Wrapping up the Synovus annual shareholders’ meeting this morning, Chairman and Chief Executive Officer Kessel Stelling recalled a few simple, but sage words of advice offered up a couple of years ago from longtime company board member and retired W.C. Bradley Co. executive Bill Turner.
“He said: Whenever you start making money, that will solve a lot of problems,” Stelling remarked, drawing a ripple of laughs from those in attendance.
Check that basic achievement off the Synovus list of things to do to get back on track financially after suffering a dozen quarterly losses before reaching profitability in the third quarter of 2011. On Tuesday, the regional bank reported its third-straight positive quarter, with $21.4 million in net income.
“I know there were lots of doubters and lots of skeptics, and I don’t blame anyone of you,” said Stelling. “We went through three years of negative headlines, rumors and even some nasty letters from people who didn’t think we could still compete.”
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The entire process of recovering from a “oppressive economy” that put the company on its heels and in “crisis” mode hasn’t been easy, the CEO said. And there remains much to do, he said, including reducing the inflows of bad and problematic loans even more, growing earnings, and paying back the $968 million that Synovus owes through the federal Troubled Asset Relief Program, often commonly referred to by its bailout acronym, TARP.
“Rest assured we have a plan and want to get out” of TARP, said Stelling, who thanked customers, employees and shareholders for their “patience and loyalty” through the bank’s painful moments. That included closing some branches and eliminating roughly 2,000 jobs from its five-state company footprint, about 885 of those cuts last year.
The annual meeting powerpoint display and the cover of the company’s 2011 annual report stated the message that Synovus and its top executives are trying to send in 2012 — “a turning point.”
Synovus moved the gathering from the more posh RiverCenter for the Performing Arts — where it had taken place for several years — to one of the smaller meeting rooms inside the Columbus Convention and Trade Center, which connotes more of a blue-collar and industrialized tone. The company said the RiverCenter was booked and unavailable.
Early in the meeting, Stelling thanked Jim Blanchard and Richard Anthony, both retired Synovus chairmans and CEOs, for their work on the bank’s board of directors, as well as longtime board member Richard “Bo” Bradley. All three departed the board effective Thursday, while W.C. Bradley Co. Chairman Steve Butler and Jerry Nix, vice chairman and chief financial officer of Genuine Parts Co., were added to the company’s governing body.
Sam Hatcher, Synovus general counsel and corporate secretary, reported that the remainder of the company’s board members had been re-elected for another year, and that key executives’ compensation packages and performance goals had been overwhelmingly approved. That includes a 2.5-percent raise scheduled this year for those at the top.
Stelling noted from the start of his presentation that the mood this year heading into the meeting was “much more positive” than that of a year ago. The bank had just reported its 11th straight quarterly loss last April and was in the middle of its 12th, following a 2010 in which it had racked up an $848 million loss.
The momentum began to turn last October, with the company announcing a surprise $15.7 million profit in the third quarter, followed by net income of $12.8 million in the fourth-quarter. That set the stage for the latest first-quarter profit and the opportunity to make it four in a row. Analysts surveyed by research firm Thomson Financial are currently projecting earnings of 2 cents per share in the second quarter.
The reversal of fortune — while still a work in progress — is a “meaningful and momentous step for our company,” Stelling said of the small string of profits now under the bank’s belt.
Still, he said, the flow of non-performing loans and the firm’s net charge-off ratio remain too high for long-term success. The work also includes knocking the level of past-due loans and non-performing assets down even further, while keeping an eye on expenses.
As for TARP, Stellling conceded it remains a “big, big issue” for the company and that there are constant conversations with the U.S. Treasury and banking regulators on the topic, the timing of repayment of the $968 million, and what will be required to make that happen.
He noted Synovus has paid the federal government $152 million in dividends through TARP and has never been late on those payments. Repayment of the principal amount will come as bad-loan levels fall and core profits rise, he said, and when it’s “prudent, efficient and acceptable.”
But today, it was obvious that the CEO was breathing a sigh of relief of sorts at having possibly put much of the financial “crisis” behind Synovus. He also pointed to several Greenwich Awards and a J.D. Power ranking in customer service as evidence that the bank is not ignoring the basics as it deals with everything else.
“This franchise, after some pretty stressed times, is still strong,” Stelling said. “But this team is not resting, and we will continue to push this company forward.”