contact and programming team members. The campus facility consolidated most of TSYS' multiple Columbus locations. TSYS began moving personnel into the new campus facility in December 1998 and had completed the move of a substantial number of personnel to this facility at the end of the third quarter of 1999. Item 3. Legal Proceedings See Note 10 of Notes to Consolidated Financial Statements on pages F-17 through F-19 of Synovus' 1999 Annual Report to Shareholders which is specifically incorporated herein by reference. Item 4. Submission of Matters to a Vote of Security Holders None. Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Shares of common stock of Synovus are traded on the New York Stock Exchange under the symbol "SNV." See "Capital Resources" and "Dividends" under the "Financial Review" Section which are set forth on pages F-44 and F-45 of Synovus' 1999 Annual Report to Shareholders which are specifically incorporated herein by reference. During 1999, Synovus issued shares of its common stock pursuant to the exemption from registration set forth in Section 4(2) of the Securities Act of 1933 to the former shareholders of Canterbury Trust Company, Inc., Wallace & de Mayo, Ready Bank of Fort Walton Beach Holding Company and Horizon Bancshares, Inc. in connection with Synovus' acquisition of such companies. See Note 1 of Notes to Consolidated Financial Statements on page F-10 and "Acquisitions" under the "Financial Review" Section which is set forth on page F-26 of Synovus' 1999 Annual Report to Shareholders which are specifically incorporated herein by reference. Item 6. Selected Financial Data The "Selected Financial Data" Section which is set forth on page F-25 of Synovus' 1999 Annual Report to Shareholders is specifically incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The "Financial Review" Section which is set forth on pages F-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 include the information encompassed by "Management's Discussion and Analysis of Financial Condition and Results of Operations," are 13 specifically incorporated herein by reference. Item 7A. Quantitative and Qualitative Disclosures About Market Risk See "Market Risk" under the "Financial Review" Section which is set forth on pages F-42 and F-43 of Synovus' 1999 Annual Report to Shareholders which is specifically incorporated herein by reference. Item 8. Financial Statements and Supplementary Data The "Summary of Quarterly Financial Data" Section which is set forth on page F-48, and the "Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Changes in Shareholders' Equity, Consolidated Statements of Cash Flows, Summary of Significant Accounting Policies, Notes to Consolidated Financial Statements and Independent Auditors' Report" Sections which are set forth on pages F-2 through F-24 of Synovus' 1999 Annual Report to Shareholders are specifically incorporated herein by reference. Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure None. Part III Item 10. Directors and Executive Officers of the Registrant The "ELECTION OF DIRECTORS" Section which is set forth on pages 3 through 5, the "EXECUTIVE OFFICERS" Section which is set forth on pages 7 and 8 and the "SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE SECTION" which is set forth on pages 27 and 28 of Synovus' Proxy Statement in connection with its Annual Shareholders' Meeting to be held on April 20, 2000 are specifically incorporated herein by reference. Item 11. Executive Compensation The "DIRECTORS' COMPENSATION" Section which is set forth on page 7, the `"EXECUTIVE COMPENSATION - Summary Compensation Table; Stock Option Exercises and Grants; and Employment Contracts and Change in Control Arrangements" Sections which are set forth on pages 15 through 18 and the "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" Section which is set forth on page 21 of Synovus' Proxy Statement in connection with its Annual Shareholders' Meeting to be held on April 20, 2000 are specifically incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management The "STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS" Section 14 which is set forth on pages 8 and 9, the "PRINCIPAL SHAREHOLDERS" Section which is set forth on pages 22 through 24, and the "RELATIONSHIPS BETWEEN SYNOVUS, COLUMBUS BANK, TSYS AND CERTAIN OF SYNOVUS' SUBSIDIARIES AND AFFILIATES - TSYS Common Stock Ownership of Directors and Management" Section which is set forth on pages 25 and 26 of Synovus' Proxy Statement in connection with its Annual Shareholders' Meeting to be held on April 20, 2000 are specifically incorporated herein by reference. Item 13. Certain Relationships and Related Transactions The "TRANSACTIONS WITH MANAGEMENT" Section which is set forth on pages 21 and 22, the "RELATIONSHIPS BETWEEN SYNOVUS, COLUMBUS BANK, TSYS AND CERTAIN OF SYNOVUS' SUBSIDIARIES AND AFFILIATES - Beneficial Ownership of TSYS Common Stock by Columbus Bank" Section which is set forth on pages 24 and 25, the "RELATIONSHIPS BETWEEN SYNOVUS, COLUMBUS BANK, TSYS AND CERTAIN OF SYNOVUS' SUBSIDIARIES AND AFFILIATES - Interlocking Directorates of Synovus, Columbus Bank and TSYS" Section which is set forth on page 25, and the "RELATIONSHIPS BETWEEN SYNOVUS, COLUMBUS BANK, TSYS AND CERTAIN OF SYNOVUS' SUBSIDIARIES AND AFFILIATES - Transactions and Agreements Between Synovus, Columbus Bank, TSYS and Certain of Synovus' Subsidiaries" Section which is set forth on pages 26 and 27 of Synovus' Proxy Statement in connection with its Annual Shareholders' Meeting to be held on April 20, 2000 are specifically incorporated herein by reference. Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) 1. Financial Statements The following Consolidated Financial Statements of Synovus Financial Corp. and its subsidiaries are specifically incorporated by reference from pages F-2 through F-24 of Synovus' 1999 Annual Report to Shareholders, in response to Item 8, Part II, Financial Statements and Supplementary Data. Consolidated Balance Sheets - December 31, 1999 and 1998 Consolidated Statements of Income - Years Ended December 31, 1999, 1998 and 1997 Consolidated Statements of Changes in Shareholders' Equity - Years Ended December 31, 1999, 1998 and 1997 Consolidated Statements of Cash Flows - Years Ended December 31, 1999, 1998 and 1997 15 Summary of Significant Accounting Policies - December 31, 1999, 1998 and 1997 Notes to Consolidated Financial Statements - December 31, 1999, 1998 and 1997 Independent Auditors' Report 2. Financial Statement Schedules Financial Statement Schedules - None applicable because the required information has been incorporated in the Consolidated Financial Statements of Synovus Financial Corp. and its subsidiaries incorporated by reference herein. 3. Exhibits Exhibit Number Description -------- ----------------- 3.1 Articles of Incorporation, as amended, of Synovus Financial Corp. ("Synovus") incorporated by reference to Exhibit 4(a) of Synovus' Registration Statement on Form S-8 filed with the Securities and Exchange Commission on July 23, 1990 (File No. 33-35926). 3.2 Bylaws, as amended, of Synovus. 4.1 Form of Rights Agreement incorporated by reference to Exhibit 4.1 of Synovus' Registration Statement on Form 8-A dated April 28, 1999 filed with the Commission on April 28, 1999 pursuant to Section 12 of the Securities Exchange Act of 1934, as amended. 9.1 Voting Lease Agreement incorporated by reference to Exhibit 9.1 of Synovus' Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as filed with the Commission on March 24, 1995. 10. EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS 10.1 Employment Agreement of James D. Yancey with Synovus incorporated by reference to Exhibit 10.1 of Synovus' Registration Statement on Form S-1 filed with the Commission on December 18, 1990 (File No. 33-38244). 10.2 Incentive Bonus Plan of Synovus incorporated by reference to Exhibit 10.5 of Synovus' Registration Statement on Form S-1 filed 16 with the Commission on December 18, 1990 (File No. 33-38244). 10.3 Director Stock Purchase Plan of Synovus. 10.4 Key Executive Restricted Stock Bonus Plan of Synovus incorporated by reference to Exhibit 10.6 of Synovus' Registration Statement on Form S-1 filed with the Commission on December 18, 1990 (File No. 33-38244). 10.5 1989 Stock Option Plan of Synovus incorporated by reference to Exhibit "A" of Synovus' Registration Statement on Form S-8 filed with the Commission on July 23, 1990 (File No. 33-35926), which Option Plan was amended on March 16, 1992 to eliminate the stock appreciation rights feature of the outstanding options under the Plan and reduce the exercise price from $16 5/8 per share to $9.70 per share. 10.6 Consulting Agreement of H. Lynn Page with Synovus incorporated by reference to Exhibit 10.6 of Synovus' Annual Report on Form 10-K for the fiscal year ended December 31, 1992, as filed with the Commission on March 29, 1993. 10.7 Excess Benefit Agreement of Synovus incorporated by reference to Exhibit 10.7 of Synovus' Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as filed with the Commission on March 24, 1995. 10.8 Wage Continuation Agreement of Synovus incorporated by reference to Exhibit 10.8 of Synovus' Annual Report on Form 10-K for the fiscal year ended December 31, 1992, as filed with the Commission on March 29, 1993. 10.9 1991 Stock Option Plan for Key Executives of Synovus incorporated by reference to Exhibit 10.9 of Synovus' Annual Report on Form 10-K for the fiscal year ended December 31, 1992, as filed with the Commission on March 29, 1993. 10.10 Synovus Financial Corp. 1992 Long-Term Incentive Plan incorporated by reference to Exhibit 10.10 of Synovus' Annual Report on Form 10-K for the fiscal year ended December 31, 1992, as filed with the Commission on March 29, 1993. 10.11 Agreement in Connection with Use of Aircraft incorporated by reference to Exhibit 10.11 of Synovus' Annual Report on Form 10-K for the fiscal year ended December 31, 1992, as filed with the 17 Commission on March 29, 1993. 10.12 Life Insurance Trusts incorporated by reference to Exhibit 10.12 of Synovus' Annual Report on Form 10-K for the fiscal year ended December 31, 1992, as filed with the Commission on March 29, 1993. 10.13 Supplemental Compensation Agreement, Incentive Compensation Agreements and Performance Compensation Agreement with Richard E. Anthony; which Agreements were assumed by Synovus on December 31, 1992 as a result of its acquisition of First Commercial Bancshares, Inc.; and which stock awards made pursuant to the Agreements were converted at a ratio of 1.5 to 1, the exchange ratio applicable to the merger incorporated by reference to Exhibit 10.13 of Synovus' Annual Report on Form 10-K for the fiscal year ended December 31, 1992, as filed with the Commission on March 29, 1993. 10.14 1993 Split Dollar Insurance Agreement of Synovus incorporated by reference to Exhibit 10.14 of Synovus' Annual Report on Form 10-K for the fiscal year ended December 31, 1993, as filed with the Commission on March 28, 1994. 10.15 1995 Split Dollar Insurance Agreement of Synovus incorporated by reference to Exhibit 10.15 of Synovus' Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as filed with the Commission on March 24, 1995. 10.16 Synovus Financial Corp. 1994 Long-Term Incentive Plan incorporated by reference to Exhibit 10.16 of Synovus' Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as filed with the Commission on March 24, 1995. 10.17 Employment Agreement of Robert V. Royall, Jr. incorporated by reference to Exhibit 10.17 of Synovus' Annual Report on Form 10-K for the fiscal year ended December 31, 1995, as filed with the Commission on March 25, 1996. 10.18 Synovus Financial Corp. Executive Bonus Plan incorporated by reference to Exhibit 10.18 of Synovus' Annual Report on Form 10-K for the fiscal year ended December 31, 1995, as filed with the Commission on March 25, 1996. 10.19 Change of Control Agreements incorporated by reference to Exhibit 10.19 of Synovus' Annual Report on Form 10-K for the 18 fiscal year ended December 31, 1995, as filed with the Commission on March 25, 1996. 10.20 Consulting Agreement of Joe E. Beverly incorporated by reference to Exhibit 10.20 of Synovus' Annual Report on Form 10-K for the fiscal year ended December 31, 1996, as filed with the Commission on March 6, 1997. 10.21 Employment Agreement of James H. Blanchard incorporated by reference to Exhibit 10 of Synovus' Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, as filed with the Commision on November 15, 1999. 10.22 Synovus Financial Corp. 2000 Long-Term Incentive Plan. 13.1 Certain specified pages of Synovus' 1999 Annual Report to Shareholders which are specifically incorporated herein by reference. 20.1 Proxy Statement, for the Annual Meeting of Shareholders of Synovus to be held on April 20, 2000, certain specified pages of which are specifically incorporated herein by reference. 21.1 Subsidiaries of Synovus Financial Corp. 23.1 Independent Auditors' Consents. 24.1 Powers of Attorney contained on the signature pages of the 1999 Annual Report on Form 10-K. 27.1 Financial Data Schedule (for SEC use only). 99.1 Annual Report on Form 11-K for the Synovus Financial Corp. Employee Stock Purchase Plan for the year ended December 31, 1999 (to be filed as an amendment hereto within 120 days of the end of the period covered by this report). 99.2 Annual Report on Form 11-K for the Synovus Financial Corp. Director Stock Purchase Plan for the year ended December 31, 1999 (to be filed as an amendment hereto within 120 days of the end of the period covered by this report). Synovus agrees to furnish the Commission, upon request, a copy of each instrument with respect to issues of long-term debt. The principal amount of any individual instrument, which has not been previously filed, does not exceed ten percent of the total assets of Synovus and its 19 subsidiaries on a consolidated basis. (b) Reports on Form 8-K On January 12, 2000, Synovus filed a Form 8-K with the Commission in connection with the announcement of its earnings for the year ended December 31, 1999. Filings\snv\10k.98 20 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 22, 2000 By:/s/James H. Blanchard --------------------- James H. Blanchard, Chairman of the Board and Principal Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints James H. Blanchard, James D. Yancey and Richard E. Anthony, and each of them, his or her true and lawful attorney(s)-in-fact and agent(s), with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments to this report and to file the same, with all exhibits and schedules thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney(s)-in-fact and agent(s) full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney(s)-in-fact and agent(s), or their substitute(s), may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in the capacities and on the dates indicated. /s/William B. Turner Date: March 22, 2000 - -------------------------------------------- William B. Turner, Director and Chairman of the Executive Committee /s/James H. Blanchard Date: March 22, 2000 - -------------------------------------------- James H. Blanchard, Chairman of the Board and Principal Executive Officer /s/James D. Yancey Date: March 22, 2000 - -------------------------------------------- James D. Yancey, President and Director /s/Richard E. Anthony Date: March 22, 2000 - -------------------------------------------- Richard E. Anthony, Vice Chairman of the Board /s/Walter M. Deriso, Jr. Date: March 22, 2000 - -------------------------------------------- Walter M. Deriso, Jr., Vice Chairman of the Board /s/Thomas J. Prescott Date: March 22, 2000 - -------------------------------------------- Thomas J. Prescott, Executive Vice President, Treasurer, Principal Accounting and Financial Officer /s/Joe E. Beverly Date: March 22, 2000 - -------------------------------------------- Joe E. Beverly, Director /s/Richard Y. Bradley Date: March 22, 2000 - -------------------------------------------- Richard Y. Bradley, Director Date: March __, 2000 - -------------------------------------------- C. Edward Floyd, Director /s/Gardiner W. Garrard, Jr. Date: March 22, 2000 - -------------------------------------------- Gardiner W. Garrard, Jr., Director /s/V. Nathaniel Hansford Date: March 22, 2000 - -------------------------------------------- V. Nathaniel Hansford, Director /s/John P. Illges, III Date: March 22, 2000 - -------------------------------------------- John P. Illges, III, Director /s/Mason H. Lampton Date: March 22, 2000 - -------------------------------------------- Mason H. Lampton, Director /s/Elizabeth C. Ogie Date: March 22, 2000 - -------------------------------------------- Elizabeth C. Ogie, Director /s/H. Lynn Page Date: March 22, 2000 - -------------------------------------------- H. Lynn Page, Director Date: March __, 2000 - -------------------------------------------- Robert V. Royall, Jr., Director /s/Melvin T. Stith Date: March 22, 2000 - -------------------------------------------- Melvin T. Stith, Director EX-3.2 2 BYLAWS As Amended Effective January 14, 2000 BYLAWS OF SYNOVUS FINANCIAL CORP. ARTICLE I. OFFICES ------------------ Section 1. Principal Office. The principal office for the transaction of the business of the corporation shall be located in Muscogee County, Georgia, at such place within said County as may be fixed from time to time by the Board of Directors. Section 2. Other Offices. Branch offices and places of business may be established at any time by the Board of Directors at any place or places where the corporation is qualified to do business, whether within or without the State of Georgia. ARTICLE II. SHAREHOLDERS' MEETINGS -------------------------------------- Section 1. Meetings, Where Held. Any meeting of the shareholders of the corporation, whether an annual meeting or a special meeting, may be held either at the principal office of the corporation or at any place in the United States within or without the State of Georgia. Section 2. Annual Meeting. The annual meeting of the shareholders of the corporation for the election of Directors and for the transaction of such other business as may properly come before the meeting shall be held on such date and at such time and place as is determined by the Board of Directors of the corporation each year. Provided, however, that if the Board of Directors shall fail to set a date for the annual meeting of shareholders in any year, that the annual meeting of the shareholders of the corporation shall be held on the fourth Thursday in April of each year; provided, that if said day shall fall upon a legal holiday, then such annual meeting shall be held on the next day thereafter ensuing which is not a legal holiday. In addition to any other applicable requirements, for business to properly come before the meeting, notice of any nominations of persons for election to the Board of Directors or of any other business to be brought before an annual meeting of shareholders by a shareholder must be provided in writing to the Secretary of the corporation not later than the close of business on the 45th day nor earlier than the close of business on the 90th day prior to the date of the proxy statement released to shareholders in connection with the previous year's annual meeting and such business must constitute a proper subject to be brought before such meeting. Such shareholder's notice shall set forth (a) as to each person whom the shareholder proposes to nominate for election as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person's written consent to being named in the Proxy Statement 1 in connection with such annual meeting as a nominee and to serving as a director if elected), and evidence reasonably satisfactory to the corporation that such nominee has no interests that would limit such nominee's ability to fulfill his or her duties of office; (b) as to any other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such shareholder, as they appear on the corporation's books, and of such beneficial owner and (ii) the class and number of shares of the corporation that are owned beneficially and held of record by such shareholder and such beneficial owner. Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 2. The Chairman of the Board of Directors shall, if the facts warrant, determine and declare to the meeting that business has not been properly brought before the meeting in accordance with the provisions of this Section 2, and if the Chairman should so determine, the Chairman shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Section 3. Special Meetings. A special meeting of the shareholders of the corporation, for any purpose or purposes whatsoever, may be called at any time by the Chairman of the Board, any Vice Chairman of the Board, the President, any Vice President, a majority of the Board of Directors, or one or more shareholders of the corporation representing at least 66 2/3% of the votes entitled to be cast by the holders of all of the issued and outstanding shares of common stock of the corporation. Such a call for a special meeting must state the purpose of the meeting. This section, as it relates to the call of a special meeting of the shareholders of the corporation by one or more shareholders representing at least 66 2/3% of the votes entitled to be cast by the holders of all of the issued and outstanding shares of common stock of the corporation shall not be altered, deleted or rescinded except upon the affirmative vote of the shareholders of the corporation representing at least 66 2/3% of the votes entitled to be cast by the holders of all of the issued and outstanding shares of common stock of the corporation. Section 4. Notice of Meetings. Unless waived, notice of each annual meeting and of each special meeting of the shareholders of the corporation shall be given to each shareholder of record entitled to vote, not less than ten (10) days nor more than seventy (70) days prior to said meeting. Such notice shall specify the place, day and hour of the meeting; and in the case of a special meeting, it shall also specify the purpose or purposes for which the meeting is called. Section 5. Waiver of Notice. Notice of an annual or special meeting of the shareholders of the corporation may be waived by any shareholder, either before or after the meeting; and the attendance of a shareholder at a meeting, either in person or by proxy, shall of itself constitute waiver of notice and waiver of any and all objections to the place or time of the meeting, or to the manner in which it has been called or convened, except when a 2 shareholder attends solely for the purpose of stating, at the beginning of the meeting, an objection or objections to the transaction of business at such meeting. Section 6. Quorum, Voting and Proxy. Shareholders representing a majority of the votes entitled to be cast by the holders of all of the issued and outstanding shares of common stock of the corporation shall constitute a quorum at a shareholders' meeting. Any shareholder may be represented and vote at any shareholders' meeting by proxy filed with the Secretary of the corporation on or before the date of such meeting; provided, however, that no proxy shall be valid for more than 11 months after the date thereof unless otherwise specified in such proxy. The common stock of the corporation shall have the following voting rights: (a) Except as otherwise provided in paragraph (b) below, every holder of record of the common stock shall be entitled to one (1) vote in person or by proxy on each matter submitted to a vote at a meeting of shareholders for each share of the common stock held of record by such holder as of the record date of such meeting. (b) Notwithstanding paragraph (a) above, every holder of record of a share of the common stock meeting any one of the following criteria, shall be entitled to ten (10) votes in person or by proxy on each matter submitted to a vote at a meeting of shareholders for each share of the common stock held of record by such holder as of the record date of such meeting which: (1) has had the same beneficial owner since April 24, 1986; or (2) has had the same beneficial owner for a continuous period of greater than 48 months prior to the record date of such meeting; or (3) is held by the same beneficial owner to whom it was issued by the corporation in or as a part of an acquisition of a banking or non-banking company by the corporation where the resolutions adopted by the corporation's Board of Directors approving said acquisition specifically reference and grant such rights; or (4) is held by the same beneficial owner to whom it was issued by the corporation, or to whom it transferred by the corporation from treasury shares held by the corporation, and the resolutions adopted by the corporation's Board of Directors approving such issuance and/or transfer specifically reference and grant such rights; or (5) was acquired under any employee, officer and/or director benefit plan maintained for one or more employees, officers and/or directors of the corporation, and/or its subsidiaries, and is held by the same beneficial owner for whom it was acquired under the terms and provisions of 3 such plan; or (6) was acquired by reason of participation in a dividend reinvestment plan approved by the corporation and is held by the same beneficial owner for whom it was acquired under the terms and provisions of such plan; or (7) is owned by a holder who, in addition to shares which are beneficially owned under the provisions of paragraph (b) (1)-(6) above, is the beneficial owner of less than 100,000 shares of common stock of the corporation, with such amount to be appropriately adjusted to properly reflect any change in the shares of common stock of the corporation by means of a stock split, a stock dividend, a recapitalization or otherwise occurring after April 24, 1986. (c) For purposes of paragraphs (b) above and (e) below: (1) any transferee of a share of the common stock receiving such stock: (i) by gift; or (ii) by bequest, devise or otherwise through the law of inheritance, descent and distribution from a descendant's estate; or (iii) by distribution from a trust holding such stock for the benefit of such transferee; or (2) any corporate transferee receiving such common stock solely in exchange for the capital stock of such corporate transferee prior to December 31, 1986, provided that the transferor(s) of such common stock and their respective donees, legatees and devises own all of the issued and outstanding shares of capital stock of such corporate transferee; shall be deemed in each case to be the same beneficial owner as the transferor. Any transfer of any share of the capital stock of a corporate transferee described in subparagraph c(2) above, other than by means described in subparagraph c(l) above shall disqualify all shares of the common stock held by such corporate transferee from the operation of this paragraph c. (d) For purposes of paragraph (b) above, shares of the common stock acquired pursuant to a stock option shall be deemed to have been acquired on the date the option was granted, and any shares of common stock acquired by the beneficial owner as a direct 4 result of a stock split, stock dividend or other type of distribution of shares with respect to existing shares ("Dividend Shares") will be deemed to have been acquired and held continuously from the date on which the shares with regard to which the Dividend Shares were issued were acquired. (e) For purposes of paragraph (b) above, any share of the common stock held in "street" or "nominee" name shall be presumed to have been acquired by the beneficial owner subsequent to April 24, 1986 and to have had the same beneficial owner for a continuous period of less than 48 months prior to the record date of the meeting in question. This presumption shall be rebuttable by presentation to the corporation's Board of Directors by such beneficial owner of evidence satisfactory to the corporation's Board of Directors that such share has had the same beneficial owner continuously since April 24, 1986 or such share has had the same beneficial owner for a period greater than 48 months prior to the record date of the meeting in question. (f) For purposes of this section, a beneficial owner of a share of common stock is defined to include a person or group of persons who, directly or indirectly, through any contract, arrangement, undertaking, relationship or otherwise has or shares (1) voting power, which includes the power to vote, or to direct the voting of such share of common stock, (2) investment power, which includes the power to direct the sale or other disposition of such share of common stock, (3) the right to receive, retain or direct the distribution of the proceeds of any sale or other disposition of such share of common stock, or (4) the right to receive or direct the disposition of any distributions, including cash dividends, in respect of such share of common stock. For purposes of paragraphs (a) through (e) above, all determinations concerning beneficial ownership, changes therein, or the absence of any such change, shall be made by the corporation's Board of Directors. Written procedures designed to facilitate such determinations shall be established by the corporation's Board of Directors and refined from time to time. Such procedures shall provide, among other things, the manner of proof of facts that will be accepted and the frequency with which such proof may be required to be renewed. The corporation's Board of Directors shall be entitled to rely on all information concerning beneficial ownership of the common stock coming to its attention from any source and in any manner reasonably deemed by it to be reliable, but the corporation shall not be charged with any other knowledge concerning the beneficial ownership of the common stock. Any disputes arising concerning beneficial ownership, changes therein, or the absence of any such changes, pursuant to this paragraph (f), shall be definitively resolved by a determination of the corporation's Board of Directors made in good faith. Section 7. Voting Rights. The voting rights of shares of common stock of the corporation shall not be altered, deleted or rescinded except upon the affirmative vote of the shareholders of the corporation representing at least 66 2/3% of the votes entitled to be cast by the holders of all of the issued and outstanding shares of common stock of the corporation. Section 8. No Meeting Necessary When. Any action required by law or permitted to be 5 taken at any shareholders' meeting may be taken without a meeting if, and only if, written consent, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof. Such consent shall have the same force and effect as a unanimous vote of the shareholders and shall be filed with the Secretary and recorded in the Minute Book of the corporation. ARTICLE III. DIRECTORS ----------------------- Section 1. Number. The Board of Directors of the corporation shall consist of not less than 8 nor more than 60 Directors. The number of Directors may vary between said minimum and maximum, and within said limits, the shareholders representing at least 66 2/3% of the votes entitled to be cast by the holders of all of the issued and outstanding shares of common stock of the corporation may, from time to time, by resolution fix the number of Directors to comprise said Board. This section, as it relates to, from time to time, fixing the number of Directors of the corporation by the shareholders of the corporation representing at least 66 2/3% of the votes entitled to be cast by the holders of all of the issued and outstanding shares of common stock of the corporation, shall not be altered, deleted or rescinded except upon the affirmative vote of the shareholders of the corporation representing at least 66 2/3% of the votes entitled to be cast by the holders of all of the issued and outstanding shares of common stock of the corporation. Section 2. Election and Tenure. The Board of Directors of the corporation shall be divided into three classes serving staggered 3-year terms, with each class to be as nearly equal in number as possible. At the first annual meeting of the shareholders of the corporation on or after the date of adoption of this provision, all members of the Board of Directors shall be elected with the terms of office of Directors comprising the first class to expire at the first annual meeting of the shareholders of the corporation after their election, the terms of office of Directors comprising the second class to expire at the second annual meeting of the shareholders of the corporation after their election and the terms of office of Directors comprising the third class to expire at the third annual meeting of the shareholders of the corporation after their election, and as their terms of office expire, the Directors of each class will be elected to hold office until the third succeeding annual meeting of the shareholders of the corporation after their election. In such elections, the nominees receiving a plurality of votes shall be elected. This section, as it relates to the division of the Board of Directors into three classes serving staggered 3-year terms, shall not be altered, deleted or rescinded except upon the affirmative vote of the shareholders of the corporation representing at least 66 2/3% of the votes entitled to be cast by the holders of all of the issued and outstanding shares of common stock of the corporation. Section 3. Powers. The Board of Directors shall have authority to manage the affairs and exercise the powers, privileges and franchises of the corporation as they may deem expedient for the interests of the corporation, subject to the terms of the Articles of Incorporation, bylaws, any valid Shareholders' Agreement, and such policies and directions as may be prescribed from time to time by the shareholders of the corporation. 6 Section 4. Meetings. The annual meeting of the Board of Directors shall be held without notice immediately following the annual meeting of the shareholders of the corporation, on the same date and at the same place as said annual meeting of the shareholders. The Board by resolution may provide for regular meetings, which may be held without notice as and when scheduled in such resolution. Special meetings of the Board may be called at any time by the Chairman of the Board, any Vice Chairman of the Board, the President, or by any two or more Directors. Section 5. Notice and Waiver; Quorum. Notice of any special meeting of the Board of Directors shall be given to each Director personally or by mail, telegram or cablegram addressed to him at his last known address, at least one day prior to the meeting. Such notice may be waived, either before or after the meeting; and the attendance of a Director at any special meeting shall of itself constitute a waiver of notice of such meeting and of any and all objections to the place or time of the meeting, or to the manner in which it has been called or convened, except where a Director states, at the beginning of the meeting, any such objection or objections to the transaction of business. A majority of the Board of Directors shall constitute a quorum at any Directors' meeting. Section 6. No Meeting Necessary, When. Any action required by law or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if written consent, setting forth the action so taken, shall be signed by all the Directors. Such consent shall have the same force and effect as a unanimous vote of the Board of Directors and shall be filed with the Secretary and recorded in the Minute Book of the corporation. Section 7. Voting. At all meetings of the Board of Directors each Director shall have one vote and, except as otherwise provided herein or provided by law, all questions shall be determined by a majority vote of the Directors present. Section 8. Removal. Any one or more Directors or the entire Board of Directors may be removed from office, with or without cause, by the affirmative vote of the shareholders of the corporation representing at least 66 2/3% of the votes entitled to be cast by the holders of all of the issued and outstanding shares of common stock of the corporation at any shareholders' meeting with respect to which notice of such purpose has been given. This section, as it relates to the removal of Directors of the corporation by the shareholders of the corporation representing at least 66 2/3% of the votes entitled to be cast by the holders of all of the issued and outstanding shares of common stock of the corporation, shall not be altered, deleted or rescinded except upon the affirmative vote of the shareholders of the corporation representing at least 66 2/3% of the votes entitled to be cast by the holders of all of the issued and outstanding shares of common stock of the corporation. Section 9. Vacancies. Any vacancy occurring in the Board of Directors caused by an increase in the number of Directors may be filled by the shareholders of the corporation for a full classified 3-year term, or such vacancy may be filled by the Board of Directors until 7 the next annual meeting of the shareholders. Any vacancy occurring in the Board of Directors caused by the removal of a Director shall be filled by the shareholders, or if authorized by the shareholders, by the Board of Directors, for the unexpired term of the Director so removed. Any vacancy occurring in the Board of Directors caused by a reason other than an increase in the number of Directors or removal of a Director may be filled by the Board of Directors, or the shareholders, for the unexpired term of the Director whose position is vacated. Vacancies in the Board of Directors filled by the Board of Directors may be filled by the affirmative vote of a majority of the remaining Directors, though less than a quorum, or the sole remaining Director, as the case may be. Section 10. Dividends. The Board of Directors may declare dividends payable in cash or other property out of the unreserved and unrestricted net earnings of the current fiscal year, computed to the date of declaration of the dividend, or the preceding fiscal year, or out of the unreserved and unrestricted earned surplus of the corporation, as they may deem expedient. Section 11. Committees. In the discretion of the Board of Directors, said Board from time to time may elect or appoint, from its own members, an Executive Committee, an Audit Committee, a Nominating Committee, a Corporate Development Committee, a Compensation Committee and such other committee or committees as said Board may see fit to establish. Each such committee shall consist of two or more Directors, and each shall possess such powers and be charged with such responsibilities, subject to the limitations imposed herein these bylaws and by applicable law, as the Board by resolution may from time to time prescribe. Executive Committee The Executive Committee shall, during the intervals between meetings of the corporation's Board of Directors, possess and may exercise any and all powers of the corporation's Board of Directors in the management and direction of the business and affairs of the corporation in which specific direction has not been given by the corporation's Board of Directors. Nominating Committee The Nominating Committee shall possess the power and be charged with the responsibility of: (i) evaluating the performance of incumbent directors and non-directors in determining whether or not they should be nominated for re-election, or election in the first instance, by the shareholders to serve upon the Board of Directors of the corporation; and (ii) recommending to the Board of Directors of the corporation whether or not the Board should nominate such individuals for re-election or election, as the case may be, by the shareholders to serve upon the Board of Directors of the corporation. 8 Compensation Committee The Compensation Committee shall possess the power and be charged with the responsibility of: (i) evaluating and setting the remuneration of senior management and members of the Board of Directors of the corporation and the compensation and fringe benefit plans in which officers, employees and directors of the corporation are eligible to participate; and (ii) recommending to the Board of Directors of the corporation whether or not it should modify or approve such remuneration, compensation or fringe benefit plans. Corporate Development Committee The Corporate Development Committee shall possess the power and be charged with the responsibility of reviewing with and assisting the management of the corporation in the formalization of plans and strategies with regard to the future expansion and growth of, and the overall operation of, the market areas served by, and the services provided by the corporation and its subsidiaries, including, but not limited to, plans and strategies in connection with acquisitions by the corporation of control of organizations and firms engaged in banking activities and activities determined by the Board of Governors of the Federal Reserve System to be closely related to banking, the provision by the corporation and its subsidiaries of additional services to the customers in the market areas served by the corporation and its subsidiaries and the expansion of the market areas served by the corporation and its subsidiaries. Audit Committee The Audit Committee shall possess the power and be charged with the responsibility of: (i) reviewing and determining the independence of the independent auditors to be engaged by the corporation to perform the annual audit and interim reviews of the financial condition of the corporation and its subsidiaries (hereinafter referred to as the "corporation's independent auditors"); (ii) reviewing, determining and maintaining the independence of the corporation's internal auditors by assisting management of the corporation in the formulation of the job description of the head of the corporation's internal audit division and providing for direct reporting by the corporation's internal auditors to it in all matters relating to the audit function; (iii) instituting, directing and supervising investigations in matters relating to the audit function to be made by the corporation's internal auditors of the corporation and/or its subsidiaries; (iv) reviewing and approving each professional service to be provided by the corporation's independent auditors for the corporation and/or its subsidiaries prior to the performance of such services; (v) reviewing and approving the range of management advisory services provided by the corporation's independent auditors; (vi) reviewing the adequacy by the corporation's and its subsidiaries' systems of internal accounting controls; (vii) reviewing the scope and results of the corporation's procedures for internal auditing of the corporation and its subsidiaries; (viii) reviewing the results of regulatory examination of the corporation and its subsidiaries; (ix) reviewing the corporation's independent auditor's plan and results of its audit engagement; (x) periodically reviewing with the corporation's independent auditors with the assistance 9 of management of the corporation the financial statement of the corporation and consolidated financial statements of the corporation and its subsidiaries with the primary goal of such review being to insure that such financial statements fairly present the financial results of the corporation in conformity with generally accepted accounting principles; (xi) reviewing and recommending to the Board of Directors of the corporation any engagement or termination of the corporation's independent auditors; and (xii) considering such other matters with regard to the internal and independent audit of the corporation and its subsidiaries as, in its discretion, it deems to be desirable, periodically reporting to the Board of Directors of the corporation as to the exercise of its duties and responsibilities and, where appropriate, recommending to the Board of Directors matters in connection with the audit function upon which it should consider taking action. Section 12. Officers, Salaries and Bonds. The Board of Directors shall elect all officers of the corporation and shall approve the remuneration, including remuneration from employee benefit plans, of all officers, except that the Board of Directors shall not have the responsibility to approve salaries for officers who are not executive officers. The fact that any officer is a Director shall not preclude him from receiving a salary or from voting upon the resolution providing the same. The Board of Directors may or may not, in their discretion, require bonds from either or all of the officers and employees of the corporation for the faithful performance of their duties and good conduct while in office. Section 13. Compensation of Directors. Directors, as such shall be entitled to receive compensation for their service as Directors and such fees and expenses, if any, for attendance at each regular or special meeting of the Board and any adjournments thereof, as may be fixed from time to time by resolution of the Board, and such fees and expenses shall be payable even though an adjournment be had because of the absence of a quorum; provided, however, that nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of either standing or special committees may be allowed such compensation as may be provided from time to time by resolution of the Board for serving upon and attending meetings of such committees. Section 14. Advisory Directors. The Board of Directors of the corporation may at its annual meeting, or from time to time thereafter, appoint any individual to serve as a member of an Advisory Board of Directors of the corporation. Any individual appointed to serve as a member of an Advisory Board of Directors of the corporation shall be entitled to attend all meetings of the Board of Directors and may participate in any discussion thereat, but such individual may not vote at any meeting of the Board of Directors or be counted in determining a quorum for such meeting. It shall be the duty of members of the Advisory Board of Directors of the corporation to advise and provide general policy advice to the Board of Directors of the corporation at such times and places and in such groups and committees as may be determined from time to time by the Board of Directors, but such individuals shall not have any responsibility or be subject to any liability imposed upon a director or in any manner otherwise deemed a director. The same compensation paid to directors for their services as directors shall be paid to members of an Advisory Board of 10 Directors of the corporation for their services as advisory directors. Each member of the Advisory Board of Directors except in the case of his earlier death, resignation, retirement, disqualification or removal, shall serve until the next succeeding annual meeting of the Board of Directors and thereafter until his successor shall have been appointed. Section 15. Emeritus Directors. When a member of the Board of Directors or the Advisory Board of Directors of the corporation, as the case may be: (a) attains seventy (70) years of age or, (b) prior to his attainment of seventy (70) years of age, retires from his principal occupation, under the retirement policy and criteria established from time to time by the Board of Directors of the corporation (except for a member of the Board of Directors or the Advisory Board of Directors of the corporation: (1) who is, upon the attainment of age seventy (70), then serving as an executive officer of the corporation; or (2) who was sixty (60) years of age on June 14, 1973), such director shall automatically, at his option, either (i) retire from the Board of Directors or the Advisory Board of Directors of the corporation, as the case may be; or (ii) be appointed as a member of the Emeritus Board of Directors of the corporation. A member of the Board of Directors or the Advisory Board of Directors of the corporation: (1) who is, upon the attainment of age seventy (70), then serving as an executive officer of the corporation; or (2) who was sixty (60) years of age on June 14, 1973, may, at his option, either: (a) continue his service as a member of the Board of Directors or the Advisory Board of Directors of the corporation, as the case may be; or (b) be appointed as a member of the Emeritus Board of Directors of the corporation. Members of the Emeritus Board of Directors of the corporation shall be appointed annually by the Chairman of the Board of Directors of the corporation at the Annual Meeting of the Board of Directors of the corporation, or from time to time thereafter. Each member of the Emeritus Board of Directors of the corporation, except in the case of his earlier death, resignation, retirement, disqualification or removal, shall serve until the next succeeding Annual Meeting of the Board of Directors of the corporation. Any individual appointed as a member of the Emeritus Board of Directors of the corporation may, but shall not be required to, attend meetings of the Board of Directors of the corporation and may participate in any discussions thereat, but such individual may not vote at any meeting of the Board of Directors of the corporation or be counted in determining a quorum at any meeting of the Board of Directors of the corporation, as provided in Section 5 of Article III of the bylaws of the corporation. It shall be the duty of the members of the Emeritus Board of Directors of the corporation to serve as goodwill ambassadors of the corporation, but such individuals shall not have any responsibility or be subject to any liability imposed upon a member of the Board of Directors of the corporation or in any manner otherwise be deemed to be a member of the Board of Directors of the corporation. Each member of the Emeritus Board of Directors of the corporation shall be paid such compensation as may be set from time to time by the Chairman of the Board of Directors of the corporation and shall remain eligible to participate in any Director Stock Purchase Plan maintained by, or participated in, from time to time by the corporation according to the terms and conditions thereof. 11 ARTICLE IV. OFFICERS -------------------- Section 1. Selection. The Board of Directors at each annual meeting shall elect or appoint a President (who shall be a Director), a Secretary and a Treasurer, each to serve for the ensuing year and until his successor is elected and qualified, or until his earlier resignation, removal from office, or death. The Board of Directors, at such meeting, may or may not, in the discretion of the Board, elect a Chairman of the Board, one or more Vice Chairmen of the Board, one or more Chairmen of the Board-Emeritus and/or one or more Vice Presidents and, also may elect or appoint one or more Assistant Vice Presidents and/or one or more Assistant Secretaries and/or one or more Assistant Treasurers. When more than one Vice President is elected, they may, in the discretion of the Board, be designated Executive Vice President, First Vice President, Second Vice President, etc., according to seniority or rank, and any person may hold two or more offices, except that the President shall not also serve as the Secretary. Section 2. Removal, Vacancies. Any officers of the corporation may be removed from office at any time by the Board of Directors, with or without cause. Any vacancy occurring in any office of the corporation may be filled by the Board of Directors. Section 3. Chairman of the Board. The Chairman of the Board of Directors, when and if elected, shall, whenever present, preside at all meetings of the Board of Directors and at all meetings of the shareholders. The Chairman of the Board of Directors shall have all the powers of the President in the event of his absence or inability to act, or in the event of a vacancy in the office of the President. The Chairman of the Board of Directors shall confer with the President on matters of general policy affecting the business of the corporation and shall have, in his discretion, power and authority to generally supervise all the affairs of the corporation and the acts and conduct of all the officers of the corporation, and shall have such other duties as may be conferred upon the Chairman of the Board by the Board of Directors. Section 4. President. If there be no Chairman of the Board or Vice Chairman of the Board elected, or in their absence, the President shall preside at all meetings of the Board of Directors and at all meetings of the shareholders. The immediate supervision of the affairs of the corporation shall be vested in the President. It shall be his duty to attend constantly to the business of the corporation and maintain strict supervision over all of its affairs and interests. He shall keep the Board of Directors fully advised of the affairs and condition of the corporation, and shall manage and operate the business of the corporation pursuant to such policies as may be prescribed from time to time by the Board of Directors. The President shall, subject to approval of the Board and/or Compensation Committee, hire and fix the compensation of all employees and agents of the corporation, other than officers, and any person thus hired shall be removable at his pleasure. Section 5. Vice President. Any Vice President of the corporation may be designated by the Board of Directors to act for and in the place of the President in the event of sickness, disability or absence of said President or the failure of said President to act for 12 any reason, and when so designated, such Vice President shall exercise all the powers of the President in accordance with such designation. The Vice Presidents shall have such duties as may be required of, or assigned to, them by the Board of Directors, the Chairman of the Board or the President. Section 6. Secretary. It shall be the duty of the Secretary to keep a record of the proceedings of all meetings of the shareholders and Board of Directors; to keep the stock records of the corporation; to notify the shareholders and Directors of meetings as provided by these bylaws; and to perform such other duties as may be prescribed by the Chairman of the Board, President or Board of Directors. Any Assistant Secretary, if elected, shall perform the duties of the Secretary during the absence or disability of the Secretary and shall perform such other duties as may be prescribed by the Chairman of the Board, President, Secretary or Board of Directors. Section 7. Treasurer. The Treasurer shall keep, or cause to be kept, the financial books and records of the corporation, and shall faithfully account for its funds. He shall make such reports as may be necessary to keep the Chairman of the Board, the President and Board of Directors fully informed at all times as to the financial condition of the corporation, and shall perform such other duties as may be prescribed by the Chairman of the Board, President or Board of Directors. Any Assistant Treasurer, if elected, shall perform the duties of the Treasurer during the absence or disability of the Treasurer, and shall perform such other duties as may be prescribed by the Chairman of the Board, President, Treasurer or Board of Directors. ARTICLE V. CONTRACTS, ETC. -------------------------- Section 1. Contracts, Deeds and Loans. All contracts, deeds, mortgages, pledges, promissory notes, transfers and other written instruments binding upon the corporation shall be executed on behalf of the corporation by the Chairman of the Board, if elected, the President, or by such other officers or agents as the Board of Directors may designate from time to time. Any such instrument required to be given under the seal of the corporation may be attested by the Secretary or Assistant Secretary of the corporation. Section 2. Proxies. The Chairman of the Board, any Vice Chairman of the Board, the President, any Executive Vice President, Secretary or Treasurer of the corporation shall have full power and authority, on behalf of the corporation, to attend and to act and to vote at any meetings of the shareholders, bond holders or other security holders of any corporation, trust or association in which the corporation may hold securities, and at and in connection with any such meeting shall possess and may exercise any and all of the rights and powers incident to the ownership of such securities and which as owner thereof the corporation might have possessed and exercised if present, including the power to execute proxies and written waivers and consents in relation thereto. In the case of conflicting representation at any such meeting, the corporation shall be represented by its highest ranking officer, in the order first above stated. Notwithstanding the foregoing, the Board of Directors may, by resolution, from time to time, confer like powers upon any other 13 person or persons. ARTICLE VI. CHECKS AND DRAFTS ----------------------------- Checks and drafts of the corporation shall be signed by such officer or officers or such other employees or persons as the Board of Directors may from time to time designate. ARTICLE VII. STOCK ------------------ Section 1. Certificates of Stock. The certificates for shares of capital stock of the corporation shall be in such form as shall be determined by the Board of Directors. They shall be numbered consecutively and entered into the stock book of the corporation as they are issued. Each certificate shall state on its face the fact that the corporation is a Georgia corporation, the name of the person to whom the shares are issued, the number and class of shares (and series, if any) represented by the certificate and their par value, or a statement that they are without par value. In addition, when and if more than one class of shares shall be outstanding, all share certificates of whatever class shall state that the corporation will furnish to any shareholder upon request and without charge a full statement of the designations, relative rights, preferences and limitations of the shares of each class authorized to be issued by the corporation. Section 2. Signature; Transfer Agent; Registrar. Share certificates shall be signed by the President or Vice President and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation, and shall bear the seal of the corporation or a facsimile thereof. The Board of Directors may from time to time appoint transfer agents and registrars for the shares of capital stock of the corporation or any class thereof, and when any share certificate is countersigned by a transfer agent or registered by a registrar, the signature of any officer of the corporation appearing thereon may be a facsimile signature. In case any officer who signed, or whose facsimile signature was placed upon, any such certificate shall have died or ceased to be such officer before such certificate is issued, it may nevertheless be issued with the same effect as if he continued to be such officer on the date of issue. Section 3. Stock Book. The corporation shall keep at its principal office, or at the office of its transfer agent, wherever located, with a copy at the principal office of the corporation, a book, to be known as the stock book of the corporation, containing in alphabetical order the name of each shareholder of record, together with his address, the number of shares of each kind, class or series of stock held by him and his social security number. The stock book shall be maintained in current condition. The stock book, including the share register, or the duplicate copy thereof maintained at the principal office of the corporation, shall be available for inspection by any shareholder at any meeting of the shareholders upon request and shall also be made available for inspection and copying upon the request of any shareholder owning in excess of 2% of the corporation's common stock, which request must be made in accordance with the provisions of section 14-2-1602 of the Official Code of 14 Georgia Annotated, as amended. The information contained in the stock book and share register may be stored on punch cards, magnetic tape, or any other approved information storage devices related to electronic data processing equipment, provided that any such method, device, or system employed shall first be approved by the Board of Directors, and provided further that the same is capable of reproducing all information contained therein, in legible and understandable form, for inspection by shareholders or for any other proper corporate purpose. Section 4. Transfer of Stock; Registration of Transfer. The stock of the corporation shall be transferred only by surrender of the certificate and transfer upon the stock book of the corporation. Upon surrender to the corporation, or to any transfer agent or registrar for the class of shares represented by the certificate surrendered, of a certificate properly endorsed for transfer, accompanied by such assurances as the corporation, or such transfer agent or registrar, may require as to the genuineness and effectiveness of each necessary endorsement and satisfactory evidence of compliance with all applicable laws relating to securities transfers and the collection of taxes, it shall be the duty of the corporation, or such transfer agent or registrar, to issue a new certificate, cancel the old certificate and record the transactions upon the stock book of the corporation. Section 5. Registered Shareholders. Except as otherwise required by law, the corporation shall be entitled to treat the person registered on its stock book as the owner of the shares of the capital stock of the corporation as the person exclusively entitled to receive notification, dividends or other distributions, to vote and to otherwise exercise all the rights and powers of ownership and shall not be bound to recognize any adverse claim. Section 6. Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action affecting the interests of shareholders, the Board of Directors may fix, in advance, a record date. Such date shall not be more than seventy (70) nor less than ten (10) days before the date of any such meeting nor more than seventy (70) days prior to any other action. In each case, except as otherwise provided by law, only such persons as shall be shareholders of record on the date so fixed shall be entitled to notice of and to vote at such meeting and any adjournment thereof, to express such consent or dissent, or to receive payment of such dividend or such allotment of rights, or otherwise be recognized as shareholders for any other related purpose, notwithstanding any registration of a transfer of shares on the stock book of the corporation after any such record date so fixed. Section 7. Lost Certificates. When a person to whom a certificate of stock has been issued alleges it to have been lost, destroyed or wrongfully taken, and if the corporation, transfer agent or registrar is not on notice that such certificate has been acquired by a bona fide purchaser, a new certificate may be issued upon such owner's compliance with all of the following conditions, to-wit: (a) He shall file with the Secretary of the corporation, 15 and the transfer agent or the registrar, his request for the issuance of a new certificate, with an affidavit setting forth the time, place and circumstances of the loss; (b) He shall also file with the Secretary, and the transfer agent or the registrar, a bond with good and sufficient security acceptable to the corporation and the transfer agent or the registrar, or other agreement of indemnity acceptable to the corporation and the transfer agent or the registrar, conditioned to indemnify and save harmless the corporation and the transfer agent or the registrar from any and all damage, liability and expense of every nature whatsoever resulting from the corporation's or the transfer agent's or the registrar's issuing a new certificate in place of the one alleged to have been lost; and (c) He shall comply with such other reasonable requirements as the Chairman of the Board, the President or the Board of Directors of the corporation, and the transfer agent or the registrar shall deem appropriate under the circumstances. Section 8. Replacement of Mutilated Certificates. A new certificate may be issued in lieu of any certificate previously issued that may be defaced or mutilated upon surrender for cancellation of a part of the old certificate sufficient in the opinion of the Secretary and the transfer agent or the registrar to duly identify the defaced or mutilated certificate and to protect the corporation and the transfer agent or the registrar against loss or liability. Where sufficient identification is lacking, a new certificate may be issued upon compliance with the conditions set forth in Section 7 of this Article VII. ARTICLE VIII. INDEMNIFICATION AND REIMBURSEMENT --------------------------------------------------- Subject to any express limitations imposed by applicable law, every person now or hereafter serving as a director, officer, employee or agent of the corporation and all former directors and officers, employees or agents shall be indemnified and held harmless by the corporation from and against the obligation to pay a judgement, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), and reasonable expenses (including attorneys' fees and disbursements) that may be imposed upon or incurred by him or her in connection with or resulting from any threatened, pending, or completed, action, suit, or proceeding, whether civil, criminal, administrative, investigative, formal or informal, in which he or she is, or is threatened to be made, a named defendant or respondent: (a) because he or she is or was a director, officer, employee, or agent of the corporation; (b) because he or she is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise; or (c) because he or she is or was serving as an employee of the corporation who was employed to render professional services as a lawyer or an accountant to the corporation; regardless of whether such person is acting in such a capacity at the time such obligation shall have been imposed or incurred, if (i) such person acted in a manner he or she believed in good faith to be in or not opposed to the best interests of the corporation, and, with respect to any criminal proceeding, if such person had no reasonable cause to believe his or her conduct was unlawful or (ii), with respect to an employee benefit plan, such person believed in good faith that his or her conduct was in the interests of the participants in and beneficiaries of the plan. 16 Reasonable expenses incurred in any proceeding shall be paid by the corporation in advance of the final disposition of such proceeding if authorized by the Board of Directors in the specific case, or if authorized in accordance with procedures adopted by the Board of Directors, upon receipt of a written undertaking executed personally by or on behalf of the director, officer, employee, or agent to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation, and a written affirmation of his or her good faith belief that he or she has met the standard of conduct required for indemnification. The foregoing rights of indemnification and advancement of expenses shall not be deemed exclusive of any other right to which those indemnified may be entitled, and the corporation may provide additional indemnity and rights to its directors, officers, employees or agents to the extent they are consistent with law. The provisions of this Article VIII shall cover proceedings whether now pending or hereafter commenced and shall be retroactive to cover acts or omissions or alleged acts or omissions which heretofore have taken place. In the event of death of any person having a right of indemnification or advancement of expenses under the provisions of this Article VIII, such right shall inure to the benefit of his or her heirs, executors, administrators and personal representatives. If any part of this Article VIII should be found to be invalid or ineffective in any proceeding, the validity and effect of the remaining provisions shall not be affected. ARTICLE IX. MERGERS, CONSOLIDATIONS AND OTHER DISPOSITIONS OF ASSETS -------------------------------------------------------- The affirmative vote of the shareholders of the corporation representing at least 66 2/3% of the votes entitled to be cast by the holders of all of the issued and outstanding shares of common stock of the corporation shall be required to approve any merger or consolidation of the corporation with or into any corporation, and the sale, lease, exchange or other disposition of all, or substantially all, of the assets of the corporation to or with any other corporation, person or entity, with respect to which the approval of the corporation's shareholders is required by the provisions of the corporate laws of the State of Georgia. This Article shall not be altered, deleted or rescinded except upon the affirmative vote of the shareholders representing at least 66 2/3% of the votes entitled to be cast by the holders of all of the issued and outstanding shares of common stock of the corporation. ARTICLE X. CRITERIA FOR CONSIDERATION OF TENDER OR OTHER OFFERS ---------------------------------------------------- Section 1. Factors to Consider. The Board of Directors of the corporation may, if it deems it advisable, oppose a tender or other offer for the corporation's securities, whether the offer is in cash or in the securities of a corporation or otherwise. When considering whether to oppose an offer, the Board of Directors may, but is not legally obligated to, consider any pertinent issues; by way of illustration, but not of limitation, the Board of 17 Directors may, but shall not be legally obligated to, consider any or all of the following: (i) whether the offer price is acceptable based on the historical and present operating results or financial condition of the corporation; (ii) whether a more favorable price could be obtained for the corporation's securities in the future; (iii) the impact which an acquisition of the corporation would have on the employees, depositors and customers of the corporation and its subsidiaries and the communities which they serve; (iv) the reputation and business practices of the offeror and its management and affiliates as they would affect the employees, depositors and customers of the corporation and its subsidiaries and the future value of the corporation's stock; (v) the value of the securities, if any, that the offeror is offering in exchange for the corporation's securities, based on an analysis of the worth of the corporation as compared to the offeror or any other entity whose securities are being offered; and (vi) any antitrust or other legal or regulatory issues that are raised by the offer. Section 2. Appropriate Actions. If the Board of Directors determines that an offer should be rejected, it may take any lawful action to accomplish its purpose including, but not limited to, any or all of the following: (i) advising shareholders not to accept the offer; (ii) litigation against the offeror; (iii) filing complaints with governmental and regulatory authorities; (iv) acquiring the corporation's securities; (v) selling or otherwise issuing authorized but unissued securities of the corporation or treasury stock or granting options or rights with respect thereto; (vi) acquiring a company to create an antitrust or other regulatory problem for the offeror; and (vii) soliciting a more favorable offer from another individual or entity. ARTICLE XI. AMENDMENT --------------------- Except as otherwise specifically provided herein, the bylaws of the corporation may be altered, amended or added to by the affirmative vote of the shareholders of the corporation representing 66 2/3% of the votes entitled to be cast by the holders of all of the issued and outstanding shares of common stock of the corporation present and voting therefor at a shareholders' meeting or, subject to such limitations as the shareholders may from time to time prescribe, by a majority vote of all the Directors then holding office at any meeting of the Board of Directors. 