The U.S. government is poised to pump nearly $1 billion into Synovus Financial Corp.
The Columbus-based regional bankholding company said Friday it has received preliminary approval from the U.S. Treasury to sell $973 million of preferred stock to the government.
The sale is part of the Troubled Asset Relief Program, which aims to give U.S. banks a cash infusion to strengthen them as they grapple with the housing market meltdown.
In the case of Synovus, it has been hit hard by bad loans written to residential housing developers across its five-state footprint. The worst damage, however, has come in the Atlanta and west Florida markets.
"What this capital does for the system and the individual banks is during this period of weakness and instability, it provides a new dimension of strength that I think we can use to our advantage from an investment standpoint, from a customer standpoint," Richard Anthony, Synovus chairman and chief executive officer, said late Friday.
Synovus is among the national and regional banks receiving a cut of the $250 billion earmarked for the program. The company submitted its application two weeks ago and now must await a mid-December vote by its shareholders, said Synovus spokeswoman Alison Dowe.
The vote will be to amend the company's articles of incorporation and bylaws, clearing the way for Synovus to issue preferred stock and execute definitive agreements with the government.
Preferred stock is more of an investment stock, which will pay a 5-percent dividend for the first five years and allow the government to own up to 15 percent of the $973 million investment in Synovus, Anthony said. The government will likely sell the investment in a few years, realizing some sort of profit, he said.
The more familiar common stock, meanwhile, allows owners to vote on various company issues and leadership changes. The dividend payout on that stock typically changes quarterly — up and down — based on a firm's financial performance.
Dowe said the process of selling the stock to the government could occur by the end of December.
"They are expecting to move through this process with banks who are getting this money by the end of the year," she said. "Now that may have changed, but the latest information we have is by the end of the year."
Once the company does receive the $973 million, it will have about $3.8 billion in reserve. Anthony said it is likely Synovus will hold on to most of that cash until the economy turns around.
"Short term, you can't really put that capital to work immediately. You basically put it on your balance sheet," the CEO said.
The idea is to wait for loan demand to increase as a recovery picks up steam.
"Longer term, I think all banks will basically put that capital to work through some additional expansion and loan growth, and maybe even acquisitions or expansion into new markets," Anthony said. "But that's not a 2008, and maybe not a 2009, priority."
Synovus oversees more than $34 billion in assets, operating 32 banks spread across Georgia, Alabama, South Carolina, Florida and Tennessee.