Synovus Financial Corp. today announced its intention to redeem all 967,870 shares of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A, issued to the U.S. Treasury through the Capital Purchase Program established under the Troubled Asset Relief Program (“TARP”), for an aggregate purchase price of $967.87 million.  Internally available funds (including a $680 million dividend from its wholly owned subsidiary, Synovus Bank) will be used to fund over two-thirds of the redemption price.   Synovus also announced today the commencement of an underwritten public offering of $185 million of its common stock.  The shares will be issued pursuant to a prospectus supplement filed as part of a shelf registration statement on Form S-3 filed with the Securities and Exchange Commission.  Synovus intends to use the net proceeds from the common stock offering, together with the net proceeds of a planned $130 million preferred stock offering, to fund the balance of the TARP redemption payment. 

“Today’s announcement of our planned TARP redemption represents the culmination of a journey to return Synovus to a position of strength,” said Kessel Stelling, Synovus Chairman and CEO. “We laid out and successfully executed a clear, deliberate, and aggressive plan to return Synovus to sustainable profitability.  Key components of the plan included taking significant actions to strengthen credit quality, stabilize and remix the balance sheet, and improve operating efficiency while investing in the talent and technology that will enable us to support growth and enhance the customer experience.  Our team did an outstanding job of tackling important issues throughout this journey while remaining focused on our customers.

“The size of the offerings announced today is based on discussions with regulators and management’s assessment of the appropriate level of Tier 1 Common Equity, Tier 1 Leverage and other capital ratios.  Following these offerings and the planned redemption of the TARP preferred stock, we believe that our solid capital position will provide us the flexibility to grow our balance sheet as the economy improves and to capitalize on future strategic opportunities.”

The attached table outlines Synovus’ reported capital ratios at June 30, 2013 and March 31, 2013, with a comparison to the pro forma results as of June 30, 2013 reflecting completion of the common stock offering and the planned preferred stock offering as well as redemption of the TARP preferred stock:

Currently, the TARP preferred stock (dividends and accretion of discount) reduces net income available to common shareholders by approximately $59 million per year.  After TARP redemption, the annualized benefit from the elimination of this cost, net of the impact of the above transactions to be undertaken to facilitate the redemption of TARP, is expected to result in a net increase in diluted earnings per share of approximately $0.04 (based on annualized 2Q13 earnings).

After redemption of the TARP preferred stock, the U.S. Treasury would continue to hold warrants to purchase 15,510,737 shares of Synovus common stock at an initial exercise price of $9.36 per share.  Synovus intends to evaluate the potential repurchase of these warrants directly from the U.S. Treasury or through participation in a subsequent auction process, which may or may not be successful.