18 EX-10.3 3 DIRECTOR STOCK PURCHASE PLAN SYNOVUS FINANCIAL CORP. DIRECTOR STOCK PURCHASE PLAN AMENDED AND RESTATED AS OF JANUARY 1, 2000 The name of this plan is the Synovus Financial Corp. Director Stock Purchase Plan (the "Plan"). The purpose of the Plan is to enable Synovus Financial Corp. ("Synovus") to promote interest in its success, growth and development by providing directors of Synovus and its subsidiaries a convenient means of purchasing shares of Synovus Common Stock in the open market, by means of voluntary contributions and 50% matching contributions from Synovus and its subsidiary Participating Companies. ARTICLE I DEFINITIONS A. Synovus Common Stock: The shares of common stock of the par value of $1.00 per share of Synovus, and any shares which may be issued and exchanged for or upon a change of such shares whether in subdivision or in combination thereof and whether as a part of a classification or reclassification thereof, or otherwise. B. Synovus: Synovus Financial Corp. C. Company: Synovus Financial Corp. D. Contribution Date: The date in each calendar month on which Participant contributions to the Plan shall be made. E. Effective Date of the Plan: January 1, 2000. F. Director: Any person who currently serves or in the future shall be elected to serve as a member, advisory member or emeritus member of the Board of Directors of one or more Participating Companies which compensates such members in fees or other cash remuneration for serving in such capacity. Persons who serve in multiple capacities as 1 members of the Boards of Directors of one or more Participating Companies shall be allowed to participate in the Plan in only one such capacity, and, if such multiple capacities involve service upon Synovus' Board of Directors and another Participating Company or Participating Companies, such single participation shall be limited to participation at the Synovus level. G. Participating Company: Synovus and each subsidiary of Synovus which compensates its Directors in fees or other cash remuneration for serving in such capacity and elects to participate in the Plan. H. Offering Period: The last fifteen days of each calendar quarter during which Directors may elect to begin participation in the Plan. I. Participant: A Director who shall have become a Participant in the Plan by submitting to the Agent through his Participating Company an Automatic Transfer Contribution Form and whose participation in the Plan shall not have been terminated. J. Automatic Transfer Contribution Form: The form which a Participant must forward to the Agent through his Participating Company so as to participate in the Plan. This form shall contain a description, including the account number, of the demand deposit account maintained by the Participant with a Participating Company from which the Participant desires his Participant contribution to the Agent of the Plan to be made by automatic transfer. K. Plan Year: The period commencing on January 1st of each year and ending on December 31st of each year. L. Stock Share Account: The separate account which is required to be established and maintained with respect to each Participant for the purpose of recording Synovus Common Stock purchased for and allocated to the Participant under the Plan. M. Agent of the Plan, or Agent: State Street Bank and Trust Company, as the 2 Agent of the Plan, and any duly appointed successor Agent. ARTICLE II PARTICIPATION A Director may become a Participant in the Plan during an Offering Period by submitting an Automatic Transfer Contribution Form to the Agent of the Plan through his or her Participating Company. ARTICLE III PARTICIPANT CONTRIBUTIONS Participants may contribute to the Plan by submitting an Automatic Transfer Contribution Form to the Agent of the Plan through his or her Participating Company. In connection with the Participant automatic transfer contribution procedure, automatic transfer contributions to the Agent of the Plan shall be made on either a monthly or a quarterly basis, as designated by the Participant, by the subsidiary bank of Synovus which maintains the demand deposit account designated by the Participant to be the source of such contributions according to the following schedule of levels of participation: Participant Participation Level Contribution Monthly/Quarterly ------------------- ------------ ----------------- A $ 333.33 Monthly B $ 222.22 Monthly C $ 111.11 Monthly D $ 1,000.00 Quarterly Automatic transfer contributions shall be made only on Contribution Dates. The Agent of the Plan, and the Participating Company with whom the demand deposit account to be charged with the automatic transfer is established, shall have sole and absolute discretion in the determination of the Contribution Date upon which the automatic transfer contributions of 3 Participants in the Plan shall be made. Automatic transfer contributions may be authorized only during an Offering Period and only by submitting an Automatic Transfer Contribution Form to the Agent through a Participating Company and/or the subsidiary bank of Synovus with which the Participant maintains the demand deposit account to be the source of such contributions. A Participant may change the participation level of his or her automatic transfer contribution by submitting a new Automatic Transfer Contribution Form to the Agent through the Participating Company at least fifteen days prior to a Contribution Date. Automatic Transfer Contributions may be terminated pursuant to Article XIII hereof. Each Participating Company shall remit Participant's Automatic Transfer Contributions to the Agent on the appropriate Contribution Date. ARTICLE IV PARTICIPATING COMPANY CONTRIBUTIONS Participating Companies shall make contributions to the Plan for each of their Directors who are Participants in the Plan. In connection with the Participant automatic transfer contribution procedure, Participating Company contributions to the Agent of the Plan for the Directors of such Participating Company who are Participants in the Plan shall be made on the Contribution Date, on either a monthly or a quarterly basis, in accordance with such Participant's designation for his or her Participant contribution. The automatic transfer contributions for such Participants are made according to the following schedule of levels of participation: Participating Company Participation Level Contribution Monthly/Quarterly ------------------- -------------------- ----------------- A $ 166.67 Monthly B $ 111.11 Monthly C $ 55.55 Monthly D $ 1,000.00 Quarterly 4 As Participating Company contributions to the Plan must be treated by the Participants for whom such contributions are made as compensation for serving as Directors, such amount will be reflected on the Form 1099 furnished to Directors annually by their respective Participating Companies. ARTICLE V ADMINISTRATION OF PLAN The Plan shall be administered by Synovus. Synovus may, from time to time, adopt rules and regulations not inconsistent with the Plan for carrying out the Plan or for providing for any and all matters not specifically covered herein. The functions and duties of Synovus in general, are as follows: (a) To establish rules for the administration and make interpretations of the Plan, which rules and interpretations will apply to all Participants similarly situated. (b) To make provision for payment of contributions to the Agent of the Plan. (c) To maintain, with the assistance of the Agent of the Plan, records, including, but not limited to, those with respect to Participant contributions and Participating Company contributions and dividends paid to the Agent of the Plan. (d) To file with the appropriate governmental agencies any and all reports and notifications required of the Plan and to provide all Participants with any and all reports and notifications to which they are by law entitled. (e) To engage a certified public accountant to perform an annual audit of the Plan. (f) To give prompt notification to the Agent of the effectiveness, the initiation of proceedings which could result in the termination of effectiveness and the termination of effectiveness of registration, exemption or qualification of the Plan and/or the Synovus Common Stock offered thereunder under federal and applicable state securities laws. 5 (g) To receive from and, upon its approval thereof, to promptly forward to the Agent of the Plan the written requests of Participants for the issuance of stock certificates for all or part of the full number of shares of Synovus Common Stock in such Participants' Stock Share Accounts. (h) To give prompt notification to the Agent of the Plan of the termination of the participation of any Participant in the Plan for any reason whatsoever. (i) To perform any and all other functions reasonably necessary to administer the Plan. Synovus shall indemnify each employee of Synovus and any other Participating Company involved in the administration of the Plan against all costs, expenses and liabilities, including attorneys' fees, incurred in connection with any action, suit or proceeding instituted against such employee alleging any act or omission or commission performed by such employee while acting in good faith in discharging his or her duties with respect to the Plan. This indemnification is limited to the extent such costs and expenses are not covered under insurance as may be now or hereafter provided by Synovus or the appropriate Participating Company. ARTICLE VI AGENT OF THE PLAN The Agent of the Plan shall be State Street Bank and Trust Company, and any Successor Agent appointed by Synovus. The Agent shall receive all contributions made by the Participating Companies and Participants in cash only. All contributions so received, ("Fund"), shall be held, managed, and administered pursuant to the terms of the Plan. No part of the Fund shall be used for or diverted to purposes other than for the exclusive benefit of the Participants and former Participants in the Plan. 6 Any Agent of the Plan may be removed by Synovus at any time. Any Agent of the Plan may resign at any time upon 120 days notice in writing to Synovus. Upon removal or resignation of such Agent, Synovus shall appoint a successor Agent of the Plan who shall have the same powers and duties as those conferred upon the Agent hereunder. Upon acceptance of such appointment by the successor Agent, the predecessor Agent shall assign, transfer, and pay over to such successor Agent the funds and properties then constituting the Fund and any and all records it might have with regard to the Fund and the administration of the Fund. Any corporation into which any corporate agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which any corporate agent may be a party, or any corporation to which all or substantially all of the business of any corporate agent may be transferred, shall be the successor of such agent without the filing of any instrument or performance of any further act. The Agent of the Plan shall have the following powers and authority in the administration and investment of the Fund: (a) To purchase for the benefit of the Participants in the Plan shares of Synovus Common Stock in its name as Agent of the Plan, to retain the same and shares of Synovus Common Stock previously acquired under the Existing Plan and to cause such shares to be disposed of pursuant to the terms of the Plan. (b) To cause any Synovus Common Stock held as part of the Fund to be registered in the Agent's own name or in the name of one or more nominees, but the books and records of the Agent shall at all times show that all such investments are part of the Fund. (c) To keep such portions of the Fund in cash or cash balances as the Agent, from time to time, may in its sole discretion deem to be in the best interests of the Participants in the Plan without liability for interest thereon. 7 (d) To make, execute, acknowledge and deliver any and all documents of transfer and conveyance and any and all other instruments as may be necessary or appropriate to carry out the powers herein granted. (e) To employ subagents to engage in the actual purchase of Synovus Common Stock for the benefit of the Participants in the Plan. (f) To do all such acts, take all such proceedings, and exercise all such rights and privileges, although not specifically mentioned herein, as the Agent of the Plan may deem necessary or desirable to administer the Fund, and to carry out and satisfy the purposes and intent of the Plan. The Agent shall keep accurate and detailed accounts of all receipts, disbursements, and other transactions hereunder, including, but not limited to, Participant and Participating Company contributions received, dividends and other distributions received, and Synovus Common Stock purchased, allocated and held for, and Synovus Common Stock distributed to, Participants hereunder. All accounts, books, and records relating to such transactions shall be open to inspection and audit at all reasonable times by any person designated by Synovus. On or before the fifteenth day following the close of each month or upon such other reporting schedules and for such other reporting periods as Synovus and the Agent of the Plan shall agree, the Agent shall file with Synovus a written report setting forth all receipts, disbursements, and other transactions effected during such preceding month or reporting period, and setting forth the current status of the Fund. ARTICLE VII STOCK PURCHASE The Agent of the Plan shall purchase shares of Synovus Common Stock in the open market for the benefit of the Participants in the Plan. 8 In the event that the Agent retains the services of subagents to make such purchases of shares of Synovus Common Stock, such subagents shall not be controlled by, controlling or under common control with Synovus or its affiliates. Neither Synovus nor any of its affiliates shall have, nor exercise, directly or indirectly, any control or influence over the times when, or the prices at which, Synovus Common Stock may be purchased by the Agent or its subagents, the amounts of Synovus Common Stock to be so purchased or the manner in which such Synovus Common Stock is to be purchased. The Agent may retain the services of said subagents only upon the execution of subagency agreements by and between the Agent and subagents which sets forth terms and conditions not materially different from those contained herein with regard to the purchase of Synovus Common Stock. Neither the Agent of the Plan, Synovus, nor any subagent retained by the Agent shall have any responsibility as to the value of Synovus Common Stock acquired under the Plan. The duties of the Agent and any subagent to cause the purchase of Synovus Common Stock under the Plan shall be subject to any and all legal restrictions or limitations imposed at the time by governmental authority, including, but not limited to, the Securities and Exchange Commission, and shall be subject to any other restrictions, limitations or considerations deemed valid by such Agent or any subagent. Accordingly, neither the Agent of the Plan, Synovus, nor any subagent shall be liable in any way if, as a result of such restrictions, limitations or considerations, the whole amount of funds available under the Plan for the purchase of Synovus Common Stock is not applied to the purchase of such shares at the time herein otherwise provided or contemplated. ARTICLE VIII ALLOCATION OF STOCK As promptly as practical after each purchase by the Agent (or any subagents) of 9 Synovus Common Stock for the benefit of the Participants in the Plan, the Agent of the Plan shall determine the average cost per share of all shares so purchased. The Agent shall then ratably allocate such shares to the Stock Share Accounts of the Participants, charging each such Participant with the average cost, including transactional costs, of the shares so allocated. Full shares and fractional share interests in one share (to three decimal places) shall be allocated. ARTICLE IX ISSUANCE OF SHARES OF STOCK CERTIFICATES AND/OR CASH A Participant may request that the Agent issue shares or sell shares for all or a part of the full number of shares of Synovus Common Stock in a Participant's Stock Share Account. As promptly as practicable, in accordance with and after receipt by the Agent of such Participant's request, the Agent will (1) issue such shares to such Participant, to the Participant's Synovus Dividend Reinvestment and Direct Stock Purchase Plan account, or to any person or brokerage account designated in writing by such Participant; or (2) sell all or the specified number of shares, deduct brokerage commissions and a transaction charge, and mail a check for the net proceeds to the Participant. The Agent will notify the Participant's Participating Company of such issuance or sale of shares. The Participant request must clearly indicate the number of shares to be issued or sold, or specify that all shares held in such Participant's Stock Share Account are to be issued or sold; otherwise, the Agent shall return such request to the Participant's Participating Company without issuing or selling any shares in such Participant's account. No Participant shall have the authority or power to direct the date or sales price at which shares may be sold. 10 ARTICLE X DIVIDENDS AND DISTRIBUTIONS Stock dividends and stock splits received by the Agent of the Plan will be allocated by such Agent to each Participant's Stock Share Account to the extent that such stock is attributable to the allocated Synovus Common Stock in such Participant's Stock Share Account. Cash dividends received by the Agent of the Plan shall be used to acquire additional shares of Synovus Common Stock pursuant to the provisions of the Plan, and such shares so acquired will be allocated ratably to the Stock Share Accounts of Participants. ARTICLE XI VOTING RIGHTS Each Participant in the Plan shall have the rights and powers of ordinary shareholders with respect to the shares of Synovus Common Stock in such Participant's Stock Share Account, including, but not limited to, the right to vote such shares. Synovus shall deliver or cause to be delivered to the Participants in the Plan at the time and in the manner such materials are sent to Synovus shareholders generally all reports, proxy solicitation materials and all other disclosure type communications distributed to Synovus shareholders generally. ARTICLE XII REPORTS TO PARTICIPANTS As soon as practical following the end of each Plan Year, or more often and as often as Synovus may elect, Synovus and/or the Agent of the Plan shall send to each Participant a written report of all transactions for such Participant's benefit under the Plan for such Plan year. ARTICLE XIII TERMINATION OF PARTICIPATION IN PLAN A Participant may terminate his or her participation in the Plan by contacting the 11 Participant's Participating Company at least fifteen (15) days prior to a Contribution Date. The Participating Company will communicate the Participant's request to the Agent. As promptly as practical, the Agent of the Plan, will, in accordance with the instructions of such former Participant, (1) issue the number of full shares of Synovus Common Stock allocated to his or her Stock Share Account, together with a check for any fractional share interests and any remaining cash balance to the Participant or to the Participant's Synovus Dividend Reinvestment and Direct Stock Purchase Plan Account or other person or brokerage account designated by the Participant in writing; or (2) issue a check made payable to the Participant for the net cash proceeds from the sale of such shares, after deduction of brokerage commissions and a transaction charge. The Agent will notify the Participant's Participating Company of such issuance or sale of shares. If a Participant terminates his or her participation in the Plan, such Participant may not re-enter the Plan until the expiration of a six month waiting period. Assignments or pledges of any interests under the Plan are not allowed. ARTICLE XIV TERMINATION OF STATUS AS A DIRECTOR Participation in the Plan shall automatically terminate without notice upon termination of the Participant's status as a Director whether by death, retirement, or otherwise. If termination is other than by death, the Agent of the Plan will, in accordance with the Participant's instructions, as promptly as practical, (1) issue the number of full shares of Synovus Common Stock allocated to his Stock Share Account and not previously distributed, together with a check for any fractional share interests and any remaining cash balance to the Participant or to the Participant's Synovus Dividend Reinvestment and Direct Stock Purchase Plan Account or other person or brokerage account designated by the Participant in writing; or 12 (2) issue a check made payable to the Participant for the net cash proceeds from the sale of such shares, after deduction of brokerage commissions and a transaction charge. The Agent will notify the Participant's Participating Company of such issuance or sale of shares. If no such instructions are provided by the former Participant, the shares will be delivered in certificate form to the former Participant at his or her last known address. If termination is by reason of death, settlement shall be made by the Agent, as promptly as practical and after notification and approval by the Participant's Participating Company and will be to the Participant's duly appointed legal representative after satisfaction of any applicable legal requirements. ARTICLE XV EXPENSES Synovus shall bear the cost of administering the Plan, including any transfer taxes incurred in transferring the Synovus Common Stock from the Plan to the Participants. Any broker's fees, commissions, postage or other transaction costs actually incurred will be included in the cost of the Synovus Common Stock to Participants. ARTICLE XVI LIMITATION ON THE SALE OF STOCK No Synovus Common Stock will be offered or sold under the Plan to any Director in any state where the sale of such stock is not permitted under the applicable laws of such state. For purposes of this Article XVI, the offering or sale of stock is not permitted under the applicable laws of a state if, inter alia, the securities laws of such state would require the Plan and/or the Synovus Common Stock offered pursuant thereto, to be registered in such state and the Plan and/or Synovus Common Stock is not registered therein. 13 ARTICLE XVII AMENDMENT, TERMINATION AND SUSPENSION OF THE PLAN The formula provisions of the Plan relating to Participant and Participating Company contributions as set forth in Article III and Article IV, respectively, of the Plan may not be amended more than once every six months, other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder. With the exception of the restrictions set forth in the previous sentence, Synovus reserves the right to amend the Plan at any time; however, no amendment shall affect or diminish any Participant's right to the benefit of contributions made by such Participant or his or her Participating Company prior to the date of such amendment, and no amendment shall affect the authority, duties, rights, liabilities or indemnities of the Agent of the Plan without the Agent's prior written consent. Synovus reserves the right to terminate the Plan. In such event, there will be no further Participant contributions and no further Participating Company contributions, but the Agent of the Plan will make purchases of Synovus Common Stock out of available funds and will allocate such stock to the Stock Share Accounts of the Participants in the usual manner. Upon termination of the Plan, distributions of Synovus Common Stock and any cash held as a part of the fund shall be governed by the provisions of Article XIV hereof. Synovus reserves the right to suspend Participating Company contributions to the Plan if the Board of Directors of Synovus feels that the financial condition of Synovus warrants such suspension. Such suspension shall remain in effect until such time as Synovus' Board of Directors determines that the financial condition of Synovus warrants the restoration of the Plan to full active status. During the time Participating Company contributions are suspended, Synovus' Board of Directors shall determine whether Participant contributions are to be 14 continued or suspended. If Synovus' Board of Directors permits the continuance of Participant contributions, each Participant may elect to continue or suspend Participant contributions on his or her own behalf. If the Participant elects to continue to make Participant contributions while Participating Company contributions are suspended, the Participating Companies shall be under no obligation at any future date to make Participating Company contributions with respect to such Participant's contributions made during such period of suspension. During any period of suspension under this Article XVII, the Plan shall continue normal operation to the extent practical. ARTICLE XVIII SUSPENSION OR TERMINATION IF STOCK PURCHASE IS PROHIBITED In addition to all rights to terminate or suspend the Plan otherwise reserved herein, it is understood that the Plan may be suspended or terminated at any time or from time to time by Synovus' Board of Directors if the Plan's continuance would, for any reason, be prohibited under any federal and state law even though such prohibition arises because of some act on the part of Synovus, including, but not limited to, Synovus engaging in a distribution of securities. If the Plan is suspended under this Article XVIII, no Participating Company contributions or Participant contributions shall be made and no Synovus Common Stock shall be purchased until the Plan is restored to an active status. If the Plan is terminated pursuant to this Article XVIII, there shall be no further Participant contributions and no further Participating Company contributions and there shall be no additional purchases of Synovus Common Stock. As soon as practical after the termination pursuant to this Article XVIII, distribution of Synovus Common Stock and any cash held as a part of the Fund shall be governed by the provisions of Article XIV hereof. 15 ARTICLE XIX CONSTRUCTION This Plan shall be governed by and construed under the laws of the State of Georgia. IN WITNESS WHEREOF, Synovus has caused this Agreement to be executed by its duly authorized officer as of the month, day and year first above written. SYNOVUS FINANCIAL CORP. By:/s/James D. Yancey Title: President and Chief Operating Officer 16 EX-10.22 4 SYNOVUS 2000 LONGTERM INCENTIVE PLAN SYNOVUS FINANCIAL CORP. 2000 EMPLOYEE LONG-TERM INCENTIVE PLAN SECTION 1. General Purpose of Plan The name of this plan is the Synovus Financial Corp. 2000 Employee Long-Term Incentive Plan (the "Plan"), formerly the 1996 Employee Long-Term Incentive Plan. The purpose of the Plan is to enable Synovus Financial Corp. (the "Corporation") and its Subsidiaries to attract, retain, motivate, and reward employees who make a significant contribution to the Corporation's long-term success, and to enable such employees to acquire and maintain an equity interest in Synovus Financial Corp. SECTION 2. Definitions For purposes of the Plan, the following terms shall be defined as set forth below: a. "Award" means any award of Stock Options, Option Price Adjustment Rights, Stock Appreciation Rights, Restricted Stock, or Performance Awards, whether in cash or stock or a combination thereof, authorized by the Committee under this Plan. b. "Board" means the Board of Directors of the Corporation or the Executive Committee of the Board of Directors of the Corporation. c. "Cause" means a felony conviction of a Participant or the failure of a Participant to contest prosecution for a felony, or a Participant's willful misconduct, dishonesty, embezzlement, fraud, deceit or civil rights violations, any of which acts cause the Corporation or any Subsidiary liability or loss, as determined by the Board. d. "Code" means the Internal Revenue Code of 1986, as amended, or any successor thereto. e. "Committee" means the Compensation Committee, or any other committee of the Board appointed for the purpose of administering the Plan, which committee shall consist exclusively of two or more Disinterested Persons, at least two of whom are directors of both the Corporation and of Total System. In the context of Awards made to employees of Total System, the term "Committee" shall mean only those members of the Committee who are directors of both the Corporation and of Total System. f. "Commission" means the Securities and Exchange Commission. g. "Corporation" means Synovus Financial Corp. h. "Disability" means total and permanent physical or mental disability or incapacity of an employee to fulfill at any time or from time to time his normal duties as an employee, as certified in writing by two competent physicians, one of which shall be selected by the Committee and the other of which shall be selected by the employee or his duly appointed guardian or legal or personal representative. In addition, for purposes of determining Disability as it applies to any Incentive Stock Option, the term "Disability" shall be interpreted consistently with Code Sections 421-424. i. "Disinterested Person" is a person who meets both (i) the definition of "disinterested person" as set forth in Rule 16b-3 as promulgated by the Commission under the Exchange Act, or any successor definition adopted by the Commission, and (ii) the definition of "outside director" as set forth in Code Section 162(m), as amended from time to time. j. "Early Retirement" means retirement from active employment with the Corporation or any Subsidiary pursuant to the early retirement provisions of the applicable Corporation or Subsidiary pension plan. k. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and any successor thereto. l. "Fair Market Value" means, as of any given date, the closing price of the Stock on such date (or if no transactions were reported on such date on the next preceding date on which transactions were so reported) in the principal market in which such Stock is traded on such date as reported in The Wall Street Journal (or any other publication designated by the Committee) except that, with respect to grants of Restricted Stock, "Fair Market Value" for Restricted Stock on the date of grant shall be determined as of the time and date of the Restricted Stock grant by the Compensation Committee. m. "Incentive Stock Option" means any Stock Option intended to be and designated as an "incentive stock option" within the meaning of Section 422 of the Code. n. "Non-Qualified Stock Option" means any Stock Option that is not an Incentive Stock Option. o. "Normal Retirement" means retirement from active employment with the Corporation or any Subsidiary on or after the normal retirement date specified in the applicable Corporation or Subsidiary pension plan. p. "Option Price Adjustment Right" means a right granted under Section 6 in tandem with a Stock Option which entitles the recipient to have applied as a credit against the exercise price of the related Stock Option an amount equal to: (i) the total number of shares of stock subject to the Option Price Adjustment Right (or the portion or portions thereof which the recipient from time to time elects to use for this purpose), multiplied by (ii) a fixed percentage of the Fair Market Value of a share of Stock on a date to be designated by the Committee. q. "Participant" means any employee of the Corporation and its Subsidiaries designated by the Committee to receive an Award under the Plan. r. "Performance Award" means an award of shares of Stock or cash to a Participant pursuant to Section 9 contingent upon achieving certain performance goals. s. "Plan" means this Synovus Financial Corp. 2000 Employee Long-Term Incentive Plan. t. "Restricted Stock" means an award of shares of Stock that are subject to restrictions under Section 8. u. "Retirement" means Normal or Early Retirement under the applicable Corporation or Subsidiary pension plan. v. "Stock" means the common stock of the Corporation or any successor corporation. w. "Stock Appreciation Right" means a right granted under Section 7, which entitles the holder to receive a cash payment or an award of Stock or, if applicable, as a credit against the purchase price of a related Stock Option, in an amount equal to the difference between (i) the Fair Market Value of the Stock covered by such right at the date the right is granted and (ii) the Fair Market Value of the Stock covered by such right at the date the right is exercised, unless otherwise determined by the Committee pursuant to Section 7, multiplied by the number of shares covered by the right. x. "Stock Option" means any option to purchase shares of Stock granted to employees pursuant to Section 6. y. "Subsidiary" means any corporation (other than Synovus Financial Corp.) in an unbroken chain of corporations beginning with the Corporation if each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. z. "Total System" means Total System Services, Inc., a Subsidiary of the Corporation of which approximately 19% of the stock is publicly held. SECTION 3. Administration The Plan shall be administered by the Committee which shall at all times consist of not less than two Disinterested Persons, at least two of whom are directors of both the Corporation and of Total System. Whenever under this Plan, any act or decision is to be made with respect to Awards made to employees of Total System, including without limitation the selection of Total System employees for the grant of Awards and the establishment, administration and certification of attainment of relevant performance goals, if any, such act or decision shall be made by, and the term "Committee" in that context shall mean, only those members of the Committee who are directors of both the Corporation and of Total Systems. The Committee shall have the power and authority to grant to eligible employees, pursuant to the terms of the Plan: (i) Stock Options; (ii) Option Price Adjustment Rights; (iii) Stock Appreciation Rights; (iv) Restricted Stock; or (v) Performance Awards. In particular, the Committee shall have the authority: (i) to select the employees of the Corporation and its Subsidiaries to whom Stock Options, Option Price Adjustment Rights, Stock Appreciation Rights, Restricted Stock, or Performance Awards or a combination of the foregoing from time to time will be granted hereunder; (ii) to grant Incentive Stock Options, Non-Qualified Stock Options, Option Price Adjustment Rights, Stock Appreciation Rights, Restricted Stock, or Performance Awards, or a combination of the foregoing, hereunder; (iii) to determine the number of shares of Stock to be covered by each such Award granted hereunder; (iv) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder including, but not limited to, any restriction on any Award and/or the shares of Stock relating thereto based on performance and/or such other factors as the Committee may determine, in its sole discretion, and any vesting acceleration features based on performance and/or such other factors as the Committee may determine, in its sole discretion; (v) to determine whether, to what extent and under what circumstances Stock and other amounts payable with respect to an Award under this Plan shall be deferred either automatically or at the election of a Participant, including providing for and determining the amount (if any) of deemed earnings on any deferred amount during any deferral period. Subject to Section 10, the Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable; to interpret the terms and provisions of the Plan and any Award issued under the Plan (and any agreements relating thereto); and to otherwise supervise the administration of the Plan. All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on all persons, including the Corporation and all Plan Participants. It is not anticipated that the Plan will be presented for shareholder approval. SECTION 4. Stock Subject to Plan The total number of shares of Stock reserved and available for distribution under the Plan shall be 20,000,000. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares. If any shares of Stock that have been subject to option cease to be subject to option without having been exercised, or if any shares subject to any Restricted Stock, Option Price Adjustment Rights, Stock Appreciation Rights, or Performance Awards granted hereunder are forfeited or such Awards are otherwise terminated without having been exercised, such shares shall again be available for distribution in connection with future Awards under the Plan in each case to the full extent available pursuant to the rules and interpretations of the Securities and Exchange Commission under Section 16 of the Exchange Act. In the event that prior to the Award's cancellation, termination, expiration, or lapse, the holder of the Award at any time received one or more "benefits of ownership" pursuant to such Award (as defined by the Securities and Exchange Commission, pursuant to any rule or interpretation promulgated under Section 16 of the Exchange Act), the Stock subject to such Award shall not be available for regrant under the Plan. In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, or other change in corporate structure affecting the Stock, a substitution or adjustment shall be made in the aggregate number of shares reserved for issuance under the Plan, in the number and option price of shares subject to outstanding Stock Options granted under the Plan and in the number of shares subject to Stock Appreciation Rights, Option Price Adjustment Rights, Restricted Stock or Performance Awards granted under the Plan as may be determined to be appropriate by the Committee, in its sole discretion, in order to preserve each Participant's rights substantially proportionate to the Participant's rights existing prior to such event, provided that the number of shares subject to any Award shall always be a whole number. Such adjusted option price shall also be used to determine the amount payable by the Corporation upon the exercise of any Stock Appreciation Rights or Option Price Adjustment Rights associated with any Stock Option the price of which is adjusted. Notwithstanding any provision in the Plan to the contrary, the maximum number of shares of Stock with respect to one or more Awards that may be granted to any one Participant in any calendar year shall be 2,000,000. SECTION 5. Eligibility Any employee of the Corporation or any of its Subsidiaries (but excluding members of the Committee and any person who is a director of the Corporation or any Subsidiary, but not an employee of the Corporation or any Subsidiary) is eligible to be granted Stock Options, Option Price Adjustment Rights, Stock Appreciation Rights, Restricted Stock or Performance Awards. The Participants under the Plan shall be selected from time to time by the Committee, in its sole discretion, from among those eligible, and the Committee shall determine, in its sole discretion, the number of shares covered by each Award or grant. SECTION 6. Stock Options Stock Options may be granted either alone or in addition to other Awards granted under the Plan. Any Stock Option granted under the Plan shall be in such form as the Committee may from time to time approve, and the provisions of Stock Option Awards need not be the same with respect to each optionee. The Stock Options granted under the Plan may be of two types: (i) Incentive Stock Options (subject to the provisions of Section 15 of the Plan) and (ii) Non-Qualified Stock Options. The Committee shall have the authority to grant any optionee Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options (in each case with or without Option Price Adjustment Rights or Stock Appreciation Rights). To the extent that any Stock Option does not qualify as an Incentive Stock Option, it shall constitute a separate Non-Qualified Stock Option. Anything in the Plan to the contrary notwithstanding, no term of this Plan relating to Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify either the Plan or any Incentive Stock Option under Section 422 of the Code. Stock Options granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable: (a) Option Price. The option price per share of Stock purchasable under a Stock Option shall be determined by the Committee at the time of grant. The option price per share of Stock may be equal to or more or less than the Fair Market Value of the Stock on the date of grant, except that the option price for any Incentive Stock Option shall be not less than 100% of the Fair Market Value of the Stock on the date of the grant of the Stock Option (determined without regard to any Option Price Adjustment Rights or Stock Appreciation Rights). If the option is an Incentive Stock Option and if the employee to whom the Incentive Stock Option is granted owns directly or indirectly more than 10% of the total combined voting power of all classes of Stock immediately before the grant of the option, then the option price per share of Stock must be at least 110% of the Fair Market Value of the Stock on the date of grant. (b) Option Term. The term of each Stock Option shall be fixed by the Committee, but no Stock Option shall be exercisable more than ten years after the date such Stock Option is granted. If the option is an Incentive Stock Option and if the employee to whom the Incentive Stock Option is granted owns directly or indirectly more than 10% of the total combined voting power of all classes of Stock immediately before the grant of the option, then the term of the option may not exceed five years. (c) Exercisability. Subject to paragraph (j) of this Section 6 with respect to Incentive Stock Options, Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at grant, provided, however, that except as provided in paragraphs (f) and (g) of Section 6, unless a longer vesting period is otherwise determined by the Committee at grant, no Stock Option shall be exercisable for a period of six months after the date of the grant of the option. If the Committee provides, in its discretion, that any Stock Option is exercisable only in installments, the Committee may waive such installment exercise provision at any time in whole or in part based on performance and/or such other factors as the Committee may determine in its sole discretion. (d) Method of Exercise. Stock Options may be exercised in whole or in part at any time during the exercise period described in Section 6(c) by giving written notice of exercise to the Corporation specifying the number of shares to be purchased, accompanied by payment in full of the purchase price, in cash, by check or such other instrument as may be acceptable to the Committee. If approved and as determined by the Committee, in its sole discretion, at or after grant, payment in full or in part may also be made in the form of unrestricted Stock owned by the optionee (based on the Fair Market Value of the Stock on the date the option is exercised, as determined by the Committee). Payment of the exercise price of a Stock Option and any withholding tax due at exercise also may be made through any program or procedure (including but not limited to a broker-dealer cashless exercise program) if approved by the Committee. No shares of Stock resulting from the exercise of a Stock Option shall be issued until full payment therefor has been made. An optionee shall have the rights to dividends or other rights of a stockholder with respect to shares subject to the option when the optionee has given written notice of exercise and has paid in full for such shares. (e) Transferability of Options. (1) Incentive Stock Options. No Incentive Stock Option shall be transferable by the optionee, otherwise than by will or by the laws of descent and distribution, or be subject to attachment, execution or similar process. All Incentive Stock Options shall be exercisable, during the optionee's lifetime, only by the optionee. (2) Non-Qualified Stock Options. Non-Qualified Stock Options shall likewise be non-transferable by the optionee, otherwise than by will or by the laws of descent and distribution, and not subject to attachment, execution or similar process; provided, however, that the Committee may by resolution or after grant designate existing or future Non-Qualified Stock Options as "transferable," meaning that the optionee may sign an agreement which transfers all or a portion of such Non-Qualified Stock Option (either exercisable or non-exercisable) to (A) a member of the optionee's Immediate Family, (B) any trust or trusts in which members of the optionee's Immediate Family have more than a fifty percent (50%) beneficial interest, (C) any entity in which optionee and/or members of the optionee's Immediate Family own more than fifty percent (50%) of the voting interests, or (D) any foundation in which optionee and/or optionee's Immediate Family members control the management of the foundation's assets, subject to such terms and conditions as the Committee may establish. The form of agreement pursuant to which such options are transferred must be approved by the Committee and executed by the optionee, transferee and the Company. Following transfer, any such options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, except that the term "optionee" shall be deemed to refer to the transferee subject to any terms and conditions established by the Committee. Subsequent transfers of such transferred options shall be prohibited, except by will or the laws of descent and distribution. For purposes of this Subsection, "Immediate Family" means the optionee's child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, nephew or niece of the optionee (including by adoption), and any person sharing the optionee's household (other than a tenant or employee). (f) Termination by Death (other than by suicide). Unless otherwise determined by the Committee at or after grant, if any optionee's employment with the Corporation or any Subsidiary terminates by reason of death (other than by suicide), the Stock Option may thereafter be immediately exercised, to the extent then exercisable (or on such accelerated basis as the Committee shall determine at or after grant), by the legal representative of the estate or by the legatee of the optionee under the will of the optionee, for a period of one year from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter. (g) Termination by Reason of Disability. Unless otherwise determined by the Committee at or after grant, if any optionee's employment with the Corporation or any Subsidiary terminates by reason of Disability, any Stock Option held by such optionee may thereafter be exercised, to the extent it was exercisable at the time of termination due to Disability (or on such accelerated basis as the Committee shall determine at or after grant), but may not be exercised after one year from the date of such termination of employment or the expiration of the stated term of such Stock Option, whichever period is the shorter; provided, however, that, if the optionee dies within such one year period, any unexercised Stock Option held by such optionee shall thereafter be exercisable to the extent to which it was exercisable at the time of death for a period of twelve months from the date of such death or for the stated term of such Stock Option, whichever period is the shorter. In the event of termination of employment by reason of Disability, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified Stock Option. (h) Termination by Reason of Retirement. Unless otherwise determined by the Committee at or after grant, if any optionee's employment with the Corporation or any Subsidiary terminates by reason of Normal or Early Retirement, any Stock Option held by such optionee may thereafter be exercised to the extent it was exercisable at the time of such Retirement (or on such accelerated basis as the Committee shall determine at or after grant), but may not be exercised after the expiration of the stated term of such Stock Option; and, provided that if the optionee dies within such period any unexercised Stock Option held by such optionee shall thereafter be exercisable, to the extent to which it was exercisable at the time of death, for the remainder of the stated term of the Stock Option. In the event of termination of employment by reason of Retirement, if an Incentive Stock Option is exercised after the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified Stock Option. (i) Other Termination. Unless otherwise determined by the Committee at or after grant, if an optionee's employment with the Corporation or any Subsidiary terminates for Cause or for death by reason of suicide or for any reason other than Disability or Normal or Early Retirement or death other than by suicide, the Stock Option shall thereupon terminate, except that such Stock Option may be exercised to the extent such Stock Option could have been exercised on the date of cessation of employment for the lesser of three months from the date of termination or the balance of such Stock Option's term if the optionee's employment with the Corporation or any Subsidiary is involuntarily terminated by the optionee's employer without Cause. (j) Limit on Value of Incentive Stock Options First Exercisable Annually. The aggregate Fair Market Value (determined at the time of grant) of the Stock for which "incentive stock options" within the meaning of Section 422 of the Code are exercisable for the first time by an optionee during any calendar year under the Plan (and/or any other stock option plans of the Corporation or any Subsidiary) shall not exceed $100,000. (k) Option Price Adjustment Rights. The Committee shall have the discretion to grant Option Price Adjustment Rights in conjunction with all or part of any Stock Option granted under the Plan, either at or after the time of grant of such Stock Option. Option Price Adjustment Rights shall be exercisable only at such time as and to the same extent that the Stock Options to which the Option Price Adjustment Rights relate are exercisable. An Option Price Adjustment Right granted with respect to a given Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the related Stock Option. An Option Price Adjustment Right may be exercised by an optionee by exercising and surrendering the applicable potion of the related Stock Option. Upon such exercise and surrender, the optionee shall be entitled to have applied as a credit against the exercise price of the related Stock Option an amount equal to: (i) the total number of shares of stock subject to the Option Price Adjustment Right (or the portion or portions thereof which the optionee from time to time elects to use for this purpose), multiplied by (ii) a fixed percentage of the Fair Market Value of a share of Stock on a date to be designated by the Committee. SECTION 7. Stock Appreciation Rights (a) Grant and Exercise When Granted in Conjunction With Stock Options. Stock Appreciation Rights may be granted alone or in conjunction with all or part of any Stock Option granted under the Plan and may contain terms and conditions different from those of the related Stock Option, except as otherwise provided below. In the case of a Non-Qualified Stock Option, such rights may be granted either at or after the time of the grant of such Non-Qualified Stock Option. In the case of an Incentive Stock Option, such rights may be granted only at the time of the grant of such Incentive Stock Option. A Stock Appreciation Right or applicable portion thereof granted with respect to a given Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the related Stock Option, except that, unless otherwise provided by the Committee at the time of grant, a Stock Appreciation Right granted with respect to less than the full number of shares covered by a related Stock Option shall only be reduced if and to the extent that the number of shares covered by the exercise or termination of the related Stock Option exceeds the number of shares not covered by the Stock Appreciation Right. A Stock Appreciation Right may be exercised by an optionee, in accordance with paragraph (c) of this Section 7, by surrendering the applicable portion of the related Stock Option. Upon such exercise and surrender, the optionee shall be entitled to receive an amount determined in the manner prescribed in paragraph (c) of this Section 7. Stock Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the related Stock Appreciation Rights have been exercised. (b) Grant and Exercise When Granted Alone. Stock Appreciation Rights may be granted at the discretion of the Committee in a manner not related to an award of a Stock Option. The Committee should have the discretion to determine the terms and conditions of any Stock Appreciation Rights not related to a Stock Option Award. A Stock Appreciation Right granted under this Section 7(b) is not exercisable for a period of six months from the date of grant, unless a longer period is otherwise determined by the Committee. The Stock Appreciation Right, granted under Section 7(b), shall be exercisable in accordance with Section 7(c) over a period not to exceed ten years. Any Stock Appreciation Right which is outstanding on the last day of the exercisable period shall be automatically exercised on such date for cash or Common Stock, as determined by the Committee, without any action by the holder if, on that date, the Fair Market Value of the Stock exceeds the exercise price of the Stock Appreciation Right. (c) Terms and Conditions. Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee, including the following: (i) Stock Appreciation Rights granted pursuant to Section 7(a) shall be exercisable only at such time or times and to the extent that the Stock Options to which the Stock Appreciation Rights relate shall be exercisable in accordance with the provisions of Section 6 and this Section 7 of the Plan; provided, however, that any Stock Appreciation Right granted subsequent to the grant of the related Stock Option shall not be exercisable during the first six months of the term of the Stock Appreciation Right, except that this additional limitation shall not apply in the event of death other than by suicide or Disability of the optionee prior to the expiration of the six-month period. (ii) Upon the exercise of a Stock Appreciation Right granted pursuant to Section 7(a), an optionee shall be entitled to receive an amount in cash or shares of Stock equal in value to the excess of the Fair Market Value of one share of Stock over the option price per share specified in the related Stock Option, multiplied by the number of shares in respect of which the Stock Appreciation Right shall have been exercised, with the Committee having the right to determine the form of payment. Upon the exercise of a Stock Appreciation Right granted pursuant to Section 7(b), the holder shall be entitled to receive an amount in cash or shares of Stock equal in value to the excess of the Fair Market Value of one share of Stock over the Fair Market Value of one share of Stock at the date the Stock Appreciation Right was granted multiplied by the number of shares in respect of which the Stock Appreciation Right shall have been exercised, with the Committee having the right to determine the form of payment. (iii)No Stock Appreciation Right shall be transferable by the holder, other than by will or the laws of descent and distribution, or be subject to attachment, execution or similar process. All Stock Appreciation Rights shall be exercisable, during the holder's lifetime, only by the holder. (iv) Upon the exercise of a Stock Appreciation Right granted pursuant to Section 7(a), the Stock Option or part thereof to which such Stock Appreciation Right is related shall be deemed to have been exercised for the purpose of the limitation set forth in Section 4 of the Plan on the number of shares of Stock to be issued under the Plan. (v) A Stock Appreciation Right granted in connection with an Incentive Stock Option pursuant to Section 7(a), may be exercised only if and when the market price of the Stock subject to the Incentive Stock Option exceeds the exercise price of such Stock Option. (vi) In its sole discretion, the Committee may provide, at the time of grant of a Stock Appreciation Right under this Section 7, that such Stock Appreciation Right can be exercised only in the event of a "Change of Control" (as defined in Section 12 below). Furthermore, the Committee may provide, at the time of grant of any Stock Appreciation Right, that such Stock Appreciation Right can be exercised only upon the attainment of specified performance goals or other such criteria as the Committee may determine in its sole discretion. (vii)In the discretion of the Committee, if the Plan is approved by the shareholders of the Corporation in accordance with Section 15 of the Plan, a Stock Appreciation Right may provide that any exercise by a Participant of all or a portion of a Stock Appreciation Right for cash, may only be made during the period beginning on the third business day following the date of the Corporation's release of its quarterly or annual summary statements of earnings to the public and ending on the twelfth business day following such date; provided, however, that the foregoing shall not apply to any exercise by a Participant of a Stock Appreciation Right for cash where the date of exercise is automatic or fixed in advance under the Plan and is outside the control of the Participant. SECTION 8. Restricted Stock (a) Administration. Shares of Restricted Stock may be issued either alone or in addition to other Awards granted under the Plan. The Committee shall determine the employees of the Corporation and its Subsidiaries to whom, and the time or times at which, grants of Restricted Stock will be made, the number of shares to be awarded, the price, if any, to be paid by the recipient of Restricted Stock (subject to Section 8(b) hereof), the time or times within which such Awards may be subject to forfeiture, the nature of the restrictions, including any performance requirements, the circumstances under which restrictions will lapse and all other conditions of the Awards. The Committee may also condition the grant of Restricted Stock upon the attainment of specified performance goals, or such other criteria as the Committee may determine, in its sole discretion. The provisions of Restricted Stock Awards need not be the same with respect to each recipient. (b) Awards and Certificates. The prospective recipient of an Award of shares of Restricted Stock shall not have any rights with respect to such Award, unless and until such recipient has executed an agreement evidencing the Award (a "Restricted Stock Award Agreement") and has delivered a fully executed copy thereof to the Corporation, and has otherwise complied with the then applicable terms and conditions. (i) Awards of Restricted Stock must be accepted within a period of thirty days (or such shorter period as the Committee may specify) after the Award date by executing a Restricted Stock Award Agreement and paying whatever price, if any, is required. (ii) Each Participant who is awarded Restricted Stock shall be issued a stock certificate in respect of such shares of Restricted Stock to be held in escrow as described below. Such certificate shall be registered in the name of the Participant, and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award, substantially in the following form: "The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Synovus Financial Corp. 2000 Employee Long-Term Incentive Plan and a Restricted Stock Award Agreement entered into between the registered owner and Synovus Financial Corp. Copies of such Plan and Agreement are on file in the offices of Synovus Financial Corp., One Arsenal Place, 901 Front Avenue, Suite 301, Columbus, Georgia, 31901." (iii)The Committee shall require that the stock certificate evidencing such shares be held in escrow by Synovus Trust Company ("STC"), or any other escrow agent designated by the Committee until the restrictions thereon shall have lapsed, and that, as a condition of any Restricted Stock Award, the Participant shall have delivered a stock power, endorsed in blank, relating to the Stock covered by such Award. In the event the Participant has obtained a loan to purchase the Restricted Stock or to pay any taxes due with respect to the Restricted Stock, STC or other escrow agent shall have the right to require that the shares continue to be held in escrow until such loan is repaid. (c) Restrictions and Conditions. The shares of Restricted Stock awarded pursuant to this Section 8 shall be subject to the following restrictions and conditions: (i) Subject to the provisions of this Plan and Restricted Stock Award Agreements, during the period of six months after the Award or such longer period as may be set by the Committee commencing on the grant date (the "Restriction Period"), the Participant shall not be permitted to sell, transfer, pledge or assign shares of Restricted Stock awarded under the Plan. Within these limits, the Committee may, in its sole discretion, provide for the lapse of such restrictions in installments and may accelerate or waive such restrictions in whole or in part based on performance and/or such other factors as the Committee may determine, in its sole discretion. (ii) Except as provided in paragraph (c)(i) of this Section 8, the Participant shall have, with respect to the shares of Restricted Stock, all of the rights of a stockholder of the Corporation, including the right to receive any dividends, unless the Committee shall declare otherwise at the time of the Award. Dividends paid in cash with respect to shares of Restricted Stock shall not be subject to any restrictions or subject to forfeiture. Dividends paid in Stock of the Corporation or Stock received in connection with a stock split with respect to Restricted Stock shall be subject to the same restrictions as on such Restricted Stock. Certificates for shares of unrestricted Stock shall be delivered to the Participant promptly after, and only after, the period of forfeiture shall expire without forfeiture in respect of such shares of Restricted Stock and the repayment of any loans obtained to purchase the Restricted Stock or to pay any taxes due with respect to the Restricted Stock. (iii)Subject to the provisions of the Restricted Stock Award Agreement and this Section 8, upon termination of employment for any reason during the Restriction Period, all shares still subject to restriction (together with any price paid for such shares by the Participant) shall be forfeited by the Participant, unless otherwise determined by the Committee. (iv) The Committee may, in its sole discretion, waive in whole or in part any or all restrictions with respect to any Participant's shares of Restricted Stock. SECTION 9. Performance Awards (a) Administration. Shares of Stock and/or a payment in cash may be distributed under the Plan to an employee upon the attainment of performance objectives, as a Performance Award. The Committee shall determine the employees of the Corporation and its Subsidiaries to whom Performance Awards are granted, the terms and conditions of the performance objectives, the term of the performance period and the value and form of the payment of the Performance Award. (b) Performance Objectives. The Committee, in its sole discretion may establish, under this Section 9, performance objectives either in terms of Corporation-wide objectives or in terms of objectives that are related to the specific performance of an employee or a bank, a group, division, department, or Subsidiary within the Corporation in which the Participant is employed. A minimum level of performance, at the discretion of the Committee, may be established. If, at the end of the performance period, the specified objectives have been attained, the Participant is deemed to have fully earned the Performance Award. If such performance objectives are only partially attained, the Participant may be deemed by the Committee to have partly earned the Performance Award and would become eligible to receive a portion of the total Award, as determined by the Committee. If a required minimum level of achievement has not been met, as determined by the Committee, the Participant is entitled to no portion of the Performance Award. If, at the end of the performance period, performance exceeds the target, the Participant, at the Committee's discretion, may receive a multiple of the Performance Award. The Committee may adjust the payment of Awards or the performance objectives if events occur or circumstances arise which would cause a particular payment or set of performance objectives to be inappropriate as a measure of performance. (c) Terms and Conditions. A Participant to whom a Performance Award has been granted is given performance objectives to be reached over a specified period, the "performance period." Generally this period shall be not less than one year. Any Participant granted a Performance Award pursuant to this Section 9 who by reason of death (other than by suicide), Disability or Retirement terminates employment before the end of the performance period is entitled to receive a portion of any earned Performance Award. The Committee, in its