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| FINANCIAL REVIEW |
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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.
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. |
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. |
