“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.”
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 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.”
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 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, Stelling 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.”