discretion, will determine the amount of the Performance Award earned, if any, and the time at which payment will be made. A Participant who terminates employment for any other reason, including death by suicide, forfeits all rights under the Performance Award. SECTION 10. Amendments and Termination The Board may amend, alter, or discontinue the Plan at any time, but no amendment, alteration, or discontinuation shall be made which affects an existing Award under the Plan without the optionee's or Participant's consent. If stockholder approval of this Plan is obtained, no amendment, alteration or discontinuation shall be made by the Board which, without the approval of the stockholders, would: (a) increase the total number of shares reserved for the purpose of the Plan, except as provided for in accordance with Section 4 of the Plan; (b) decrease the option price of any Stock Option to less than 100% of the Fair Market Value on the date of the granting of the option, except as provided for in accordance with Section 4 of the Plan; (c) change the Participants or class of Participants eligible to participate in the Plan; (d) extend the maximum option period under paragraph (b) of Section 6 of the Plan; or (e) materially increase in any other way the benefits accruing to Participants. The Committee may amend the terms of any Award or option theretofore granted, prospectively or retroactively, but no such amendment shall affect an existing Award under the Plan without the Participant's consent. The Committee may also substitute new Stock Options for previously granted Stock Options, including options granted under other plans applicable to the Participant, and previously granted Stock Options having higher option prices. SECTION 11. Change of Control The following provisions shall apply in the event of a "Change of Control," as defined in this Section 11: (a) In the event of a "Change of Control" as defined in paragraph (c) of this Section 11, the vesting of any outstanding Stock Options, Option Price Adjustment Rights, Stock Appreciation Rights, Restricted Stock or Performance Awards shall be accelerated so that all Awards not previously exercisable and vested are fully exercisable and vested. (b) If the employment of a Participant is terminated for any reason following a Change of Control, any outstanding Stock Options, Option Price Adjustment Rights, Stock Appreciation Rights, Restricted Stock or Performance Awards granted to the Participant that are not fully exercisable and vested shall become fully exercisable and vested as of the date of such termination of employment and any obligations to pay amounts to the Corporation or any Subsidiary in connection with an Award shall be terminated as of the date of such termination of employment. (c) For purposes of this Section 11, a "Change of Control" means the happening of any of the following: (i) when any "person," as such term is used in Section 13(d) and 14(d) of the Exchange Act (other than the Corporation or a Subsidiary or any Corporation employee benefit plan (including its trustee)), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities; (ii) the occurrence of a transaction requiring stockholder approval for the acquisition of the Corporation by an entity other than the Corporation or a Subsidiary through purchase of assets, or by merger, or otherwise; (iii)the filing of an application with any regulatory authority having jurisdiction over the ownership of the Corporation by any "person," as defined in the preceding paragraph, to acquire 20% or more of the combined voting power of the Corporation's then outstanding securities; or (iv) the occurrence of a "Triggering Event" as such term is defined in the Rights Agreement dated April 20, 1989, by and between the Corporation and Trust Company Bank, the provisions of which are incorporated herein by this reference. (d) For purposes of this Section 11, a "Change of Control" shall not result from any transaction precipitated by the Corporation's insolvency, appointment of a conservator, or determination by a regulatory agency that the Corporation is insolvent, nor from any transaction initiated by the Corporation in regard to creating a holding company of which the Corporation would be a primary entity, nor from any transaction initiated by the Corporation in regard to converting from a publicly traded company to a privately held company. SECTION 12. General Provisions (a) All certificates for shares of Stock delivered under the Plan shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Commission, any stock exchange upon which the Stock is then listed, and any applicable Federal or state securities or other laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (b) Nothing set forth in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. The Corporation and its Subsidiaries specifically reserve the right to terminate (whether by dismissal, discharge, retirement or otherwise) any Participant's employment with the Company or a Subsidiary at any time at will. Neither the granting of an Award nor the adoption of the Plan shall confer upon any employee of the Corporation or its Subsidiaries any right to continued employment with the Corporation or a Subsidiary, as the case may be, nor shall it interfere in any way with the right of the Corporation or a Subsidiary to terminate the employment of any of its employees at any time. (c) Each Participant shall, no later than the date as of which the value of an Award first becomes includable in the gross income of the Participant for Federal income tax purposes, pay to the Corporation, or make arrangements satisfactory to the Committee regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld with respect to the Award. The obligations of the Corporation under the Plan shall be conditional on such payment or arrangements and the Corporation (and, where applicable, its Subsidiaries), shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant. A Participant may irrevocably elect to have the withholding tax obligations or, in the case of all Awards hereunder except Stock Options which have related Option Price Adjustment Rights or Stock Appreciation Rights, if the Committee so determines, any additional tax obligation with respect to any Awards hereunder satisfied by (a) having the Corporation withhold shares of Stock otherwise deliverable to the Participant with respect to the Award or (b) delivering to the Corporation shares of unrestricted Stock; provided, however, that if the Participant is an "officer" of the Corporation within the meaning of Section 16 of the Exchange Act, no such election shall be made (i) unless the Plan has been approved by shareholders in accordance with Section 15 of the Plan and (ii) such election is made either (a) during one of the "window" periods described in section (c)(3)(iii) of Rule 16b-3 promulgated under the Exchange Act, or (b) at least six months prior to the date income is recognized with respect to the Award. (d) No members of the Board or the Committee, nor any officer or employee of the Corporation acting on behalf of the Board or the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Committee and each and any officer or employee of the Corporation acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Corporation in respect of any such action, determination or interpretation provided such individual first gives the Corporation an opportunity, at its own expense, to handle and defend any legal action before such individual undertakes to handle and defend such legal action. (e) The existence of Stock Options, Option Price Adjustment Rights, Stock Appreciation Rights, Restricted Stock and Performance Awards shall not affect the right or power of the Corporation and its shareholders to make adjustments, recapitalizations, reorganizations, or other changes to the Corporation's capital structure or its business; issue bonds, debentures, preferred or prior preference stocks affecting the Corporation's Common Stock or the rights thereof; dissolve or liquidate the Corporation, or sell or transfer any part of its assets or business; or any other corporate act, whether of a similar character or otherwise. (f) The validity, interpretation, and administration of the Plan and of any rules, regulations, determinations, or decisions made thereunder, and the rights of any and all persons having or claiming to have any interest therein or thereunder, shall be determined exclusively in accordance with the laws of the State of Georgia, except where those laws may be superseded by the laws of the United States of America. Without limiting the generality of the foregoing, the period within which any action in connection with the Plan must be commenced shall be governed by the laws of the State of Georgia. (g) The obligation of the Corporation to make payment of Awards in Stock shall be subject to all applicable laws, rules and regulations, and to such approvals by government agencies as may be required. The Corporation shall be under no obligation to register under the Securities Act of 1933, as amended from time to time ("1993 Act"), any of the shares of Stock paid under the Plan. If the Stock paid under the Plan may in certain circumstances be exempt from registration under the 1933 Act, the Corporation may restrict the transfer of such Stock in such manner as it deems advisable to ensure the availability of any such exemption. SECTION 13. Cash Awards and Loans The Committee, in its sole discretion, at any time may authorize special cash Awards to Participants to enable them to fund the exercise price of a Stock Option or any taxes that must be paid or withheld upon the exercise of a Stock Option, Option Price Adjustment Right or Stock Appreciation Right, to fund the purchase price (if any) of Restricted Stock or any taxes that must be paid or withheld with respect to Restricted Stock, or to fund any taxes that must be paid or withheld with respect to any Performance Award. The Committee in its sole discretion, at any time, may assist a Participant in obtaining a loan for any funds required in connection with any aspect of the Plan, including without limitation the exercise or purchase price of any Award and any taxes that must be paid or withheld in connection with any Award. SECTION 14. Accounting It is the intent of the Board that the accounting expenses for any Awards under this Plan to employees of Subsidiaries be charged to the Subsidiaries employing such employees and not to the Corporation. The Board of Directors and the Committee shall have the right to adopt any policies and procedures required in order to carry out this intent. SECTION 15. Effective Date of Plan The Plan shall become effective upon the earlier of its adoption by the Board of Directors or by the Executive Committee of the Board of Directors; provided, however, that Incentive Stock Options awarded hereunder shall be automatically converted into Non-Qualified Stock Options if shareholder approval of the Plan is not obtained within twelve months of the Plan's effective date. SECTION 16. Term of Plan No Stock Option, Option Price Adjustment Right, Stock Appreciation Right, Restricted Stock or Performance Award shall be granted pursuant to the Plan on or after the tenth anniversary of the effective date of the Plan, but Awards theretofore granted may extend beyond that date. SECTION 17. Execution IN WITNESS WHEREOF, the Corporation has caused this Plan to be signed by its duly authorized officers effective as of this 1st day of February, 2000. SYNOVUS FINANCIAL CORP. By: /s/G. Sanders Griffith, III Title: Senior Executive Vice President EX-13.1 5 ANNUAL REPORT FINANCIAL PAGES FINANCIAL APPENDIX [LOGO] SYNOVUS FINANCIAL CORP. Consolidated Balance Sheets as of December 31, 1999 and 1998 ................................... F-2 Consolidated Statements of Income for the Years ended December 31, 1999, 1998, and 1997 ........ F-3 Consolidated Statements of Changes In Shareholders' Equity for the Years ended December 31, 1999, 1998, and 1997 ................................... F-4 Consolidated Statements of Cash Flows for the Years ended December 31, 1999, 1998, and 1997 .... F-5 Summary of Significant Accounting Policies ..................................................... F-6 Notes to Consolidated Financial Statements ..................................................... F-10 Independent Auditors' Report ................................................................... F-24 Selected Financial Data ........................................................................ F-25 Financial Review ............................................................................... F-26 Summary of Quarterly Financial Data, Unaudited ................................................. F-48
F-1 CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
December 31, 1999 1998 - --------------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks, including $3,783 and $21,061 in 1999 and 1998, respectively, on deposit to meet Federal Reserve requirements (note 9) ................................. $ 466,543 373,376 Interest earning deposits with banks (note 9) ............................................... 1,928 1,383 Federal funds sold (note 9) ................................................................. 92,093 77,392 Mortgage loans held for sale (note 9) ....................................................... 83,145 156,231 Investment securities available for sale (notes 2 and 9) .................................... 1,716,678 1,571,840 Investment securities held to maturity (fair value of $273,504 and $311,726 in 1999 and 1998, respectively) (notes 2 and 9) ............................. 277,279 305,633 Loans (notes 3 and 9) ....................................................................... 9,077,516 7,612,142 Less: Unearned income .......................................................................... (9,277) (8,537) Reserve for loan losses .................................................................. (127,558) (114,109) ------------ ---------- Loans, net ......................................................................... 8,940,681 7,489,496 ------------ ---------- Premises and equipment, net (note 6) ........................................................ 437,309 381,385 Other assets (note 4) ....................................................................... 531,345 454,856 ------------ ---------- Total assets ....................................................................... $ 12,547,001 10,811,592 ============ ========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Deposits (notes 5 and 9): Non-interest bearing .................................................................. $ 1,625,313 1,433,929 Interest bearing ...................................................................... 7,814,774 7,363,483 ------------ ---------- Total deposits ..................................................................... 9,440,087 8,797,412 Federal funds purchased and securities sold under agreement to repurchase (note 9) ....... 1,261,391 503,287 Long-term debt (notes 6 and 9) ........................................................... 318,620 131,802 Other liabilities (notes 7 and 8) ........................................................ 235,949 215,081 ------------ ---------- Total liabilities .................................................................. 11,256,047 9,647,582 ------------ ---------- Minority interest in consolidated subsidiary ................................................ 64,285 52,093 Shareholders' equity (notes 1, 2, 6, 8, and 13): Common stock -- $1.00 par value. Authorized 600,000,000 shares; issued 282,189,425 in 1999 and 278,807,393 in 1998; outstanding 282,014,161 in 1999 and 278,414,206 in 1998 ...... 282,189 278,807 Surplus .................................................................................. 79,190 59,657 Less treasury stock -- 175,264 shares in 1999 and 393,187 shares in 1998 ................. (1,285) (5,099) Less unamortized restricted stock ........................................................ (1,293) (2,545) Accumulated other comprehensive income (loss) ............................................ (30,134) 10,475 Retained earnings ........................................................................ 898,002 770,622 ------------ ---------- Total shareholders' equity ......................................................... 1,226,669 1,111,917 Commitments and contingencies (note 10) ------------ ---------- Total liabilities and shareholders' equity ......................................... $ 12,547,001 10,811,592 ============ ==========
See accompanying summary of significant accounting policies and notes to consolidated financial statements. F-2 CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data)
YEARS ENDED DECEMBER 31, 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------ Interest income: Loans, including fees ................................................... $758,517 673,288 632,546 Investment securities: U.S. Treasury and U.S. Government agencies ........................... 81,140 80,638 83,044 Mortgage-backed securities ........................................... 26,167 17,708 17,360 State and municipal .................................................. 8,650 7,482 6,564 Other investments .................................................... 2,907 2,497 1,495 Mortgage loans held for sale ............................................ 7,659 5,502 2,368 Federal funds sold ...................................................... 2,879 5,152 2,807 Interest earning deposits with banks .................................... 88 51 77 -------- ------- ------- Total interest income ............................................. 888,007 792,318 746,261 -------- ------- ------- Interest expense: Deposits (note 5) ....................................................... 323,752 314,036 293,527 Federal funds purchased and securities sold under agreement to repurchase 39,427 15,413 19,119 Long-term debt .......................................................... 11,534 7,804 7,695 -------- ------- ------- Total interest expense ............................................ 374,713 337,253 320,341 -------- ------- ------- Net interest income ............................................... 513,294 455,065 425,920 Provision for losses on loans (note 3) ..................................... 34,007 26,882 32,485 -------- ------- ------- Net interest income after provision for losses on loans ........... 479,287 428,183 393,435 -------- ------- ------- Non-interest income: Data processing services ................................................ 490,154 365,605 335,991 Service charges on deposit accounts ..................................... 70,161 62,884 57,298 Fees for trust services ................................................. 20,031 15,341 12,645 Credit card fees ........................................................ 15,123 13,581 11,001 Securities gains (losses), net (note 2) ................................. 1,202 1,299 (66) Other operating income (note 11) ........................................ 143,094 123,503 84,543 -------- ------- ------- Total non-interest income ......................................... 739,765 582,213 501,412 -------- ------- ------- Non-interest expense: Salaries and other personnel expense (note 8) ........................... 457,741 390,142 346,067 Net occupancy and equipment expense (notes 4 and 10) .................... 208,197 158,218 138,045 Other operating expenses (note 11) ...................................... 190,611 147,452 134,579 Minority interest in subsidiary's net income ............................ 13,188 10,559 9,143 -------- ------- ------- Total non-interest expense ........................................ 869,737 706,371 627,834 -------- ------- ------- Income before income taxes ........................................ 349,315 304,025 267,013 Income tax expense (note 7) ................................................ 124,008 107,560 96,184 -------- ------- ------- Net income ........................................................ $225,307 196,465 170,829 ======== ======= ======= Net income per share (note 14): Basic ................................................................... $ 80 .72 .63 ======== ======= ======= Diluted ................................................................. .80 .71 .63 ======== ======= ======= Weighted average shares outstanding (note 14): Basic ................................................................... 280,016 272,416 269,285 ======== ======= ======= Diluted ................................................................. 283,355 277,223 273,152 ======== ======= =======
See accompanying summary of significant accounting policies and notes to consolidated financial statements. F-3 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (In thousands, except per share data)
Accumulated Unamortized Other Shares Common Treasury Restricted Comprehensive Retained Years Ended December 31, 1999, 1998, and 1997 Issued Stock Surplus Stock Stock Income (Loss) Earnings Total - ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1996, as previously reported .....................................261,953 $ 261,953 9,515 (1,285) (5,344) (1,063) 519,974 783,750 Issuance of common stock for acquisitions (note 1) ..................................... 6,982 6,982 12,681 -- -- 163 8,720 28,546 ------- --------- ------ ------ ------ ------- ------- --------- Balance at December 31, 1996, as restated ......268,935 268,935 22,196 (1,285) (5,344) (900) 528,694 812,296 Net income ..................................... -- -- -- -- -- -- 170,829 170,829 Other comprehensive income, net of tax -- change in unrealized gains/losses on investment securities available for sale, net of reclassification adjustment (note 15) ......................... -- -- -- -- -- 6,824 -- 6,824 --------- Comprehensive income ........................... -- -- -- -- -- -- -- 177,653 --------- Cash dividends declared -- $.24 per share ...... -- -- -- -- -- -- (62,948) (62,948) Cash dividends of pooled subsidiaries prior to acquisition ............................... -- -- -- -- -- -- (2,042) (2,042) Issuance of restricted stock (note 8) .......... 13 13 233 -- (246) -- -- -- Amortization of restricted stock (note 8) ...... -- -- (45) -- 1,856 -- -- 1,811 Stock options exercised (note 8) ............... 1,379 1,379 4,405 -- -- -- -- 5,784 Stock option tax benefit ....................... -- -- 4,775 -- -- -- -- 4,775 Treasury stock purchased by subsidiary prior to acquisition ......................... -- -- -- (22) -- -- -- (22) Ownership change at majority-owned subsidiary ................................... -- -- -- -- -- -- (47) (47) Fractional shares for stock split .............. (3) (3) (35) -- -- -- -- (38) ------- --------- ------ ------ ------ ------- ------- --------- Balance at December 31, 1997 ...................270,324 270,324 31,529 (1,307) (3,734) 5,924 634,486 937,222 Net income ..................................... -- -- -- -- -- -- 196,465 196,465 Other comprehensive income, net of tax (note 15): Change in unrealized gains/losses on investment securities available for sale, net of reclassification adjustment ................................ -- -- -- -- -- 4,450 -- 4,450 Gain on foreign currency translation ....... -- -- -- -- -- 1 -- 1 --------- Other comprehensive income ................. -- -- -- -- -- -- -- 4,451 --------- Comprehensive income ........................... -- -- -- -- -- -- -- 200,916 --------- Issuance of common stock for acquisitions (note 1) ..................................... 6,436 6,436 14,517 -- -- 100 20,188 41,241 Cash dividends declared -- $.29 per share ...... -- -- -- -- -- -- (77,696) (77,696) Cash dividends of pooled subsidiaries prior to acquisition .................................. -- -- -- -- -- -- (2,821) (2,821) Amortization of restricted stock (note 8) ...... -- -- 36 -- 1,189 -- -- 1,225 Stock options exercised (note 8) ............... 2,050 2,050 8,060 -- -- -- -- 10,110 Stock option tax benefit ....................... -- -- 5,351 -- -- -- -- 5,351 Treasury stock purchased by subsidiary prior toacquisition ................................ -- -- -- (3,792) -- -- -- (3,792) Ownership change at majority-owned subsidiary .. -- -- 141 -- -- -- -- 141 Fractional shares for stock split .............. (3) (3) (77) -- -- -- -- (80) Commitment of stock donation to charitable foundation ................................... -- -- 100 -- -- -- -- 100 ------- --------- ------ ------ ------ ------- ------- --------- Balance at December 31, 1998 ...................278,807 278,807 59,657 (5,099) (2,545) 10,475 770,622 1,111,917 Net income ..................................... -- -- -- -- -- -- 225,307 225,307 Other comprehensive loss, net of tax (note 15): Change in unrealized gains/losses on investment securities available for sale, net of reclassification adjustment ................................ -- -- -- -- -- (39,913) -- (39,913) Loss on foreign currency translation ........ -- -- -- -- -- (223) -- (223) --------- Other comprehensive loss .................... -- -- -- -- -- -- -- (40,136) --------- Comprehensive income ........................... -- -- -- -- -- -- -- 185,171 --------- Issuance of common stock for acquisitions (note 1) ..................................... 2,325 2,325 9,269 -- -- (473) 6,335 17,456 Issuance of treasury stock for purchase acquisition (note 1) ......................... -- -- -- 1,860 -- -- -- 1,860 Cash dividends declared -- $.36 per share ...... -- -- -- -- -- -- (98,460) (98,460) Cash dividends of pooled subsidiaries prior to acquisition ............................... -- -- -- -- -- -- (5,774) (5,774) Amortization of restricted stock (note 8) ...... -- -- -- -- 1,252 -- -- 1,252 Stock options exercised (note 8) ............... 1,150 1,150 5,620 -- -- -- -- 6,770 Stock option tax benefit ....................... -- -- 7,390 -- -- -- -- 7,390 Retirement of subsidiary's treasury stock upon acquisition .................................. (93) (93) (1,861) 1,954 -- -- -- -- Ownership change at majority-owned subsidiary .. -- -- (985) -- -- -- (28) (1,013) Commitment of stock donation to charitable foundation ................................... -- -- 100 -- -- -- -- 100 ------- --------- ------ ------ ------ ------- ------- --------- Balance at December 31, 1999 ...................282,189 $ 282,189 79,190 (1,285) (1,293) (30,134) 898,002 1,226,669 ======= ========= ====== ====== ====== ======= ======= =========
See accompanying summary of significant accounting policies and notes to consolidated financial statements. F-4 CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
YEARS ENDED DECEMBER 31, 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income .................................................................... $ 225,307 196,465 170,829 Adjustments to reconcile net income to net cash provided by operating activities: Provision for losses on loans .............................................. 34,007 26,882 32,485 Depreciation, amortization, and accretion, net ............................. 72,475 61,019 50,255 Deferred income tax expense (benefit) ...................................... (144) 6,227 911 Increase in interest receivable ............................................ (7,449) (3,097) (7,215) Increase in interest payable ............................................... 9,204 3,183 6,867 Minority interest in subsidiary's net income ............................... 13,188 10,559 9,143 Decrease (increase) in mortgage loans held for sale ........................ 73,086 (85,376) (2,522) Other, net ................................................................. 33,374 (51,811) 940 ----------- -------- -------- Net cash provided by operating activities ............................... 453,048 164,051 261,693 ----------- -------- -------- INVESTING ACTIVITIES Cash acquired from acquisitions ............................................... 7,639 22,230 -- Net (increase) decrease in interest earning deposits with banks ............... (339) (10,514) 868 Net (increase) decrease in federal funds sold ................................. (11,477) 50,876 (61,677) Proceeds from maturities and principal collections of investment securities available for sale .......................................................... 453,143 627,897 368,661 Proceeds from sales of investment securities available for sale ............... 48,472 131,493 89,822 Purchases of investment securities available for sale ......................... (695,526) (914,456) (497,986) Proceeds from maturities and principal collections of investment securities held to maturity ............................................................ 63,875 161,111 70,321 Purchases of investment securities held to maturity ........................... (32,781) (92,290) (37,884) Net increase in loans ......................................................... (1,416,486) (456,610) (587,487) Purchases of premises and equipment ........................................... (124,462) (119,149) (67,040) Proceeds from disposals of premises and equipment ............................. 8,315 2,262 2,274 Net cash paid on sale of branches ............................................. (55,641) -- -- Proceeds from sales of other real estate ...................................... 8,520 10,692 8,339 Additions to contract acquisition costs ....................................... (15,812) (20,105) (17,558) Additions to computer software ................................................ (54,189) (39,502) (15,106) ----------- -------- -------- Net cash used in investing activities ................................... (1,816,749) (646,065) (744,453) ----------- -------- -------- FINANCING ACTIVITIES Net increase in demand and savings deposits ................................... 174,703 468,250 298,374 Net increase (decrease) in certificates of deposit ............................ 432,420 (130,939) 234,105 Net increase (decrease) in federal funds purchased and securities sold under agreement to repurchase ........................................... 758,104 190,331 (38,403) Principal repayments on long-term debt ........................................ (2,030) (15,430) (10,261) Proceeds from issuance of long-term debt ...................................... 186,849 8,320 41,171 Purchases of treasury stock ................................................... -- (3,792) (22) Purchases of treasury stock by majority-owned subsidiary ...................... (1,043) -- -- Dividends paid to shareholders ................................................ (98,837) (76,665) (61,984) Proceeds from issuance of common stock ........................................ 6,702 9,220 5,785 ----------- -------- -------- Net cash provided by financing activities ............................... 1,456,868 449,295 468,765 ----------- -------- -------- Increase (decrease) in cash and cash equivalents ................................. 93,167 (32,719) (13,995) Cash and cash equivalents at beginning of period ................................. 373,376 406,095 420,090 ----------- -------- -------- Cash and cash equivalents at end of period ....................................... $ 466,543 373,376 406,095 =========== ======== ========
See accompanying summary of significant accounting policies and notes to consolidated financial statements. F-5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS OPERATIONS The consolidated financial statements include the accounts of Synovus Financial Corp. (Parent Company) and its consolidated subsidiaries, all but one of which were wholly-owned at December 31, 1999. Synovus has 38 wholly-owned bank subsidiaries predominantly involved in retail and commercial banking activities, and wholly-owned debt collection and bankruptcy management, trust, mortgage, insurance, and broker/dealer companies. Total System Services, Inc. (TSYS), an 80.8% owned subsidiary, provides bankcard data processing and related services to banks and other card-issuing institutions. In addition, the financial statements include joint ventures of TSYS accounted for under the equity method. Synovus has two reportable segments: banking operations and transaction processing services. For the year ended December 31, 1999, revenues (defined as net interest income plus non-interest income) from the banking operations segment represent 55.3% of consolidated revenues, while the transaction processing services segment represents the remaining 44.7% of consolidated revenues. The banking operations' revenues are earned in four southeastern states: Georgia (61%), Alabama (19%), South Carolina (13%), and Florida (7%). For the year ended December 31, 1999, TSYS had two major customers which accounted for approximately 29% of its total revenues. TSYS' revenues are generated from customers throughout the United States, Mexico, Canada, Honduras and the Caribbean. BASIS OF PRESENTATION In preparing the consolidated financial statements in accordance with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the balance sheet and the reported amounts of revenues and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the reserve for loan losses; the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans; and the disclosures for contingent assets and liabilities. In connection with the determination of the reserve for loan losses and the valuation of other real estate, management obtains independent appraisals for significant properties and properties collateralizing impaired loans. The accounting and reporting policies of Synovus Financial Corp. and subsidiaries (Synovus) conform to generally accepted accounting principles and to general practices within the banking and transaction processing industries. All significant intercompany accounts and transactions have been eliminated in consolidation. The following is a description of the more significant of those policies. CASH FLOW INFORMATION For the years ended December 31, 1999, 1998, and 1997, income taxes of $106 million, $95 million, and $95 million, and interest of $367 million, $334 million, and $313 million, respectively, were paid. Loans receivable of approximately $4 million, $9 million, and $8 million were transferred to other real estate during 1999, 1998, and 1997, respectively. MORTGAGE LOANS HELD FOR SALE Mortgage loans held for sale are carried at the lower of aggregate cost or fair value. Fair values are based upon quoted prices from secondary market investors and forward commitments to sell. No valuation allowances were required at December 31, 1999 or 1998. The cost of mortgage loans held for sale is the mortgage note amount plus certain net origination costs less discounts collected. INVESTMENT SECURITIES Synovus classifies its securities into two categories: available for sale or held to maturity. Held to maturity securities are those securities for which Synovus has the ability and intent to hold until maturity. All other securities not included in held to maturity are classified as available for sale. Available for sale securities are recorded at fair value. Fair value is determined at a specific point in time, based on quoted market prices. Held to maturity securities are recorded at cost, adjusted for the amortization or accretion of premiums or discounts. Unrealized gains and losses, net of the related tax effect, on securities available for sale are excluded from earnings and are reported as a separate component of shareholders' equity, within other comprehensive income, until realized. Transfers of securities between categories are recorded at fair value at the date of transfer. The unrealized gains or losses included in other comprehensive income for a security transferred from available for sale to held to maturity are maintained and amortized into earnings over the remaining life of the security as an adjustment to yield in a manner consistent with the amortization or accretion of premium or discount on the associated security. A decline in the market value of any available for sale or held to maturity security below cost that is deemed other than temporary results in a charge to earnings and the establishment of a new cost basis for the security. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to the yield using the effective interest method and prepayment assumptions. Dividend and interest income are recognized when earned. Realized gains and losses for securities classified as available for sale and held to maturity are included in earnings and are derived using the specific identification method for determining the amortized cost of securities sold. Gains and losses on sales of investment securities are recognized on the settlement date, based on the amortized cost of the specific security. The financial statement impact of settlement date accounting versus trade date accounting is immaterial. LOANS AND INTEREST INCOME Loans are reported at principal amounts outstanding, less unearned income, including net deferred fees, and the reserve for loan losses. Interest income on consumer loans, made on a discount basis, is recognized in a manner which approximates the level yield method. Interest income on substantially all other loans is recognized on a level yield basis. Loan fees, net of certain direct origination costs, are deferred and amortized over the terms of the loans using a method which approximates a level yield. Annual fees, net of costs, collected for credit cards are recognized on a straight-line basis over the period the fee entitles the cardholder to use the card. Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. Accrual of interest on loans is discontinued when the full collection of interest or principal is not probable or when they become contractually in default for 90 days or more as to either interest or principal, unless they are both well-secured and in the process of collection. When a loan is placed on nonaccrual status, previously accrued and uncollected interest is charged to interest income on loans, unless management believes F-6 that the accrued interest is recoverable through the liquidation of collateral. Interest payments received on nonaccrual loans are applied as a reduction of principal. Loans are returned to accruing status when they are brought fully current with respect to interest and principal and when, in the judgment of management, the loans are estimated to be fully collectible as to both principal and interest. Such interest, when ultimately collected, is recorded as interest income in the period received. Interest on accruing impaired loans is recognized as long as such loans do not meet the criteria for nonaccrual classification. RESERVE FOR LOAN LOSSES The reserve for loan losses is established through provisions for loan losses charged to operations. Loans are charged against the reserve for loan losses when management believes that the collection of principal is unlikely. Subsequent recoveries are added to the reserve. Management's evaluation of the adequacy of the reserve for loan losses is based on a formal analysis which assesses the risk within the loan portfolio. This analysis includes consideration of historical performance, current economic conditions, level of nonperforming loans, loan concentrations, and review of certain individual loans. Management believes that the reserve for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the reserve for loan losses may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review Synovus' subsidiary banks' reserves for loan losses. Such agencies may require Synovus' subsidiary banks to recognize additions to the reserve for loan losses based on their judgments about information available to them at the time of their examination. Management, considering current information and events regarding a borrowers' ability to repay its obligations, considers a loan to be impaired when the ultimate collectibility of all amounts due, according to the contractual terms of the loan agreement, is in doubt. When a loan is considered to be impaired, the amount of impairment is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate. If the loan is collateral-dependent, the fair value of the collateral is used to determine the amount of impairment. Subsequent recoveries are added to the reserve for loan losses. Cash receipts for accruing loans are applied to principal and interest under the contractual terms of the loan agreement. Cash receipts on impaired loans for which the accrual of interest has been discontinued are applied first to principal and then to interest income. The accounting for impaired loans described above applies to all loans, except for large pools of smaller-balance, homogeneous loans that are collectively evaluated for impairment, loans that are measured at fair value or at the lower of cost or fair value, and debt securities. The reserve for loan losses for large pools of smaller-balance, homogeneous commercial and retail loans is established through consideration of such factors as changes in the nature and volume of the portfolio, overall portfolio quality, adequacy of the underlying collateral, loan concentrations, historical charge-off trends, and economic conditions that may affect the borrowers' ability to pay. PREMISES AND EQUIPMENT Premises and equipment, including leasehold improvements and purchased internal-use software, are reported at cost, less accumulated depreciation and amortization, which are computed using straight-line or accelerated methods over the estimated useful lives of the related assets. OTHER ASSETS The following paragraphs describe some of the more significant amounts included in other assets. Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the assets described below is measured by a comparison of the carrying amount of the asset to future undiscounted net operating cash flows expected to be generated by the asset. If such assets are considered impaired, the amount of impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Intangibles: Goodwill, which represents the excess of cost over the fair value of net assets of businesses acquired, is being amortized using the straight-line method over periods of 5 to 40 years. Core deposit premiums resulting from the valuation of core deposit intangibles acquired in business combinations or in the purchase of branch offices are amortized using accelerated methods over periods not exceeding the estimated average remaining life of the existing customer deposit bases acquired. Amortization periods range from 10 to 18 years. Amortization periods for intangible assets are monitored to determine if events and circumstances require such periods to be reduced. Computer Software: Software development costs are capitalized from the time technological feasibility of the software product or enhancement is established until the software is ready for use in providing processing services to customers. Research and development costs and computer software maintenance costs are expensed as incurred. Software development costs related to the TS(2) processing system are amortized using the greater of the straight-line method over the estimated useful life of 10 years or the ratio of current revenues to current and anticipated revenues. All other software development costs and costs of purchased computer software are amortized using the greater of the straight-line method over the estimated useful life (3 to 5 years) or the ratio of current revenues to current and anticipated revenues. Bank-Owned Life Insurance Programs: Premiums paid for bank-owned life insurance programs are recorded at the net realizable value of the underlying insurance contracts. The change in contract value during the period is recorded as an adjustment of premiums paid in determining the expense or income to be recognized under the contract during the period. Income or expense from bank-owned life insurance programs is included as a component of other operating income. Investments in Joint Ventures: TSYS' 49% investment in Total System Services de Mexico, S.A. de C.V. (TSYS de Mexico), a bankcard data processing operation located in Mexico, is accounted for under the equity method, as is TSYS' 50% investment in Vital Processing Services L.L.C. (Vital), a merchant processing operation headquartered in Tempe, Arizona. F-7 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Contract Acquisition Costs: TSYS capitalizes certain contract acquisition costs related to signing or renewing long-term contracts. These costs, which primarily consist of cash payments for rights to provide processing services, incremental internal conversion and software development costs, and third-party software development costs, are amortized using the straight-line method over the contract term beginning when the customer's cardholder accounts are converted to TSYS' processing system. Other Real Estate: Other real estate, consisting of properties obtained through foreclosure or in satisfaction of loans, is reported at the lower of cost or fair value, determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources, adjusted for estimated selling costs. Any excess of the loan balance at the time of foreclosure over the fair value of the real estate held as collateral is treated as a loan charge-off. Gain or loss on sale and any subsequent adjustment to the value are recorded as a component of non-interest expense. Originated and Purchased Mortgage Servicing Rights: The rights to service mortgage loans for others, regardless of whether the servicing rights are acquired through either the purchase or origination of mortgage loans, are recognized as separate assets. The capitalized mortgage servicing rights are evaluated for impairment based upon the fair value of those rights. Fair value is estimated by determining the present value of the estimated future cash flows using discount rates commensurate with the risks involved. In determining the present value, Synovus stratifies its mortgage servicing rights based on risk characteristics including loan types, note rates, and note terms. Capitalized mortgage servicing rights are amortized in proportion to and over the period of estimated net servicing income, using a method that approximates a level yield and taking into consideration prepayment of the underlying loans. Management re-evaluates the terms used for amortization based upon prepayment history and adjusts the terms as necessary. DERIVATIVE FINANCIAL INSTRUMENTS As part of its overall interest rate risk management activities, Synovus utilizes off-balance sheet derivatives to modify the repricing characteristics of on-balance sheet assets and liabilities. The primary instruments utilized by Synovus are interest rate swaps. Synovus has also purchased interest rate floors and collars. The fair values of these off-balance sheet derivative financial instruments are based on dealer quotes and third party financial models. Interest rate swaps, purchased floors, and purchased collars are accounted for on an accrual basis, and the net interest differential, including premiums paid, if any, is recognized as an adjustment to interest income or expense of the related designated asset or liability. Changes in the fair values of the swaps, purchased floors, and purchased collars are not recorded in the consolidated statements of income because these agreements are being treated as synthetic alterations of the designated assets or liabilities. Synovus considers its interest rate swaps to be a synthetic alteration of an asset or liability as long as (i) the swap is designated with a specific asset or liability or finite pool of assets or liabilities; (ii) the notional amount of the swap is less than or equal to the principal amount of the designated asset or liability; and (iii) the swap term is less than or equal to the expected remaining term of the designated asset or liability. The criteria for consideration of a floor or collar as a synthetic alteration of an asset or liability are generally the same as those for a swap arrangement. If the swap, purchased floor, or purchased collar arrangements are terminated before their maturity, the net proceeds received or paid are deferred and amortized over the shorter of the remaining contract life or the maturity of the designated asset or liability as an adjustment to interest income or expense. If the designated asset or liability is sold or matures, the swap agreement is marked to market and the gain or loss is included with the gain or loss on the sale or maturity of the designated asset or liability. Changes in the fair value of any undesignated swaps, purchased floors, and purchased collars are included in other income in the consolidated statements of income. Premiums paid for purchased interest rate floor and collar agreements are amortized to interest income or expense over the terms of the floors and collars. Unamortized premiums are included in other assets in the consolidated balance sheets. Amounts receivable or payable under collar and floor agreements are accrued as an adjustment to interest income or expense. DATA PROCESSING SERVICES TSYS' bankcard data processing revenues are derived from long-term processing contracts with banks and other institutions and are recognized as revenues at the time the services are performed. TSYS' bankcard data processing service contracts generally contain original terms ranging from 3 to 10 years. INCOME TAXES Synovus uses the asset and liability method to account for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Synovus files a consolidated federal income tax return with its wholly-owned and majority-owned subsidiaries. STOCK-BASED COMPENSATION Synovus accounts for its fixed stock-based compensation in accordance with the provisions set forth in Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. In accordance with APB Opinion No. 25, compensation expense is recorded on the grant date only to the extent that the current market price of the underlying stock exceeds the exercise price on the grant date. The pro forma net income and earnings per share disclosures for employee stock-based grants made in 1995 and subsequent years are determined based upon the fair-value-based method which is defined in Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." POSTRETIREMENT BENEFITS Synovus sponsors a defined benefit health care plan for substantially all of its employees and early retirees. The expected costs of retiree health care and other postretirement benefits are being expensed over the period that employees provide service. F-8 FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value estimates are made at a specific point in time, based on relevant market information and other information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale, at one time, Synovus' entire holdings of a particular financial instrument. Because no market exists for a portion of Synovus' financial instruments, fair value estimates are also based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include deferred income tax accounts, premises and equipment, computer software, and goodwill. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 standardizes the accounting for derivative instruments, including certain derivative instruments embedded in other contracts. Under the standard, entities are required to carry all derivative instruments in the balance sheet at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, on the reason for holding it. If certain conditions are met, entities may elect to designate a derivative instrument as a hedge of exposures to changes in fair values, cash flows, or foreign currencies. If the hedged exposure is a fair value exposure, the gain or loss on the derivative instrument is recognized in earnings in the period of change together with the offsetting gain or loss on the hedged item attributable to the risk being hedged. If the hedged exposure is a cash flow exposure, the effective portion of the gain or loss on the derivative instrument is reported initially as a component of other comprehensive income (outside earnings) and subsequently reclassified into earnings when the forecasted transaction affects earnings. Any amounts excluded from the assessment of hedge effectiveness as well as the ineffective portion of the gain or loss is reported in earnings immediately. If the derivative instrument is not designated as a hedge, the gain or loss is recognized in earnings in the period of change. For Synovus, SFAS No. 133, as amended by SFAS No. 137, is effective January 1, 2001. On adoption, the provisions of SFAS No. 133 must be applied prospectively. Synovus is in the process of assessing the impact that SFAS No. 133 will have on its financial statements. F-9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 BUSINESS COMBINATIONS On October 31, 1999, Synovus completed the acquisitions of Ready Bank of Fort Walton Beach Holding Company, Inc. with $65 million in assets, and Horizon Bancshares, Inc. with $60 million in assets. Synovus issued 1,946,416 shares of common stock for all the issued and outstanding shares of these two entities. Both transactions were accounted for as poolings of interests, except that the financial information preceding the dates of acquisition have not been restated to include the financial condition and results of operations of these two entities since the effect was not material. On September 30, 1999, Synovus completed the acquisition of the $306 million asset Merit Holding Corporation. Merit Holding Corporation (Merit) is the parent company of Mountain National Bank in Tucker, Georgia, and Charter Bank & Trust Co. in Marietta, Georgia. Synovus issued 5,995,085 shares of common stock for all the issued and outstanding shares of Merit. On September 30, 1999, Synovus completed the acquisition of the debt collection and bankruptcy management business offered by Wallace & de Mayo (WDM), a firm based in Norcross, Georgia. Synovus issued 2,339,624 shares of common stock for all of the outstanding common stock of WDM. Effective September 30, 1999, WDM operates as TSYS Total Debt Management, Inc. (TDM), a wholly-owned subsidiary of Synovus. The aforementioned two acquisitions have been accounted for as poolings of interests. Accordingly, the financial statements for all periods presented have been restated to include the financial condition and results of operations of these two entities. Synovus' consolidated financial statements for the three years ended December 31, 1999, have been restated for the mergers with Merit and WDM as follows:
YEARS ENDED DECEMBER 31, (In thousands) 1999 1998 1997 - -------------------------------------------------------------------------------------------- Net interest income (expense): Synovus -- exclusive of pre-acquisition amounts .... $500,983 440,361 412,229 Merit Holding Corporation and subsidiaries ......... 12,311 14,722 13,723 Wallace & de Mayo .................................. -- (18) (32) -------- -------- -------- Total ........................................... $513,294 455,065 425,920 ======== ======== ======== Non-interest income: Synovus -- exclusive of pre-acquisition amounts .... $718,236 562,137 489,406 Merit Holding Corporation and subsidiaries ......... 1,328 1,550 1,399 Wallace & de Mayo .................................. 20,201 18,526 10,607 -------- -------- -------- Total ........................................... $739,765 582,213 501,412 ======== ======== ======== Net income: Synovus -- exclusive of pre-acquisition amounts .... $217,432 187,107 165,236 Merit Holding Corporation and subsidiaries ......... 3,932 4,955 4,441 Wallace & de Mayo(*) ............................... 3,943 4,403 1,152 -------- -------- -------- Total ........................................... $225,307 196,465 170,829 ======== ======== ========
(*)Prior to its merger with Synovus, WDM was a nontaxable enterprise due to its S corporation status. Accordingly, the pre-acquisition net income amounts shown above for WDM do not include income tax expense. Pro forma income tax expense related to WDM's net income for the years ended December 31, 1999, 1998, and 1997 would be approximately $1.4 million, $1.5 million, and $400 thousand, respectively. On January 31, 1999, Synovus issued 333,163 shares of common stock to acquire the remaining 80% interest in Canterbury Trust Company, Inc., which provides trust, custody, investment and consulting services to large institutional clients. The acquisition was accounted for as a purchase resulting in goodwill of $5.5 million which is being amortized on a straight-line basis over fifteen years. On January 29, 1999, Merit acquired Source Capital Group I, Inc., an Atlanta-based equipment leasing company, in exchange for 100,000 shares of Merit's common stock (equivalent of 125,330 Synovus shares), valued at approximately $1.9 million. The acquisition was accounted for as a purchase resulting in goodwill of $1.3 million which is being amortized on a straight-line basis over fifteen years. On December 18, 1998, Synovus completed the acquisition of the $178 million asset Georgia Bank & Trust (GB&T), located in Calhoun, Georgia. Synovus issued 1,811,058 shares of common stock for all the issued and outstanding shares of GB&T. On November 30, 1998, Synovus completed the acquisition of the $55 million asset Bank of Georgia, located in Watkinsville, Georgia. Synovus issued 850,269 shares of common stock for all the issued and outstanding shares of Bank of Georgia. On September 1, 1998, Synovus completed the acquisition of the $348 million asset Community Bank Capital Corporation (CBCC). CBCC is the parent company of the Bank of North Georgia, located in Alpharetta, Georgia. Synovus issued 3,774,531 shares of common stock for all the issued and outstanding shares of CBCC. The aforementioned three acquisitions have been accounted for as poolings of interests, except that the financial information preceding the dates of acquisition have not been restated to include the financial position and results of operations of these acquired entities since the effect was not material. Net income for the years ended December 31, 1998 and 1997 would have been increased by $2.6 million and $7.2 million, respectively, if the previous periods had been restated. F-10 NOTE 2 INVESTMENT SECURITIES The amortized cost, gross unrealized gains and losses, and estimated fair values of investment securities at December 31, 1999 and 1998 are summarized as follows:
DECEMBER 31, 1999 ---------------------------------------------------------- INVESTMENT SECURITIES AVAILABLE FOR SALE GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED FAIR (In thousands) COST GAINS LOSSES VALUE - ------------------------------------------------------------------------------------------------------------- U.S. Treasury and U.S. Government agencies .. $1,327,368 446 (39,861) 1,287,953 Mortgage-backed securities .................. 403,096 251 (10,567) 392,780 State and municipal ......................... 15,736 71 (681) 15,126 Other investments ........................... 18,094 3,597 (872) 20,819 ---------- ---------- ---------- --------- Total .................................... $1,764,294 4,365 (51,981) 1,716,678 ========== ========== ========== ========= DECEMBER 31, 1998 ---------------------------------------------------------- GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED FAIR (In thousands) COST GAINS LOSSES VALUE - ------------------------------------------------------------------------------------------------------------- U.S. Treasury and U.S. Government agencies .. $1,190,424 16,179 (1,342) 1,205,261 Mortgage-backed securities .................. 328,195 1,954 (813) 329,336 State and municipal ......................... 13,718 285 (196) 13,807 Other investments ........................... 21,062 2,818 (444) 23,436 ---------- ---------- ---------- --------- Total .................................... $1,553,399 21,236 (2,795) 1,571,840 ========== ========== ========== ========= DECEMBER 31, 1999 ---------------------------------------------------------- INVESTMENT SECURITIES HELD TO MATURITY GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED FAIR (In thousands) COST GAINS LOSSES VALUE - ------------------------------------------------------------------------------------------------------------- U.S. Treasury and U.S. Government agencies .. $ 24,914 16 (294) 24,636 Mortgage-backed securities .................. 53,698 218 (937) 52,979 State and municipal ......................... 169,745 1,041 (3,697) 167,089 Other investments ........................... 28,922 -- (122) 28,800 ---------- ---------- ---------- --------- Total .................................... $ 277,279 1,275 (5,050) 273,504 ========== ========== ========== ========= DECEMBER 31, 1998 ---------------------------------------------------------- GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED FAIR (In thousands) COST GAINS LOSSES VALUE - ------------------------------------------------------------------------------------------------------------- U.S. Treasury and U.S. Government agencies .. $ 51,996 730 (67) 52,659 Mortgage-backed securities .................. 77,899 1,063 (101) 78,861 State and municipal ......................... 153,924 4,745 (151) 158,518 Other investments ........................... 21,814 1 (127) 21,688 ---------- ---------- ---------- --------- Total .................................. $ 305,633 6,539 (446) 311,726 ========== ========== ========== =========
F-11 The amortized cost and estimated fair value of investment securities at December 31, 1999 by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
INVESTMENT SECURITIES INVESTMENT SECURITIES HELD TO MATURITY AVAILABLE FOR SALE -------------------------- -------------------------- AMORTIZED ESTIMATED AMORTIZED ESTIMATED (In thousands) COST FAIR VALUE COST FAIR VALUE - ----------------------------------------------------------------------------------------------------------------- U. S. Treasury and U. S. Government agencies: Within 1 year ................................ $ 7,010 7,011 97,970 97,982 1 to 5 years ................................. 9,151 9,048 920,770 895,154 5 to 10 years ................................ 8,753 8,577 306,608 292,833 More than 10 years ........................... -- -- 2,020 1,984 ---------- ---------- ---------- ---------- $ 24,914 24,636 1,327,368 1,287,953 ========== ========== ========== ========== State and municipal: Within 1 year ................................ $ 8,742 8,780 447 451 1 to 5 years ................................. 38,474 38,505 3,434 3,445 5 to 10 years ................................ 79,815 78,634 7,140 6,951 More than 10 years ........................... 42,714 41,170 4,715 4,279 ---------- ---------- ---------- ---------- $ 169,745 167,089 15,736 15,126 ========== ========== ========== ========== Other investments: Within 1 year ................................ $ 751 752 2,445 2,222 1 to 5 years ................................. 263 265 758 775 5 to 10 years ................................ 808 809 2,529 2,547 More than 10 years ........................... 27,100 26,974 12,362 15,275 ---------- ---------- ---------- ---------- $ 28,922 28,800 18,094 20,819 ========== ========== ========== ========== Mortgage-backed securities ...................... $ 53,698 52,979 403,096 392,780 ========== ========== ========== ========== Total investment securities: Within 1 year ................................ $ 16,503 16,543 100,862 100,655 1 to 5 years ................................. 47,888 47,818 924,962 899,374 5 to 10 years ................................ 89,376 88,020 316,277 302,331 More than 10 years ........................... 69,814 68,144 19,097 21,538 Mortgage backed securities ................... 53,698 52,979 403,096 392,780 ---------- ---------- ---------- ---------- $ 277,279 273,504 1,764,294 1,716,678 ========== ========== ========== ==========
A summary of sales transactions in the investment securities available for sale portfolio for 1999, 1998, and 1997 is as follows:
GROSS GROSS REALIZED REALIZED (In thousands) PROCEEDS GAINS LOSSES ----------------------------------------------------------------------- 1999.............................. $ 48,472 1,252 (50) 1998.............................. 131,493 1,371 (72) 1997.............................. 89,822 151 (217)
There were no sales transactions in the investment securities held to maturity portfolio during the three years ended December 31,1999. Securities with a carrying value of $1,297,866 and $1,152,931 at December 31, 1999 and 1998, respectively, were pledged to secure certain deposits and repurchase agreements as required by law. F-12 NOTE 3 LOANS Loans outstanding, by classification, are summarized as follows:
(In thousands) DECEMBER 31, 1999 1998 - ------------------------------------------------------------------ Commercial: Commercial, financial, and agricultural ................. $3,195,512 2,701,561 Real estate-construction ....... 1,609,594 1,164,443 Real estate-mortgage ........... 1,983,766 1,540,459 ---------- --------- Total commercial ............ 6,788,872 5,406,463 ---------- --------- Retail: Real estate-mortgage ........... 1,089,217 1,058,172 Consumer loans-credit card ..... 237,546 257,721 Consumer loans-other ........... 961,881 889,786 ---------- --------- Total retail ................ 2,288,644 2,205,679 ---------- --------- Total loans ................. $9,077,516 7,612,142 ========== =========
Activity in the reserve for loan losses is summarized as follows:
(In thousands) DECEMBER 31, 1999 1998 1997 - ---------------------------------------------------------------------------------- Balance at beginning of year ...... $ 114,109 105,705 97,455 Loan loss reserves of acquired subsidiaries ..................... 2,928 6,170 -- Provision for losses on loans ..... 34,007 26,882 32,485 Recoveries of loans previously charged off ...................... 6,957 6,493 8,077 Loans charged off ................. (30,443) (31,141) (32,312) --------- ------- ------- Balance at end of year ............ $ 127,558 114,109 105,705 ========= ======= =======
At December 31, 1999, the recorded investment in loans that were considered to be impaired was $29.6 million (of which $25.2 million were on a nonaccrual basis). Included in this amount is $25.0 million of impaired loans for which the related loan loss reserve is $12.3 million, and $4.6 million of impaired loans for which there is no related allowance determined in accordance with SFAS No. 114, "Accounting by Creditors for Impairment of a Loan". At December 31, 1998, the recorded investment in loans that were considered to be impaired was $27.5 million (of which $18.8 million were on a nonaccrual basis). Included in this amount is $14.7 million of impaired loans for which the related loan loss reserve is $5.4 million, and $12.8 million of impaired loans for which there is no related allowance determined in accordance with SFAS No. 114. The loan loss reserve amounts for impaired loans were primarily determined using the fair value of the loans' collateral. The average recorded investment in impaired loans was approximately $26,500,000, $29,000,000, and $31,000,000 for the years ended December 31, 1999, 1998, and 1997, respectively, and the related amount of interest income recognized during the period that such loans were impaired was approximately $1,468,000, $1,573,000, and $1,956,000 in 1999, 1998, and 1997, respectively. Loans on nonaccrual status amounted to approximately $26,672,000, $20,756,000, and $18,304,000 at December 31, 1999, 1998, and 1997, respectively. If nonaccruing loans had been on a full accruing basis, interest income on these loans would have been increased by approximately $2,603,000, $1,891,000, and $2,251,000 in 1999, 1998, and 1997, respectively. A substantial portion of Synovus' loans are secured by real estate in markets in which subsidiary banks are located throughout Georgia, Alabama, South Carolina, and Northwest Florida. Accordingly, the ultimate collectibility of a substantial portion of Synovus' loan portfolio and the recovery of a substantial portion of the carrying amount of real estate owned are susceptible to changes in market conditions in these areas. In the ordinary course of business, Synovus has direct and indirect loans outstanding to certain executive officers, directors, and principal holders of equity securities (including their associates). Management believes that such loans are made substantially on the same terms, including interest rate and collateral, as those prevailing at the time for comparable transactions with other customers. The following is a summary of such loans outstanding and the activity in these loans for the year ended December 31, 1999.
(In thousands) - --------------------------------------------------------------------------- Balance at December 31, 1998 ............................... $ 128,362 Adjustment for executive officer and director changes ...... (13,149) ---------- Adjusted balance at December 31, 1998 ...................... 115,213 New loans .................................................. 228,614 Repayments ................................................. (214,359) ---------- Balance at December 31, 1999 ............................... $ 129,468 ==========
NOTE 4 OTHER ASSETS Included in other assets are the following significant balances: mortgage servicing rights, bank-owned life insurance programs, TSYS' computer software costs, contract acquisition costs, and investments in joint ventures. At December 31, 1999 and 1998, Synovus had approximately $33,411,000 and $28,317,000, respectively, in capitalized mortgage servicing rights. There was no valuation allowance as of December 31, 1999 and 1998. At December 31, 1999 and 1998, Synovus serviced mortgage loans for unaffiliated investors of approximately $2,519,000,000 and $2,115,000,000, respectively. At December 31, 1999 and 1998, Synovus maintained certain bank-owned life insurance programs with a carrying value of approximately $75,000,000 and $40,000,000, respectively. The following table summarizes TSYS' computer software at December 31, 1999 and 1998:
(In thousands) 1999 1998 - -------------------------------------------------------------- Purchased computer software ....... $111,331 68,636 TS(2) ............................. 33,049 33,049 Other capitalized software development costs ............... 26,787 14,854 -------- ------- 171,167 116,539 Less accumulated amortization ..... 72,342 50,677 -------- ------- Computer software, net ............ $ 98,825 65,862 ======== =======
Amortization expense related to purchased and capitalized software development costs at TSYS was $21,627,000, $16,774,000 and $11,668,000 for the years ended December 31, 1999, 1998, and 1997, respectively. Contract acquisition costs, net, at TSYS were $50,862,000 and $46,681,000 at December 31, 1999 and 1998, respectively. TSYS' investments in joint ventures, net, were $35,101,000 and $28,304,000 at December 31, 1999 and 1998, respectively. F-13 NOTE 5 INTEREST BEARING DEPOSITS A summary of interest bearing deposits at December 31, 1999 and 1998 is as follows:
(In thousands) 1999 1998 - ----------------------------------------------------------------- Interest bearing demand deposits ..... $1,364,244 1,406,885 Money market accounts ................ 1,766,893 1,708,522 Savings accounts ..................... 444,493 457,711 Time deposits under $100,000 ......... 2,451,629 2,509,196 Time deposits of $100,000 or more .... 1,787,515 1,281,169 ---------- --------- Total interest bearing deposits.. $7,814,774 7,363,483 ========== =========
Interest expense for the years ended December 31, 1999, 1998, and 1997 on time deposits of $100,000 or more was $82,685,000, $76,311,000, and $69,767,000, respectively. NOTE 6 LONG-TERM DEBT Long-term debt at December 31, 1999 and 1998 consists of the following:
(In thousands) 1999 1998 - ---------------------------------------------------------------------------------- Parent Company: 6.125% senior note, due October 15, 2003, with semi-annual interest payments and principal to be paid at maturity ................... $ 75,000 75,000 8.75% debenture, due May 15, 2003, with minimum annual principal payments of $120 and $1,120 at maturity ........................ 1,480 1,720 -------- ------- Total Parent Company debt ...................... 76,480 76,720 -------- ------- Subsidiaries: Federal Home Loan Bank advances with interest and principal payments due at various maturity dates through 2009 and interest rates ranging from 4.65% to 7.54% at December 31, 1999 ........... 241,763 54,130 9.23% note payable, due October 31, 2003, with annual principal and interest payments ........................................... 204 245 8.00% capital lease obligation payable, due in monthly principal and interest payments through 2002 .............................. 126 173 Other notes payable and capital lease obligations payable, with an interest rate of 7.85% at December 31, 1999, maturing in 2000 ................ 47 534 -------- ------- Total subsidiaries debt ......................... 242,140 55,082 -------- ------- Total long-term debt ............................ $318,620 131,802 ======== =======
The provisions of the loan and security agreements associated with some of the promissory notes place certain restrictions, within specified limits, on payments of cash dividends, issuance of additional debt, creation of liens upon property, disposition of common stock or assets, and investments in subsidiaries. As of December 31, 1999, Synovus and its subsidiaries were in compliance with the covenants of the aforementioned loan and security agreements. The Federal Home Loan Bank advances are secured by certain mortgage loans receivable as well as all of the stock of the Federal Home Loan Bank owned by various Synovus affiliate banks. Synovus has an unsecured line of credit, with an unaffiliated bank, for $25 million with an interest rate of 50 basis points above the short-term index, as defined. The line of credit requires an annual commitment fee of .125% on the average daily available balance and draws can be made on demand (subject to compliance with certain restrictive covenants). There were no advances outstanding at December 31, 1999 and 1998. Required annual principal payments on long-term debt for the five years subsequent to December 31, 1999 are as follows:
PARENT (In thousands) COMPANY SUBSIDIARIES TOTAL - ---------------------------------------------------------- 2000................ $ 120 33,463 33,583 2001................ 120 100,602 100,722 2002................ 120 25,576 25,696 2003................ 76,120 8,390 84,510 2004................ -- 5,597 5,597
NOTE 7 INCOME TAXES For the years ended December 31, 1999, 1998, and 1997, income tax expense (benefit) consists of:
(In thousands) 1999 1998 1997 - ---------------------------------------------------------------------------- Current: Federal ......................... $ 117,284 96,223 89,479 State ........................... 6,868 5,110 5,794 --------- ------- ------ 124,152 101,333 95,273 --------- ------- ------ Deferred: Federal ......................... (122) 5,244 788 State ........................... (22) 983 123 --------- ------- ------ (144) 6,227 911 --------- ------- ------ Total income tax expense ..... $ 124,008 107,560 96,184 ========= ======= ======
Income tax expense as shown in the consolidated statements of income differed from the amounts computed by applying the U.S. Federal income tax rate of 35% to pretax income as a result of the following:
(In thousands) 1999 1998 1997 - --------------------------------------------------------------------------------- Taxes at statutory Federal income tax rate ................. $ 122,260 106,409 93,455 Tax-exempt income ................. (3,200) (2,798) (2,473) State income taxes, net of federal income tax benefit ...... 4,450 3,960 3,846 Minority interest ................. 4,616 3,696 3,200 Other, net ........................ (4,118) (3,707) (1,844) --------- -------- ------- Total income tax expense ...... $ 124,008 107,560 96,184 --------- -------- ------- Effective income tax rate ..... 35.50% 35.38 36.02 ========= ======== =======
F-14 The tax effects of temporary differences that gave rise to significant portions of the deferred income tax assets and liabilities at December 31, 1999 and 1998 are presented below:
(In thousands) 1999 1998 - ------------------------------------------------------------------------------------------- Deferred income tax assets: Provision for losses on loans ................................. $ 48,709 42,734 Net unrealized loss on investment securities available for sale 18,094 -- State tax credits ............................................. 2,622 -- Other assets .................................................. 15,180 12,732 -------- ------- Total gross deferred income tax assets ..................... 84,605 55,466 Less valuation allowance ...................................... (1,400) -- -------- ------- Total net deferred income tax assets ....................... 83,205 55,466 -------- ------- Deferred income tax liabilities: Computer software development costs ........................... (18,311) (17,210) Differences in depreciation ................................... (12,215) (7,710) Capitalization of mortgage servicing rights ................... (9,201) (7,172) Net unrealized gain on investment securities available for sale -- (7,007) Ownership interest in partnership ............................. (2,553) (720) Other liabilities ............................................. (7,520) (7,199) -------- ------- Total gross deferred income tax liabilities ................ (49,800) (47,018) -------- ------- Net deferred income tax assets .......................... $ 33,405 8,448 ======== =======
The valuation allowance for deferred tax assets as of December 31, 1999 was $1,400,000. There was no valuation allowance at December 31, 1998. In assessing the realizability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred income tax assets are deductible, management believes that it is more likely than not that Synovus will realize the benefits of these deductible differences, net of existing valuation allowances, at December 31, 1999. NOTE 8 EMPLOYEE BENEFIT PLANS Synovus has various stock option plans under which the Compensation Committee of the Board of Directors has the authority to grant options to key Synovus employees. At December 31, 1999, Synovus had 5,436,563 shares of its authorized but unissued common stock reserved for future grants under the stock option plans. The general terms of the existing stock option plans include vesting periods ranging from two to three years and exercise periods ranging from five to ten years. Such stock options are granted at exercise prices which equal the fair market value of a share of common stock on the grant date. During 1999 and 1998, Synovus granted options to purchase 150 shares of stock to each employee for a total of 1,546,650 and 1,246,650 stock options in 1999 and 1998, respectively. The exercise price per share is equal to the fair market value at the grant date of $19.19 and $22.00 for the 1999 and 1998 grants, respectively. The options are exercisable after the price of the stock has doubled or after three years, whichever comes first. During 1999, Synovus granted options to purchase 500,000 shares of stock to a key executive. The exercise price per share is equal to the fair market value at the grant date of $19.06. The options are exercisable in equal installments when the per share market price of Synovus common stock exceeds $40, $45, and $50, and in any event on September 12, 2006. Synovus applies APB Opinion No. 25 in accounting for its stock option plans, accordingly, compensation expense for the option grants has not been recognized in the accompanying financial statements. A summary of the status of Synovus' stock option plans as of December 31, 1999, 1998, and 1997 and changes during the years then ended is presented below:
1999 1998 1997 ---------------------------- ---------------------------- ---------------------------- WEIGHTED AVG. WEIGHTED AVG. WEIGHTED AVG. SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE ---------------------------- ---------------------------- ---------------------------- Options outstanding at beginning of period 16,364,209 $ 12.84 13,349,230 $ 9.22 10,078,092 $ 5.90 Options granted .......................... 4,589,819 21.13 4,348,434 21.67 4,389,519 15.50 Options exercised ........................ (1,347,711) 5.02 (1,196,396) 4.60 (1,046,860) 3.23 Options canceled ......................... (165,367) 17.27 (137,059) 12.44 (71,521) 10.83 ------------------------- ------------------------- ------------------------- Options outstanding at end of period .. 19,440,950 16.28 16,364,209 12.84 13,349,230 9.22 ========================= ========================= ========================= Options exercisable at end of period .. 8,456,609 $ 8.72 6,211,534 $ 6.04 3,607,612 $ 4.30 ========================= ========================= =========================
F-15 The following is a summary of stock options outstanding at December 31, 1999:
WEIGHTED AVERAGE WEIGHTED RANGE OF OPTIONS OPTIONS WEIGHTED AVERAGE EXERCISE PRICE- AVERAGE REMAINING EXERCISE PRICES OUTSTANDING EXERCISABLE EXERCISE PRICE OPTIONS EXERCISABLE CONTRACTUAL LIFE - --------------- ----------- ----------- ---------------- ------------------- ----------------- $ 2.37 - $ 4.72 2,303,034 2,303,034 $ 3.83 $ 3.83 1.7 years $ 6.74 - $ 9.61 4,624,619 4,624,619 $ 8.15 $ 8.15 4.9 years $14.27 - $22.87 12,513,297 1,528,956 $19.29 $17.80 6.9 years
The per share weighted average fair value of stock options granted during 1999, 1998, and 1997 was $5.41, $4.96, and $3.68, respectively. The fair value for these options was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for 1999, 1998, and 1997, respectively: risk-free interest rates of 5.3%, 5.4%, and 6.5%; expected volatility of 36%, 32%, and 22%, expected life of 4.3 years, 4 years, and 4 years; and dividend yield of 1.7%, 1.3%, and 1.4%. Had Synovus determined compensation expense based on the fair value at the grant date for its stock options granted during the years 1995 through 1999 under SFAS No. 123, Synovus' net income would have been reduced to the pro forma amounts indicated below:
YEARS ENDED DECEMBER 31, 1999 1998 1997 - --------------------------------------------------------------------------- Net income (In thousands): As reported .................. $225,307 196,465 170,829 Pro forma .................... 213,662 187,044 166,361 Earnings per share-diluted: As reported .................. 0.80 0.71 0.63 Pro forma .................... 0.75 0.67 0.61
In addition to the stock options described above, Synovus has awarded non-transferable, restricted shares of Synovus common stock to various key executives under key executive restricted stock bonus plans. The market value of the common stock at the date of issuance is included as a reduction of shareholders' equity in the consolidated balance sheets and is amortized as compensation expense using the straight-line method over the vesting period of the awards. Aggregate compensation expense with respect to the foregoing Synovus restricted stock awards was approximately $1,252,000, $1,189,000, and $1,856,000 in 1999, 1998, and 1997, respectively. Summary information regarding outstanding restricted stock bonus plans at December 31, 1999 is presented below:
Year awards Market value Vesting granted at award date period ----------- ------------- -------- 1995 $2,054,000 5 years 1996 3,771,000 5 years 1997 246,000 5 years
TSYS has also awarded 1,438,800 non-transferable, restricted shares of its common stock to various key executives under restricted stock bonus plans. Compensation expense related to these restricted stock awards was approximately $44,325 and $357,800 in 1998 and 1997, respectively. These awards were fully amortized during 1998. Synovus generally provides noncontributory, trusteed, money purchase, profit sharing and 401(k) plans which cover all eligible employees. Annual discretionary contributions to these plans are set each year by the respective Boards of Directors of each subsidiary, but cannot exceed amounts allowable as a deduction for federal income tax purposes. Aggregate contributions to these money purchase, profit sharing, and 401(k) plans for the years ended December 31, 1999, 1998, and 1997 were $46,475,366, $38,871,669, and $30,961,713, respectively. Synovus has stock purchase plans for directors and employees whereby Synovus makes contributions equal to one-half of employee and director voluntary contributions. The funds are used to purchase outstanding shares of Synovus common stock. TSYS has established director and employee stock purchase plans, modeled after Synovus' plans except that the funds are used to purchase outstanding shares of TSYS common stock. Synovus and TSYS contributed $6,365,000, $5,448,000, and $4,664,000 to these plans in 1999, 1998, and 1997, respectively. Synovus has entered into employment agreements with certain executive officers for past and future services which provide for current compensation in addition to salary in the form of deferred compensation payable at retirement or in the event of death, total disability, or termination of employment. The aggregate cost of these salary continuation plans and employment agreements was not material to the consolidated financial statements. Synovus provides certain medical benefits to qualified retirees through a postretirement medical benefits plan. The benefit expense and accrued benefit cost is not material to Synovus' consolidated financial statements. F-16 NOTE 9 FAIR VALUE OF FINANCIAL INSTRUMENTS The following table presents the carrying and estimated fair values of Synovus' on-balance sheet financial instruments at December 31, 1999 and 1998. The estimated fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties.
1999 1998 -------------------------- ----------------------- CARRYING ESTIMATED CARRYING ESTIMATED (In thousands) VALUE FAIR VALUE VALUE FAIR VALUE - ------------------------------------------------------------------------------------------------------------------------------- Financial assets: Cash and due from banks ................................................. $ 466,543 466,543 373,376 373,376 Interest earning deposits with banks .................................... 1,928 1,928 1,383 1,383 Federal funds sold ...................................................... 92,093 92,093 77,392 77,392 Mortgage loans held for sale ............................................ 83,145 83,145 156,231 156,231 Investment securities available for sale ................................ 1,716,678 1,716,678 1,571,840 1,571,840 Investment securities held to maturity .................................. 277,279 273,504 305,633 311,726 Loans, net .............................................................. 8,940,681 8,984,381 7,489,496 7,468,278 Purchased and originated mortgage servicing rights ...................... 33,411 36,945 28,317 29,091 Financial liabilities: Non-interest bearing deposits ........................................... 1,625,313 1,625,313 1,433,929 1,433,929 Interest bearing deposits ............................................... 7,814,774 7,757,991 7,363,483 7,379,757 Federal funds purchased and securities sold under agreement to repurchase 1,261,391 1,261,391 503,287 503,287 Long-term debt .......................................................... 318,620 318,178 131,802 133,274
The carrying and estimated fair values relating to off-balance sheet financial instruments are summarized in Note 10. Cash and due from banks, interest earning deposits with banks, and federal funds sold are repriced on a short-term basis; as such, the carrying value closely approximates fair value. The fair value of mortgage loans held for sale is based on quoted market prices of comparable instruments. The fair value of loans is estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type, such as commercial, mortgage, home equity, credit card, and other consumer loans. Fixed rate commercial loans are further segmented into certain collateral code groupings. Commercial and other consumer loans with adjustable interest rates are assumed to be at fair value. Mortgage loans are further segmented into fixed and adjustable rate interest terms. Home equity and credit card loans have adjustable interest rates and are, therefore, assumed to be at fair value. The fair value of loans, except mortgage loans, is calculated by discounting contractual cash flows using estimated market discount rates which reflect the credit and interest rate risk inherent in the loan. For mortgage loans, fair value is estimated by discounting contractual cash flows adjusted for certain prepayment assumptions, estimated using discount rates based on secondary market sources adjusted to reflect differences in servicing and credit costs. In accordance with SFAS No. 107, "Disclosures About Fair Value of Financial Instruments," the fair value of deposits with no stated maturity, such as non-interest bearing demand accounts, interest bearing demand deposits, money market accounts, and savings accounts, is equal to the amount payable on demand as of that respective date. The fair value of time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities. Short-term debt that matures within ten days is assumed to be at fair value. The fair value of short-term and long-term debt with fixed interest rates is calculated by discounting contractual cash flows using estimated market discount rates. NOTE 10 COMMITMENTS AND CONTINGENCIES OFF-BALANCE SHEET FINANCIAL INSTRUMENTS Synovus is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers, reduce its own exposure to fluctuations in interest rates, and to conduct lending activities. These financial instruments include commitments to extend credit, standby and commercial letters of credit, commitments to sell mortgage loans, and interest rate contracts. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated financial statements. Synovus' exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, and standby and commercial letters of credit is represented by the contract amount of those instruments. Synovus uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. For interest rate swap and floor agreements held at year-end, Synovus had insignificant credit risk. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, total commitment amounts do not necessarily represent future cash requirements. Loan commitments and letters of credit at December 31, 1999 include the following:
(In thousands) 1999 - ------------------------------------------------------- Standby letters of credit................ $ 359,451 Undisbursed construction loans .......... 536,028 Unused credit card lines................. 698,761 Other loan commitments................... 1,140,704 ----------- Total.................................... $ 2,734,944 ===========
F-17 Due to the short-term nature of the outstanding loan commitments, and the likelihood that, when funded, these loans will be indexed to the then current market rates, the off-balance sheet value closely approximates fair value. At December 31, 1999, outstanding commitments to sell mortgage loans amounted to approximately $86,000,000. Such commitments are entered into to reduce Synovus' exposure to market risk arising from potential changes in interest rates, which could affect the fair value of mortgage loans held for sale and outstanding commitments to originate residential mortgage loans held for sale. The commitments to sell mortgage loans are at fixed prices and are scheduled to settle at specified dates which generally do not exceed 90 days. The off-balance sheet value of outstanding commitments to sell mortgage loans at December 31, 1999 closely approximated fair value. Interest rate swap transactions generally involve the exchange of fixed and floating rate interest payment obligations without the exchange of the underlying principal amounts. Entering into off-balance sheet interest rate contracts involves not only interest rate risk but also, the risk of counterparties' failure to fulfill their legal obligations. Notional principal amounts often are used to express the volume of these transactions, but the amounts potentially subject to credit risk are much smaller. The consolidated notional amount of interest rate swap, floor, and collar contracts was $665,000,000 and $595,000,000 as of December 31, 1999 and 1998, respectively, with a carrying amount of $77,000 and $280,000 at December 31, 1999 and 1998, respectively. The estimated net unrealized gain (loss) on these interest rate contracts was ($10,575,000) and $5,578,000 at December 31, 1999 and 1998, respectively. These interest rate contracts are being utilized to hedge approximately $825,500,000 in prime rate floating loans in Georgia and South Carolina and $30 million in fixed rate deposits in South Carolina. (Dollars in thousands)
Weighted Weighted Weighted Average Net Notional Average Average Maturity Unrealized Unrealized Unrealized DECEMBER 31, 1999 Amount Receive Rate Pay Rate(a) In Months Gains Losses Gains (Losses) - --------------------------------------------------------------------------------------------------------------------------------- Receive fixed swaps - LIBOR $180,000 5.78% 6.16% 19 $ 181 (2,711) (2,530) Receive fixed swaps - Prime 420,000 8.82% 8.50% 39 75 (8,047) (7,972) -------- ---- ---- -- --- -------- -------- Total receive fixed swaps 600,000 7.91% 7.80% 33 256 (10,758) (10,502) -------- ---- ---- -- --- -------- --------
Weighted Weighted Average Net Notional Average Maturity Unrealized Unrealized Unrealized Amount Floor Rate In Months Gains Losses Gains (Losses) - --------------------------------------------------------------------------------------------------------------------------------- Purchased interest rate floors.. 65,000 7.90% 9 -- (73) (73)
Weighted Average Net Notional Maturity Unrealized Unrealized Unrealized Amount In Months Gains Losses Gains (Losses) Total $665,000 31 $ 256 (10,831) (10,575) ======== === ======== =======
Weighted Weighted Weighted Average Net Notional Average Average Maturity Unrealized Unrealized Unrealized DECEMBER 31, 1998 Amount Receive Rate Pay Rate(a)(b) In Months Gains Losses Gains (Losses) - --------------------------------------------------------------------------------------------------------------------------------- Receive fixed swaps - LIBOR $ 235,000 5.79% 5.33% 9 $ 1,220 (16) 1,204 Receive fixed forward starting swaps - LIBOR 100,000 5.90% 5.07% 41 1,455 (16) 1,439 Receive fixed swaps - Prime 95,000 8.79% 7.75% 29 2,226 -- 2,226 -------- ---- ---- -- ----- -------- ------- Total receive fixed swaps 430,000 6.48% 5.80% 21 4,901 (32) 4,869 -------- ---- ---- -- ----- -------- -------
Weighted Weighted Weighted Average Net Notional Average Average Maturity Unrealized Unrealized Unrealized Amount Cap Rate Floor Rate In Months Gains Losses Gains (Losses) - ---------------------------------------------------------------------------------------------------------------------------------- Purchased interest rate collars 80,000 9.16% 7.91% 10 $ 256 -- 256
Weighted Weighted Average Net Notional Average Maturity Unrealized Unrealized Unrealized Amount Floor Rate In Months Gains Losses Gains (Losses) - ---------------------------------------------------------------------------------------------------------------------------------- Purchased interest rate floors 85,000 7.87% 24 $ 453 -- 453
Weighted Average Net Notional Maturity Unrealized Unrealized Unrealized Amount In Months Gains Losses Gains (Losses) - --------------------------------------------------------------------------------------------------------------------------------- Total $595,000 20 $ 5,610 (32) 5,578 ======== ===== ===== =====
(a) Variable pay rate based upon contract rates in effect at December 31, 1999 and 1998. (b) Pay rate on forward starting swaps is based on the three month LIBOR at December 31, 1998. F-18 LEASE COMMITMENTS Synovus and its subsidiaries have entered into long-term operating leases for various branch locations, corporate facilities, data processing equipment, and furniture. Management expects that, as these leases expire, they will be renewed or replaced by other leases. At December 31, 1999, minimum rental commitments under all such noncancelable leases for the next five years are as follows:
Equipment Real and (In thousands) Property Furniture Total - ------------------------------------------------------- 2000............. $11,289 89,427 100,716 2001............. 10,687 91,958 102,645 2002............. 8,541 79,135 87,676 2003............. 2,309 44,775 47,084 2004............. 5,266 35,364 40,630
In 1997, TSYS entered into an operating lease agreement for TSYS' new corporate campus. Under the agreement, which is guaranteed by Synovus, the lessor paid for the construction and development costs and has leased the facilities to TSYS for a term of three years beginning in November 1999. The lease provides for substantial residual value guarantees and includes purchase options at the original cost of the property. The amount of the residual value guarantees relative to the assets under this lease is projected to be $81.4 million. The terms of this lease financing arrangement require, among other things, that TSYS maintain certain minimum financial ratios and provide certain information to the lessor. Rental expense on equipment, including cancelable leases, was $82,272,000, $55,320,000, and $51,925,000 in 1999, 1998, and 1997, respectively. Rental expense on facilities was $11,033,000, $7,685,000, and $7,170,000 in 1999, 1998, and 1997, respectively. CONTRACTUAL COMMITMENTS In the normal course of its business, TSYS maintains processing contracts with its customers. These processing contracts contain commitments, including, but not limited to, minimum standards and time frames against which TSYS' performance is measured. In the event that TSYS does not meet its contractual commitments with its customers, TSYS may incur penalties and/or certain customers may have the right to terminate their contracts with TSYS. TSYS does not believe that it will fail to meet its contractual commitments to an extent that will result in a material adverse effect on its financial condition or results of operations. LEGAL PROCEEDINGS Synovus is subject to various legal proceedings and claims which arise in the ordinary course of its business. Any litigation is vigorously defended by Synovus and, in the opinion of management, based on consultation with external legal counsel, any outcome of such litigation would not materially affect Synovus' consolidated financial position or results of operations. Currently, multiple lawsuits seeking class action treatment are pending against one of Synovus' Alabama banking subsidiaries that involve: (1) payments of service fees or interest rebates to automobile dealers in connection with the assignment of automobile credit sales contracts to that Synovus subsidiary; (2) the forced placement of insurance to protect that Synovus subsidiary's interest in collateral for which consumer credit customers have failed to obtain or maintain insurance; and (3) the receipt of commissions by that Synovus subsidiary in connection with the sale of credit life insurance to its consumer credit customers and the charging of an interest surcharge and a processing fee in connection with consumer loans made by that subsidiary. These lawsuits seek unspecified damages, including punitive damages. Synovus intends to vigorously contest these lawsuits and all other litigation to which Synovus and its subsidiaries are parties. Based upon information presently available, and in light of legal, equitable, and factual defenses available to Synovus and its subsidiaries, contingent liabilities arising from the threatened and pending litigation are not considered material. It should be noted, however, that large punitive damage awards, bearing little relation to the actual damages sustained by plaintiffs, have been awarded in Alabama. In November, 1998, a class action complaint was filed against NationsBank of Delaware, N.A., in the United States District Court for the Southern District of Mississippi. On March 23, 1999, the named plaintiff amended the complaint and named TSYS and certain credit bureaus as defendants in the case. The named plaintiff alleges, among other things, that the defendants failed to report properly the credit standing of each member of the putative class. The named plaintiff has defined the class as all persons and entities within the United States who obtained credit cards from NationsBank and whose accounts were purchased by or transferred to U.S. BankCard and whose accounts were reported to credit bureaus or credit agencies incorrectly in August 1998. The amended complaint alleges negligence, violation of the Fair Credit Reporting Act, breach of the duty of good faith and fair dealing, and seeks declaratory relief, injunctive relief and the imposition of punitive damages. This lawsuit seeks unspecified damages. Though settlement negotiations have occurred, these negotiations have to date not resulted in a definitive settlement agreement among the parties. TSYS is not in a position to determine its possible exposure, if any, as a result of this litigation. NOTE 11 SUPPLEMENTAL FINANCIAL DATA Components of other operating income and expenses in excess of 1% of total revenues for any of the respective years are as follows:
(In thousands) 1999 1998 1997 - ----------------------------------------------------------------------------- Income: Income associated with originating, servicing, and selling mortgage loans...... $21,196 21,366 10,681 Third-party services on credit cards and other consumer loans................... 37,698 38,220 23,580 Expenses: Stationery, printing, and supplies......... 33,700 28,556 26,555 Third-party processing services............ 20,018 6,263 5,516
F-19 NOTE 12 OPERATING SEGMENTS Synovus has two reportable segments: banking operations and transaction processing services. The banking operations segment is predominately involved in commercial banking activities and also provides retail banking, trust, mortgage, and brokerage services. The transaction processing segment consists primarily of operations at TSYS, which is primarily credit, debit, commercial and private label card processing. The transaction processing services segment also includes related services to banks and other card issuing institutions as well as TDM's debt collection and bankruptcy management operations. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. All inter-segment services provided are charged at the same rates as those charged to unaffiliated customers. Such services are included in the revenues and net income of the respective segments and are eliminated to arrive at consolidated totals. Segment information for the years ended December 31, 1999, 1998, and 1997 is presented below.
TRANSACTION BANKING PROCESSING (IN THOUSANDS) OPERATIONS SERVICES (c) ELIMINATIONS CONSOLIDATED - -------------------------------------------------------------------------------------------------------------------- Total revenue (e) ................ 1999 $ 692,718 568,613 (8,272)(a) 1,253,059 .............................. 1998 614,003 427,676 (4,401)(a) 1,037,278 .............................. 1997 548,769 381,420 (2,857)(a) 927,332 Net interest income .............. 1999 511,135 2,159 -- 513,294 .............................. 1998 452,755 2,310 -- 455,065 .............................. 1997 423,798 2,122 -- 425,920 Income before taxes .............. 1999 253,571 108,932 (13,188)(b) 349,315 .............................. 1998 228,213 86,371 (10,559)(b) 304,025 .............................. 1997 203,329 72,827 (9,143)(b) 267,013 Income tax expense ............... 1999 88,251 35,757 -- 124,008 .............................. 1998 80,423 27,137 -- 107,560 .............................. 1997 71,987 24,197 -- 96,184 Net income ....................... 1999 165,320 73,175 (13,188)(b) 225,307 .............................. 1998 147,790 59,234 (10,559)(b) 196,465 .............................. 1997 131,342 48,630 (9,143)(b) 170,829 Total assets ..................... 1999 12,142,344 464,969 (60,312)(d) 12,547,001 .............................. 1998 10,466,428 356,125 (10,961)(d) 10,811,592 .............................. 1997 9,304,331 299,705 (73,495)(d) 9,530,541
(a) Principally, data processing service revenues provided to the banking operations segment. (b) Minority interest in TSYS. (c) Includes equity in income of joint ventures which is included in other operating income. (d) Primarily TSYS' cash deposits with the banking operations segment. (e) Consists of net interest income and non-interest income. NOTE 13 CONDENSED FINANCIAL INFORMATION OF SYNOVUS FINANCIAL CORP. (PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS (In thousands) DECEMBER 31, 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------ ASSETS Cash .......................................................................................... $ 5,050 5,569 Investment in consolidated bank subsidiaries, at equity (including TSYS) ...................... 1,233,759 1,128,990 Investment in consolidated nonbank subsidiaries, at equity .................................... 44,171 35,686 Notes receivable from subsidiaries ............................................................ 23,776 21,463 Other assets .................................................................................. 31,274 30,788 ----------- --------- Total assets ........................................................................ $ 1,338,030 1,222,496 =========== ========= LIABILITIES AND SHAREHOLDERS' EQUITY Long-term debt ................................................................................ $ 76,480 76,720 Other liabilities ............................................................................. 34,881 33,859 ----------- --------- Total liabilities ................................................................... 111,361 110,579 ----------- --------- Shareholders' equity: Common stock ............................................................................. 282,189 278,807 Surplus .................................................................................. 79,190 59,657 Less treasury stock ...................................................................... (1,285) (5,099) Less unamortized restricted stock ........................................................ (1,293) (2,545) Accumulated other comprehensive income ................................................... (30,134) 10,475 Retained earnings ........................................................................ 898,002 770,622 ----------- --------- Total shareholders' equity .......................................................... 1,226,669 1,111,917 ----------- --------- Total liabilities and shareholders' equity .......................................... $ 1,338,030 1,222,496 =========== =========
F-20
CONDENSED STATEMENTS OF INCOME (In thousands) YEARS ENDED DECEMBER 31, 1999 1998 1997 - -------------------------------------------------------------------------------------------------------------------------------- Income: Dividends received from bank subsidiaries (including TSYS) ........................... $153,689 132,714 105,486 Management fees ...................................................................... 2,125 1,871 1,806 Interest income ...................................................................... 3,301 2,237 1,853 Other income ......................................................................... 10,066 5,684 2,394 -------- ------- ------- Total income ..................................................................... 169,181 142,506 111,539 -------- ------- ------- Expenses: Interest expense ..................................................................... 4,878 4,774 4,785 Other expenses ....................................................................... 25,217 24,651 23,718 -------- ------- ------- Total expenses ................................................................... 30,095 29,425 28,503 -------- ------- ------- Income before income taxes and equity in undistributed income of subsidiaries .... 139,086 113,081 83,036 Allocated income tax benefit ............................................................. (6,404) (5,502) (6,569) -------- ------- ------- Income before equity in undistributed income of subsidiaries ..................... 145,490 118,583 89,605 Equity in undistributed income of subsidiaries ........................................... 79,817 77,882 81,224 -------- ------- ------- Net income ....................................................................... $225,307 196,465 170,829 ======== ======= =======
CONDENSED STATEMENTS OF CASH FLOWS (In thousands) YEARS ENDED DECEMBER 31, 1999 1998 1997 - -------------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income ........................................................................... $ 225,307 196,465 170,829 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed earnings of subsidiaries ................................ (79,817) (77,882) (81,224) Net income of equity method investments ......................................... (60) (157) (44) Depreciation, amortization, and accretion, net .................................. 1,705 1,309 847 Net increase (decrease) in other liabilities .................................... 2,270 (5,576) (8,382) Net (increase) decrease in other assets ......................................... (4,233) (1,758) (6,848) -------- ------- ------- Net cash provided by operating activities ................................... 145,172 112,401 75,178 -------- ------- ------- INVESTING ACTIVITIES Net investment in subsidiaries ....................................................... (55,836) (52,733) (5,093) Net increase in notes receivable from subsidiaries ................................... -- -- (700) Net (increase) decrease in short-term notes receivable from subsidiaries ............. (2,280) 14,254 (8,392) Purchase of premises and equipment, net .............................................. (114) (1,111) (190) -------- ------- ------- Net cash used in investing activities ....................................... (58,230) (39,590) (14,375) -------- ------- ------- FINANCING ACTIVITIES Dividends paid to shareholders ........................................................ (93,923) (74,768) (60,586) Principal repayments on long-term debt ................................................ (240) (4,289) (240) Purchase of treasury stock ............................................................ -- (3,792) (22) Proceeds from issuance of common stock ................................................ 6,702 9,417 5,785 -------- ------- ------- Net cash used in financing activities ....................................... (87,461) (73,432) (55,063) -------- ------- ------- (Decrease) increase in cash .............................................................. (519) (621) 5,740 Cash at beginning of period .............................................................. 5,569 6,190 450 -------- ------- ------- Cash at end of period .................................................................... $ 5,050 5,569 6,190 ======== ======= =======
For the years ended December 31, 1999, 1998, and 1997, the Parent Company paid income taxes of $103 million, $91 million, and $93 million, respectively, and interest in the amount of $5 million each year. The amount of dividends paid to the Parent Company from each of the subsidiary banks is limited by various banking regulatory agencies. The amount of cash dividends available from subsidiary banks for payment in 2000, in the aggregate, without prior approval from the banking regulatory agencies, is approximately $109,655,000. In prior years, certain Synovus banks have received permission and have paid cash dividends to the Parent Company in excess of these regulatory limitations. F-21 Synovus is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on Synovus' consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, Synovus must meet specific capital guidelines that involve quantitative measures of Synovus' assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Synovus' capital amounts and classification are also subject to qualitative judgements by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require Synovus on a consolidated basis, and the Parent Company and subsidiary banks, individually, to maintain minimum amounts and ratios of total and Tier I capital to risk-weighted assets as defined, and of Tier I capital to average assets, as defined. Management believes, as of December 31, 1999, that Synovus meets all capital adequacy requirements to which it is subject. As of December 31, 1999, the most recent notification from The Federal Reserve Bank of Atlanta categorized the significant Synovus subsidiaries as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, Synovus and its subsidiaries must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table below. Management is not aware of the existence of any conditions or events occurring subsequent to December 31, 1999 which would affect Synovus' or its subsidiaries' well capitalized classification. Actual capital amounts and ratios for Synovus are presented in the table below on a consolidated basis and for each significant subsidiary, as defined.
TO BE WELL CAPITALIZED FOR CAPITAL UNDER PROMPT CORRECTIVE (Amounts in thousands) ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS ---------------------------- --------------------- ----------------------- DECEMBER 31, 1999 1998 1999 1998 1999 1998 - ----------------------------------------------------------------------------------------------------------------------------- SYNOVUS FINANCIAL CORP Tier I capital ...................... $ 1,281,850 1,118,599 409,708 351,423 N/A N/A Total risk-based capital ............ 1,410,888 1,230,192 819,416 702,845 N/A N/A Tier I capital ratio ................ 12.51% 12.73 4.00 4.00 N/A N/A Total risk-based capital ratio ...... 13.77 14.00 8.00 8.00 N/A N/A Leverage ratio ...................... 10.52 10.82 4.00 4.00 N/A N/A COLUMBUS BANK AND TRUST COMPANY Tier I capital ...................... $ 501,325 428,655 98,292 84,732 147,438 127,098 Total risk-based capital ............ 521,730 446,192 196,584 169,463 245,730 211,829 Tier I capital ratio ................ 20.40% 20.24 4.00 4.00 6.00 6.00 Total risk-based capital ratio ...... 21.23 21.06 8.00 8.00 10.00 10.00 Leverage ratio ...................... 17.55 21.22 4.00 4.00 5.00 5.00 THE NATIONAL BANK OF SOUTH CAROLINA Tier I capital ...................... $ 128,018 111,129 56,723 47,474 85,085 72,212 Total risk-based capital ............ 145,762 125,996 113,446 94,949 141,808 118,686 Tier I capital ratio ................ 9.03% 9.36 4.00 4.00 6.00 6.00 Total risk-based capital ratio ...... 10.28 10.62 8.00 8.00 10.00 10.00 Leverage ratio ...................... 7.79 8.02 4.00 4.00 5.00 5.00
F-22 NOTE 14 EARNINGS PER SHARE The following table displays a reconciliation of the information used in calculating basic and diluted earnings per share (EPS) for the years ended December 31, 1999, 1998, and 1997.
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997 -------------------------------- -------------------------------- -------------------------------- (In thousands, NET AVERAGE NET INCOME NET AVERAGE NET INCOME NET AVERAGE NET INCOME except per share data) INCOME SHARES PER SHARE INCOME SHARES PER SHARE INCOME SHARES PER SHARE - ---------------------------------------------------------------------------------------------------------------------------------- BASIC EPS $225,307 280,016 $.80 $196,465 272,416 $.72 $170,829 269,285 $.63 Effect of dilutive options -- 3,339 -- 4,807 -- 3,867 -------- ------- -------- ------- -------- ------- DILUTED EPS $225,307 283,355 $.80 $196,465 277,223 $.71 $170,829 273,152 $.63 ======== ======= ==== ======== ======= ==== ======== ======= ====
The following represents options to purchase shares of Synovus common stock that were outstanding during the periods noted below, but were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average market price of the common shares.
WTD. AVG. EXERCISE PRICE QUARTER ENDED NUMBER OF SHARES PER SHARE - ------------- ---------------- --------- December 31, 1999................. 6,260,596.................$21.87 September 30, 1999................ 6,383,651.................$21.82 June 30, 1999..................... 3,666,048.................$22.60 December 31, 1998................. 10,000.................$22.81 December 31, 1997................. 1,328,936.................$18.37 September 30, 1997................ 1,328,936.................$18.37
NOTE 15 OTHER COMPREHENSIVE INCOME (LOSS) The components of other comprehensive income (loss) for the years ended December 31, 1999, 1998, and 1997 are as follows:
1999 1998 1997 --------------------------------- ---------------------------------- --------------------------------- BEFORE-TAX TAX EXPENSE NET OF BEFORE-TAX TAX EXPENSE NET OF BEFORE-TAX TAX EXPENSE NET OF (In thousands) AMOUNT OR BENEFIT TAX AMOUNT AMOUNT OR BENEFIT TAX AMOUNT AMOUNT OR BENEFIT TAX AMOUNT - ------------------------------------------------------------------------------------------------------------------------------------ Net unrealized gains/losses on investment securities available for sale: Unrealized gains (losses) arising during the year ..$(63,698) 24,524 (39,174) 8,535 (3,286) 5,249 11,031 (4,247) 6,784 Reclassification adjustment for (gains) losses realized in net income ............... (1,202) 463 (739) (1,299) 500 (799) 66 (26) 40 --------- ------ -------- ------- ------- ------ ------ ------- ------ Net unrealized gains (losses) ................. (64,900) 24,987 (39,913) 7,236 (2,786) 4,450 11,097 (4,273) 6,824 Foreign currency translation adjustments .. (223) -- (223) 1 -- 1 -- -- -- --------- ------ -------- ------- ------- ------ ------ ------- ------ Other comprehensive income (loss) ............$(65,123) 24,987 (40,136) 7,237 (2,786) 4,451 11,097 (4,273) 6,824 ========= ====== ======== ======= ======= ====== ====== ======= ======
F-23 INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders Synovus Financial Corp.: We have audited the accompanying consolidated balance sheets of Synovus Financial Corp. and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1999. These consolidated financial statements are the responsibility of Synovus' management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Synovus Financial Corp. and subsidiaries at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1999, in conformity with generally accepted accounting principles. /s/ KPMG LLP January 12, 2000 F-24 (Amounts in thousands, except per share data)
YEARS ENDED DECEMBER 31, ---------------------------------------------------------------- 1999 1998 1997 1996 (b) 1995 ---------------------------------------------------------------- INCOME STATEMENT: Total revenues (a) .............................. $ 1,251,857 1,035,979 927,398 821,793 702,412 Net interest income ............................. 513,294 455,065 425,920 386,350 352,355 Provision for losses on loans ................... 34,007 26,882 32,485 32,411 26,841 Non-interest income ............................. 739,765 582,213 501,412 435,443 350,057 Non-interest expense ............................ 869,737 706,371 627,834 563,496 460,367 Net income ...................................... 225,307 196,465 170,829 144,174 118,338 PER SHARE DATA: Net income - basic .............................. 0.80 0.72 0.63 0.54 0.45 Net income - diluted ............................ 0.80 0.71 0.63 0.53 0.44 Cash dividends declared ......................... 0.36 0.29 0.24 0.19 0.16 Book value ...................................... 4.35 3.99 3.50 3.02 2.68 BALANCE SHEET: Investment securities ........................... 1,993,957 1,877,473 1,702,681 1,685,672 1,527,039 Loans, net of unearned income ................... 9,068,239 7,603,605 6,752,154 6,188,882 5,620,384 Deposits ........................................ 9,440,087 8,797,412 7,928,211 7,395,732 6,900,943 Long-term debt .................................. 318,620 131,802 131,492 100,415 109,299 Shareholders' equity ............................ 1,226,669 1,111,917 937,222 812,296 718,408 Average total shareholders' equity .............. 1,165,426 1,013,334 865,232 757,302 662,458 Average total assets ............................ 11,438,696 9,827,925 9,067,237 8,355,951 7,692,029 PERFORMANCE RATIOS AND OTHER DATA: Return on average assets ........................ 1.97% 2.00 1.88 1.73 1.54 Return on average equity ........................ 19.33 19.39 19.74 19.04 17.86 Net interest margin ............................. 5.07 5.23 5.28 5.19 5.15 Efficiency ratio (c) ............................ 58.15 58.01 56.45 58.36 60.95 Dividend payout ratio (d) ....................... 43.78 41.52 38.10 36.62 36.69 Average shareholders' equity to average assets .. 10.19 10.31 9.54 9.06 8.61 Average shares outstanding, basic ............... 280,016 272,416 269,285 268,271 265,546 Average shares outstanding, diluted ............. 283,355 277,223 273,152 272,594 268,395
(a) Consists of net interest income and non-interest income, excluding securities gains (losses). (b) 1996 selected financial data reflects the impact of the special FDIC assessment. Without the special FDIC assessment, net income would have been $146,970 and diluted net income per share would have been $.57. (c) For the banking operations segment. (d) Determined by dividing dividends declared (excluding pooled subsidiaries) by consolidated net income. F-25 INTRODUCTION To better understand financial trends and performance, Synovus analyzes certain financial data in two separate components: banking operations and transaction processing services. Banking operations represents 55.3% and 73.4% of 1999's consolidated revenues and net income, respectively. Transaction processing services consists of majority-owned Total System Services, Inc. (TSYS) and wholly-owned TSYS Total Debt Management, Inc. (TDM). TSYS provides bankcard data processing and related services to banks and other institutions generally under long-term processing contracts. TDM is a debt collection and bankruptcy management business. TSYS represented 96.4% and 93.7% of 1999's total transaction processing revenues and net income, respectively. The following discussion reviews the results of operations and assesses the financial condition of Synovus. This discussion should be read in conjunction with the preceding consolidated financial statements and accompanying notes as well as the selected financial data. SUMMARY 1999 was another exceptional year for Synovus. Total revenues for 1999 were $1.252 billion, a 20.8% increase over 1998. Net income for 1999 was $225.3 million, an increase of 14.7% over 1998 net income of $196.5 million. Diluted net income per share increased to $0.80 in 1999, up 12.2% over $0.71 per share in 1998. Return on assets was 1.97% in 1999, compared to 2.00% in 1998. Return on equity was 19.33% in 1999, compared to 19.39% in 1998. Two major growth areas -- fee income from both TSYS and banking operations; and core commercial lending -- were the primary contributors to 1999's financial performance. Synovus' operating results for 1999 also reflect the impact of expense control management and continued strong credit quality, as exhibited by the credit quality indicators. Banking operations' revenues increased by 13.2% over 1998, while net income increased 11.9% over 1998. Return on assets for the year was 1.49%, and return on equity was 18.04%, compared to 1.55% and 18.16%, respectively, for 1998. Transaction processing services revenues for 1999 were $568.6 million, a 33.0% increase over 1998. Net income for 1999 was $73.2 million, up 23.5% from $59.2 million in 1998. The increase in revenues and net income was due primarily to the addition of various retail credit card portfolios to TSYS' customer base in 1999, net internal growth of existing customers, as well as portfolio acquisitions by existing customers. Synovus' total assets ended the year at $12.5 billion, a growth rate of 16.1% for 1999, resulting primarily from net loan growth of $1.451 billion, or 19.4%. This asset growth was partially funded by a $642.7 million, or 7.3%, increase in total deposits. Additional funding was provided by long-term debt (primarily in the form of Federal Home Loan Bank advances) and short-term fundings (consisting mostly of federal funds purchased) which increased by a total of $944.9 million, or 48.8%, over 1998. The increase in loans reflects the continued strength of the regional economy and our competitive advantage in the local markets we serve. Shareholders' equity grew 10.3% to $1.2 billion, which represented 9.78% of total assets. During 1998, Synovus completed three bank acquisitions which were accounted for as poolings of interests; however, financial information preceding the dates of acquisition have not been restated since the effect was not material. Net income for the years ended December 31, 1998 and 1997 would have been increased by $2.6 million and $7.2 million, respectively, if the previous periods had been restated for these acquisitions. Additionally, total assets, net loans, and deposits at December 31, 1997 would have increased by $589.9 million, $345.4 million, and $540.9 million, respectively, if prior periods had been restated. ACQUISITIONS Acquisitions completed during the past three years are as follows:
(Dollars in thousands) Total Shares Accounting Company and Location Date Assets Issued Treatment - ----------------------------------------------------------------------------------------------------------------------- Ready Bank of Fort Walton Beach October 31, 1999 $ 65,000 902,785 Pooling (Non-restated) Holding Company, Inc. Ft. Walton Beach, Florida Horizon Bancshares, Inc. October 31, 1999 $ 60,000 1,043,631 Pooling (Non-restated) Pensacola, Florida Wallace & de Mayo September 30, 1999 $ 7,000 2,339,624 Pooling Norcross, Georgia Merit Holding Corporation September 30, 1999 $306,000 5,995,085 Pooling Tucker, Georgia Canterbury Trust Company, Inc. January 31, 1999 $ 7,400 333,163 Purchase Birmingham, Alabama Georgia Bank & Trust December 18, 1998 $178,000 1,811,058 Pooling (Non-restated) Calhoun, Georgia Bank of Georgia November 30, 1998 $ 55,000 850,269 Pooling (Non-restated) Watkinsville, Georgia Community Bank Capital Corporation September 1, 1998 $348,000 3,774,531 Pooling (Non-restated) Alpharetta, Georgia
This information is discussed in further detail in Note 1 of the financial statements. F-26 TABLE ONE NET INTEREST INCOME (In thousands)
YEARS ENDED DECEMBER 31, ---------------------------------------- 1999 1998 1997 ---------------------------------------- Interest income .................................... $888,007 792,318 746,261 Taxable-equivalent adjustment ...................... 5,309 4,637 4,477 -------- ------- ------- Interest income, taxable-equivalent ............. 893,316 796,955 750,738 Interest expense ................................... 374,713 337,253 320,341 -------- ------- ------- Net interest income, taxable-equivalent ......... $518,603 459,702 430,397 ======== ======= =======
EARNING ASSETS, SOURCES OF FUNDS, AND NET INTEREST INCOME Average total assets for 1999 were $11.4 billion, or 16.4% over 1998 average total assets of $9.8 billion. Average earning assets for 1999 were $10.2 billion, which represented 89.4% of average total assets. An $890.2 million, or 10.9%, increase in average deposits for 1999 provided the primary funding for a $1.2 billion, or 17.6%, increase in average net loans. Average shareholders' equity for 1999 was $1.2 billion. For 1998, average total assets increased $760.7 million, or 8.4%. Average earning assets for 1998 were $8.8 billion, which represented 89.5% of average total assets. For more detailed information on Synovus' average balance sheets for 1999, 1998, and 1997, refer to Table Two. Net interest income (interest income less interest expense) is a major component of Synovus' net income, representing the earnings of Synovus' primary business of gathering funds from deposit sources and investing those funds in loans and securities. Synovus' long term objective is to manage those assets and liabilities to provide the largest possible amount of income while balancing interest rate, credit, liquidity, and capital risks. Net interest income is presented in this discussion on a tax-equivalent basis, so that the income from assets exempt from federal income taxes is adjusted based on a statutory marginal federal tax rate of 35% in all years (See Table One). The net interest margin is defined as taxable-equivalent net interest income divided by average total interest earning assets and provides an indication of the efficiency of the earnings from balance sheet activities. The net interest margin is affected by changes in the spread between interest earning asset yields and interest bearing liability costs (spread rate), and by the percentage of interest earning assets funded by non-interest bearing liabilities. Net interest income for 1999 was a record $513.3 million, up $58.2 million, or 12.8%, from 1998. On a taxable-equivalent basis, net interest income was $518.6 million, up $58.9 million, or 12.8%, over 1998. During 1999, average interest earning assets increased $1.4 billion, or 16.3%, with the majority of this increase attributable to loan growth. Increases in the level of federal funds purchased and time, money market, and interest-bearing demand deposits were the main contributors to the $1.3 billion, or 18%, growth in average interest bearing liabilities. The 5.07% net interest margin achieved in 1999 is a 16-basis point decrease over the 5.23% reported for 1998. This decrease is the result of lower loan and investment yields partially offset by lower cost of funds. A 35-basis point decrease in the average prime rate for 1999 was the primary cause of the decreased loan yields. Another influence impacting the net interest margin is the percentage of earning assets funded by non-interest bearing liabilities. Funding for Synovus' earning assets comes from interest bearing liabilities, non-interest bearing liabilities, and shareholders' equity. Earning assets funded by non-interest bearing liabilities continue to provide a positive impact on the net interest margin. During 1998, net interest income and tax-equivalent net interest income increased 6.8%. Average interest earning assets grew 7.9% while interest bearing liabilities increased 6.5%. The net interest margin of 5.23% is a 5-basis-point decrease over the 5.28% reported in 1997. This decrease is the result of lower loan and investment yields partially offset by a lower cost of funds. F-27 TABLE TWO CONSOLIDATED AVERAGE BALANCES, INTEREST, AND YIELDS (Amounts in thousands)
1999 1998 1997 ------------------------------ ------------------------------ ----------------------------- AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/ BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE ------------ -------- ------ ----------- -------- ------ ----------- -------- ------ ASSETS INTEREST EARNING ASSETS: Taxable loans, net (a)(b) ........ $ 8,186,544 756,202 9.24% $ 6,961,897 671,167 9.64% $ 6,440,190 630,174 9.79% Tax-exempt loans, net (a)(b)(c) .. 31,510 3,493 11.09 31,725 3,193 10.06 32,965 3,565 10.81 Reserve for loan losses .......... (119,626) -- -- (107,898 -- -- (98,496) -- -- ------------ -------- ----------- -------- ----------- -------- Loans, net .................... 8,098,428 759,695 9.38 6,885,724 674,360 9.79 6,374,659 633,739 9.94 ------------ -------- ----------- -------- ----------- -------- Taxable investment securities (d) 1,798,853 110,214 6.13 1,581,497 100,841 6.38 1,584,757 101,900 6.43 Tax-exempt investment securities (c)(d) .............. 170,744 12,781 7.49 142,318 11,049 7.76 115,284 9,847 8.54 ------------ -------- ----------- -------- ----------- -------- Total investment securities ... 1,969,597 122,995 6.24 1,723,815 111,890 6.49 1,700,041 111,747 6.57 ------------ -------- ----------- -------- ----------- -------- Interest earning deposits with banks .......................... 1,562 88 5.63 896 51 5.69 1,448 77 5.32 Federal funds sold ............... 57,730 2,879 4.99 92,454 5,152 5.57 43,192 2,807 6.50 Mortgage loans held for sale ..... 102,524 7,659 7.47 95,699 5,502 5.75 34,223 2,368 6.92 ------------ -------- ----------- -------- ----------- -------- Total interest earning assets . 10,229,841 893,316 8.73 8,798,588 796,955 9.06 8,153,563 750,738 9.21 ------------ -------- ----- ----------- -------- ----- ----------- -------- ----- Cash and due from banks ............. 340,478 329,312 325,188 Premises and equipment, net ......... 408,443 331,644 293,139 Other real estate ................... 8,773 9,958 11,336 Other assets (e) .................... 451,161 358,423 284,011 ------------ ----------- ----------- Total assets .................. $ 11,438,696 $ 9,827,925 $ 9,067,237 ============ =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY INTEREST BEARING LIABILITIES: Interest bearing demand deposits .... $ 1,355,301 30,429 2.25 $ 1,202,108 29,922 2.49 $ 1,087,617 28,179 2.59 Money market accounts ............... 1,796,114 73,280 4.08 1,452,386 62,859 4.33 1,253,634 54,259 4.33 Savings deposits .................... 466,879 10,085 2.16 453,487 11,166 2.46 461,415 11,999 2.60 Time deposits ....................... 3,963,862 209,958 5.30 3,710,312 210,089 5.66 3,531,265 199,090 5.64 Federal funds purchased and securities sold under agreement to repurchase ..................... 786,954 39,427 5.01 311,617 15,413 4.95 356,122 19,119 5.37 Other borrowed funds ................ 199,091 11,534 5.79 131,381 7,804 5.94 128,543 7,695 5.99 ------------ -------- ----------- -------- ----------- -------- Total interest bearing liabilities .................... 8,568,201 374,713 4.37 7,261,291 337,253 4.64 6,818,596 320,341 4.70 ------------ -------- ----- ----------- -------- ----- ----------- -------- ----- SPREAD RATE ...................... 4.36% 4.42% 4.51% ===== ===== ===== Non-interest bearing demand deposits .......................... 1,450,547 1,324,257 1,194,759 Other liabilities ................... 254,522 229,043 188,650 Shareholders' equity ................ 1,165,426 1,013,334 865,232 ------------ ----------- ----------- Total liabilities and shareholders' equity ........ $ 11,438,696 $ 9,827,925 $ 9,067,237 ============ =========== =========== NET INTEREST INCOME/MARGIN .......... 518,603 5.07% 459,702 5.23% 430,397 5.28% ===== ===== ===== Taxable-equivalent adjustment ....... (5,309) (4,637) (4,477) -------- -------- -------- Net interest income, actual ......... $513,294 $455,065 $425,920 ======== ======== ========
(a) Average loans are shown net of unearned income. Nonperforming loans are included. (b) Interest income includes loan fees as follows: 1999 - $37,155, 1998 - $30,092, 1997 - $26,373. (c) Reflects taxable-equivalent adjustments, using the statutory federal income tax rate of 35%, in adjusting interest on tax-exempt loans and investment securities to a taxable-equivalent basis. (d) Includes certain investment securities available for sale, at their respective average amortized cost. For the years ended December 31, 1999, 1998, and 1997, the average amortized cost of these securities amounted to $1,680,945, $1,411,233, and $1,354,863, respectively. (e) In 1999, there was a $9,138 average net unrealized loss on investment securities available for sale. In 1998, there was a $16,246 average net unrealized gain and in 1997 there was a $973 average net unrealized loss on investment securities available for sale. F-28 TABLE THREE RATE/VOLUME ANALYSIS (In thousands)
1999 COMPARED TO 1998 1998 COMPARED TO 1997 ---------------------------------- ---------------------------------- CHANGE DUE TO (a) CHANGE DUE TO (a) ---------------------------------- ---------------------------------- YIELD/ NET YIELD/ NET VOLUME RATE CHANGE VOLUME RATE CHANGE ---------- --------- --------- -------- -------- -------- Interest earned on: Taxable loans, net ........................ $ 118,056 (33,021) 85,035 51,075 (10,082) 40,993 Tax-exempt loans, net (b) ................. (22) 322 300 (134) (238) (372) Taxable investment securities ............. 13,867 (4,494) 9,373 (210) (849) (1,059) Tax-exempt investment securities (b) ...... 2,206 (474) 1,732 2,309 (1,107) 1,202 Interest earning deposits with banks ...... 38 (1) 37 (29) 3 (26) Federal funds sold ........................ (1,934) (339) (2,273) 3,202 (857) 2,345 Mortgage loans held for sale .............. 392 1,765 2,157 4,254 (1,120) 3,134 ---------- --------- --------- -------- -------- -------- Total interest income .................. 132,603 (36,242) 96,361 60,467 (14,250) 46,217 ---------- --------- --------- -------- -------- -------- Interest paid on: Interest bearing demand deposits .......... 3,815 (3,308) 507 2,965 (1,222) 1,743 Money market accounts ..................... 14,883 (4,462) 10,421 8,606 (6) 8,600 Savings deposits .......................... 329 (1,410) (1,081) (206) (627) (833) Time deposits ............................. 14,351 (14,482) (131) 10,098 901 10,999 Federal funds purchased and securities sold under agreement to repurchase ...... 23,529 485 24,014 (2,390) (1,316) (3,706) Other borrowed funds ...................... 4,022 (292) 3,730 170 (61) 109 ---------- --------- --------- -------- -------- -------- Total interest expense ................. 60,929 (23,469) 37,460 19,243 (2,331) 16,912 ---------- --------- --------- -------- -------- -------- Net interest income .................... $ 71,674 (12,773) 58,901 41,224 (11,919) 29,305 ========== ========= ========= ======== ======== ========
(a) The change in interest due to both rate and volume has been allocated to the rate component. (b) Reflects taxable-equivalent adjustments using the statutory federal income tax rate of 35% in adjusting interest on tax-exempt loans and investment securities to a taxable-equivalent basis. NON-INTEREST INCOME Non-interest income consists of TSYS and TDM's revenues as well as a wide variety of fee generating services from the banking operations segment. Non-interest income totaled $739.8 million in 1999, an increase of 27.1% from the previous year and $582.2 million in 1998, an increase of 16.1% from 1997. Revenues from bankcard data processing services offered by TSYS were the largest contributor increasing $124.5 million or 34.1% in 1999, and increasing $29.6 million or 8.8% in 1998 over the previous year. TSYS and TDM's combined revenues represented approximately 76.6% of consolidated non-interest income in 1999 compared to approximately 73.5% in 1998. Banking operations' non-interest income increased $31.3 million or 20.8% in 1999 and $31.4 million or 26.3% in 1998. The increase in banking operations non-interest income in 1999 was led by increases in service charges, fees for trust services, brokerage revenue, and credit card fees. Other operating income for 1999 includes $2.7 million in income earned on bank-owned life insurance (new for 1999) and a $3.5 million increase from gain on sale of a corporate investment. Additionally, the 1999 results include a $6 million gain from the sale of five bank branches in slow-growth markets. The net income impact of the branch sales was an after tax gain of $3.5 million. TSYS contributed approximately 73.9% of Synovus' total non-interest income in 1999 with the majority of it reported as data processing services income. TSYS' revenues are derived from providing bankcard data processing and related services to banks and other institutions generally under long-term processing contracts. TSYS' services are provided through the company's cardholder systems, TS(2) and TS(1), to financial institutions and other organizations throughout the United States, Mexico, Canada, Honduras, and the Caribbean. Bankcard data processing services revenues are generated primarily from charges based on the number of accounts billed, transactions and authorizations processed, statements mailed, credit bureau requests, credit cards embossed and mailed, and other processing services for cardholder accounts on file at TSYS. Cardholder accounts on file include active and inactive bank, retail, debit, stored value and commercial card accounts. Due to the expanding use of cards and the increase in the number of cardholder accounts processed by TSYS, as well as increases in the scope of services offered to customers, revenues relating to bankcard data processing services have continued to grow. Processing contracts with large customers, representing a significant portion of TSYS' total revenues, generally provide for discounts on certain services based on the size and activity of customers' portfolios. As a result, bankcard data processing revenues and the related margins are influenced by the customer mix relative to the size of customer card portfolios, as well as the number and activity of individual cardholder accounts processed for each customer. F-29 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. Furthermore, growth in card portfolios of existing customers, the conversion of cardholder accounts of new customers to THE TOTAL SYSTEM, and the loss of cardholder accounts impact the results of operations from period to period. Another factor, among others, which may affect TSYS' revenues and results of operations from time to time is the sale by a customer of its business, its card portfolio, or a segment of its accounts to a party which processes cardholder accounts internally or uses another third party processor. Consolidation in the financial services industry could favorably or unfavorably impact TSYS' financial condition and results of operations in the future. The average number of TSYS' cardholder accounts on file increased 78.4% to 180.4 million in 1999, compared to 101.1 million in 1998, which represented a 15.9% increase over 87.2 million in 1997. At December 31, 1999, TSYS' cardholder accounts on file were approximately 206.2 million, up from 117.6 million and 92.8 million at December 31, 1998 and 1997, respectively. The increase in cardholder accounts on file at December 31, 1999, as compared to December 31, 1998, included net internal growth of existing customers of approximately 7.8 million accounts, and approximately 80.8 million accounts added during 1999 were due to new customers and portfolio acquisitions by existing customers. TSYS had approximately 147.2 million accounts being processed on TS(2) at year-end 1999, compared to 62.8 million at year-end 1998 and 19.2 million at year-end 1997. The increase in accounts being processed on TS(2) is the result of converting approximately 79.0 million new accounts and net internal growth of existing customers of approximately 5.4 million accounts. As a result of the completion of the conversions of the account portfolios for Sears and Nordstrom, TSYS became the leading third-party processor of retail accounts. At December 31, 1999, TSYS was processing approximately 88.7 million retail card accounts, a 527.8% increase over the approximately 14.1 million being processed at year-end 1998, a 120% increase over the 6.4 million at year-end 1997. On a per account basis, the processing revenues generated by retail accounts are generally lower than the processing revenues associated with bankcard accounts. However, TSYS realizes profit margins from retail accounts similar to those it generates from bankcard accounts. A significant amount of TSYS' revenues are derived from long-term contracts with large customers, including certain major customers. Two of TSYS' customers, NationsBank and Bank of America, merged effective September 30, 1998. The new parent company of these entities is Bank of America Corporation. In September 1999, TSYS announced a new ten-year agreement with the combined entity to continue processing its credit card portfolio until 2009. The combination of NationsBank and Bank of America under a single processing agreement with TSYS reduced TSYS' revenues in 1999 and will reduce TSYS' revenues in future years because together NationsBank and Bank of America will be entitled to receive greater discounts than either would have been entitled to receive standing alone. Bank of America accounted for approximately 16%, 21%, and 20% of total revenues for the years ended December 31, 1999, 1998, and 1997, respectively. The loss of Bank of America, or any 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 (UCS) to CITIBANK, a part of Citigroup. CITIBANK accounted for approximately 13%, 13%, and 15% of TSYS' total revenues for the years ended December 31, 1999, 1998, and 1997, respectively. On February 26, 1999, CITIBANK notified TSYS of its decision to terminate UCS' processing agreement with TSYS for consumer credit card accounts at the end of its original term on August 1, 2000. Consumer credit card accounts represented 67% of CITIBANK's revenues derived to TSYS for the year ended December 31, 1999. TSYS' 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. In May 1998, TSYS announced the signing of a long-term processing agreement with Sears, Roebuck and Co. to convert and process its 65 million retail accounts. TSYS successfully converted the first 7.2 million of these accounts to TS(2) in October 1998 and completed the conversion in May 1999. In January 2000, TSYS announced a one year extension of its long-term retail processing agreement with Sears until 2010. Synovus continues to emphasize the importance of growth in non-interest related sources of income in its banking operations via its Financial Services Beyond Banking strategy which offers the complete financial solutions that our customers need. Non-interest income for Synovus' banking operations increased $31.3 million or 20.8% in 1999, with increases in service charges on deposit accounts of $7.3 million or 11.6%, trust service fees of $4.7 million or 30.6%, brokerage revenues of $2.3 million or 20%, and credit card fees of $1.5 million or 11.3%. Total banking operations' non-interest income as a percentage of total banking operations revenues was 26.3% in 1999 up from 24.6% in 1998. Service charges on deposit accounts represent the single largest fee income component for banking operations. The main factors that contributed to the 11.6% increase in service charges in 1999 were increases in the number of individual and commercial accounts, transaction volume growth, and the effect of pricing increases in certain service charges. Additionally, service charges would have increased by $1.8 million in 1998 if the prior periods had been restated for the 1998 bank acquisitions. Fees for trust services are derived from providing estate administration services, personal trust and investment management services, and employee benefit plan administration. Factors contributing to the 30.6% increase in trust revenues in 1999 included our focused, needs-based sales program that added $2.8 million in new fee revenues during 1999, a 45% increase from 1998. Additionally, the acquisition of Canterbury Trust Company in January 1999, which provides trust, custody, investment, and consulting services to large institutional clients, resulted in additional revenues of $2.1 million in 1999. To a large extent, trust revenues are impacted by the market value of managed assets. During 1999, the market value of a significant portion of our managed assets decreased due to lower valuations of the underlying equity securities, resulting in lower fees assessed to those accounts in 1999. At December 31, 1999 and 1998, the total market value of assets administered by Synovus was approximately $7.1 billion and $6.3 billion, respectively. Brokerage revenues increased 20% in 1999 or $2.3 million. Brokerage revenues are derived from the retail and capital markets sectors. The retail brokerage sector accounted for approximately 70% of total brokerage revenues in 1999, compared to approximately 64% in 1998. Revenues from retail brokerage were up 50% F-30 over 1998, outpacing the capital markets growth of 12%. Growth in retail brokerage was due to the opening of new brokerage facilities in 1999 and late 1998 as well as an increase in volume in existing facilities. During 1999, revenues from mortgage banking activities were relatively unchanged from the previous year at $21.2 million. In 1998, Synovus experienced the highest loan origination volume in its history, due in part to a favorable interest rate environment. The rising interest rate environment in 1999 resulted in a decrease in loan originations and related loan origination fees and marketing gains. The decrease in loan production revenues was partially offset by higher revenues from loan servicing. At December 31, 1999, Synovus serviced loans for unaffiliated investors of $2.5 billion up from $2.1 billion at year end 1998. In 1998, banking operations' non-interest income increased $31.4 million, or 26.3%. Service charges on deposit accounts increased $5.6 million, or 9.7%, primarily as a result of increases in the number of accounts serviced and increased volume related to activity-based fees. Fees for trust services increased $2.9 million, or 22.6%, over 1997. Other operating income increased $19.2 million, or 38.8% in 1998 primarily due to increased product revenues from mortgage banking activities (up $10.6 million or 99.8%), credit card fees (up $2.6 million or 23.5%), and brokerage (up $1.8 million or 18.6%). NON-INTEREST EXPENSE Management analyzes non-interest expense in two separate components: banking operations and transaction processing services. The table below summarizes this data for the years ended December 31, 1999, 1998, and 1997:
1999 1998 1997 ------------------------ ------------------------ ------------------------ TRANSACTION TRANSACTION TRANSACTION BANKING PROCESSING BANKING PROCESSING BANKING PROCESSING (In thousands) OPERATIONS SERVICES OPERATIONS SERVICES OPERATIONS SERVICES ------------------------ ------------------------ ------------------------ Salaries and other personnel expense ....... $242,624 215,117 221,899 168,243 192,899 153,168 Net occupancy and equipment expense ........ 55,398 152,799 51,635 106,583 42,797 95,248 Other operating expenses ................... 98,048 92,563 78,527 68,925 72,122 62,457 -------- ------- ------- ------- ------- ------- Total non-interest expense .............. $396,070 460,479 352,061 343,751 307,818 310,873 ======== ======= ======= ======= ======= =======
In 1999, non-interest expense for Synovus' banking operations increased $44.0 million or 12.5%. The primary reasons for this increase are increased employment expenses and technology costs which include third-party processing services and new equipment depreciation. The increase in employment expenses includes normal merit and promotional salary adjustments, costs associated with our PDE initiatives (Personally Developing EveryONE) and higher employee group health insurance costs. Throughout 1999, banking operations had an emphasis on overall expense control management and headcount growth containment, which resulted in only a slight increase in the average number of employees in banking operations from 5,048 in 1998 to 5,170 in 1999. The employees added during 1999 resulted mostly from acquisitions. Approximately $2.0 million of the $3.8 million increase in occupancy and equipment expense during 1999 relates to increased depreciation on the computer equipment that was added primarily as a result of the conversion to a new core processing system as well as increased service contract expenses on this equipment. Other factors contributing to the increase in occupancy and equipment expenses during 1999 consist of additional carrying costs associated with the new branch offices and other banking facilities added during the latter part of 1998 and throughout 1999. Technology cost increases are a major contributor to the $19.5 million or 24.9% increase in banking operations' other operating expenses in 1999. During the second quarter of 1999, we completed the conversion to a state-of-the-art data processing system for all of our banks provided by Marshall & Illsley (M&I) Data Services. This conversion was a crucial step in building The New Bank, and is allowing our banking teams to know our customers better, and to provide them greater products and even better service when, where, and how the customers choose. Third-party processing services increased by $13.8 million, from $6.3 million in 1998. This increase was mainly due to a full year of information processing fees payable to M&I in 1999 compared to only a partial year in 1998. Other factors contributing to the increase in other operating expenses in 1999 consist of a $1.5 million increase in telephone and communications expenses, a $1.3 million increase in training costs, and approximately $1.0 million increase in acquisition-related expenditures. The banking operations' efficiency ratio increased slightly to 58.15% in 1999 compared to 58.01% in 1998 and 56.45% in 1997. The efficiency ratio in 1999 and 1998 reflects the significant investments (and the associated costs) that we have made in the last two years. However, as a result of our continued emphasis on expense control management, we expect that the banking operations' efficiency ratio will improve during 2000. Non-interest expense for Synovus' banking operations increased $44.2 million, or 14.4%, in 1998 over 1997. Expenses associated with the increase in the number of employees and normal salary increases as well as M&I conversion expenses were the primary reasons for this increase. The average number of employees in banking operations increased from 4,627 in 1997 to 5,048 in 1998. This increase was primarily due to the growth within the banking subsidiaries, as they continued to develop new products and provide additional services for their customers. Additionally, during the first quarter of 1998, Synovus began the conversion of its bank data processing to the M&I system, and expensed approximately $11.3 million for this conversion in 1998. Other factors causing an increase in non-interest expense include training expense related to The New Bank initiatives and performance-based employee retirement plan expenses. During 1999, Synovus' transaction processing services operating expenses as a percentage of revenues remained consistent with prior years at 83.1%, compared to 82.9% and 83.5% for 1998 and 1997, respectively. Approximately 97% of total transaction processing services non-interest expense relates to TSYS, with the remainder related to TDM, which is owned directly by Synovus. The following discussion provides an analysis of the non-interest expense components at TSYS. The principal increases in operating expenses in 1999 compared to 1998 resulted from the addition of personnel; the additional investment in property, equipment and software; the F-31 development of global business--including the establishment of a physical presence in the United Kingdom; the cost of materials associated with the services provided by all companies, particularly the supplies related to processing the increased number of accounts; and certain costs associated with ongoing enhancements to TS(2), as well as certain costs associated with the conversion of customers to TS(2). A significant portion of TSYS' operating expenses relates to salaries and other personnel costs. During 1999, the average number of employees increased to 4,106, compared to 3,382 in 1998 and 2,895 in 1997. In addition to the growth in the number of employees, the increase in salaries and other personnel costs is attributable to normal salary increases and related employee benefits. This increase was reduced by $14.9 million, $19.4 million and $4.4 million in 1999, 1998 and 1997, respectively, invested in software development costs and contract acquisition costs. Computer equipment and software rentals, which represent the largest component of TSYS' net occupancy and equipment expenses, increased $27.5 million, or 51.5%, in 1999 compared to 1998, and $3.1 million, or 6.2%, in 1998 compared to 1997. Due to rapidly changing technology in computer equipment and software, TSYS' equipment and software needs are achieved primarily through operating leases. During 1999 and the last half of 1998, TSYS made significant investments in computer software licenses related to its new East Center data center to accommodate increased volumes and expected growth in the number of accounts associated with new and existing customers. TSYS continues to monitor and assess its building and equipment needs as it positions itself for future growth and expansion. In 1997, construction began on a campus-type facility which now serves as TSYS' corporate headquarters and houses administrative, client contact and programming team members. TSYS has entered into an operating lease agreement relating to the new corporate campus. Under the agreement, the lessor has purchased the properties, paid the construction and development costs and leased the facilities to TSYS. The lease provides for substantial residual value guarantees and includes purchase options at the original cost of the property. Real estate taxes, insurance, maintenance and operating expenses applicable to the leased property are the obligations of TSYS. TSYS began moving personnel into the new campus facility in December 1998, and completed the move of a substantial number of its personnel to this facility at the end of the third quarter of 1999. With the move to the corporate campus, TSYS did not renew leases on certain facilities. The increase in net occupancy and equipment expenses related to occupying the campus was $6.4 million in 1999, and is expected to be $7.6 million in 2000, net of the relinquished lease obligations. Other operating expenses at TSYS increased 35.9% in 1999 compared to 1998 and 6.5% in 1998 compared to 1997. The growth in other operating expenses in 1999 is primarily due to increased amortization of contract acquisition costs, increased transaction processing provisions, increased travel and other business development costs associated with exploring both domestic and international business opportunities, including the establishment of an office in the United Kingdom. YEAR 2000 READINESS DISCLOSURE Many computer programs were written with a two-digit date field. If these programs were not made Year 2000 compliant, they would not be able to correctly process date information for the year 2000 and beyond. Remediation efforts went beyond Synovus' internal computer systems and required coordination with third- party information processing providers, customers, vendors, government entities and other third parties to assure that their systems and related interfaces were compliant. Failure to achieve timely remediation of Synovus' critical programs and computer systems for Year 2000 would have had a material adverse effect on Synovus' financial condition and results of operations. Synovus experienced a smooth transition in passing the century date changeover. Synovus did not experience any significant internal or external issues concerning Year 2000, and all Synovus companies, systems, facilities and clients processed, and have continued to process, without incident. Synovus will continue to monitor Year 2000 issues by overseeing critical tasks during the year 2000. The majority of Synovus' costs in becoming Year 2000 compliant are related to TSYS. Such costs are being expensed as incurred. TSYS currently estimates the total cost for the Year 2000 project will amount to approximately $17 million of direct costs. This amount consists primarily of the costs associated with personnel dedicated to the Year 2000 project and hardware/software costs related to testing. During 1999, TSYS incurred $6.8 million of direct costs associated with the Year 2000 project and has incurred $15.8 million since project inception. The banking operations' Year 2000 remediation costs, other than those related to the conversion to M&I, are not material. Synovus estimates that the total cost for its banking operations Year 2000 project is approximately $2.5 million (approximately $1.4 million incurred in 1998, with most of the remainder incurred during 1999). These costs are exclusive of the costs associated with the conversion to the M&I system and consist primarily of direct personnel costs and customer notifications. All forward-looking statements regarding Year 2000 readiness, including estimates, forecasts and expectations, are inherently uncertain as they are based on various expectations and assumptions concerning future events and are subject to numerous risks and uncertainties which could cause actual events or results to differ materially from those projected. Important factors upon which Synovus' Year 2000 forward-looking statements are premised include: (a) retention of employees and contractors working on Year 2000 projects; (b) TSYS' customers' remediation of their internal systems to be Year 2000 ready and their cooperation in timely testing; (c) no material disruption of telecommunication, data transmission networks, payment networks, government services, utilities or other infra-structure services and no unexpected failure of third-party products; (d) no unexpected failures by third-parties providing services to Synovus; (e) no undiscovered subversion of systems or program code affecting Synovus' systems; and (f) no undiscovered material flaws in Synovus' test processes. INVESTMENT SECURITIES Synovus' investment securities portfolio consists of debt and equity securities categorized as either available for sale or held to maturity. Investment securities provide Synovus with a source of liquidity and a relatively stable source of income. The investment securities portfolio also provides management with a tool to balance the interest rate risk of its loan portfolio. At December 31, 1999, approximately $1.3 billion of these investment securities were pledged as required collateral for certain deposits and repurchase agreements. See Table Thirteen for maturity and average yield information of the available for sale and held to maturity investment securities. Synovus' investment strategy focuses on the use of the investment securities portfolio to manage the interest rate risk created by the inherent mismatch between the loan and deposit portfolios. With the strong loan demand at Synovus' subsidiary banks, there is little need for investment securities solely to augment income or utilize unpledged deposits. As such, Synovus' investment securities are primarily U.S. Treasuries, U.S. Government agencies, and Government agency sponsored mortgage-backed securities, all of F-32 which have a high degree of liquidity and limited credit risk. A mortgage-backed security depends on the underlying pool of mortgage loans to provide a cash flow pass-through of principal and interest. At December 31, 1999, substantially all of the collateralized mortgage obligations and mortgage-backed pass-through securities held by Synovus were issued or backed by Federal agencies. As of December 31, 1999 and 1998, the estimated fair value of investment securities as a percentage of their amortized cost was 97.5% and 101.3%, respectively. The investment securities portfolio had gross unrealized gains of $5.6 million and gross unrealized losses of $57.0 million, for a net unrealized loss of $51.4 million as of December 31, 1999. As of December 31, 1998, the investment securities portfolio had a net unrealized gain of $24.5 million. In accordance with Statement of Financial Accounting Standards (SFAS) No. 115, shareholders' equity contained a net unrealized loss of $29.0 million and a net unrealized gain of $11.4 million recorded on the available for sale portfolio as of December 31, 1999 and 1998, respectively. During 1999, the average balance of investment securities increased to $1.97 billion, compared to $1.72 billion in 1998. Synovus earned a taxable-equivalent rate of 6.24% and 6.49% for 1999 and 1998, respectively, on its investment securities portfolio. As of December 31, 1999 and 1998, average investment securities represented 19.3% and 19.6%, respectively, of average interest earning assets. Table Four presents the carrying value of investment securities held to maturity and investment securities available for sale at December 31, 1999, 1998, and 1997. TABLE FOUR INVESTMENT SECURITIES
(In thousands) DECEMBER 31, 1999 1998 1997 Investment Securities Held to Maturity: U.S. Treasury and U.S. Government agencies ................ $ 24,914 51,996 64,372 Mortgage-backed securities ................................ 53,698 77,899 123,519 State and municipal ....................................... 169,745 153,924 125,090 Other investments ......................................... 28,922 21,814 18,677 ---------- --------- --------- Total investment securities held to maturity ........... $ 277,279 305,633 331,658 ========== ========= ========= Investment Securities Available for Sale: U.S. Treasury and U.S. Government agencies ................ $ 1,287,953 1,205,261 1,214,690 Mortgage-backed securities ................................ 392,780 329,336 135,274 State and municipal ....................................... 15,126 13,807 959 Other investments ......................................... 20,819 23,436 20,100 ---------- --------- --------- Total investment securities available for sale ......... $ 1,716,678 1,571,840 1,371,023 ========== ========= ========= Total Investment Securities: U.S. Treasury and U.S. Government agencies ................ $ 1,312,867 1,257,257 1,279,062 Mortgage-backed securities ................................ 446,478 407,235 258,793 State and municipal ....................................... 184,871 167,731 126,049 Other investments ......................................... 49,741 45,250 38,777 ---------- --------- --------- Total investment securities ............................ $ 1,993,957 1,877,473 1,702,681 ========== ========= =========
LOANS Since lending activities are our single largest source of revenue, Synovus' main objective is to adhere to sound lending practices. When analyzing prospective loans, management assesses both interest rate objectives and credit quality objectives in determining whether to extend a given loan and the appropriate pricing for that loan. Operating under a decentralized structure, management emphasizes lending in the local markets we serve. Synovus strives towards maintaining a diversified loan portfolio to spread risk and reduce exposure to economic downturns that may occur in different segments of the economy, geographic locations, or in particular industries. As such, Synovus has no significant concentration of loans to any single industry, geographic location, or borrower. Synovus' loan policy discourages loans to highly speculative real estate developments, highly leveraged transactions, and other industries known for excessive risk. In 1999, Synovus experienced its strongest loan growth in recent history. At year end 1999, loans were $9.1 billion, up 19.3% over 1998 with commercial loans accounting for 94% of the increase. Average net loans increased 17.6% or $1.2 billion compared to 1998, representing 79.2% of average earning assets and 70.8% of average total assets. We experienced growth in our existing portfolio and market share gains through successful business development and additional products and services offered to the current customer base. The mix of loan products being offered focuses on meeting the needs of our customers. As a result of this emphasis, loans have continued to grow throughout Synovus' subsidiary markets. Our loan portfolio spreads across four Southeastern states with diverse economies. Geographically, the largest portion of our loan portfolio is originated by our Georgia affiliate banks, representing 59% of the consolidated portfolio. The Alabama affiliate banks represent 19%, followed by South Carolina with 16% and Northwest Florida with 6%. The growth by geographic market during 1999 was as follows: Georgia 20%; South Carolina 24%; Alabama 14%; and Northwest Florida 10%. Specifically, the larger urban or metropolitan markets contributed to the majority of our F-33 loan growth: $303 million in Columbus, GA; $236 million in North Atlanta, GA; $117 in Birmingham, AL; $77 million in Charleston, SC; $52 million in Athens, GA; $38 million in Columbia, SC; $34 million in Carrollton, GA; $31 million in Huntsville, AL; and $23 million in Spartanburg, SC. The average loan-to-deposit ratio increased to 89.7% during 1999, compared to 84.6% and 84.7% in 1998 and 1997, respectively. During 1999, average loan growth outpaced average deposit growth by 1.36 times. As a result, our funding mix changed, generating the need to increase external funding sources. Table Five shows the composition of the loan portfolio at the end of the past five years. TABLE FIVE LOANS BY TYPE (In thousands)
DECEMBER 31, 1999 1998 1997 1996 1995 Commercial Commercial, financial, and agricultural ..... $ 3,195,512 2,701,562 2,372,778 2,128,014 2,006,189 Real estate-construction .................... 1,609,594 1,164,443 875,136 765,192 604,610 Real estate-mortgage ........................ 1,983,766 1,540,459 1,333,561 1,255,223 1,181,287 ----------- --------- --------- --------- --------- Total commercial ......................... 6,788,872 5,406,464 4,581,475 4,148,429 3,792,086 ----------- --------- --------- --------- --------- Retail: Real estate-mortgage ........................ 1,089,217 1,058,172 1,039,420 977,432 824,998 Consumer loans-credit card .................. 237,546 257,721 306,360 290,470 222,204 Consumer loans-other ........................ 961,881 889,785 830,611 782,786 795,908 ----------- --------- --------- --------- --------- Total retail ............................. 2,288,644 2,205,678 2,176,391 2,050,688 1,843,110 ----------- --------- --------- --------- --------- Total loans .............................. 9,077,516 7,612,142 6,757,866 6,199,117 5,635,196 Unearned income ............................. (9,277) (8,537) (5,712) (10,235) (14,812) ----------- --------- --------- --------- --------- Total loans, net of unearned income ...... $ 9,068,239 7,603,605 6,752,154 6,188,882 5,620,384 =========== ========= ========= ========= =========
The commercial loan portfolio includes commercial, financial, and agricultural loans as well as real estate loans. These loans are granted primarily on the borrower's general credit standing and on the strength of the borrower's ability to generate repayment cash flows from income sources. Real estate construction and mortgage loans represent extensions of credit used as interim or permanent financing of real estate properties that are secured by commercial real estate as well as 1-4 family residences. As of December 31, 1999, the commercial loan portfolio comprised 75% of total loans compared to 71% and 68% in 1998 and 1997, respectively. During 1999, commercial loans experienced their strongest loan growth in recent years. Commercial, financial, and agricultural loans grew by 18%, real estate construction loans grew by 38%, and real estate mortgage loans grew by 29%. This growth was primarily centered in our larger urban or metropolitan markets, which are benefiting from a strong and growing economy. It is important to note that since these markets continue to experience strong economic growth, especially with respect to real estate, Synovus conducts ongoing reviews to monitor rapid increases in real estate property values in these markets or any significant overbuilding. Retail loans consist of residential mortgages, equity lines, credit card loans, installment loans and other credit line loans. Retail lending decisions are made based upon the cash flow or earning power of the borrower that represents the primary source of repayment. However, in many lending transactions collateral is taken to provide an additional measure of security. Transactions secured by collateral result in a secondary source of repayment in that the collateral may be liquidated. Synovus determines the need for collateral on a case-by-case basis. Factors considered include the purpose of the loan, current and prospective credit-worthiness of the customer, terms of the loan, and economic conditions. During 1999, retail loans grew by $83 million or 4%. Loan growth in the real estate and consumer portfolios was partially offset by a decrease in credit card loans during 1999. This decrease was in part due to the termination of an affinity card relationship with a customer and the sale of the related receivables to our former affinity partner. This portfolio accounted for approximately $5 million of outstanding credit card receivables at year-end 1998. Synovus continues to place strong emphasis on asset quality in credit card receivables. This emphasis has contributed to lower charge-offs and past due levels for this segment of the portfolio in 1999. Table Six shows the maturity of selected loan categories as of December 31, 1999. Also provided are the amounts due after one year, classified according to the sensitivity in interest rates. F-34 TABLE SIX LOANS MATURITY DISTRIBUTION AND INTEREST SENSITIVITY
(In thousands) DECEMBER 31, -------------------------------------------------------- ONE OVER ONE YEAR OVER YEAR THROUGH FIVE FIVE OR LESS YEARS YEARS TOTAL ---------- ------------ ------- --------- Selected loan categories: Commercial, financial, and agricultural ............ $1,917,307 1,054,519 223,686 3,195,512 Real estate-construction ........................... 965,756 531,166 112,672 1,609,594 ---------- ------------ ------- --------- Total ........................................... $2,883,063 1,585,685 336,358 4,805,106 ========== ============ ======= ========= Loans due after one year: Having predetermined interest rates .............................................................. $1,153,226 Having floating interest rates ................................................................... 768,817 ---------- Total ......................................................................................... $1,922,043 ==========
Actual repayments of loans may differ from the contractual maturities reflected above because borrowers have the right to prepay obligations with and without prepayment penalties. Additionally, the refinancing of such loans or the potential delinquency of such loans could also create differences between the contractual maturities reflected above and the actual repayment of such loans. PROVISION FOR LOSSES ON LOANS AND NET CHARGE-OFFS Despite Synovus' credit standards, internal controls, and continuous loan review process, the inherent risk in the lending process results in periodic charge-offs. The provision for loan losses is the charge to operating earnings necessary to maintain an adequate reserve for loan losses. Through the provision for loan losses, Synovus maintains a reserve for loan losses that management believes is adequate to absorb losses within the loan portfolio. However, future additions to the reserve may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as an integral part of their examination procedures, periodically review Synovus' subsidiary banks' reserve for loan losses. Based on their judgments about information available to them at the time of their examination, such agencies may require Synovus' subsidiary banks to recognize additions to their reserve for loan losses. To determine the adequacy of the reserve for loan losses and the need for potential charges to the reserve, a formal analysis is completed quarterly to assess the risk within the loan portfolio. This assessment, conducted by lending officers and each bank's loan administration department as well as an independent holding company loan administration department, includes analyses of historical performance, past due trends, the level of nonperforming loans, reviews of certain problem loans, loan activity since the last quarter, consideration of current economic conditions, and other pertinent information. Each one of Synovus' loans is assigned a rating, either individually or as part of a homogeneous pool, based on an internally developed grading system. An organizationally independent department also reviews grade assignments on an ongoing basis. The resulting conclusions are reviewed and approved by senior management. The reserve for loan losses consists of two main components: the allocated and unallocated reserves. Both components of the reserve are available to cover inherent losses in the portfolio. The allocated component of the reserve is determined by type of loan within the commercial and retail portfolios. Generally, the allocated reserve for commercial loans is based on application of loss reserve factors to the components of the portfolio based on the assigned loan grades. The estimated loss factors are based on historical losses adjusted for current events. The allocated reserve for retail loans is generally determined on pools of homogeneous loan categories. Loss factors applied to these pools are also based on average historical losses for the past two years, current delinquency trends, changes in underwriting standards and other factors. The unallocated component of the reserve is established for loss estimates that may exist in the remainder of the portfolio, but have yet to be identified. This also compensates for the uncertainty in estimating loan losses. The unallocated component of the reserve is based upon management's evaluation of various conditions, the effects of which are not directly considered in the allocated reserve. These include credit concentrations, recent levels and trends in delinquencies and non-accruals, new credit products, changes in lending policies and procedures, changes in personnel, and regional and local economic conditions. In accordance with SFAS No. 114, "Accounting by Creditors for Impairment of a Loan", management, considering current information and events regarding the borrowers' ability to repay their obligations, considers a loan to be impaired when the ultimate collectibility of all amounts due, according to the contractual terms of the loan agreement, is in doubt. When a loan becomes impaired, management calculates the impairment based on the present value of expected future cash flows discounted at the loan's effective interest rate. If the loan is collateral dependent, the fair value of the collateral is used to measure the amount of impairment. The amount of impairment and any subsequent changes are recorded, through a charge to earnings, as an adjustment to the reserve for loan losses. When management considers a loan, or a portion thereof, as uncollectible, it is charged against the reserve for loan losses. Credit quality continues to be strong. Reflecting the continued strength of the Southeastern regional economy and the emphasis on high credit quality and credit management, the ratio of nonperforming assets to loans and other real estate is at its lowest level in more than twenty years at .38% as of December 31, 1999, compared to the already low level of .40% at year-end 1998. The reserve for loan losses was 1.41% of loans, which provides coverage of 456.80% of nonperforming loans at December 31, 1999, compared to 538.05% at year-end 1998. Synovus' provision for loan losses was $34.0 million, up 26.5%, compared to $26.9 in 1998. This resulted in a provision to net charge-offs coverage of 1.45 times net charge-offs compared to a coverage of 1.09 times in 1998. The increase in the provision expense for the year was primarily due to the strong loan growth that we experienced in 1999, and was partially offset by lower charge-offs. Net charge-offs were $23.5 million in 1999 down from $24.6 million in 1998. As a percentage of average net loans, the net charge-off ratio was .29% in 1999 compared to .35% in 1998. A summary, by loan category, of loans charged off, recoveries of loans previously charged off, and additions to the reserve through provision expense is presented in Table Seven. F-35 TABLE SEVEN RESERVE FOR LOAN LOSSES
(Amounts in thousands) YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995 Reserve for loan losses at beginning of year ............... $114,109 105,705 97,455 83,927 76,707 Reserve for loan losses of acquired subsidiaries ........... 2,928 6,170 -- 188 1,001 Loans charged off: Commercial: Commercial, financial, and agricultural .............. 9,457 7,559 7,424 8,245 13,956 Real estate-construction ............................. 538 249 412 217 269 Real estate-mortgage ................................. 1,099 2,209 2,417 2,456 1,857 -------- ------- ------- ------- -------- Total commercial .................................. 11,094 10,017 10,253 10,918 16,082 -------- ------- ------- ------- -------- Retail: Real estate-mortgage ................................. 1,598 1,347 1,750 1,032 209 Consumer loans-credit card ........................... 11,592 13,939 14,308 7,798 6,627 Consumer loans-other ................................. 6,159 5,838 6,001 6,011 2,279 -------- ------- ------- ------- -------- Total retail ...................................... 19,349 21,124 22,059 14,841 9,115 -------- ------- ------- ------- -------- Total loans charged off ........................... 30,443 31,141 32,312 25,759 25,197 -------- ------- ------- ------- -------- Recoveries on loans previously charged off: Commercial: Commercial, financial, and agricultural .............. 2,594 2,360 3,499 1,844 1,269 Real estate-construction ............................. 45 253 99 173 50 Real estate-mortgage ................................. 363 336 1,229 1,329 92 -------- ------- ------- ------- -------- Total commercial .................................. 3,002 2,949 4,827 3,346 1,411 -------- ------- ------- ------- -------- Retail: Real estate-mortgage ................................. 295 202 197 352 115 Consumer loans-credit card ........................... 1,359 1,392 737 776 1,237 Consumer loans-other ................................. 2,301 1,950 2,316 2,214 1,812 -------- ------- ------- ------- -------- Total retail ...................................... 3,955 3,544 3,250 3,342 3,164 -------- ------- ------- ------- -------- Total loans recovered ............................. 6,957 6,493 8,077 6,688 4,575 -------- ------- ------- ------- -------- Net loans charged off ...................................... 23,486 24,648 24,235 19,071 20,622 -------- ------- ------- ------- -------- Additions to reserve through provision expense ............. 34,007 26,882 32,485 32,411 26,841 -------- ------- ------- ------- -------- Reserve for loan losses at end of year ..................... $127,558 114,109 105,705 97,455 83,927 ======== ======= ======= ======= ======== Reserve for loan losses to loans, net of unearned income ... 1.41% 1.50 1.57 1.57 1.49 ======== ======= ======= ======= ======== Ratio of net loans charged off to average loans outstanding, net of unearned income ...................... .29% .35 .37 .32 .38 ======== ======= ======= ======= ========
An allocation of the reserve for loan losses has been made according to the respective amounts deemed necessary to provide for the possibility of incurred losses within the various loan categories. Although other relevant factors are considered, the allocation is primarily based on previous charge-off experience adjusted for risk characteristic changes among each category. Additional reserve amounts are allocated by evaluating the loss potential of individual loans that management has considered impaired. The reserve for loan loss allocation is based on historical data, subjective judgment, and estimates, and therefore is not necessarily indicative of the specific amounts or loan categories in which charge-offs may ultimately occur. Refer to Table Eight for a five year comparison of the allocation of the reserve for loan losses. The unallocated component of the reserve for loan losses decreased from .36% to .30% of total loans at December 31, 1998 and 1999, respectively. Management continues to believe that this level of unallocated reserve is appropriate in light of the instability in the worldwide economic environment, the new markets entered into through recent acquisitions, the geographic concentration of its real estate loan portfolio (Southeastern United States), and the aggregate risk profile in the loan portfolio. F-36 TABLE EIGHT ALLOCATION OF RESERVE FOR LOAN LOSSES
(Amounts in thousands) DECEMBER 31, ------------------------------------------------------------------------------------ 1999 1998 1997 1996 1995 -------------- -------------- -------------- ------------- ------------- RESERVE %(*) RESERVE %(*) RESERVE %(*) RESERVE %(*) RESERVE %(*) -------- --- -------- --- -------- --- ------- --- ------- --- Commercial: Commercial, financial, and agricultural $ 54,011 35% $ 45,431 35% $ 43,003 35% $39,570 35% $34,128 36% Real estate-construction .............. 3,380 18 1,822 15 2,166 13 1,791 12 1,312 11 Real estate-mortgage .................. 9,324 22 6,381 21 5,562 20 5,110 20 4,392 20 -------- --- -------- --- -------- --- ------- --- ------- --- Total commercial ................... 66,715 75 53,634 71 50,731 68 46,471 67 39,832 67 -------- --- -------- --- -------- --- ------- --- ------- --- Retail: Real estate-mortgage .................. 1,634 12 1,582 14 632 15 581 15 499 15 Consumer loans-credit card ............ 11,877 3 12,950 3 14,646 5 11,619 5 6,627 4 Consumer loans-other .................. 20,200 10 18,555 12 17,498 12 15,216 13 14,696 14 -------- --- -------- --- -------- --- ------- --- ------- --- Total retail ....................... 33,711 25 33,087 29 32,776 32 27,416 33 21,822 33 -------- --- -------- --- -------- --- ------- --- ------- --- Unallocated ........................... 27,132 -- 27,388 -- 22,198 -- 23,568 -- 22,273 -- -------- --- -------- --- -------- --- ------- --- ------- --- Total reserve for loan losses ......... $127,558 100% $114,109 100% $105,705 100% $97,455 100% $83,927 100% ======== === ======== === ======== === ======= === ======= ===
(*) Loan balance in each category expressed as a percentage of total loans. NONPERFORMING ASSETS AND PAST DUE LOANS Nonperforming assets consist of loans classified as nonaccrual or restructured, and real estate acquired through foreclosure. Nonaccrual loans consist of those loans on which recognition of interest income has been discontinued. Loans may be restructured as to rate, maturity, or other terms as determined on an individual credit basis. Demand and time loans, whether secured or unsecured, are generally placed on nonaccrual status when principal and/or interest is 90 days or more past due, or earlier if it is known or expected that the collection of all principal and/or interest is unlikely. Loans past due 90 days or more, which based on a determination of collectibility are accruing interest, are classified as past due loans. Nonaccrual loans are reduced by the direct application of interest and principal payments to loan principal, for accounting purposes only. In all circumstances, the determination of when to place loans on nonaccrual status is also based on evaluation of the individual characteristics of each particular loan, which may result in policy deviations in some circumstances. Table Nine presents the amount of interest income that would have been recorded on nonaccrual loans if those loans had been current and performing in accordance with their original terms. Synovus' nonperforming assets increased $3.9 million to $34.6 million with the corresponding nonperforming asset ratio improving to .38% as of December 31, 1999 compared to .40% as of year-end 1998. Synovus incurred a 12.7% increase in nonperforming assets while increasing loans $1.5 billion, or 19.3%, during 1999. As a percentage of total loans outstanding, loans 90 days past due and still accruing improved from prior year levels to .19% at December 31, 1999 compared to .32% at year-end 1998. Contributing to this improvement, credit card loans 90 days past due and still accruing decreased $2.7 million in 1999 from 1998. Management believes that sufficient collateral value securing these loans exists to cover contractual interest and principal payments on the loans and management further believes the resolution of these delinquencies will not cause a material increase in nonperforming assets. Management continuously monitors nonperforming, impaired, and past due loans, to prevent further deterioration regarding the condition of these loans. Management is not aware of any material loans classified for regulatory purposes as loss, doubtful, substandard, or special mention that have been excluded from nonperforming assets or impaired loans. Impaired loans at December 31, 1999 and 1998 are $29.6 million and $27.5 million, respectively. Management further believes nonperforming assets and impaired loans include all material loans in which doubts exist as to the collectibility of amounts due according to the contractual terms of the loan agreement. F-37 TABLE NINE NONPERFORMING ASSETS AND PAST DUE LOANS
(Amounts in thousands) YEARS ENDED DECEMBER 31, ------------------------------------------------------------- 1999 1998 1997 1996 1995 ------------------------------------------------------------- Nonaccrual loans ........................................... $ 26,672 20,756 18,304 24,717 22,767 Restructured loans ......................................... 1,252 452 563 1,625 1,733 -------- ------ ------ ------ ------ Nonperforming loans ..................................... 27,924 21,208 18,867 26,342 24,500 Loans 90 days past due and still accruing .................. 16,878 24,640 20,963 15,952 11,417 -------- ------ ------ ------ ------ Total ................................................ $ 44,802 45,848 39,830 42,294 35,917 ======== ====== ====== ====== ====== Nonperforming assets: Nonperforming loans (a) ................................. $ 27,924 21,208 18,867 26,342 24,500 Other real estate ....................................... 6,718 9,536 10,545 10,893 12,790 -------- ------ ------ ------ ------ Total ................................................ $ 34,642 30,744 29,412 37,235 37,290 ======== ====== ====== ====== ====== Nonperforming assets to total loans and other real estate .. .38% .40 .43 .60 .66 ======== ====== ====== ====== ====== Reserve for loan losses to nonperforming loans ............. 456.80% 538.05 560.26 369.96 342.56 ======== ====== ====== ====== ======
Interest income on nonperforming loans that would have been reported for the years ended December 31, 1999, 1998, and 1997 is summarized as follows:
1999 1998 1997 ------ ------ ------ Interest at contractual rates (b) ...................................................... $3,177 2,929 3,237 Less interest recorded as income ....................................................... 569 1,031 977 ------ ------ ------ Reduction of interest income ........................................................ $2,608 1,898 2,260 ====== ====== ======
(a) Nonperforming assets exclude loans 90 days past due and still accruing. (b) Interest income that would have been recorded if the loans had been current and performing in accordance with their original terms. DEPOSITS Deposits provide the most significant funding source for Synovus' interest earning assets. Table Ten shows the relative composition of average deposits for 1999, 1998, and 1997. Refer to Table Eleven for the maturity distribution of time deposits of $100,000 or more. These larger deposits represented 18.9% and 14.6% of total deposits at December 31, 1999 and 1998, respectively. Historically, Synovus' large denomination time deposits are generally from customers within the local market areas of its subsidiary banks, and, therefore, provide a greater degree of stability than is typically associated with this source of funds. In 1999, approximately half of the increase in time deposits over $100,000 was due to national market brokered deposits. Synovus expects to further the utilization of this funding source while continuing to maintain and grow its local market large denomination time deposit base. Time deposits over $100,000 at December 31, 1999, 1998, and 1997 were $1.8 billion, $1.3 billion, and $1.3 billion, respectively. Interest expense for the years ended December 31, 1999, 1998, and 1997 on these large denomination deposits was $82.7 million, $76.3 million, and $69.8 million, respectively. During 1999, Synovus' average deposits increased $890.2 million, or 10.9%, to $9.0 billion from $8.1 billion in 1998. Average interest bearing deposits for 1999, which include interest bearing demand deposits, money market accounts, savings deposits, and time deposits, increased $763.9 million, or 11.2%, from 1998. Average non-interest bearing demand deposits increased $126.3 million, or 9.5%, during 1999. Average interest bearing deposits increased $484.4 million, or 7.6%, from 1997 to 1998, while average non-interest bearing demand deposits increased $129.5 million, or 10.8%. See Table Two for further information on average deposits, including the average rates paid for 1999, 1998, and 1997. TABLE TEN AVERAGE DEPOSITS
(Amounts in thousands) YEARS ENDED DECEMBER 31, ------------------------------------------------------------------------ 1999 %(*) 1998 %(*) 1997 %(*) ------------------------------------------------------------------------ Non-interest bearing demand deposits ............. $1,450,547 16.1 1,324,257 16.3 1,194,759 15.9 Interest bearing demand deposits ................. 1,355,301 15.0 1,202,108 14.8 1,087,617 14.4 Money market accounts ............................ 1,796,114 19.9 1,452,386 17.8 1,253,634 16.7 Savings deposits ................................. 466,879 5.2 453,487 5.6 461,415 6.1 Time deposits .................................... 2,436,688 27.0 2,387,392 29.3 2,316,455 30.8 Time deposits $100,000 and over .................. 1,527,174 16.8 1,322,920 16.2 1,214,810 16.1 ---------- ----- --------- ----- --------- ----- Total average deposits ........................ $9,032,703 100.0 8,142,550 100.0 7,528,690 100.0 ========== ===== ========= ===== ========= =====
(*) Average deposits balance in each category expressed as percentage of total average deposits. F-38 TABLE ELEVEN MATURITY DISTRIBUTION OF TIME DEPOSITS OF $100,000 OR MORE
(In thousands) DECEMBER 31, 1999 3 months or less ................................ $ 712,642 Over 3 months through 6 months .................. 459,406 Over 6 months through 12 months ................. 432,082 Over 12 months .................................. 183,385 --------- Total outstanding ............................ $ 1,787,515 =========
INTEREST RATE RISK MANAGEMENT Managing interest rate risk is a primary goal of Synovus' asset/liability management function. Synovus attempts to achieve consistent growth in net interest income while limiting volatility arising from changes in interest rates. Synovus seeks to accomplish this goal by balancing the maturity and repricing characteristics of balance sheet assets and liabilities along with the selective use of off-balance sheet financial instruments. Simulation modeling is the primary tool used by Synovus to measure its interest rate sensitivity. On at least a quarterly basis, the following 24-month time period is simulated to determine a baseline net interest income forecast and the sensitivity of this forecast to changes in interest rates. These simulations include all of the company's earning assets, liabilities and off-balance sheet instruments. Forecasted balance sheet changes, primarily reflecting loan and deposit growth forecasts, are included in the periods modeled. The magnitude and velocity of rate changes among the various asset and liability groups exhibit different characteristics for each possible interest rate scenario. Simulation modeling enables Synovus to capture the effect of these differences. Simulation also enables Synovus to capture the effect of expected prepayment level changes on selected assets subject to prepayment. Synovus maintains policies designed to limit the maximum acceptable negative impact on net interest income over twelve and twenty-four month time horizons from a gradual change in interest rates of up and down 200 basis points. These policies specify the maximum allowable negative change in net interest income in the rising and declining rate scenarios from the stable rate scenarios. The current policy limits this change to 5% of projected net interest income for the twelve month time horizon and 7% for the twenty-four month time horizon. As of December 31, 1999, Synovus was well within its policy guidelines with simulations indicating that Synovus is positioned such that its net interest income would increase by approximately 1.5% in a rising rate environment and decrease by approximately 1.5% in a declining rate environment. The exact change in net interest income would also depend on the specific changes in asset and liability volumes and mix experienced over these time horizons. Synovus also utilizes simulation modeling to evaluate the longer-term interest rate risk position of the company. Synovus measures this position by simulating the market value of equity in changing rate environments. The model estimates the impact of an immediate 200 basis point rate shock on the present value of the future cash flows of all assets, liabilities, and off-balance sheet instruments. Synovus maintains a policy guideline limiting the maximum allowable change in the market value of equity in both rising and declining rate shocks. This policy limits the maximum allowable change to an amount equal to one percent of on-balance sheet assets. Synovus was within this guideline at year-end. Another tool utilized by Synovus' management is cumulative gap analysis, which seeks to measure the repricing differentials, or gap, between rate sensitive assets and liabilities over various time periods. Table Twelve reflects the gap positions of Synovus' consolidated balance sheets on December 31, 1999 and 1998, at various repricing intervals. The projected deposit repricing volumes reflect adjustments based on management's assumptions of the expected rate sensitivity relative to the prime rate for core deposits without contractual maturity (i.e., interest bearing checking, savings, and money market accounts). Management believes that these adjustments allow for a more accurate profile of Synovus' interest rate risk position. The projected investment securities repricing reflects expected prepayments on mortgage-backed securities and expected cash flows on securities subject to accelerated redemption options. These assumptions are made based on the interest rate environment as of each balance sheet date and are subject to change as the general level of interest rates change. Management would anticipate a modest lengthening of average investment maturities in a rising rate environment and a slightly more significant shortening in a declining rate environment. While these potential changes are not depicted in the static gap analysis, simulation modeling allows for the proper analysis of these and other relevant potential changes. This gap analysis indicates that Synovus has a cumulative one-year gap of minus 11.5% as of December 31, 1999. While the gap measurement would indicate a liability sensitive position, the more comprehensive evaluation of repricing velocity and volumes available in simulation modeling indicates a more balanced position. Management believes that adjusted gap analysis is a useful tool for measuring interest rate risk only when used in conjunction with its simulation model. F-39 TABLE TWELVE INTEREST RATE SENSITIVITY
(Amounts in millions) DECEMBER 31, 1999 ----------------------------------------- 0-3 4-12 1-5 OVER 5 MONTHS MONTHS YEARS YEARS -------- -------- ------- ------- Investment securities (a) ........................................ $ 123.7 192.3 1,186.9 538.7 Loans and mortgage loans held for sale, net of unearned income ... 4,339.4 1,208.8 3,026.0 577.2 Other ............................................................ 93.8 0.2 -- -- -------- -------- ------- ------- Interest sensitive assets ..................................... 4,556.9 1,401.3 4,212.9 1,115.9 -------- -------- ------- ------- Deposits ......................................................... 2,575.6 2,725.3 2,022.7 491.2 Other borrowings ................................................. 1,420.9 8.4 97.7 52.8 -------- -------- ------- ------- Interest sensitive liabilities ................................ 3,996.5 2,733.7 2,120.4 544.0 -------- -------- ------- ------- Interest rate swaps ........................................... (550.0) 20.0 530.0 -- -------- -------- ------- ------- Interest sensitivity gap ................................... $ 10.4 (1,312.4) 2,622.5 571.9 ======== ======== ======= ======= Cumulative interest sensitivity gap ........................ $ 10.4 (1,302.0) 1,320.5 1,892.4 ======== ======== ======= ======= Cumulative interest sensitivity gap as a percentage of total interest sensitive assets ....................... .1% (11.5) 11.7 16.8 ======== ======== ======= =======
DECEMBER 31, 1998 ---------------------------------------- 0-3 4-12 1-5 OVER 5 MONTHS MONTHS YEARS YEARS -------- -------- ------- ------- Investment securities (a) ........................................ $ 172.3 333.3 1,005.9 347.5 Loans and mortgage loans held for sale, net of unearned income ... 3,837.0 1,081.3 2,243.4 598.1 Other ............................................................ 77.4 -- 1.4 -- -------- ------- ------- ------- Interest sensitive assets ..................................... 4,086.7 1,414.6 3,250.7 945.6 -------- ------- ------- ------- Deposits ......................................................... 2,453.2 2,314.1 2,085.2 511.0 Other borrowings ................................................. 504.2 7.1 120.1 3.7 -------- ------- ------- ------- Interest sensitive liabilities ................................ 2,957.4 2,321.2 2,205.3 514.7 -------- ------- ------- ------- Interest rate swaps ........................................... (270.0) 25.0 245.0 -- -------- ------- ------- ------- Interest sensitivity gap ................................... $ 859.3 (881.6) 1,290.4 430.9 ======== ======= ======= ======= Cumulative interest sensitivity gap ........................ $ 859.3 (22.3) 1,268.1 1,699.0 ======== ======= ======= ======= Cumulative interest sensitivity gap as a percentage of total interest sensitive assets ....................... 8.9% (0.2) 13.1 17.5 ======== ======= ======= =======
(a) Excludes the effect of SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities", consisting of net unrealized losses of $47.6 million and net unrealized gains of $18.4 million at December 31, 1999 and 1998, respectively. F-40 TABLE THIRTEEN
MATURITIES OF INVESTMENT SECURITIES AND AVERAGE YIELDS (Amounts in thousands) DECEMBER 31, 1999 -------------------------------------------------------------- INVESTMENT SECURITIES INVESTMENT SECURITIES HELD TO MATURITY AVAILABLE FOR SALE ---------------------------- ---------------------------- AMORTIZED AVERAGE ESTIMATED AVERAGE COST YIELD FAIR VALUE YIELD --------- ------- ---------- ------- U.S. Treasury and U.S. Government agencies: Within 1 year ............................... $ 7,010 5.47% $ 97,982 6.34% 1 to 5 years ................................ 9,151 6.07 895,154 5.96 5 to 10 years ............................... 8,753 7.39 292,833 6.65 More than 10 years .......................... -- -- 1,984 7.20 -------- ---------- Total .................................... 24,914 6.36 1,287,953 6.13 -------- ---------- State and municipal: Within 1 year ............................... 8,742 7.97 451 9.64 1 to 5 years ................................ 38,474 7.70 3,445 7.44 5 to 10 years ............................... 79,815 7.49 6,951 7.13 More than 10 years .......................... 42,714 8.15 4,279 5.38 -------- ---------- Total .................................... 169,745 7.73 15,126 6.78 -------- ---------- Other investments: Within 1 year ............................... 751 7.25 2,222 6.26 1 to 5 years ................................ 263 5.21 775 5.49 5 to 10 years ............................... 808 4.53 2,547 4.27 More than 10 years .......................... 27,100 6.65 15,275 3.54 -------- ---------- Total .................................... 28,922 6.59 20,819 4.09 -------- ---------- Mortgage backed securities ..................... 53,698 6.58 392,780 6.30 -------- ---------- Total investment securities: Within 1 year ............................... 16,503 6.87 100,655 6.35 1 to 5 years ................................ 47,888 7.37 899,374 5.96 5 to 10 years ............................... 89,376 7.46 302,331 6.64 More than 10 years .......................... 69,814 7.57 21,538 4.24 Mortgage backed securities .................. 53,698 6.58 392,780 6.30 -------- ---------- Total .................................... $277,279 7.27% $1,716,678 6.15% ======== ==========
The calculation of weighted average yields for securities is based on the amortized cost and effective yields of each security. The yield on state and municipal securities is computed on a taxable-equivalent basis using the statutory federal income tax rate of 35%. Maturity information is presented based upon contractual maturity. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. OFF-BALANCE SHEET DERIVATIVES FOR INTEREST RATE RISK MANAGEMENT As part of the overall interest rate risk management activities, Synovus utilizes off-balance sheet derivatives to modify the repricing characteristics of on-balance sheet assets and liabilities. The primary instruments utilized by Synovus are interest rate swaps where Synovus receives a fixed rate of interest and pays a floating rate tied to either the prime rate or three month LIBOR. These swaps are utilized to convert on-balance sheet floating rate loans to fixed rate assets and to convert fixed rate liabilities to floating rate liabilities. Synovus has also purchased interest rate floors and collars to manage its overall interest rate risk position. Interest rate floors serve to effectively convert floating-rate loans to fixed-rate when the prime rate falls below a pre-specified level. These instruments are utilized to reduce asset sensitivity in falling rate environments but not in rising rate environments. Interest rate collars convert floating-rate loans to fixed-rate when the prime rate moves outside of a pre-specified range. These instruments reduce overall asset sensitivity in both falling and rising interest rate environments. All off-balance sheet derivatives utilized by Synovus represent end-user activities designed as hedges, all of which are linked to specific assets or liabilities as part of overall interest rate risk management practices. Management feels that the utilization of these instruments provides greater financial flexibility and is a very efficient tool for managing interest rate risk. The notional amount of off-balance sheet derivatives utilized by Synovus as of December 31, 1999 and 1998, was $665 million and $595 million, respectively. The notional amounts represent the amount on which calculations of interest payments to be exchanged are based. Although Synovus is not exposed to credit risk equal to the notional amounts, there is exposure to potential credit risks equal to the fair or replacement values of the swaps if the counterparty fails to perform. This credit risk is normally a very small percentage of the notional amount and fluctuates as interest rates change. Synovus minimizes this risk by subjecting the transaction to the same approval process as on-balance sheet credit activities, by dealing with only highly-rated counterparties, and by obtaining collateral agreements for exposure above certain predetermined limits. F-41
(Dollars in thousands) Weighted Weighted Weighted Average Net Notional Average Average Maturity Unrealized Unrealized Unrealized DECEMBER 31, 1999 Amount Receive Rate Pay Rate (a) In Months Gains Losses Gains (Losses) - ------------------------------------------------------------------------------------------------------------------------------------ Receive fixed swaps - LIBOR $180,000 5.78% 6.16% 19 $ 181 (2,711) (2,530) Receive fixed swaps - Prime 420,000 8.82% 8.50% 39 75 (8,047) (7,972) -------- ---- ---- -- ----- ------ ------ Total receive fixed swaps 600,000 7.91% 7.80% 33 256 (10,758) (10,502) -------- ---- ---- -- ----- ------ ------
Weighted Weighted Average Net Notional Average Maturity Unrealized Unrealized Unrealized Amount Floor Rate In Months Gains Losses Gains (Losses) - ----------------------------------------------------------------------------------------------------------------------------------- Purchased interest rate floors 65,000 7.90% 9 -- (73) (73)
Weighted Average Net Notional Maturity Unrealized Unrealized Unrealized Amount In Months Gains Losses Gains (Losses) - ----------------------------------------------------------------------------------------------------------------------------------- Total $665,000 31 $ 256 (10,831) (10,575) ======== ===== ======= =======
Weighted Weighted Weighted Average Net Notional Average Average Maturity Unrealized Unrealized Unrealized December 31, 1998 Amount Receive Rate Pay Rate (a)(b) In Months Gains Losses Gains (Losses) - ---------------------------------------------------------------------------------------------------------------------------------- Receive fixed swaps - LIBOR $235,000 5.79% 5.33% 9 $ 1,220 (16) 1,204 Receive fixed forward starting swaps - LIBOR 100,000 5.90% 5.07% 41 1,455 (16) 1,439 Receive fixed swaps - Prime 95,000 8.79% 7.75% 29 2,226 -- 2,226 -------- ---- ---- -- ----- --- ----- Total receive fixed swaps 430,000 6.48% 5.80% 21 4,901 (32) 4,869 -------- ---- ---- -- ----- --- -----
Weighted Weighted Weighted Average Net Notional Average Average Maturity Unrealized Unrealized Unrealized Amount Cap Rate Floor Rate In Months Gains Losses Gains (Losses) - ---------------------------------------------------------------------------------------------------------------------------------- Purchased interest rate collars 80,000 9.16% 7.91% 10 $ 256 -- 256
Weighted Weighted Average Net Notional Average Maturity Unrealized Unrealized Unrealized Amount Floor Rate In Months Gains Losses Gains (Losses) - ---------------------------------------------------------------------------------------------------------------------------------- Purchased interest rate floors 85,000 7.87% 24 $ 453 -- 453
Weighted Average Net Notional Maturity Unrealized Unrealized Unrealized Amount In Months Gains Losses Gains (Losses) - ---------------------------------------------------------------------------------------------------------------------------------- Total $595,000 20 $ 5,610 (32) 5,578 ======== ======= === =====
(a) Variable pay rate based upon contract rates in effect at December 31, 1999 and 1998. (b) Pay rate on forward starting swaps is based on the three month LIBOR at December 31, 1998. The above table represents the December 31, 1999 and 1998 status of all off-balance sheet interest rate contracts. During 1999, there were nine maturities and two terminations. There was one termination in 1998. Off-balance sheet interest rate contracts contributed additional net interest income of $2,487,000 and two basis points to the net interest margin for 1999. For 1998, the contribution was additional net interest income of $651,000 and a one basis point increase to the net interest margin. MARKET RISK Market risk reflects the risk of economic loss resulting from adverse changes in market prices and interest rates. This risk of loss can be reflected in either diminished current market values or reduced potential net interest income in future periods. Synovus' market risk arises primarily from interest rate risk inherent in its lending and deposit taking activities. The structure of Synovus' loan and deposit portfolios is such that a significant decline in the prime rate may adversely impact net market values and interest income. Management seeks to manage this risk through the utilization of various tools, primarily investment securities and off-balance sheet derivative financial instruments. The composition and size of the investment portfolio is managed so as to reduce the interest rate risk in the deposit and loan portfolios while at the same time maximizing the yield generated from the portfolio. Off-balance sheet derivatives are also utilized to reduce the risk in the combined deposit and loan portfolios. One of the primary instruments utilized by Synovus is the receive fixed interest rate swap which allows the company to effectively convert on- F-42 balance sheet floating rate loans to fixed rate assets. Synovus also utilizes receive fixed interest rate swaps to effectively convert fixed rate liabilities to floating rate liabilities. Both of these structures allow Synovus to reduce the exposure to declining interest rates inherent in its combined deposit and loan portfolios. Table Fourteen below presents in tabular form the contractual balances and the estimated fair value of Synovus' on-balance sheet financial instruments and the notional amount and estimated fair value of Synovus' off-balance sheet derivative financial instruments at their expected maturity dates as of December 31, 1999, with comparative summary balances at December 31, 1998. Investment securities' cash flows are reflected at their contractual maturity date, except for mortgage-backed securities' cash flows which are reflected in the period in which they are expected to prepay taking into consideration historical prepayment experience. For core deposits without contractual maturity (i.e., interest bearing checking, savings, and money market accounts), the table presents principal cash flows based on management's judgment concerning their most likely runoff or repricing behaviors. The table below presents notional amounts and weighted-average interest rates by contractual maturity date for off-balance sheet derivative financial instruments. Notional amounts represent the amount on which calculations of interest payments to be exchanged are based. Weighted average variable rates are based on market rates at the most recent reset date for each respective swap tied to LIBOR and the December 31, 1999 prime rate for each respective swap tied to prime. There have been no substantial changes in Synovus' market risk profile from the preceding year and the assumptions are consistent with prior year assumptions. TABLE FOURTEEN
MARKET RISK INFORMATION (In thousands) PRINCIPAL/NOTIONAL AMOUNT MATURING IN: RATE-SENSITIVE ASSETS: 2000 2001 2002 2003 2004 Thereafter - --------------------------------------------------------------------------------------------------------------------------- Fixed interest rate loans $ 1,829,220 986,896 849,560 610,312 618,721 565,121 Average interest rate 8.81% 8.84% 8.66% 8.46% 8.31% 8.20% Variable interest rate loans $ 1,605,341 890,437 445,991 306,574 295,720 147,491 Average interest rate 8.40% 8.81% 9.21% 8.59% 8.58% 8.62% Fixed interest rate securities $ 146,972 179,457 295,150 342,821 313,708 677,109 Average interest rate 6.20% 6.24% 5.86% 5.75% 6.18% 6.27% Variable interest rate securities $ 16,572 12,595 9,690 7,526 5,883 34,090 Average interest rate 6.13% 6.13% 6.14% 6.14% 6.15% 5.98% Other interest bearing assets $ 94,021 -- -- -- -- -- Average interest rate 5.59% -- -- -- -- -- RATE-SENSITIVE LIABILITIES: - --------------------------------------------------------------------------------------------------------------------------- Savings and interest bearing checking $ 1,797,941 354,928 354,928 307,821 307,828 452,184 Average interest rate 3.66% 3.02% 3.02% 2.85% 2.85% 2.25% Fixed interest rate time deposits $ 3,411,203 470,047 88,215 71,743 42,649 39,183 Average interest rate 5.18% 5.51% 5.38% 5.64% 5.46% 5.77% Variable interest rate time deposits $ 91,441 20,382 4,281 -- -- -- Average interest rate 5.13% 5.34% 5.68% -- -- -- Fixed interest rate borrowings $ 13,698 5,288 753 8,240 81,516 52,424 Average interest rate 5.86% 5.95% 7.50% 5.58% 6.05% 5.45% Variable interest rate borrowings $ 1,288,092 100,000 30,000 -- -- -- Average interest rate 5.43% 6.47% 6.43% -- -- -- RATE-SENSITIVE DERIVATIVE FINANCIAL INSTRUMENTS: - --------------------------------------------------------------------------------------------------------------------------- Payable variable interest rate swaps - LIBOR $ 50,000 55,000 75,000 Average pay rate 6.11% 6.16% 6.20% Average receive rate 5.49% 6.42% 5.50% Pay variable variable forward starting interest rate swaps - LIBOR Average pay rate Average receive rate Pay variable interest rate swaps - Prime $ 20,000 75,000 55,000 150,000 120,000 Average pay rate 8.50% 8.50% 8.50% 8.50% 8.50% Average receive rate 8.94% 8.75% 8.42% 8.74% 9.11% Purchased interest rate collars - Prime Average cap rate Average floor rate Purchased interest rate floors - Prime $ 45,000 20,000 Average strike rate 7.86% 8.00% - --------------------------------------------------------------------------------------------------------------------------- MARKET RISK INFORMATION FAIR FAIR (In thousands) TOTAL VALUE TOTAL VALUE RATE-SENSITIVE ASSETS: 1999 1999 1998 1998 - ---------------------------------------------------------------------------------------------------------------------------- Fixed interest rate loans 5,459,830 5,377,645 4,461,348 4,366,762 Average interest rate 8.63% 8.76% Variable interest rate loans 3,691,554 3,689,881 3,298,488 3,257,747 Average interest rate 8.64% 8.97% Fixed interest rate securities 1,955,217 1,905,105 1,778,363 1,803,437 Average interest rate 6.09% 6.39% Variable interest rate securities 86,356 85,077 80,669 80,129 Average interest rate 6.08% 6.33% Other interest bearing assets 94,021 94,021 78,775 78,775 Average interest rate 5.59% 4.99% RATE-SENSITIVE LIABILITIES: - ---------------------------------------------------------------------------------------------------------------------------- Savings and interest bearing checking 3,575,630 3,518,260 3,573,118 3,581,660 Average interest rate 3.22% 3.10% Fixed interest rate time deposits 4,123,040 4,123,560 3,666,264 3,673,650 Average interest rate 5.24% 5.50% Variable interest rate time deposits 116,104 116,171 124,101 124,447 Average interest rate 5.19% 5.08% Fixed interest rate borrowings 161,919 161,572 104,267 105,739 Average interest rate 5.82% 6.09% Variable interest rate borrowings 1,418,092 1,417,997 530,822 530,822 Average interest rate 5.53% 4.65% RATE-SENSITIVE DERIVATIVE FINANCIAL INSTRUMENTS: - ---------------------------------------------------------------------------------------------------------------------------- Payable variable interest rate swaps - LIBOR 180,000 (2,530) 235,000 1,204 Average pay rate 6.16% 5.33% Average receive rate 5.78% 5.79% Pay variable variable forward starting interest rate swaps - LIBOR -- 100,000 1,439 Average pay rate 5.07% Average receive rate 5.91% Pay variable interest rate swaps - Prime 420,000 (7,972) 95,000 2,226 Average pay rate 8.50% 7.75% Average receive rate 8.82% 8.79% Purchased interest rate collars - Prime -- 80,000 263 Average cap rate 9.16% Average floor rate 7.91% Purchased interest rate floors - Prime 65,000 4 85,000 726 Average strike rate 7.90% 7.87% - ----------------------------------------------------------------------------------------------------------------------------
F-43 LIQUIDITY Liquidity represents the availability of funding to meet the needs of depositors, borrowers, and creditors at a reasonable cost, on a timely basis, and without adverse consequences. The Synovus Asset/Liability Management Committee actively analyzes and manages Synovus' liquidity position in coordination with similar committees at subsidiary banks. These subsidiaries, with the help of management, maintain liquidity in the form of cash on deposit, securities available for sale, and cash derived from prepayments and maturities of both their investment and loan portfolios. Liquidity is also enhanced by the acquisition of new deposits and the well-established core deposits of Synovus' 242 banking offices in four states. The subsidiary banks monitor deposit flow and evaluate alternate pricing structures to retain and grow deposits. Certain Synovus subsidiary banks maintain correspondent banking relationships with various national and regional financial organizations. These relationships provide access to short-term borrowings through federal funds which allows Synovus to meet immediate liquidity needs if required. Synovus serves diverse markets. Some of these are rapidly growing areas where loan demand outpaces the generation of deposits. However, through loan participations and federal funds sold among Synovus' subsidiary banks, these loans can be effectively funded by subsidiaries having lower local loan demand. Additionally, lending is focused within the local markets served by Synovus, enabling the development of comprehensive banking relationships. Selected Synovus subsidiary banks maintain an additional liquidity source through their membership in the Federal Home Loan Bank. At year-end 1999, these banks had access to additional funding of approximately $200 million, subject to available collateral, through utilization of Federal Home Loan Bank advances. Additionally, the Parent Company requires cash for various operating needs including dividends to shareholders, business combinations, capital infusions into subsidiaries, the servicing of debt, and the payment of general corporate expenses. The primary source of liquidity for the Parent Company is dividends from the subsidiary banks. In addition, the Parent Company has access to a $25 million line of credit. The Parent Company enjoys an excellent reputation and credit standing in the market place and has the ability to raise substantial amounts of funds in the form of either short or long-term borrowings. The Parent Company's current principal debt, senior notes totaling $75 million at a rate of 6.125%, has been rated "A" by Standard and Poors Corp., "A3" by Moody's Investor Service and "AA-" by Thomson BankWatch, Inc. For a complete description of these borrowings and other borrowings by other Synovus subsidiaries, see Note 6 to Synovus' consolidated financial statements. The consolidated statements of cash flows detail Synovus' cash flows from operating, investing, and financing activities. Net cash provided by operating activities was $453 million for the year ended December 31, 1999, while financing activities provided $1.4 billion. Investing activities used $1.8 billion of this amount, resulting in a net increase in cash and cash equivalents of $93.2 million. At year-end 1999, Synovus increased its cash on hand levels by approximately $95 million in connection with its Year 2000 planning. Management is not aware of any trends, events, or uncertainties that will have, or that are reasonably likely to have a material impact on Synovus' liquidity, capital resources, or operations. Further, management is not aware of any current recommendations by regulatory agencies which, if they were to be implemented, would have such effect. CAPITAL RESOURCES Synovus has always placed great emphasis on maintaining a strong capital base and continues to exceed regulatory capital requirements. Management is committed to maintaining a capital level sufficient to assure shareholders, customers, and regulators that Synovus is financially sound, and to enable Synovus to sustain an appropriate degree of leverage to provide a desirable level of profitability. Synovus has the ability to generate internal capital growth sufficient to support the asset growth it has experienced. Total shareholders' equity of $1.23 billion represented 9.78% of total assets at December 31, 1999. Regulators use a risk-adjusted calculation to aid them in their determination of capital adequacy by weighting assets based on the credit risk associated with on- and off-balance sheet assets. The majority of these risk-weighted assets for Synovus are on-balance sheet assets in the form of loans. A small portion of risk-weighted assets are considered off-balance sheet assets and primarily consist of letters of credit, loan commitments, and to a lesser extent interest rate contracts, that Synovus enters into in the normal course of business. Capital is categorized into two types: Tier I and Tier II. The capital guidelines used by regulators require an 8% total risk-based capital ratio of which 4% must be Tier I capital. Additionally, the regulatory agencies define a well-capitalized bank as one that has a leverage ratio of at least 5%, a Tier I capital ratio of at least 6%, and a total risk-based capital ratio of at least 10%. At the end of 1999, Synovus and all subsidiary banks were in excess of the minimum capital requirements with a consolidated Tier I capital ratio of 12.51% and a total risk-based capital ratio of 13.77%, compared to Tier I and total risk-based capital ratios of 12.73% and 14.00%, respectively, in 1998 as shown in Table Fifteen. TABLE FIFTEEN
CAPITAL RATIOS (Amounts in thousands) DECEMBER 31, ---------------------------------- 1999 1998 ---------------------------------- Tier I capital: Shareholders' equity ............................... $ 1,226,669 1,111,917 Less: Unrealized gain on investment securities available for sale ...................... 28,960 (11,425) Disallowed intangibles ............................ (38,064) (33,986) Plus: Minority interest ............................ 64,285 52,093 ------------ --------- Total Tier I capital .............................. 1,281,850 1,118,599 ------------ --------- Tier II capital: Eligible portion of the reserve for loan losses .... 127,558 109,873 Subordinated and other qualifying debt ............. 1,480 1,720 ------------ --------- Total Tier II capital ............................. 129,038 111,593 ------------ --------- Total risk-based capital ............................. $ 1,410,888 1,230,192 ============ ========= Total risk-adjusted assets ........................... $ 10,242,701 8,785,565 ============ ========= Tier I capital ratio ................................. 12.51% 12.73 Total risk-based capital ratio ....................... 13.77 14.00 Leverage ratio ....................................... 10.52 10.82 Regulatory minimums: Tier I capital ratio ............................... 4.00% Total risk-based capital ratio ..................... 8.00 Leverage ratio ..................................... 4.00
F-44 In addition to the risk-based capital standards, a minimum leverage ratio of 4% is required for the highest-rated bank holding companies that are not undertaking significant expansion programs. An additional 1% to 2% may be required for other companies, depending upon their regulatory ratings and expansion plans. The leverage ratio is defined as Tier I capital divided by quarterly average assets, net of certain intangibles. As of December 31, 1999, Synovus had a leverage ratio of 10.52% compared to 10.82% at December 31, 1998. Both ratios significantly exceed regulatory requirements. Synovus' capital levels also exceed all requirements under the Federal Reserve Board's guidelines. The Federal Reserve Board requires a minimum primary capital ratio of 5.50% and a total capital ratio of 6.00% for bank holding companies and banks. At December 31, 1999, Synovus' primary and total capital ratios as defined by the Federal Reserve Board were 11.11% and 11.12%, respectively, compared to 11.34% and 11.35%, respectively, at year-end 1998. Synovus' 80.8% ownership of TSYS is an important aspect of the market price of Synovus common stock and should be considered in a comparison of the relative market price of Synovus common stock to other financial services companies. As of December 31, 1999, there were approximately 33,648 shareholders of record of Synovus common stock, some of which are holders in nominee name for the benefit of a number of different shareholders. Table Sixteen displays high and low stock price quotations of Synovus common stock which are based on actual transactions. TABLE SIXTEEN MARKET AND STOCK PRICE INFORMATION
HIGH LOW 1999 Quarter ended December 31, 1999 .......... $22 1/8 18 7/16 Quarter ended September 30, 1999 ......... 20 5/16 17 1/2 Quarter ended June 30, 1999 .............. 23 9/16 19 1/8 Quarter ended March 31, 1999 ............. 25 20 1/2 1998 Quarter ended December 31, 1998 .......... $24 1/16 20 3/16 Quarter ended September 30, 1998 ......... 25 18 1/16 Quarter ended June 30, 1998 .............. 25 13/16 21 15/16 Quarter ended March 31, 1998 ............. 25 13/16 20 3/4
DIVIDENDS It is Synovus' objective to pay out at least one-third of earnings to shareholders in cash dividends. Synovus' dividend payout ratio was 43.78%, 41.52%, and 38.10%, in 1999, 1998, and 1997, respectively. The total dollar amount of dividends declared increased 26.9% in 1999 to $98.5 million, from $77.7 million in 1998. Cash dividends have been paid on the common stock of Synovus (including its predecessor companies) in every year since 1891. It is the present intention of the Synovus Board of Directors to continue to pay cash dividends on its common stock in accordance with the previously mentioned objective. Table Seventeen presents the declared and paid dates from recent dividends, as well as per share dividend amounts. TABLE SEVENTEEN DIVIDENDS
PER SHARE DATE DECLARED DATE PAID AMOUNT ------------- --------- --------- November 15, 1999 January 3, 2000 $.0900 September 13, 1999 October 1, 1999 .0900 May 10, 1999 July 1, 1999 .0900 March 15, 1999 April 1, 1999 .0900 November 9, 1998 January 2, 1999 .0733 September 14, 1998 October 1, 1998 .0733 May 11, 1998 July 1, 1998 .0733 March 9, 1998 April 1, 1998 .0733
COMMITMENTS AND CONTINGENCIES Synovus believes it has sufficient capital, liquidity, and future cash flows from operations to meet operating needs over the next year. Table Eighteen, Note 6, and Note 10 to Synovus' consolidated financial statements provide additional information on Synovus' short-term and long-term borrowings. In the normal course of its business, TSYS maintains processing contracts with its customers. These processing contracts contain commitments, including, but not limited to, minimum standards and time frames against which TSYS' performance is measured. In the event TSYS does not meet its contractual commitments with its customers, TSYS may incur penalties and/or certain customers may have the right to terminate their contracts with TSYS. TSYS does not believe that it will fail to meet its contractual commitments to an extent that will result in a material adverse effect on its financial condition or results of operations. Synovus and its subsidiaries are subject to various legal proceedings and claims which arise in the ordinary course of its business. Any litigation is vigorously defended by Synovus and, in the opinion of management, based on consultation with external legal counsel, any outcome of such litigation would not materially affect Synovus' consolidated financial position or results of operations. Currently, multiple lawsuits seeking class action treatment are pending against one of Synovus' Alabama banking subsidiaries that involve: (1) payment of service fees or interest rebates to automobile dealers in connection with the assignment of automobile credit sales contracts to that Synovus subsidiary; (2) the forced placement of insurance to protect that Synovus subsidiary's interest in collateral for which consumer credit customers have failed to obtain or maintain insurance; and (3) the receipt of commissions by that Synovus subsidiary in connection with the sale of credit life insurance to its consumer credit customers and the charging of an interest surcharge and a processing fee in connection with consumer loans made by that subsidiary. These lawsuits seek unspecified damages, including punitive damages. Synovus intends to vigorously contest these lawsuits and all other litigation to which Synovus and its subsidiaries are parties. Based upon information presently available, and in light of legal, equitable, and factual defenses available to Synovus and its subsidiaries, contingent liabilities arising from the threatened and pending litigation are not considered material. It should be noted, however, that large punitive damage awards bearing little relation to the actual damages sustained by plaintiffs have been awarded in Alabama. F-45 In November, 1998, a class action complaint was filed against NationsBank of Delaware, N.A., in the United States District Court for the Southern District of Mississippi. On March 23, 1999, the named plaintiff amended the complaint and named TSYS and certain credit bureaus as defendants in the case. The named plaintiff alleges, among other things, that the defendants failed to report properly the credit standing of each member of the putative class. The named plaintiff has defined the class as all persons and entities within the United States who obtained credit cards from NationsBank and whose accounts were purchased by or transferred to U.S. BankCard and whose accounts were reported to credit bureaus or credit agencies incorrectly in August 1998. The amended complaint alleges negligence, violation of the Fair Credit Reporting Act, breach of the duty of good faith and fair dealing, and seeks declaratory relief, injunctive relief, and the imposition of punitive damages. This lawsuit seeks unspecified damages. Though settlement negotiations have occurred, these negotiations have to date not resulted in a definitive settlement agreement among the parties. TSYS is not in a position to determine its possible exposure, if any, as a result of this litigation. The following table sets forth certain information regarding federal funds purchased and securities sold under agreement to repurchase, the principal components of short-term borrowings. TABLE EIGHTEEN
SHORT-TERM BORROWINGS (In thousands) 1999 1998 1997 ------------ ---------- ---------- Balance at December 31, ........... $1,261,391 503,287 312,299 Weighted average interest rate at December 31, ............ 5.49% 4.70 5.71 Maximum month end balance during the year ......... $1,261,391 503,287 520,409 Average amount outstanding during the year ................. $ 786,954 311,617 356,122 Weighted average interest rate during the year ................. 5.01% 4.95 5.37
INCOME TAX EXPENSE As reported in the consolidated statements of income, Synovus' income tax expense increased to $124.0 million in 1999, up from $107.6 million in 1998, and $96.2 million in 1997. The effective income tax rate was 35.5%, 35.4%, and 36.0% in 1999, 1998, and 1997, respectively. See Note 7 to Synovus' consolidated financial statements for a detailed analysis of income taxes. INFLATION Inflation has an important impact on the growth of total assets in the banking industry and may create a need to increase equity capital at higher than normal rates in order to maintain an appropriate equity to assets ratio. Synovus has been able to maintain a high level of equity through retention of an appropriate percentage of its net income. Synovus copes with the effects of inflation by managing its interest rate sensitivity gap position through its asset/liability management program and by periodically adjusting its pricing of services and banking products to take into consideration current costs. PARENT COMPANY The Parent Company's assets, primarily its investment in subsidiaries, are funded, for the most part, by shareholders' equity. It also utilizes short-term and long-term debt. The Parent Company is responsible for providing the necessary funds to strengthen the capital of its subsidiaries, acquire new business, fund internal growth, pay corporate operating expenses, and pay dividends to its shareholders. These operations are funded by dividends and fees received from subsidiaries, and borrowings from outside sources. In connection with dividend payments to the Parent Company from its subsidiary banks, certain rules and regulations of the various state and federal banking regulatory agencies limit the amount of dividends which may be paid. Approximately $109.7 million in dividends could be paid in 2000 to the Parent Company from its subsidiary banks without prior regulatory approval. Synovus anticipates receiving regulatory approval to allow certain subsidiaries to pay dividends in excess of their respective regulatory limits. RECENTLY ISSUED ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 standardizes the accounting for derivative instruments, including certain derivative instruments embedded in other contracts. Under the standard, entities are required to carry all derivative instruments on the balance sheet at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, on the reason for holding it. If certain conditions are met, entities may elect to designate a derivative instrument as a hedge of exposures to changes in fair values, cash flows, or foreign currencies. If the hedged exposure is a fair value exposure, the gain or loss on the derivative instrument is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. If the hedged exposure is a cash flow exposure, the effective portion of the gain or loss on the derivative instrument is reported initially as a component of other comprehensive income (outside earnings) and subsequently reclassified into earnings when the forecasted transaction affects earnings. Any amounts excluded from the assessment of hedge effectiveness as well as the ineffective portion of the gain or loss is reported in earnings immediately. If the derivative instrument is not designated as a hedge, the gain or loss is recognized in earnings in the period of change. For Synovus, SFAS No. 133, as amended by SFAS No. 137, is effective January 1, 2001. On adoption, the provisions of SFAS No. 133 must be applied prospectively. Synovus is in the process of assessing the impact that SFAS No. 133 will have on its financial statements. FORWARD-LOOKING STATEMENTS Certain statements contained in this Annual Report which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act (the "Act"). In addition, certain statements in future filings by Synovus with the Securities and Exchange Commission, in press releases, and in oral and written statements made by or with the approval of Synovus which are not statements of historical fact constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not F-46 limited to: (i) projections of revenues, income or loss, earnings or loss per share, the payment or non-payment of dividends, capital structure, efficiency ratios and other financial terms; (ii) statements of plans and objectives of Synovus or its management or Board of Directors, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as "believes," "anticipates," "expects," "intends," "targeted," and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: (i) the strength of the U.S. economy in general and the strength of the local economies in which operations are conducted; (ii) the effects of and changes in trade, monetary and fiscal policies, and laws, including interest rate policies of the Federal Reserve Board; (iii) inflation, interest rate, market and monetary fluctuations; (iv) the timely development of and acceptance of new products and services and perceived overall value of these products and services by users; (v) changes in consumer spending, borrowing, and saving habits; (vi) technological changes are more difficult or expensive than anticipated; (vii) acquisitions; (viii) the ability to increase market share and control expenses; (ix) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities, and insurance) with which Synovus and its subsidiaries must comply; (x) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, the Financial Accounting Standards Board, or other authoritative bodies; (xi) changes in Synovus' organization, compensation, and benefit plans; (xii) the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; and (xiii) the success of Synovus at managing the risks involved in the foregoing. Such forward-looking statements speak only as of the date on which such statements are made, and Synovus undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made to reflect the occurrence of unanticipated events. F-47 Presented below is a summary of the unaudited consolidated quarterly financial data for the years ended December 31, 1999 and 1998. (In thousands, except per share data)
FOURTH THIRD SECOND FIRST 1999 QUARTER QUARTER QUARTER QUARTER -------- ------- -------- -------- INTEREST INCOME ....................... $240,630 225,644 214,902 206,831 ======== ======= ======== ======== NET INTEREST INCOME ................... 136,296 130,634 125,901 120,463 ======== ======= ======== ======== PROVISION FOR LOSSES ON LOANS ......... 8,664 8,613 9,515 7,215 ======== ======= ======== ======== INCOME BEFORE INCOME TAXES ............ 98,956 89,887 82,590 77,882 ======== ======= ======== ======== NET INCOME ............................ 63,256 58,005 53,313 50,733 ======== ======= ======== ======== NET INCOME PER SHARE, BASIC ........... .22 .21 .19 .18 ======== ======= ======== ======== NET INCOME PER SHARE, DILUTED ......... .22 .21 .19 .18 ======== ======= ======== ======== 1998 Interest income ....................... $205,455 199,744 194,770 192,349 ======== ======= ======== ======== Net interest income ................... 119,199 114,941 111,423 109,502 ======== ======= ======== ======== Provision for losses on loans ......... 6,331 5,781 7,079 7,691 ======== ======= ======== ======== Income before income taxes ............ 87,406 77,147 71,988 67,484 ======== ======= ======== ======== Net income ............................ 56,215 49,607 46,834 43,809 ======== ======= ======== ======== Net income per share, basic ........... .20 .18 .18 .16 ======== ======= ======== ======== Net income per share, diluted ......... .20 .18 .17 .16 ======== ======= ======== ========
F-48 EX-20.1 6 PROXY STATEMENT [LOGO](R) SYNOVUS(R) FINANCIAL CORP. JAMES H. BLANCHARD CHAIRMAN OF THE BOARD March 16, 2000 Dear Shareholder: You are cordially invited to attend our Annual Meeting of Shareholders at 10:00 a.m. on Thursday, April 20, 2000, in the South Hall of the Columbus, Georgia Convention & Trade Center. Enclosed with this Proxy Statement are your proxy card and the 1999 Annual Report. We hope that you will be able to be with us and let us give you a review of 1999. Whether you own a few or many shares of stock and whether or not you plan to attend in person, it is important that your shares be voted on matters that come before the meeting. To make sure your shares are represented, we urge you to vote promptly. Thank you for helping us make 1999 a good year. We look forward to your continued support in 2000 and another good year. Sincerely yours, /s/James H. Blanchard JAMES H. BLANCHARD Synovus Financial Corp. Post Office Box 120 Columbus, Georgia 31902-0120 SYNOVUS(R) FINANCIAL CORP. NOTICE OF THE 2000 ANNUAL MEETING OF SHAREHOLDERS TIME............... 10:00 a.m. E.T. Thursday, April 20, 2000 PLACE.............. South Hall Columbus, Georgia Convention & Trade Center 801 Front Avenue Columbus, Georgia 31901 ITEMS OF BUSINESS.. (1) To elect three directors to serve until the Annual Meeting of Shareholders in 2003. (2) To approve the Synovus Financial Corp. 2000 Long-Term Incentive Plan. (3) To transact such other business as may properly come before the meeting and any adjournment thereof. RECORD DATE........ Holders of record of Synovus common stock at the close of business on February 11, 2000, are entitled to vote at the meeting. ANNUAL REPORT...... Synovus' 1999 Annual Report, which is not a part of the proxy soliciting material, is enclosed. PROXY VOTING....... It is important that your shares be represented and voted at the meeting. You can vote your shares by completing and returning the proxy card sent to you. Most shareholders can also vote their shares over the Internet or by telephone. If Internet or telephone voting is available to you, voting instructions are printed on the proxy card sent to you. You can revoke a proxy at any time prior to its exercise at the meeting by following the instructions in the accompanying Proxy Statement. /s/G. SANDERS GRIFFITH, III G. SANDERS GRIFFITH, III Secretary Columbus, Georgia March 16, 2000 YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE VOTE YOUR SHARES PROMPTLY. TABLE OF CONTENTS Voting Information.............................................................1 Election of Directors..........................................................3 Meetings and Committees of the Board...........................................6 Directors' Compensation........................................................7 Executive Officers.............................................................7 Stock Ownership of Directors and Executive Officers............................8 Directors' Proposal to Approve the Synovus Financial Corp. 2000 Long-Term Incentive Plan.............................................9 Executive Compensation........................................................15 Stock Performance Graph.......................................................18 Compensation Committee Report on Executive Compensation.......................19 Compensation Committee Interlocks and Insider Participation....................................................21 Transactions With Management..................................................21 Principal Shareholders........................................................22 Relationships Between Synovus, Columbus Bank and Certain of Synovus' Subsidiaries and Affiliates..........................24 Section 16(a) Beneficial Ownership Reporting Compliance.......................27 Independent Auditors..........................................................28 General Information: Financial Information....................................................28 Shareholder Proposals for the 2001 Proxy Statement.......................28 Director Nominees or Other Business for Presentation at the Annual Meeting...............................................28 Solicitation of Proxies..................................................29 VOTING INFORMATION PURPOSE This Proxy Statement and the accompanying proxy card are being mailed to Synovus shareholders beginning March 16, 2000. The Synovus Board of Directors is soliciting proxies to be used at the 2000 Annual Meeting of Synovus Shareholders which will be held on April 20, 2000, at 10:00 a.m., in the South Hall of the Columbus, Georgia Convention & Trade Center. Proxies are solicited to give all shareholders of record an opportunity to vote on matters to be presented at the Annual Meeting. In the following pages of this Proxy Statement, you will find information on matters to be voted upon at the Annual Meeting of Shareholders or any adjournment of that meeting. WHO CAN VOTE All shareholders of record of Synovus common stock as of the close of business on February 11, 2000 are entitled to vote. Shares can be voted at the meeting only if the shareholder is present or represented by a valid proxy. SHARES OUTSTANDING A majority of the votes entitled to be cast by the holders of the outstanding shares of Synovus common stock must be present, either in person or represented by proxy, in order to conduct the Annual Meeting of Synovus Shareholders. On February 11, 2000, 252,246,801 shares of Synovus common stock were outstanding. PROXIES AND VOTING PROCEDURES Your vote is important. Because many shareholders cannot attend the meeting in person, it is necessary that a large number be represented by proxy. Most shareholders have a choice of voting over the Internet, by using a toll-free telephone number or by completing a proxy card and mailing it in the postage-paid envelope provided. Please refer to your proxy card or the information forwarded by your bank, broker or other holder of record to see which options are available to you. Please be aware that if you vote over the Internet, you may incur costs such as telephone and Internet access charges for which you will be responsible. The Internet and telephone voting facilities for shareholders of record will close at 11:59 p.m. E.T. on April 19, 2000. You can revoke your proxy at any time before it is exercised by timely delivery of a properly executed, later-dated proxy (including an Internet or telephone vote) or by voting by ballot at the Annual Meeting. By providing your voting instructions promptly, you may save Synovus the expense of a second mailing. The Internet and telephone voting procedures are designed to authenticate shareholders by use of a control number and to allow you to confirm that your instructions have been properly recorded. The method by which you vote will in no way limit your right to vote at the Annual Meeting if you later decide to attend in person. If your shares are held in the name of a bank, broker or other holder of record, you must obtain a proxy, executed in your favor, from the holder of record, to be able to vote at the Annual Meeting. All shares entitled to vote and represented by properly completed proxies received prior to the Annual Meeting and not revoked will be voted at the Annual Meeting in accordance with your instructions. IF YOU DO NOT INDICATE HOW YOUR SHARES SHOULD BE VOTED ON A MATTER, THE SHARES REPRESENTED BY YOUR PROPERLY COMPLETED PROXY WILL BE VOTED AS THE BOARD OF DIRECTORS RECOMMENDS. If any other matters are properly presented at the Annual Meeting for consideration, including, among other things, consideration of a motion to adjourn the meeting to another time or place, the persons named as proxies and acting thereunder will have discretion to vote on those matters according to their best judgment to the same extent as the person delivering the proxy would be entitled to vote. At the date this Proxy Statement went to press, we did not anticipate that any other matters would be raised at the Annual Meeting. VOTES PER SHARE Holders of Synovus common stock are entitled to ten votes on each matter submitted to a vote of shareholders for each share of Synovus common stock owned on February 11, 2000 which: (1) has had the same owner since February 11, 1996; (2) was acquired by reason of participation in a dividend reinvestment plan offered by Synovus and is held by the same owner who acquired it under such plan; (3) is held by the same owner to whom it was issued as a result of an acquisition of a company or business by Synovus where the resolutions adopted by Synovus' Board of Directors approving the acquisition specifically grant ten votes per share; (4) was acquired under any employee, officer and/or director benefit plan maintained for one or more employees, officers and/or directors of Synovus and/or its subsidiaries, and is held by the same owner for whom it was acquired under any such plan; (5) is held by the same owner to whom it was issued by Synovus, or to whom it was transferred by Synovus from treasury shares, and the resolutions adopted by Synovus' Board of Directors approving such issuance and/or transfer specifically grant ten votes per share; (6) was acquired as a direct result of a stock split, stock dividend or other type of share distribution if the share as to which it was distributed was acquired prior to, and has been held by the same owner since, February 11, 1996; (7) has been owned continuously by the same shareholder for a period of 48 consecutive months prior to the record date of any meeting of shareholders at which the share is eligible to be voted; or (8) is owned by a holder who, in addition to shares which are owned under the provisions of (1)-(7) above, is the owner of less than 1,139,063 shares of Synovus common stock (which amount has been appropriately adjusted to reflect stock splits and with such amount to be appropriately adjusted to properly reflect any other change in Synovus common stock by means of a stock split, a stock dividend, a recapitalization or otherwise). Shareholders of shares of Synovus common stock not described above are entitled to one vote per share for each share. The actual voting power of each holder of shares of Synovus common stock will be based on information possessed by Synovus at the time of the Annual Meeting. As Synovus common stock is registered with the Securities and Exchange Commission and is traded on the New York Stock Exchange, Synovus common stock is subject to the provisions of an NYSE rule which, in general, prohibits a company's common stock and equity securities from being authorized or remaining authorized for trading on the NYSE if the company issues securities or takes other corporate action that would have the effect of nullifying, restricting or disparately reducing the voting rights of existing shareholders of the company. However, the rule contains a "grandfather" provision, under which Synovus' ten vote provision falls, which, in general, permits grandfathered disparate voting rights plans to continue to operate as adopted. The number of votes that each shareholder will be entitled to exercise at the Annual Meeting will depend upon whether each share held by the shareholder meets the requirements which entitle one share of Synovus common stock to ten votes on each matter submitted to a vote of shareholders. Shareholders of Synovus common stock must complete the Certification on the proxy in order for any of the shares represented by the proxy to be entitled to ten votes per share. All shares entitled to vote and represented by properly completed proxies received before the polls are closed at the Annual Meeting, and not revoked or superceded, will be voted in accordance with instructions indicated on those proxies. SHAREHOLDERS WHO DO NOT CERTIFY ON THEIR PROXY CARDS THAT THEY ARE ENTITLED TO TEN VOTES PER SHARE WILL BE ENTITLED TO ONLY ONE VOTE PER SHARE. SYNOVUS DIVIDEND REINVESTMENT AND DIRECT STOCK PURCHASE PLAN If you participate in this Plan, your proxy card represents shares held in the Plan, as well as shares you hold directly in certificate form registered in the same name. REQUIRED VOTE The presence, in person or by proxy, of the holders of a majority of the votes entitled to be cast generally for the election of directors is necessary to constitute a quorum at the Annual Meeting. Abstentions and broker "nonvotes" are counted as present and entitled to vote for purposes of determining a quorum. A broker "nonvote" occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner. A plurality of the votes duly cast is required for the election of a director (i.e., the nominee receiving the greatest number of votes will be elected). Abstentions and broker nonvotes are not counted for purposes of the election of a director. A properly completed proxy marked "withhold authority" with respect to the election of one or more directors will not be voted with respect to the director or directors indicated, although it will be counted for purposes of determining whether there is a quorum. Cumulative voting is not permitted. The affirmative vote of the holders of a majority of the votes cast thereon is required to approve the Directors' proposal to approve the Synovus 2000 Long-Term Incentive Plan. Any shares not voted (whether by abstention, broker nonvote or otherwise) have no impact on the vote. COLUMBUS BANK AND TRUST COMPANY AND TOTAL SYSTEM SERVICES, INC. Synovus is the owner of all of the issued and outstanding shares of common stock of Columbus Bank and Trust Company(R)("Columbus Bank"). Columbus Bank owns individually 80.8% of the outstanding shares of Total System Services, Inc.(R) ("TSYS(R)"), a data processing company having 194,832,720 shares of common stock outstanding on February 11, 2000. ELECTION OF DIRECTORS THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" ALL NOMINEES. NUMBER At the date of this Proxy Statement, the Board of Directors of Synovus consists of 16 members. As 20 board seats have been authorized by Synovus' shareholders, Synovus has four directorships which remain vacant. These vacant directorships could be filled in the future at the discretion of Synovus' Board of Directors. This discretionary power gives Synovus' Board of Directors the flexibility of appointing new directors in the periods between Synovus' Annual Meetings should suitable candidates come to its attention. The Board is divided into three classes whose terms are staggered so that the term of one class expires at each Annual Meeting of Shareholders. The terms of office of the Class I directors expire at the 2001 Annual Meeting, the terms of office of the Class II directors expire at the 2002 Annual Meeting and the terms of office of the Class III directors expire at the 2000 Annual Meeting. Three director nominees have been nominated for election as Class III directors at this meeting. Proxies cannot be voted at the 2000 Annual Meeting for a greater number of persons than the number of nominees named. NOMINEES The following nominees have been selected by the Board for submission to the shareholders: Richard Y. Bradley, John P. Illges, III and William B. Turner, each to serve a three year term expiring at the Annual Meeting in the year 2003. The Board believes that each director nominee will be able to stand for election. If any nominee becomes unable to stand for election, proxies in favor of that nominee will be voted in favor of the remaining nominees and in favor of any substitute nominee named by the Board. If you do not wish your shares voted for one or more of the nominees, you may so indicate on the proxy. BOARD OF DIRECTORS Following is the principal occupation, age and certain other information for each director nominee and other directors serving unexpired terms. - --------------------------------------------------------------------------------
Synovus Year Director First Classifi- Elected Principal Occupation Name Age cation Director and Other Information - ------------------------- ----- -------- ---------- ------------------------------------- Richard E. Anthony 53 II 1993 Vice Chairman of the Board, Synovus Financial Corp.; Chairman of the Board, First Commercial Bank of Birmingham (Banking Subsidiary of Synovus) Joe E. Beverly 58 II 1983 Chairman of the Board, Commercial Bank, Thomasville, Georgia (Banking Subsidiary of Synovus); Director, Flowers Industries, Inc. James H. Blanchard 58 I 1972 Chairman of the Board and Chief Executive Officer, Synovus Financial Corp.; Chairman of the Executive Committee, Total System Services, Inc.; Director, BellSouth Corporation Richard Y. Bradley 61 III 1991 Partner, Bradley & Hatcher (Law Firm); Director, Total System Services, Inc. Walter M. Deriso, Jr. 53 II 1997 Vice Chairman of the Board, Synovus Financial Corp.; Chairman of the Board, Security Bank and Trust Company, Albany, Georgia (Banking Subsidiary of Synovus) C. Edward Floyd, M.D. 65 I 1995 Vascular Surgeon Gardiner W. Garrard, Jr. 59 I 1972 President, The Jordan Company (Real Estate Development); Director, Total System Services, Inc. V. Nathaniel Hansford 56 I 1985 President, North Georgia College and State University John P. Illges, III 65 III 1997 Senior Vice President and Financial Consultant, The Robinson-Humphrey Company, Inc. (Stockbroker); Director, Total System Services, Inc. Mason H. Lampton 52 II 1993 Chairman of the Board and President, The Hardaway Company and Chairman of the Board, Standard Concrete Products (Construction Companies); Director, Total System Services, Inc. Elizabeth C. Ogie 49 II 1993 Director, W.C. Bradley Co. (Metal Manufacturer and Real Estate) H. Lynn Page 59 I 1978 Director, Synovus Financial Corp., Columbus Bank and Trust Company and Total System Services, Inc. Robert V. Royall 65 I 1995 Chairman of the Board, The National Bank of South Carolina (Banking Subsidiary of Synovus); Director, Blue Cross Blue Shield of South Carolina Melvin T. Stith 53 II 1998 Dean, College of Business, Florida State University; Director, Rexall Sundown, Inc., Correctional Services Corp. and Keebler Foods Company William B. Turner 77 III 1972 Chairman of the Executive Committee, Columbus Bank and Trust Company and Synovus Financial Corp.; Advisory Director, W. C. Bradley Co. (Metal Manufacturer and Real Estate); Director, Total System Services, Inc. James D. Yancey 58 I 1978 President and Chief Operating Officer, Synovus Financial Corp.; Chairman of the Board, Columbus Bank and Trust Company; Director, Total System Services, Inc. and Shoney's, Inc. - ------------- Richard E. Anthony was elected Vice Chairman of Synovus in September 1995. Prior to 1995, Mr. Anthony served, and continues to serve, as President of Synovus Financial Corp. of Alabama and Chairman of the Board of First Commercial Bank of Birmingham, both of which companies are subsidiaries of Synovus. James H. Blanchard was elected Chairman of the Board of Synovus in April 1986. Prior to 1986, Mr. Blanchard served in various capacities with Synovus, Columbus Bank and/or TSYS, including President of Synovus. Richard Y. Bradley formed Bradley & Hatcher in September 1995. From 1991 until 1995, Mr. Bradley served as President of Bickerstaff Clay Products Company, Inc. Walter M. Deriso, Jr. was elected Vice Chairman of Synovus in January 1997. Prior to 1997, Mr. Deriso served as President of Security Bank and Trust Company. V. Nathaniel Hansford was elected President of North Georgia College and State University in July 1999. Prior to 1999, Mr. Hansford served as Professor and Dean Emeritus of the University of Alabama School of Law. Elizabeth C. Ogie is William B. Turner's niece. William B. Turner was elected Chairman of the Executive Committee of Synovus in April 1986. Prior to 1986, Mr. Turner served in various capacities with Synovus and/or Columbus Bank, including Chairman of the Board of both Synovus and Columbus Bank. James D. Yancey was elected President and Chief Operating Officer of Synovus in April 1998. Prior to 1998, Mr. Yancey served in various capacities with Synovus and/or Columbus Bank, including Vice Chairman of the Board and President of both Synovus and Columbus Bank.
MEETINGS AND COMMITTEES OF THE BOARD BOARD OF DIRECTORS The business affairs of Synovus are managed under the direction of the Board of Directors in accordance with the Georgia Business Corporation Code, as implemented by Synovus' Articles of Incorporation and bylaws. Members of the Board are kept informed through reports routinely presented at Board and committee meetings by the Chief Executive Officer and other officers, and through other means. BOARD AND COMMITTEE MEETINGS The Board of Directors held eight meetings in 1999. All directors attended at least 82% of Board and committee meetings during 1999. COMMITTEES OF THE BOARD Synovus' Board of Directors has three principal standing committees -- an Executive Committee, an Audit Committee and a Compensation Committee. There is no Nominating Committee of Synovus' Board of Directors. The following table shows the membership of the various committees. - --------------------------------------------------------------------------------
Executive Audit Compensation - ---------- ----- ------------- William B. Turner, Chair John P. Illges, III, Chair Gardiner W. Garrard, Jr., Chair James H. Blanchard H. Lynn Page Mason H. Lampton James D. Yancey Melvin T. Stith V. Nathaniel Hansford Richard Y. Bradley Gardiner W. Garrard, Jr. John P. Illges, III
- -------------------------------------------------------------------------------- Executive Committee. During the intervals between meetings of Synovus' Board of Directors, Synovus' Executive Committee possesses and may exercise any and all of the powers of Synovus' Board of Directors in the management and direction of the business and affairs of Synovus with respect to which specific direction has not been previously given by Synovus' Board of Directors. During 1999, Synovus' Executive Committee held four meetings. Audit Committee. The primary functions to be engaged in by Synovus' Audit Committee include: (i) annually recommending to Synovus' Board the independent certified public accountants to be engaged by Synovus for the next fiscal year; (ii) reviewing the plan and results of the annual audit by Synovus' independent auditors; (iii) reviewing and approving the range of management advisory services provided by Synovus' independent auditors; (iv) reviewing Synovus' internal audit function and the adequacy of the internal accounting control systems of Synovus; (v) reviewing the results of regulatory examinations of Synovus; (vi) periodically reviewing the financial statements of Synovus; and (vii) considering such other matters with regard to the internal and independent audit of Synovus as, in its discretion, it deems to be necessary or desirable, periodically reporting to Synovus' Board as to the exercise of its duties and responsibilities and, where appropriate, recommending matters in connection with the audit function with respect to which Synovus' Board should consider taking action. During 1999, Synovus' Audit Committee held three meetings. Compensation Committee. The primary functions to be engaged in by Synovus' Compensation Committee include: (i) evaluating the remuneration of senior management and board members of Synovus and its subsidiaries and the compensation and fringe benefit plans in which officers, employees and directors of Synovus are eligible to participate; and (ii) recommending to Synovus' Board whether or not it should modify, alter, amend, terminate or approve such remuneration, compensation or fringe benefit plans. During 1999, Synovus' Compensation Committee held four meetings. DIRECTORS' COMPENSATION COMPENSATION Synovus' directors receive a $20,000 annual retainer, and fees of $1,200 for each meeting of Synovus' Board of Directors and each Executive Committee meeting they personally attend. Members of the Committees of Synovus' Board of Directors (other than the Executive Committee) receive fees of $750, with the Chairmen of such Committees receiving fees of $1,200, for each Committee meeting they personally attend. In addition, directors of Synovus receive a $1,200 fee for each board meeting from which their absence is excused and a $1,200 fee for one meeting without regard to the reason for their absence. DIRECTOR STOCK PURCHASE PLAN Synovus' Director Stock Purchase Plan is a nontax-qualified, contributory stock purchase plan pursuant to which qualifying Synovus directors can purchase, with the assistance of contributions from Synovus, presently issued and outstanding shares of Synovus common stock. Under the terms of the Director Stock Purchase Plan, qualifying directors can elect to contribute up to $1,000 per calendar quarter to make purchases of Synovus common stock, and Synovus contributes an additional amount equal to 50% of the directors' cash contributions. Participants in the Director Stock Purchase Plan are fully vested in, and may request the issuance to them of, all shares of Synovus common stock purchased for their benefit under the Plan. CONSULTING SERVICES H. Lynn Page, a director and the former Vice Chairman of the Board of Synovus, and Synovus are parties to a Consulting Agreement pursuant to which Mr. Page was paid $24,000 by Synovus during 1999 for providing consulting and advisory services to Synovus in connection with portfolio management and potential opportunities for business expansion. Joe E. Beverly, a director and the former Vice Chairman of the Board of Synovus, and Synovus are parties to a Retirement Agreement pursuant to which Mr. Beverly was paid $24,000 by Synovus during 1999 for providing consulting and advisory services to Synovus relating to Synovus' affiliate banks. EXECUTIVE OFFICERS The following table sets forth the name, age and position with Synovus of each executive officer of Synovus.
Name Age Position with Synovus - ----------------------- --- ------------------------------------------------- James H. Blanchard 58 Chairman of the Board and Chief Executive Officer William B. Turner 77 Chairman of the Executive Committee James D. Yancey 58 President and Chief Operating Officer Richard E. Anthony 53 Vice Chairman of the Board Walter M. Deriso, Jr. 53 Vice Chairman of the Board G. Sanders Griffith, III 46 Senior Executive Vice President, General Counsel and Secretary Thomas J. Prescott 45 Executive Vice President and Chief Financial Officer Calvin Smyre 52 Executive Vice President, Corporate Affairs Anne G. Dawahare 37 Chief Information Officer Elizabeth R. James 38 Chief People Officer
G. Sanders Griffith, III serves as Senior Executive Vice President, General Counsel and Secretary of Synovus, positions he has held since October 1995. From 1988 until 1995, Mr. Griffith served in various capacities with Synovus, including Executive Vice President, General Counsel and Secretary. Thomas J. Prescott was elected Executive Vice President and Chief Financial Officer of Synovus in December 1996. From 1987 until 1996, Mr. Prescott served in various capacities with Synovus, including Executive Vice President and Treasurer. Calvin Smyre was elected Executive Vice President of Synovus in November 1996. From 1976 until 1996, Mr. Smyre served in various capacities with Columbus Bank and/or Synovus, including Senior Vice President of Synovus. Anne G. Dawahare was elected Chief Information Officer of Synovus in July, 1998. Ms. Dawahare currently serves as President of Synovus Technologies, Inc., a position she has held since February, 1998, and has served in various capacities with Synovus since 1994. Elizabeth R. James was elected Chief People Officer of Synovus in July, 1998. Ms. James currently serves as President of Synovus Service Corp., a position she has held since June, 1996, and has served in various capacities with Columbus Bank and/or TSYS since 1986. STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth ownership of shares of Synovus common stock by each director, by each executive officer named in the Summary Compensation Table on page 15 and by all directors and executive officers as a group as of December 31, 1999.
Shares of Shares of Synovus Shares of Synovus Common Synovus Common Percentage of Stock Common Stock Stock Total Shares Outstanding Beneficially Beneficially Beneficially of Synovus Shares of Owned with Owned with Owned with Common Synovus Sole Voting Shared Voting Sole Voting Stock Common Stock and Invest- and Invest- but no Invest- Beneficially Beneficially ment Power ment Power ment Power Owned as of Owned as of Name as of 12/31/99 as of 12/31/99 as of 12/31/99 12/31/99 12/31/99 - ---------------------- --------------- -------------- -------------- -------------- -------------- Richard E. Anthony 390,864 199,694 11,282 968,932 * Joe E. Beverly 426,893 4,100 14,316 585,739 * James H. Blanchard 1,588,506 --- 233,678 2,909,288 1.0 Richard Y. Bradley 20,794 129,895 --- 150,689 * Walter M. Deriso, Jr. 31,076 3,934 --- 182,751 * C. Edward Floyd, M.D. 1,094,243 145,270 --- 1,239,513 * Gardiner W. Garrard, Jr. 204,147 1,274,125 --- 1,478,272 * G. Sanders Griffith, III 92,926 --- 10,844 405,993 * V. Nathaniel Hansford 125,645 410,242 --- 535,887 * John P. Illges, III 289,875 510,376 --- 800,251 * Mason H. Lampton 79,367 290,951 --- 370,318 * Elizabeth C. Ogie 68,551 30,495,786 --- 30,564,337 10.8 H. Lynn Page 815,886 12,047 --- 827,933 * Robert V. Royall 274,179 168,947 --- 719,808 * Melvin T. Stith 1,486 98 --- 1,584 * William B. Turner 72,634 30,356,517 --- 30,429,151 10.8 James D. Yancey 1,015,873 61,677 22,561 1,733,330 * Directors and Executive Officers as a Group (21 persons) 6,678,626 33,726,959 292,681 43,841,062 15.4 * Less than one percent of the outstanding shares of Synovus common stock. - --------------------------- The totals shown for the following directors and executive officers of Synovus include the number of shares of Synovus common stock that each individual has the right to acquire within 60 days through the exercise of stock options: Person Number of Shares ------ ---------------- Richard E. Anthony 367,092 Joe E. Beverly 140,430 James H. Blanchard 1,087,104 Walter M. Deriso, Jr. 147,741 G. Sanders Griffith, III 302,223 Robert V. Royall 276,682 James D. Yancey 633,219 In addition, the other executive officers of Synovus have rights to acquire an aggregate of 273,986 shares of Synovus common stock within 60 days through the exercise of stock options. Includes 62,667 shares of Synovus common stock held by a charitable foundation of which Mr. Illges is trustee. Includes 264,687 shares of Synovus common stock held in a trust for which Mr. Lampton is not the trustee. Mr. Lampton disclaims beneficial ownership of such shares. Includes 126,599 shares of Synovus common stock held by a charitable foundation of which Mrs. Ogie is a trustee. Includes 2,620,493 shares of Synovus common stock held by a charitable foundation of which Mrs. Ogie and Mr. Turner are among the trustees, and 27,716,207 shares of Synovus common stock beneficially owned by TB&C Bancshares, Inc., of which Mrs. Ogie and Mr. Turner are officers, directors and shareholders.
For a detailed discussion of the beneficial ownership of TSYS common stock by Synovus' named executive officers and directors and by all directors and executive officers of Synovus as a group, see "TSYS Common Stock Ownership of Directors and Management" on page 25. DIRECTORS' PROPOSAL TO APPROVE THE SYNOVUS FINANCIAL CORP. 2000 LONG-TERM INCENTIVE PLAN THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL. Synovus' compensation program includes long-term performance awards under the Synovus Financial Corp. 2000 Long-Term Incentive Plan (the "2000 Plan"). The purpose of the 2000 Plan is to attract, retain, motivate and reward employees who make a significant contribution to Synovus' long-term success, and to enable such employees to acquire and maintain an equity interest in Synovus. Subject to approval by Synovus' shareholders, compensation paid pursuant to the 2000 Plan is intended, to the extent reasonable, to qualify for tax deductibility under Section 162(m) of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder, as may be amended from time to time ("Section 162(m)"). Eligibility and Participation. Any employee of Synovus, excluding members of the Compensation Committee and any director who is not also an employee of Synovus, is eligible to be selected to participate in the 2000 Plan. Approximately 8,428 employees currently participate in the 2000 Plan. The Committee, as described below, has discretion to select participants from among eligible employees from year to year. Shares Subject to the Plan. The aggregate number of shares of Synovus common stock which may be granted to participants pursuant to awards granted under the 2000 Plan may not exceed twenty million (20,000,000). Awards Under the 2000 Plan. Pursuant to the 2000 Plan, Synovus may grant long-term perform ance awards to participants in the form of stock options, stock appreciation rights ("SARs"), restricted stock or performance awards. Stock Options. The Committee may grant options under the 2000 Plan in the form of qualified incentive stock options, nonqualified stock options or a combination thereof. Options may be granted either alone or in tandem with other awards granted under the 2000 Plan. Subject to the limits described herein, the Committee shall have discretion in determining the number of shares subject to options granted to each participant. The option price of nonqualified stock options may be equal to, or more or less than, one hundred percent (100%) of the fair market value of a share of Synovus common stock on the date the option is granted. The option price of qualified incentive stock options shall be at least equal to one hundred percent (100%) of the fair market value of a share of Synovus common stock on the date the option is granted. Options shall expire at such times as the Committee determines at the time of grant; provided, however, that no option shall be exercisable later than the tenth anniversary of its grant. Options granted under the 2000 Plan shall be exercisable at such times and subject to such restrictions and conditions as the Committee shall approve; provided that no option may be exercisable prior to six months following its grant. The option exercise price shall be payable in cash, by check or by such other instrument as deemed acceptable by the Committee. Payment of the exercise price and any withholding tax due at exercise may also be made through any program approved by the Committee (including a broker-dealer cashless exercise program). Options may only be transferred under the laws of descent and distribution and shall be exercisable only by the participant during his lifetime unless otherwise specified by the Committee at or after grant. The participant's rights in the event of termination of employment shall be specified by the Committee at or after grant. Subject to the terms of the 2000 Plan, the Committee may grant option price adjustment rights in conjunction with all or part of any option granted under the 2000 Plan, either at or after the time of grant of the option. Such adjustment rights are exercisable only at the same time and to the same extent as the corresponding option and shall terminate upon the termination or exercise of such option. Upon exercise, the participant shall be entitled to have applied as a credit against the exercise price of the related option an amount equal to the total number of shares subject to the adjustment right (or a portion thereof as designated by the participant) multiplied by a fixed percentage of the fair market value of a share of Synovus common stock on a date designated by the Committee. Stock Appreciation Rights. SARs granted under the 2000 Plan may be granted alone or in conjunction with all or part of any option granted under the 2000 Plan. Subject to the terms of the 2000 Plan, the Committee shall have discretion to determine the terms and conditions of any SAR granted under the 2000 Plan. With respect to an SAR granted in conjunction with an option, the grant price shall be equal to the option price of the related option, and such SAR shall terminate upon the termination or exercise of the related option. No SAR granted under the 2000 Plan may be exercisable prior to six months following its grant, except in the case of death (other than by suicide) or disability of the participant. The term of any SAR shall be determined by the Committee, provided that such term may not exceed ten years. SARs granted alone may be exercised upon the terms and conditions as are imposed by the Committee. An SAR granted in conjunction with an option may be exercised only with respect to the shares of common stock of Synovus for which the related option is exercisable. SARs granted in connection with an incentive stock option shall expire no later than the expiration of such incentive stock option; the value of the payout for such SARs may be no more than one hundred percent (100%) of the difference between the incentive stock option option price and the fair market value of the shares subject to such incentive stock option at exercise and may be exercised only when the fair market value of the shares subject to the incentive stock option exceeds the incentive stock option option price. Upon exercise, a participant will receive the difference between the fair market value of a share of common stock on the date of exercise and the grant price multiplied by the number of shares with respect to which the SAR is exercised. Payment due upon exercise may be in cash, in shares having a fair market value of the SAR being exercised, or in a combination of cash and shares, as determined by the Committee. The Committee may impose such restrictions on the exercise of SARs as may be required to satisfy the requirements of Section 16 of the Securities Exchange Act. SARs may only be transferred under the laws of descent and distribution and shall be exercisable only by the participant during his lifetime. Restricted Stock. Restricted stock may be granted in such amounts and subject to such terms and conditions as determined by the Committee. The Committee shall impose such conditions and/or restrictions on any shares of restricted stock as it deems advisable, including, but not limited to, a graduated vesting schedule and/or conditioning the grant of restricted stock on the attainment of performance goals. Each participant who is awarded restricted stock shall be issued a stock certificate in respect of such restricted stock, which shall be held in escrow by an escrow agent designated by the Committee, as provided under the 2000 Plan. During the six month period following the date of grant of restricted stock, or such longer period as may be determined by the Committee, restricted stock may not be sold, transferred, pledged or assigned. Except as limited by the 2000 Plan, the Committee may provide for the lapse of such restrictions or may accelerate or waive such restrictions based on performance or such other factors as determined by the Committee. Participants holding restricted stock shall have all of the rights of stockholders of Synovus, including the right to dividends, unless the Committee determines otherwise at the time of grant. Dividends or distributions credited during the restriction period and paid in shares shall be subject to the same restrictions as the shares of restricted stock with respect to which they were paid. All rights with respect to restricted stock shall be available only during a participant's lifetime, and each restricted stock award agreement shall specify whether the participant has a right to receive unvested restricted shares in the event of termination of employment. Performance Awards. Shares of stock and/or a payment in cash may be awarded under the 2000 Plan in the amounts and subject to the terms and conditions as determined by the Committee. The Committee may set performance objectives which, depending on the extent to which they are met, will determine the value of performance awards that will be paid out to participants. Participants shall receive payment of performance awards earned, in cash and/or shares of common stock, if the specified performance objectives have been obtained. The Committee may also establish a minimum level of performance below which no performance award may be payable. In the event a participant's employment is terminated by reason of death (other than by suicide), disability or retirement during a performance period, the participant shall receive a prorated payout of the performance award at the time and in the amount determined by the Committee. In the event employment is terminated for any other reason, the participant's rights to any performance award shall be forfeited. performance awards may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. A participant's rights under the 2000 Plan shall be exercisable only by the participant during his lifetime. Objective Performance Measures. Performance objectives applicable to awards granted under the 2000 Plan, as determined by the Committee, shall be chosen from among the following alternatives, unless and until the Committee proposes a change in such measures for shareholder vote or applicable tax and/or securities laws change to permit Committee discretion to alter such performance measures without obtaining shareholder approval: (i) total shareholder return; (ii) return on equity; (iii) earnings per share growth; and (iv) return on assets. Maximum Amount Payable to Any Participant. The maximum number of shares which may be awarded in any calendar year to any one participant is two million (2,000,000). The maximum cash amount which may be awarded in any calendar year to any participant is $1 million. Adjustments in Connection With Certain Events. The 2000 Plan provides that the Committee shall make a substitution or adjustment in the number of shares reserved for issuance under the 2000 Plan in the number and option price of shares subject to outstanding options and in the number of shares subject to SARs, restricted stock or performance awards, as it deems appropriate and equitable in connection with a change in corporate structure affecting Synovus' stock. Duration of the 2000 Plan. The 2000 Plan shall remain in effect from the date it is adopted by Synovus' Board until the date terminated by the Committee or Synovus' Board of Directors; provided, however, that no award shall be granted on or after the tenth anniversary of the 2000 Plan's effective date; provided further, however, that no future awards will be granted to Synovus' "covered employees," as defined below, unless shareholder approval of the 2000 Plan is obtained. Administration. The 2000 Plan will be administered by a committee of the Board of Directors of Synovus (the "Committee") which will be comprised of no fewer than two members who must be "outside directors" within the meaning of Section 162(m). At least two of the Committee's members must be directors of both Synovus and TSYS. Initially, the administering committee shall be the Compensation Committee of Synovus' Board. The Committee shall have authority to: (i) determine individuals to whom awards will be granted; (ii) determine the terms and conditions upon which awards shall be granted, including any restriction based on performance or other factors; (iii) determine whether and to what extent awards shall be deferred; and (iv) make all other determinations, perform all other acts, exercise all other powers, and establish any other procedures it deems necessary, appropriate or advisable in administering the 2000 Plan and maintaining compliance with applicable law. Amendment of the 2000 Plan. Synovus' Board of Directors may amend, alter or discontinue the 2000 Plan at any time except that no such amendment, suspension or discontinuation of the 2000 Plan may affect an existing award under the 2000 Plan without the affected participant's consent. In addition, no amendment, alteration or discontinuation shall be made, without the approval of shareholders, which would: (i) increase the total number of shares reserved under the 2000 Plan; (ii) decrease the option price of any option to less than one hundred percent (100%) of the fair market value of a share on the date of grant; (iii) change the participants or class of participants eligible to participate in the 2000 Plan; or (iv) materially increase the benefits accruing to participants. The 2000 Plan, which was originally named the Synovus Financial Corp. 1996 Long-Term Incentive Plan, was adopted by Synovus' Board of Directors in 1996. On February 1, 2000, Synovus' Board of Directors amended the 1996 Plan to add additional authorized shares and to rename it the 2000 Plan. Change in Control. In the event of a change in control of Synovus, as defined in the 2000 Plan, the vesting of any outstanding awards granted under the 2000 Plan shall be accelerated and all such awards shall be fully exercisable. Federal Income Tax Consequences of the 2000 Plan. The income tax consequences under current federal tax law to participants and to Synovus and its subsidiaries of incentive compensation awarded under the 2000 Plan is generally as described below. Local and state tax authorities, however, may also tax incentive compensation awarded under the 2000 Plan. Consequences to Participants. Generally, for federal income tax purposes, a participant will realize ordinary income and will incur tax liability upon receipt of the payment of an award under the 2000 Plan in an amount equal to such payment, if in cash, or the fair market value of any unrestricted shares of stock received. The tax consequences to participants of the individual types of awards which may be granted under the 2000 Plan are described below. Qualified Incentive Stock Options. With respect to options which qualify as incentive stock options, a participant will not recognize ordinary income for federal income tax purposes at the time options are granted or exercised. If the participant disposes of shares acquired by exercise of an incentive stock option before the expiration of two years from the date the options are granted, or within one year after the issuance of shares upon exercise of the incentive stock option, the participant will recognize in the year of disposition: (a) ordinary income, to the extent that the lesser of either (1) the fair market value of the shares on the date of option exercise or (2) the amount realized on disposition exceeds the option price; and (b) capital gain (or loss), to the extent that the amount realized on disposition differs from the fair market value of the shares on the date of option exercise. If the shares are sold after expiration of these holding periods, the participant will realize capital gain or loss (assuming the shares are held as capital assets) equal to the difference between the amount realized on disposition and the option price. Nonqualified Stock Options. With respect to options which do not qualify as incentive stock options, the participant will recognize no income upon grant of the option and, upon exercise, will recognize ordinary income to the extent of the difference between the amount paid by the participant for the shares and the fair market value of the shares on the date of option exercise. Upon a subsequent disposition of the shares received under the option, the participant will recognize capital gain or loss, as the case may be, to the extent of the difference between the fair market value of the shares at the time of exercise and the amount realized on the disposition (assuming the shares are held as capital assets). Stock Appreciation Rights. Ordinary income will be recognized by a participant upon the exercise of an SAR, in an amount equal to the cash received or the fair market value of the shares received on the exercise date. Restricted Stock. Participants holding restricted stock will recognize ordinary income in the year in which the restrictions lapse, in the amount of the fair market value of the shares as of the date of lapse of the restrictions, unless the participant elects to include the fair market value of the shares as of the date of grant in ordinary income at that time. Performance Awards. Ordinary income will be recognized by a participant in the year in which it is received in an amount equal to the amount of the performance award on the date of receipt. Consequences to Synovus and Its Subsidiaries. In general, Synovus will receive an income tax deduction at the same time and in the same amount as the amount which is taxable to the employee as compensation, except as provided below. To the extent a participant realizes capital gains, as described above, Synovus and its subsidiaries will not be entitled to any deduction for federal income tax purposes. Under Section 162(m), compensation paid by a public company in excess of $1 million for any taxable year to "covered employees" generally is not deductible by the company or its affiliates for federal income tax purposes unless it is related to the performance of the company, is paid pursuant to a plan approved by shareholders of the company and meets certain other requirements. Generally, "covered employees" is defined under Section 162(m) as any individual who is the chief executive officer or is among the four other highest paid executive officers named in the summary compensation table in the company's proxy statement, other than the chief executive officer, as of the last day of the taxable year. It is anticipated that future awards will qualify as performance based for purposes of Section 162(m), except for options subject to adjustment rights and restricted stock not subject to preestablished performance goals. Synovus does not presently anticipate making any such awards. However, Synovus reserves the ability to make awards which do not qualify for full deductibility under Section 162(m) if the Committee determines that the benefits of so doing outweigh full deductibility. NEW PLAN BENEFITS The following table shows all grants of options of Synovus common stock under the 2000 Plan for fiscal year 1999: Name and Number of Shares Subject Principal Position to Options Granted (1) - -------------------- -------------------- James H. Blanchard Chairman of the Board and Chief Executive Officer 170,901 James D. Yancey President and Chief Operating Officer 106,537 Richard E. Anthony Vice Chairman of the Board 59,822 G. Sanders Griffith, III Senior Executive Vice President, General Counsel and Secretary 50,275 Walter M. Deriso, Jr. Vice Chairman of the Board 47,888 Executive Group 518,779 Nonexecutive Director and Nominee Group(2) -0- Nonexecutive Officer Employee Group 2,648,643 (1)Every eligible employee, including each person named above, received 150 options with an exercise price equal to the fair market value of Synovus common stock on July 20, 1999, which was $19.19 per share. These options, entitled "Shared Interest," become exercisable upon the earlier of (a) July 20, 2002 or (b) the date the fair market value of Synovus common stock reaches $38.75 (double the exercise price, as adjusted) and expire on July 19, 2007. The remaining options listed above have an exercise price equal to the fair market value of Synovus common stock on February 9, 1999, which was $22.88 per share. These options become exercisable on February 9, 2001 and expire on February 8, 2009. The actual value an optionee may realize will depend on the excess of the fair market value of the stock less the exercise price on the date the option is exercised. The per share fair market value of Synovus stock as of February 16, 2000 was $17.50. (2)There are no non-executive directors or nominee directors (or their associates) who received such options nor any other person who is to receive 5% of such options. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following table summarizes the cash and noncash compensation for each of the last three fiscal years for the chief executive officer of Synovus and for the other four most highly compensated executive officers of Synovus. - --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE Long-Term Annual Compensation Compensation Awards -------------------------------------------------------- -------------------------------- Other Restricted Securities All Annual Stock Underlying Other Name and Compen- Award(s) Options/ Compen- Principal Position Year Salary Bonus sation SARs sation - --------------------- -------- ------------- ------------ ------------- ------------- ------------ ------------ James H. Blanchard 1999 $656,000 $492,000 $1,500 -0- 670,901 $302,977 Chairman of the 1998 635,250 476,438 -0- -0- 211,929 306,378 Board and Chief 1997 616,125 462,094 -0- -0- 615,113 298,654 Executive Officer James D. Yancey 1999 490,000 318,500 2,000 -0- 106,537 244,078 President and Chief 1998 475,000 464,750 2,000 -0- 132,126 271,639 Operating Officer 1997 445,000 442,000 2,000 -0- 524,633 235,573 Richard E. Anthony 1999 358,000 214,500 -0- -0- 59,822 137,958 Vice Chairman of the 1998 335,000 306,000 2,000 -0- 69,270 157,071 Board 1997 310,000 282,000 2,000 -0- 78,368 109,977 G. Sanders Griffith, III 1999 300,500 180,300 -0- -0- 50,275 82,951 Senior Executive Vice 1998 283,750 258,450 -0- -0- 59,226 94,336 President, General 1997 268,000 242,850 -0- -0- 254,480 81,279 Counsel and Secretary Walter M. Deriso, Jr. 1999 295,000 177,000 -0- -0- 47,888 99,767 Vice Chairman 1998 260,000 156,000 -0- -0- 51,990 106,569 of the Board 1997 225,000 135,000 -0- -0- 58,776 74,794 - --------------------- Amount for 1999 includes matching contributions under the Director Stock Purchase Plan of $1,500 for Mr. Blanchard and $2,000 for Mr. Yancey. Perquisites and other personal benefits are excluded because the aggregate amount does not exceed the lesser of $50,000 or 10% of annual salary and bonus for the named executives. As of December 31, 1999, Messrs. Blanchard, Yancey, Anthony and Griffith held 26,567, 22,563, 11,282, and 10,849 restricted shares, respectively, with a value of $528,019, $448,440, $224,230 and $215,624, respectively. The 1999 amount includes director fees of $54,900, $56,600, $20,600 and $20,600 for Messrs. Blanchard, Yancey, Anthony and Deriso, respectively, in connection with their service as directors of Synovus and certain of its subsidiaries; contributions or other allocations to defined contribution plans of $27,968 for each executive; allocations pursuant to defined contribution excess benefit agreements of $169,982, $111,621, $69,658, $54,319 and $50,867 for each of Messrs. Blanchard, Yancey, Anthony, Griffith and Deriso, respectively; premiums paid for group term life insurance coverage of $978, $1,000, $729, $613 and $602 for each of Messrs. Blanchard, Yancey, Anthony, Griffith and Deriso, respectively; the economic benefit of life insurance coverage related to split-dollar life insurance policies of $1,914, $1,318, $1,613 and $51 for each of Messrs. Blanchard, Yancey, Anthony and Griffith, respectively; and the dollar value of the benefit of premiums paid for split-dollar life insurance policies (unrelated to term life insurance coverage) projected on an actuarial basis of $47,235, $45,539 and $17,390 for each of Messrs. Blanchard, Yancey and Anthony, respectively.
STOCK OPTION EXERCISES AND GRANTS The following tables provide certain information regarding stock options granted and exercised in the last fiscal year and the number and value of unexercised options at the end of the fiscal year. - --------------------------------------------------------------------------------
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR Individual Grants - -------------------------------------------------------------------------------- % of Total Potential Options/ Realized Value at SARs Exercise Assumed Annual Rates of Options/ Granted to or Stock Price Appreciation SARs Employees Base For Option Term Granted in Fiscal Price Expiration --------------------- Name (#) Year ($/Share) Date 5%($) 10% ($) - ------------------------------ ------------ -------------- -------------- --------------- ---------- --------- James H. Blanchard 170,751 4.0973% $22.88 02/08/09 $1,865,455 $ 4,465,992 150 0.0036 19.19 07/19/07 1,374 3,291 500,000 11.9978 19.06 9/12/09 4,550,000 10,900,000 James D. Yancey 106,387 2.5528 22.88 02/08/09 1,162,278 2,782,552 150 0.0036 19.19 07/19/07 1,374 3,291 Richard E. Anthony 59,672 1.4319 22.88 02/08/09 651,917 1,560,721 150 0.0036 19.19 07/19/07 1,374 3,291 G. Sanders Griffith, III 50,125 1.2028 22.88 02/08/09 547,616 1,311,019 150 0.0036 19.19 07/19/07 1,374 3,291 Walter M. Deriso 47,738 1.1455 22.88 02/08/09 521,538 1,248,587 150 0.0036 19.19 07/19/07 1,374 3,291 - ----------- The dollar gains under these columns result from calculations using the identified growth rates and are not intended to forecast future price appreciation of Synovus common stock. Options granted on February 9, 1999 at fair market value. Options become exercisable on February 9, 2001 and are transferable to family members. Options granted on July 20, 1999 at fair market value. Options become exercisable upon the earlier of: (a) July 20, 2002; or (b) the date the per share fair market value of Synovus common stock equals or exceeds $38.38. Options granted on September 13, 1999 at fair market value. Options become exercisable in equal installments when the per share fair market value of Synovus common stock meets or exceeds $40, $45 and $50, and in any event on September 12, 2006. Options are tranferable to family members.
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Shares Value Options/SARs at FY-End (#) Options/SARs at FY-End ($) Acquired on Realized -------------------------- ------------------------------- Name Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable - ------------------------ ------------ --------- --------------------------- ------------------------------- James H. Blanchard -0- $ -0- 875,325 / 1,182,830 $7,414,356/ $2,020,103 James D. Yancey -0- -0- 501,243 / 538,663 4,014,189/ 1,612,603 Richard E. Anthony -0- -0- 297,972 / 129,092 3,056,739/ 103 G. Sanders Griffith, III 10,125 210,380 243,147 / 259,501 2,014,097/ 806,353 Walter M. Deriso -0- -0- 95,901 / 99,878 576,312/ 103 - ---------- Market value of underlying securities at exercise or year-end, minus the exercise or base price.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS Employment Agreement with Mr. Blanchard. Synovus amended its Employment Agreement with Mr. Blanchard, Chairman of the Board of Directors and Chief Executive Officer of Synovus, effective September 13, 1999. Under the amended Employment Agreement, Mr. Blanchard agreed to serve as Chairman and CEO of Synovus for five years, and to remain employed by Synovus for seven years. Synovus also agreed to make a "performance grant" of stock options to Mr. Blanchard as discussed in the "Compensation Committee Report on Executive Compensation" on page 19. During 1999, Synovus paid Mr. Blanchard a base salary of $656,000 under this Employment Agreement. The Employment Agreement with Mr. Blanchard also provides that Mr. Blanchard will receive deferred compensation totaling $468,000 over a 10 to 15 year period following his death, disability or other termination of employment. This deferred compensation may be forfeited in the event Synovus terminates his employment for cause, he violates a 2-year Covenant Not to Compete, or in the event of his death by suicide. Employment Agreement with Mr. Yancey. Synovus has entered into an Employment Agreement with Mr. Yancey, President and Chief Operating Officer of of Synovus. Under this Agreement, Mr. Yancey receives a base salary that is determined on an annual basis by the Synovus Compensation Committee. During 1999, Synovus paid Mr. Yancey a base salary of $490,000 under this Employment Agreement. The Employment Agreement with Mr. Yancey also provides that Mr. Yancey will receive deferred compensation totaling $375,000 over a 10 to 15 year period following his death, disability or other termination of employment. This deferred compensation may be forfeited in the event Synovus terminates his employment for cause, he violates a 2-year Covenant Not to Compete, or in the event of his death by suicide. Mr. Yancey's Employment Agreement automatically renews every year and may be terminated upon 30 days prior written notice. Long-Term Incentive Plans. Under the terms of Synovus' 1992, 1994 and 2000 Long-Term Incentive Plans, all awards become automatically vested in the event of a change of control. Awards under the Plans may include stock options, restricted stock, stock appreciation and performance awards. Messrs. Blanchard, Yancey, Anthony, Griffith and Deriso each have restricted stock and stock options under the Long-Term Incentive Plans. Change of Control Agreements. Synovus has entered into Change of Control Agreements with Messrs. Blanchard, Yancey, Anthony, Griffith and Deriso, and certain other executive officers. In the event of a Change of Control, as defined below, an executive would receive the following: * Three times the executive's current base salary and bonus (bonus is defined as the average bonus over the past three years measured as a percentage multiplied by the executive's current base salary). * Three years of medical, life, disability and other welfare benefits. * A pro rata bonus through the date of termination for the separation year. * A cash amount in lieu of a long-term incentive award for the year of separation equal to 1.5 times the normal market grant, if the executive received a long-term incentive award in the year of separation, or 2.5 times the market grant if not. In order to receive these benefits, an executive must be actually or constructively terminated within one year following a Change of Control or the executive may voluntarily or involuntarily terminate employment during the thirteenth month following a Change of Control. A Change of Control under these agreements is defined as (1) the acquisition of 20% or more of the "beneficial ownership" of Synovus' outstanding voting stock, with certain exceptions for Turner family members, (2) the persons serving as directors of Synovus as of January 1, 1996, and their replacements or additions, ceasing to comprise at least two-thirds of the Board members, (3) a merger, consolidation, reorganization or sale of Synovus' assets unless the prior owners of Synovus own more than two-thirds of the new company, no person owns more than 20% of the new company, and two-thirds of the company's new Board members are prior Board members of Synovus, or (4) a triggering event occurs as defined in the Synovus Rights Agreement. In the event an executive is impacted by the Internal Revenue Service excise tax that applies to certain Change of Control arrangements, the executive would receive additional payments so that he or she would be in the same position as if the excise tax did not apply. The Change of Control agreements do not provide for any retirement benefits or perquisites. STOCK PERFORMANCE GRAPH The following graph compares the yearly percentage change in cumulative shareholder return on Synovus common stock with the cumulative total return of the Standard & Poor's 500 Index and the Keefe, Bruyette & Woods 50 Bank Index for the last five fiscal years (assuming a $100 investment on December 31, 1994 and reinvestment of all dividends). [Omitted Stock Performance Graph is represented by the following table.] COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN SYNOVUS FINANCIAL CORP., S&P 500 AND KBW 50 BANK INDEX 1994 1995 1996 1997 1998 1999 ---- ---- ---- ----- ----- ----- Synovus $100 $161 $277 $429 $478 $403 S&P 500 $100 $138 $169 $226 $290 $351 KBW 50 $100 $160 $227 $331 $359 $346 COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Compensation Committee ("Committee") of Synovus is responsible for evaluating the compensation of senior management of Synovus and its subsidiaries and Synovus Board members, as well as the compensation and other benefit plans in which officers, employees and directors of Synovus and its subsidiaries participate. The Committee has designed its compensation program to attract and retain highly motivated and well-trained executives in order to create superior shareholder value for Synovus shareholders. Elements of Executive Compensation. The four elements of executive compensation at Synovus are: * Base Salary * Annual Bonus * Long-Term Incentives * Other Benefits The Committee believes that a substantial portion (though not a majority) of an executive's compensation should be at risk based upon performance, both in the short-term (through the annual bonus and the Synovus/TSYS Profit Sharing Plan and the Synovus/TSYS 401(k) Savings Plan) and long-term (through long-term incentives such as stock options and restricted stock awards). The remainder of each executive's compensation is primarily based upon the competitive practices of a select group of approximately 18 banks that had similar "market value added" as Synovus during the previous ten years ("similar companies"). "Market value added," as used by the Committee for this purpose, means the stock price increase during the ten-year period, plus dividends, less increases to paid-in capital. This subtraction eliminates any value added through acquisitions. The Committee believes that this approach accurately reflects the true competitors of Synovus and is the most appropriate market data to use for determining the compensation of Synovus executives. The companies used for comparison under this approach are not the same companies included in the peer group index appearing in the Stock Performance Graph on page 18. Each element of executive compensation is discussed in detail below. Base Salary. Base salary is an executive's annual rate of pay without regard to any other elements of compensation. The primary consideration used by the Committee to determine an executive's base salary is a market comparison of similar positions at similar companies based upon the executive's level of responsibility and experience. Base salaries are targeted in the median level of similar companies. In addition to market comparisons, individual performance is also considered in determining an executive's base salary, although it does not weigh heavily. Based solely upon market comparisons, the Committee increased Mr. Blanchard's base salary in 1999. The Committee also increased the base salaries of Synovus' other executive officers in 1999 based solely upon market comparisons. Annual Bonus. The Committee awards annual bonuses under two different plans, the Synovus Executive Bonus Plan (which was approved by Synovus shareholders) and the Synovus Incentive Bonus Plan. The Committee selects the participants in each Plan from year to year. For 1999, the Committee selected Mr. Blanchard to participate in the Executive Bonus Plan while Messrs. Yancey, Anthony, Griffith and Deriso were selected to participate in the Incentive Bonus Plan. Under the terms of the Plans, bonus amounts are paid as a percentage of base pay based on the achievement of performance goals that are established each year by the Committee. The performance goals may be chosen by the Committee from among the following measurements: * Return on assets; * Net income; * Operating income; * Non-performing assets and/or loans as a percentage of total assets and/or loans; * Return on capital compared to cost of capital; * Earnings per share and/or earnings per share growth; * Return on equity; * Non-interest expense as a percentage of total expense; * Loan charge-offs as a percentage of loans; * Productivity and expense control; * Number of cardholder, merchant and/or other customer accounts processed and/or converted by TSYS; * Successful negotiation or renewal of contracts with new and/or existing customers by TSYS; * Stock price; and * Asset growth. The Committee established a payout matrix based on attainment of net income goals during 1999 for Mr. Blanchard and Synovus' other executive officers. The maximum percentage payouts under the Plans for 1999 were 75% for Mr. Blanchard, 65% for Mr. Yancey and 60% for Messrs. Anthony, Griffith and Deriso. Synovus' financial performance and each executive's individual performance can reduce the bonus awards determined by the attainment of the goals, although this was not the case for any of Synovus' executive officers. Because the maximum net income target for 1999 under the Plans was exceeded and the overall financial results of Synovus were favorable, Mr. Blanchard and Synovus' other executive officers were awarded the maximum bonus amount for which each executive was eligible under the Plans' payout matrix. Long-Term Incentives. The Committee has awarded both stock options and restricted stock awards to executives. Restricted stock awards are designed to focus executives on the long-term performance of Synovus. Stock options provide executives with the opportunity to buy and maintain an equity interest in Synovus and to share in its capital appreciation. Executives are encouraged to hold the shares received upon the lapse of restrictions on restricted stock awards and upon the exercise of stock options, linking their interests to those of Synovus' shareholders. The Committee has established a payout matrix for long-term grants that uses total shareholder return measured by Synovus' performance (stock price increases plus dividends) and how Synovus' total shareholder return compares to the return of the peer group of companies appearing in the Stock Performance Graph on page 18. For the long-term incentive awards made in 1999, total shareholder return and peer comparisons were measured during the 1996 to 1998 performance period. Under the payout matrix, the Committee awarded Messrs. Blanchard, Yancey, Anthony, Griffith and Deriso stock options of 170,901, 106,537, 59,822, 50,275, and 47,888, respectively. In addition, in connection with the amendment to Mr. Blanchard's Employment Agreement, the Committee made a "performance grant" of 500,000 stock options to Mr. Blanchard on September 13, 1999. The options are exercisable in equal installments when the market price of Synovus common stock exceeds $40, $45 and $50 per share and in any event on September 12, 2006. The Committee strongly believes that this "performance grant," which is designed to reward Mr. Blanchard for significant growth in shareholder value, is in the best interests of shareholders. The Committee intends to make similar awards in the future. Benefits. Executives receive other benefits that serve a different purpose than the elements of compensation discussed above. In general, these benefits either provide retirement income or protection against catastrophic events such as illness, disability and death. Executives generally receive the same benefits offered to the employee population, with the only exceptions designed to promote tax efficiency or to replace other benefits lost due to regulatory limits. The Synovus/TSYS Profit Sharing Plan and the Synovus/TSYS 401(k) Savings Plan, including an excess benefit plan which replaces benefits lost due to regulatory limits (collectively the "Plan"), is the largest component of Synovus' benefits package for executives. The Plan is directly related to the performance of Synovus because the contributions to the Plan, up to a maximum of 14% of an executive's compensation, depends upon Synovus' profitability. For 1999, Mr. Blanchard and Synovus' other executive officers received a Plan contribution of 10.48% of their compensation, based upon the Plan's profitability formula. The remaining benefits provided to executives are primarily based upon the competitive practices of similar companies. The Internal Revenue Code limits the deductibility for federal income tax purposes of annual compensation paid by a publicly held corporation to its chief executive officer and four other highest paid executives for amounts in excess of $1 million, unless certain conditions are met. Because the Committee seeks to maximize shareholder value, the Committee has taken steps to ensure that any compensation paid to its executives in excess of $1 million is deductible. For 1999, Messrs. Blanchard and Yancey would have been affected by this provision, but for the steps taken by the Committee. The Committee reserves the ability to make awards which do not qualify for full deductibility under the Internal Revenue Code, however, if the Committee determines that the benefits of doing so outweigh full deductibility. The Committee believes that its executive compensation program serves the best interests of the shareholders of Synovus. As described above, a substantial portion of the compensation of Synovus' executives is directly related to Synovus' performance. The Committee believes that the performance of Synovus to date validates its compensation philosophy. Mason H. Lampton V. Nathaniel Hansford COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Mason H. Lampton and V. Nathaniel Hansford served as members of Synovus' Compensation Committee during 1999. No member of the Committee is a current or former officer of Synovus or its subsidiaries. TRANSACTIONS WITH MANAGEMENT During 1999, the subsidiary banks of Synovus had outstanding loans directly to or indirectly accruing to the benefit of certain of the then directors and executive officers of Synovus, and their related interests. These loans were made in the ordinary course of business and were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with others. In the opinion of Synovus' management, such loans do not involve more than normal risks of collectibility or present other unfavorable features. In the future, the subsidiary banks of Synovus expect to have banking transactions in the ordinary course of business with Synovus' directors, executive officers and their related interests. During 1999, Synovus and its subsidiaries, including Columbus Bank, paid to W.C. Bradley Co. an aggregate of $3,462, for printing services and marketing materials provided by W.C. Bradley Co. These payments were made in the ordinary course of business on substantially the same terms as those prevailing at the time for comparable transactions with unrelated third parties. Synovus' wholly owned subsidiary, Synovus Service Corp., and TSYS leased various properties in Columbus, Georgia from W.C. Bradley Co. during 1999 for office space and storage. The rent paid for the space by Synovus Service Corp., which is approximately 35,400 square feet, was approximately $90,729. The rent paid for the space by TSYS, which is approximately 71,915 square feet, was approximately $227,418. The lease agreements were made on substantially the same terms as those prevailing at the time for comparable leases for similar facilities with an unrelated third party in Columbus, Georgia. Columbus Bank and W.C.B. Air L.L.C. are parties to a Joint Ownership Agreement pursuant to which they jointly own or lease aircraft. W. C. Bradley Co. owns all of the limited liability company interests of W.C.B. Air. Columbus Bank and W.C.B. Air have each agreed to pay fixed fees for each hour they fly the aircraft owned and/or leased pursuant to the Joint Ownership Agreement. Columbus Bank paid an aggregate sum of $2,371,939 for use of the aircraft during 1999 pursuant to the terms of the Joint Ownership Agreement. This amount represents the charges incurred by Columbus Bank and its affiliated corporations for use of the aircraft, and includes $881,970 for TSYS' use of the aircraft, for which Columbus Bank was reimbursed by TSYS. TB&C Bancshares, Inc. is a principal shareholder of Synovus. TB&C Bancshares is a "family bank holding company" organized by William B. Turner, and his sisters, Sarah T. Butler and Elizabeth T. Corn. TB&C Bancshares is a party to a lease agreement pursuant to which it leases voting and certain other rights in a total of 13,311,843 shares of Synovus common stock held in trust by Synovus Trust Company, a subsidiary of Columbus Bank, as Trustee of three trusts for the benefit of Mr. Turner, Mrs. Butler and Mrs. Corn and their respective descendants. During 1999, TB&C Bancshares paid Synovus Trust Company, as Trustee, $523,008 pursuant to the terms of the lease agreement, which amount represents the fair market value of the voting rights as determined by an independent appraiser. William B. Turner, Chairman of the Executive Committee of Synovus and Columbus Bank and a director of TSYS, is an advisory director and shareholder of W.C. Bradley Co. and is an officer, director and shareholder of TB&C Bancshares. James H. Blanchard, Chairman of the Board of Synovus, Chairman of the Executive Committee of TSYS and a director of Columbus Bank, is a director of W.C. Bradley Co. Elizabeth C. Ogie, the niece of William B. Turner, is a director of W.C. Bradley Co., Columbus Bank and Synovus and is an officer, director and shareholder of TB&C Bancshares. W. Walter Miller, Jr., the brother-in-law of Elizabeth C. Ogie, is a director of W.C. Bradley Co. and Senior Vice President and a director of TSYS. Stephen T. Butler, the nephew of William B. Turner, is an officer and director of W.C. Bradley Co., an officer, director and shareholder of TB&C Bancshares and is a director of Columbus Bank. W.B. Turner, Jr., the son of William B. Turner, is an officer and director of W.C. Bradley Co., an officer, director and shareholder of TB&C Bancshares and a director of Columbus Bank. John T. Turner, the son of William B. Turner, is an officer and director of W.C. Bradley Co., a shareholder of TB&C Bancshares and a director of Columbus Bank. Sarah T. Butler and Elizabeth T. Corn, the sisters of William B. Turner, are shareholders of W.C. Bradley Co., are officers, directors and shareholders of TB&C Bancshares and may be deemed to be principal shareholders of Synovus as a result of their relationship with TB&C Bancshares. Bradley & Hatcher, a law firm located in Columbus, Georgia, was paid $67,184 for the performance of legal services on behalf of certain of Synovus' subsidiaries during 1999. Richard Y. Bradley, a director of Synovus, Columbus Bank and TSYS, is a partner of Bradley & Hatcher. PRINCIPAL SHAREHOLDERS The following table sets forth the number of shares of Synovus common stock held by the only known holders of more than 5% of the outstanding shares of Synovus common stock.
Percentage of Shares of Outstanding Shares of Synovus Common Stock Synovus Common Stock Name and Address of Beneficially Owned Beneficially Owned Beneficial Owner as of 12/31/99 as of 12/31/99 - ----------------------- ------------------------- --------------------------- Synovus Trust Company 36,230,295 12.8% 1148 Broadway Columbus, Georgia 31901 TB&C Bancshares, Inc. 27,716,207 10.0 1017 Front Avenue Columbus, Georgia 31901 William B. Turner 30,429,151 10.8 P.O. Box 120 Columbus, Georgia 31902 Sarah T. Butler 30,493,678 10.8 P.O. Box 120 Columbus, Georgia 31902 Elizabeth T. Corn 30,890,401 10.9 P.O. Box 120 Columbus, Georgia 31902 W.B. Turner, Jr. 30,427,141 10.8 P.O. Box 120 Columbus, Georgia 31902 Stephen T. Butler 30,459,988 10.8 P.O. Box 120 Columbus, Georgia 31902 Elizabeth C. Ogie 30,564,337 10.8 P.O. Box 120 Columbus, Georgia 31902 - ----------------------------------- As of December 31, 1999, the banking and trust company subsidiaries of Synovus, including Columbus Bank through its wholly owned subsidiary Synovus Trust Company, held in various fiduciary capacities a total of 37,290,513 shares of Synovus common stock as to which they possessed sole or shared voting or investment power. Of this total, Synovus Trust Company held 21,770,571 shares as to which it possessed sole investment power, 20,750,255 shares as to which it possessed sole voting power, 882,959 shares as to which it possessed shared voting power and 14,361,371 shares as to which it possessed shared investment power. The other banking and trust subsidiaries of Synovus held 1,002,906 shares as to which they possessed sole voting power, 721,250 shares as to which they possessed sole investment power and 201,441 shares as to which they possessed shared voting or investment power. In addition, as of December 31, 1999, Synovus Trust Company and the banking and trust subsidiaries of Synovus held in various agency capacities an additional 22,273,854 shares of Synovus common stock as to which they possessed no voting or investment power. Of this additional amount as to which no voting or investment power was possessed, Synovus Trust Company and the banking and trust subsidiaries of Synovus held 22,117,766 and 156,088 shares, respectively. Synovus and its subsidiaries disclaim beneficial ownership of all shares of Synovus common stock which are held by them in various fiduciary and agency capacities. TB&C Bancshares, Inc. is a "family bank holding company" organized by William B. Turner (the Chairman of Synovus' Executive Committee) and his sisters, Sarah T. Butler and Elizabeth T. Corn. The six directors of TB&C Bancshares, Mr. Turner, Mmes. Butler and Corn, Elizabeth C. Ogie (the daughter of Mrs. Corn), Stephen T. Butler (the son of Mrs. Butler), and William B. Turner, Jr. (the son of Mr. Turner), are each construed to be the beneficial owners of the 27,716,207 shares of Synovus common stock beneficially owned by TB&C Bancshares. As TB&C Bancshares owns 10% of the outstanding shares of Synovus common stock, TB&C Bancshares is registered as a bank holding company. To the best of Synovus' knowledge, the shares of Synovus common stock beneficially owned by TB&C Bancshares qualify for ten votes per share, subject to the completion by TB&C Bancshares of the Certification contained on its proxy card. Includes 14,404,364 shares of Synovus common stock individually owned by TB&C Bancshares; 2,620,493 shares held by a charitable foundation of which each of the directors of TB&C Bancshares is a trustee; in the case of Mrs. Corn and Mrs. Ogie, 126,599 shares of Synovus common stock held by a charitable foundation of which Mrs. Corn and Mrs. Ogie are trustees; and 13,311,843 shares of Synovus common stock beneficially owned by TB&C Bancshares pursuant to a lease agreement between TB&C Bancshares and Synovus Trust Company as Trustee of three trusts for the benefit of Mr. Turner, Mrs. Butler and Mrs. Corn and their respective descendants. Pursuant to the agreement, TB&C Bancshares leases from Synovus Trust Company as Trustee of such trusts voting and certain other rights with respect to the shares of Synovus common stock held in the trusts. In addition to the shares of Synovus common stock described in footnote 3 above, Mr. Turner possessed sole voting and investment power with respect to 72,634 shares and shared voting or investment power with respect to 19,817 shares of Synovus common stock. In addition to the shares of Synovus common stock described in footnote 3 above, Mrs. Butler possessed sole voting and investment power with respect to 65,430 shares and shared voting or investment power with respect to 91,548 shares of Synovus common stock. In addition to the shares of Synovus common stock described in footnote 3 above, Mrs. Corn possessed sole voting and investment power with respect to 6,229 shares and shared voting or investment power with respect to 420,873 shares of Synovus common stock. In addition to the shares of Synovus common stock described in footnote 3 above, Mr. Turner possessed sole voting and investment power with respect to 74,800 shares and shared voting or investment power with respect to 15,641 shares of Synovus common stock. In addition to the shares of Synovus common stock described in footnote 3 above, Mr. Butler possesssed sole voting and investment power with respect to 118,344 shares and shared voting or investment power with respect to 4,944 shares of Synovus common stock. In addition to the shares of Synovus common stock described in footnote 3 above, Mrs. Ogie possessed sole voting and investment power with respect to 68,551 shares and shared voting or investment power with respect to 32,487 shares of Synovus common stock.
RELATIONSHIPS BETWEEN SYNOVUS, COLUMBUS BANK, TSYS AND CERTAIN OF SYNOVUS' SUBSIDIARIES AND AFFILIATES BENEFICIAL OWNERSHIP OF TSYS COMMON STOCK BY COLUMBUS BANK The following table sets forth, the number of shares of TSYS common stock beneficially owned by Columbus Bank, the only known beneficial owner of more than 5% of the issued and outstanding shares of TSYS common stock, as of December 31, 1999.
Percentage of Shares of Outstanding Shares of TSYS Common Stock TSYS Common Stock Name and Address of Beneficially Owned Beneficially Owned Beneficial Owner as of 12/31/99 as of 12/31/99 - ----------------------- ------------------------ ------------------------ Columbus Bank and Trust Company 157,455,980 80.8% 1148 Broadway Columbus, Georgia 31901 - ----------------- Columbus Bank individually owns these shares. As of December 31, 1999, Synovus Trust Company held in various fiduciary capacities a total of 1,639,923 shares (.84%) of TSYS common stock. Of this total, Synovus Trust Company held 1,306,403 shares as to which it possessed sole voting power, 1,263,558 shares as to which it possessed sole investment power, 285,569 shares as to which it possessed shared voting power and 292,719 shares as to which it possessed shared investment power. In addition, as of December 31, 1999, Synovus Trust Company held in various agency capacities an additional 2,087,506 shares of TSYS common stock as to which it possessed no voting or investment power. Synovus and Synovus Trust Company disclaim beneficial ownership of all shares of TSYS common stock which are held by Synovus Trust Company in various fiduciary and agency capacities.
Columbus Bank, by virtue of its ownership of 157,455,980 shares, or 80.8% of the outstanding shares of TSYS common stock on December 31, 1999, presently controls TSYS. Synovus presently controls Columbus Bank. INTERLOCKING DIRECTORATES OF SYNOVUS, COLUMBUS BANK AND TSYS Seven of the members of and nominees to serve on Synovus' Board of Directors also serve as members of the Boards of Directors of TSYS and Columbus Bank. They are James H. Blanchard, Richard Y. Bradley, Gardiner W. Garrard, Jr., John P. Illges, III, H. Lynn Page, William B. Turner and James D. Yancey. Elizabeth C. Ogie serves as a member of the Board of Directors of Columbus Bank, but does not serve as a member of the Board of Directors of TSYS. Mason H. Lampton serves on the Board of Directors of TSYS and as an Advisory Director of Columbus Bank. TSYS COMMON STOCK OWNERSHIP OF DIRECTORS AND MANAGEMENT The following table sets forth the number of shares of TSYS common stock beneficially owned by each of Synovus' directors, by each executive officer named in the Summary Compensation Table on page 15 and by all directors and executive officers as a group as of December 31, 1999. - --------------------------------------------------------------------------------
Shares of TSYS Shares of TSYS Percentage of Common Stock Common Stock Total Outstanding Beneficially Beneficially Shares Shares of Owned with Owned with of TSYS TSYS Common Sole Voting Shared Voting Common Stock Stock and Investment and Investment Beneficially Beneficially Power as of Power as of Owned as of Owned as of Name 12/31/99 12/31/99 12/31/99 12/31/99 - --------------------------- ------------------- --------------------- ------------------- ------------- Richard E. Anthony ----- ----- ----- --- Joe E. Beverly ----- ----- ----- --- James H. Blanchard 783,443 360,480 1,143,923 * Richard Y. Bradley 21,652 5,000 26,652 * Walter M. Deriso, Jr. 3,853 3,829 7,682 * C. Edward Floyd, M.D. ----- ----- ----- --- Gardiner W. Garrard, Jr. 12,646 ----- 12,646 * G. Sanders Griffith, III 19,422 ----- 19,422 * V. Nathaniel Hansford ----- 1,552 1,552 * John P. Illges, III 103,797 81,750 185,547 * Mason H. Lampton 39,647 104,234 143,881 * Elizabeth C. Ogie 10,200 41,447 51,647 * H. Lynn Page 347,546 314,596 662,142 * Robert V. Royall 60,000 ----- 60,000 * Melvin T. Stith ----- ----- ----- --- William B. Turner 159,790 576,000 735,790 * James D. Yancey 785,295 24,208 809,503 * Directors and Executive Officers as a Group (21 persons) 2,366,001 1,513,096 3,879,097 2.0 *Less than one percent of the outstanding shares of TSYS common stock. - ------------------- Includes 16,734 shares of TSYS common stock with respect to which Mr. Griffith has no investment power. Includes 28,800 shares of TSYS common stock held in a trust for which Mr. Lampton is not the trustee. Mr. Lampton disclaims beneficial ownership of such shares. Includes 39,168 shares of TSYS common stock held by a charitable foundation of which Mrs. Ogie is a trustee. Includes 48,742 shares of TSYS common stock held by a charitable foundation of which Mr. Page is a trustee.
TRANSACTIONS AND AGREEMENTS BETWEEN SYNOVUS, COLUMBUS BANK, TSYS AND CERTAIN OF SYNOVUS' SUBSIDIARIES During 1999, Columbus Bank and certain of Synovus' other banking subsidiaries received bankcard data processing services from TSYS. The bankcard data processing agreement between Columbus Bank and TSYS can be terminated by Columbus Bank upon 60 days prior written notice to TSYS or terminated by TSYS upon 180 days prior written notice to Columbus Bank. During 1999, TSYS derived $8,049,915 in revenues from Columbus Bank and certain of Synovus' other banking subsidiaries for the performance of bankcard data processing services and $221,844 in revenues from Synovus and its subsidiaries for the performance of other data processing services. TSYS' charges to Columbus Bank and Synovus' other banking subsidiaries for bankcard and other data processing services are comparable to, and are determined on the same basis as, charges by TSYS to similarly situated unrelated third parties. Synovus Service Corp., a wholly owned subsidiary of Synovus, provides various services to Synovus' subsidiary companies, including TSYS. TSYS and Synovus Service Corp. are parties to a Lease Agreement pursuant to which Synovus Service Corp. leased from TSYS office space for lease payments aggregating $51,594 during 1999. Synovus Service Corp. also paid TSYS $382,840 during 1999 for data processing services. The terms of these transactions are comparable to those which could have been obtained in transactions with unaffiliated third parties. Synovus and TSYS and Synovus Service Corp. and TSYS are parties to Management Agreements (having one year, automatically renewable, unless terminated, terms), pursuant to which Synovus and Synovus Service Corp. provide certain management services to TSYS. During 1999, these services included human resource services, maintenance services, security services, communication services, corporate education services, travel services, investor relations services, corporate governance services, legal services, regulatory and statutory compliance services, executive management services performed on behalf of TSYS by certain of Synovus' officers and financial services. As compensation for management services provided during 1999, TSYS paid Synovus and Synovus Service Corp. management fees of $1,524,780 and $10,639,179, respectively. Management fees are subject to future adjustments based upon charges at the time by unrelated third parties for comparable services. During 1999, Synovus Trust Company served as trustee of various employee benefit plans of TSYS. During 1999, TSYS paid Synovus Trust Company trustee's fees under these plans of $317,081. During 1999, Columbus Depot Equipment Company, a wholly owned subsidiary of TSYS, and Columbus Bank and 9 of Synovus' other subsidiaries were parties to Lease Agreements pursuant to which Columbus Bank and 9 of Synovus' other subsidiaries leased from Columbus Depot Equipment Company computer related equipment for bankcard and bank data processing services for lease payments aggregating $80,490. The terms, conditions and rental rates provided for in these Agreements are comparable to corresponding terms, conditions and rates provided for in leases of similar equipment offered by unrelated third parties. During 1999, Synovus Technologies, Inc., a wholly owned subsidiary of Synovus, paid TSYS $143,405 for data links, network services and other miscellaneous items related to the data processing services which Synovus Technologies provides to its customers, which amount was reimbursed to Synovus Technologies by its customers. During 1999, Synovus Technologies paid TSYS $24,900 primarily for computer processing services. During 1999, TSYS paid Synovus Technologies $765,741 for lockbox services. The charges for processing and other services are comparable to those between unrelated third parties. During 1999, TSYS and Columbus Bank were also parties to a Lease Agreement pursuant to which TSYS leased office space from Columbus Bank for lease payments of $36,308. The terms, conditions and rental rates provided for in this Lease Agreement are comparable to corresponding terms, conditions and rates provided for in leases of similar facilities offered by unrelated third parties in the Columbus, Georgia area. In addition, TSYS paid Columbus Bank $345,893 during 1999 for marketing rights. These charges are comparable to those between unrelated third parties. During 1999, Synovus, Columbus Bank and other Synovus subsidiaries paid to Columbus Productions, Inc. and TSYS Total Solutions, Inc., wholly owned subsidiaries of TSYS, an aggregate of $5,403,294 for printing, correspondence and facilities management services. The charges for these services are comparable to those between unrelated third parties. During 1999, TSYS and its subsidiaries were paid $1,865,621 of interest by Columbus Bank in connection with deposit accounts with, and commercial paper purchased from, Columbus Bank. These interest rates are comparable to those in transactions between unrelated third parties. TSYS has entered into an agreement with Columbus Bank with respect to the use of aircraft owned or leased by Columbus Bank and W.C.B. Air L.L.C. Columbus Bank and W.C.B.Air are parties to a Joint Ownership Agreement pursuant to which they jointly own or lease aircraft. TSYS paid Columbus Bank $881,970 for its use of the aircraft during 1999. The charges payable by TSYS to Columbus Bank in connection with its use of this aircraft approximate charges available to unrelated third parties in the State of Georgia for use of comparable aircraft for commercial purposes. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires Synovus' officers and directors, and persons who own more than ten percent of Synovus common stock, to file reports of ownership and changes in ownership on Forms 3,4 and 5 with the Securities and Exchange Commission and the New York Stock Exchange. Officers, directors and greater than ten percent shareholders are required by SEC regulations to furnish Synovus with copies of all Section 16(a) forms they file. To Synovus' knowledge, based solely on its review of the copies of such forms received by it, and written representations from certain reporting persons that no Forms 5 were required for those persons, Synovus believes that during the fiscal year ended December 31, 1999 all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with, except that Ms. James filed an amended Form 3 to correctly state her beneficial ownership of shares. INDEPENDENT AUDITORS On March 1, 2000, Synovus' Board of Directors appointed KPMG LLP as the independent auditors to audit the consolidated financial statements of Synovus and its subsidiaries for the fiscal year ending December 31, 2000. The Board of Directors knows of no direct or material indirect financial interest by KPMG in Synovus or any of its subsidiaries, or of any connection between KPMG and Synovus or any of its subsidiaries, in any capacity as promoter, underwriter, voting trustee, director, officer, shareholder or employee. Representatives of KPMG will be present at Synovus' 2000 Annual Meeting with the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions. GENERAL INFORMATION FINANCIAL INFORMATION Detailed financial information for Synovus and its subsidiaries for its 1999 fiscal year is included in Synovus' 1999 Annual Report that is being mailed to Synovus' shareholders together with this Proxy Statement. SHAREHOLDER PROPOSALS FOR THE 2001 PROXY STATEMENT Any shareholder satisfying the Securities and Exchange Commission requirements and wishing to submit a proposal to be included in the Proxy Statement for the 2001 Annual Meeting of Shareholders should submit the proposal in writing to the Secretary, Synovus Financial Corp., 901 Front Avenue, Suite 301, Columbus, Georgia 31901. Synovus must receive a proposal by November 16, 2000 in order to consider it for inclusion in the Proxy Statement for the 2001 Annual Meeting of Shareholders. DIRECTOR NOMINEES OR OTHER BUSINESS FOR PRESENTATION AT THE ANNUAL MEETING Shareholders who wish to present director nominations or other business at the Annual Meeting are required to notify the Secretary of their intent at least 45 days but not more than 90 days before March 16, 2001 and the notice must provide information as required in the bylaws. A copy of these bylaw requirements will be provided upon request in writing to the Secretary, Synovus Financial Corp., 901 Front Avenue, Suite 301, Columbus, Georgia 31901. This requirement does not apply to the deadline for submitting shareholder proposals for inclusion in the Proxy Statement (see "Shareholder Proposals for the 2001 Proxy Statement" above), nor does it apply to questions a shareholder may wish to ask at the meeting. SOLICITATION OF PROXIES Synovus will pay the cost of soliciting proxies. Proxies may be solicited on behalf of Synovus by directors, officers or employees by mail, in person or by telephone, facsimile or other electronic means. Synovus will reimburse brokerage firms, nominees, custodians, and fiduciaries for their out-of-pocket expenses for forwarding proxy materials to beneficial owners. The above Notice of Annual Meeting and Proxy Statement are sent by order of the Synovus Board of Directors. By Order of the Board of Directors /s/JAMES H. BLANCHARD JAMES H. BLANCHARD Chairman of the Board, Synovus Financial Corp. March 16, 2000 EX-21.1 7 SUBSIDIARIES SUBSIDIARIES OF SYNOVUS FINANCIAL CORP. Name Ownership Percentage - ----- -------------------- Georgia Corporations - -------------------- Columbus Bank and Trust Company1 100% Commercial Bank 100% Commercial Bank and Trust Company of Troup County 100% Security Bank and Trust Company of Albany 100% Sumter Bank and Trust Company 100% The Coastal Bank of Georgia 100% First State Bank and Trust Company of Valdosta 100% Bank of Hazlehurst 100% The Cohutta Banking Company 100% Bank of Coweta 100% Citizens Bank and Trust of West Georgia 100% First Community Bank of Tifton 100% Synovus Technologies, Inc. 100% CB&T Bank of Middle Georgia 100% Sea Island Bank 100% - -------- 1 Columbus Bank and Trust Company has one majority owned subsidiary, Total System Services, Inc., a Georgia corporation, and three wholly owned subsidiaries, Synovus Trust Company, Synovus Securities, Inc. and Synovus Insurance Services of Georgia, Inc., all of which are Georgia corporations. Total System Services, Inc. has four wholly owned subsidiaries, Columbus Depot Equipment Company, TSYS Total Solutions, Inc., TSYS Canada, Inc. and Columbus Productions, Inc., all of which are Georgia corporations. Synovus Trust Company has one wholly owned subsidiary, Synovus Trust Company, a Florida corporation. Citizens First Bank2 100% The Citizens Bank 100% The Citizens Bank of Cochran 100% Athens First Bank & Trust Company3 100% Citizens & Merchants State Bank 100% Synovus Service Corp. 100% Bank of North Georgia 100% Georgia Bank and Trust 100% Charter Bank & Trust Co. 100% TSYS Total Debt Management, Inc. 100% Alabama Corporations - -------------------- Synovus Financial Corp. of Alabama 100% Community Bank and Trust of Southeast Alabama 100% First Commercial Bank of Huntsville 100% The Bank of Tuscaloosa 100% Sterling Bank 100% First Commercial Bank of Birmingham4 100% CB&T Bank of Russell County 100% - -------- 2 Citizens First Bank has one wholly owned subsidiary, Citizens Service Company, a Georgia corporation. 3 Athens First Bank & Trust Company has one wholly owned subsidiary, Athena Service Corporation, a Georgia corporation. 4 First Commercial Bank of Birmingham has three wholly owned subsidiaries, First Commercial Mortgage Corporation, First Commercial Credit Corporation and Synovus Mortgage Corp., all of which are Alabama corporations. 2 Synovus Trust Corp. 100% Florida Corporations - -------------------- Quincy State Bank 100% The Tallahassee State Bank5 100% Bank of Pensacola 100% Vanguard Bank and Trust Company 100% First Coast Community Bank 100% National Banking Associations - ----------------------------- The National Bank of Walton County (GA) 100% Peachtree National Bank (GA) 100% First National Bank of Jasper (AL)6 100% National Bank of South Carolina (SC)7 100% Mountain National Bank (GA)8 100% lists\subsid2.snv - -------- 5 Tallahassee State Bank has one wholly owned subsidiary, Synovus Insurance Services of Florida, a Florida corporation. 6 First National Bank of Jasper has one wholly owned subsidiary, Synovus Insurance Services of Alabama, Inc., an Alabama corporation. 7 National Bank of South Carolina has one wholly owned subsidiary, Synovus Insurance Services of South Carolina, Inc., a South Carolina corporation. 8 Mountain National Bank has one wholly owned subsidiary, Merit Leasing Corporation, a Georgia corporation. 3 EX-23.1 8 KPMG CONSENT Accountants' Consent We consent to the incorporation by reference in the Registration Statements (No. 333-37403, No. 333-72827, No. 333-88263, No. 333-91007 and No. 333-91091) on Form S-3 of Synovus Financial Corp. of our report dated January 12, 2000, relating to the consolidated balance sheets of Synovus Financial Corp. and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1999, which report is incorporated by reference in the Synovus Financial Corp. Annual Report on Form 10-K for the year 1999. KPMG LLP Atlanta, Georgia March 21, 2000 Accountants' Consent We consent to the incorporation by reference in the Registration Statements (No. 33-35926, No. 33-56614, No. 2-93472, No. 2-94639, No. 33-40738, No. 33-39845, No. 33-77900, No. 33-77980, No. 33-79518, No. 33-89782, No. 33-90630, No. 33-90632, No. 33-91690, No. 33-60473, No. 33-60475, No. 333-30937, No. 333-62709 and No. 333-88087) on Form S-8 of Synovus Financial Corp. of our report dated January 12, 2000, relating to the consolidated balance sheets of Synovus Financial Corp. and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1999, which report is incorporated by reference in the Synovus Financial Corp. Annual Report on Form 10-K for the year 1999. KPMG LLP Atlanta, Georgia March 21, 2000 EX-24.1 9 POWER OF ATTORNEY 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 22, 2000 By:/s/James H. Blanchard --------------------- James H. Blanchard, Chairman of the Board and Principal Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints James H. Blanchard, James D. Yancey and Richard E. Anthony, and each of them, his or her true and lawful attorney(s)-in-fact and agent(s), with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments to this report and to file the same, with all exhibits and schedules thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney(s)-in-fact and agent(s) full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney(s)-in-fact and agent(s), or their substitute(s), may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in the capacities and on the dates indicated. /s/William B. Turner Date: March 22, 2000 - -------------------------------------------- William B. Turner, Director and Chairman of the Executive Committee /s/James H. Blanchard Date: March 22, 2000 - -------------------------------------------- James H. Blanchard, Chairman of the Board and Principal Executive Officer /s/James D. Yancey Date: March 22, 2000 - -------------------------------------------- James D. Yancey, President and Director /s/Richard E. Anthony Date: March 22, 2000 - -------------------------------------------- Richard E. Anthony, Vice Chairman of the Board /s/Walter M. Deriso, Jr. Date: March 22, 2000 - -------------------------------------------- Walter M. Deriso, Jr., Vice Chairman of the Board /s/Thomas J. Prescott Date: March 22, 2000 - -------------------------------------------- Thomas J. Prescott, Executive Vice President, Treasurer, Principal Accounting and Financial Officer /s/Joe E. Beverly Date: March 22, 2000 - -------------------------------------------- Joe E. Beverly, Director /s/Richard Y. Bradley Date: March 22, 2000 - -------------------------------------------- Richard Y. Bradley, Director Date: March __, 2000 - -------------------------------------------- C. Edward Floyd, Director /s/Gardiner W. Garrard, Jr. Date: March 22, 2000 - -------------------------------------------- Gardiner W. Garrard, Jr., Director /s/V. Nathaniel Hansford Date: March 22, 2000 - -------------------------------------------- V. Nathaniel Hansford, Director /s/John P. Illges, III Date: March 22, 2000 - -------------------------------------------- John P. Illges, III, Director /s/Mason H. Lampton Date: March 22, 2000 - -------------------------------------------- Mason H. Lampton, Director /s/Elizabeth C. Ogie Date: March 22, 2000 - -------------------------------------------- Elizabeth C. Ogie, Director /s/H. Lynn Page Date: March 22, 2000 - -------------------------------------------- H. Lynn Page, Director Date: March __, 2000 - -------------------------------------------- Robert V. Royall, Jr., Director /s/Melvin T. Stith Date: March 22, 2000 - -------------------------------------------- Melvin T. Stith, Director filings\SNV\con13.sig EX-27 10 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF SYNOVUS FINANCIAL CORP. AS OF AND FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 466,543 1,928 92,093 0 1,716,678 277,279 273,504 9,151,384 127,558 12,547,001 9,440,087 1,261,391 235,949 318,620 0 0 282,189 944,480 12,547,001 766,176 118,864 2,967 888,007 323,752 374,713 513,294 34,007 1,202 869,737 349,315 225,307 0 0 225,307 0.80 0.80 5.07 27,924 16,878 1,252 0 114,109 30,443 6,957 127,558 127,558 0 27,132
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