Synovus Shows Why Banks Aren't Lending

Synovus is not the only Georgia holding company padding its loan-loss cushion. United Community Banks (UCBI Quote) of Blairsville on Monday said it was setting aside $85 million for loan losses in the fourth quarter, keeping ahead of $74 million in loan charge-offs during the period.

While the company didn't provide an estimate of its fourth-quarter earnings, the consensus earnings estimate was a loss of 33 cents per share. This is a very low loss estimate, considering that in the third quarter, when the company made a $76 million provision for loan losses, its net loss was $39.9 million, or 84 cents per share.

United Community, with $8 billion in total assets as of Sept. 30, said its ratio of reserves to total loans was 2.14% at the end of December, but the high level of charge-off activity pointed to more trouble ahead. While we can only come up with a very rough estimate at this point, the $74 million in fourth-quarter loan charge-offs put the company at an annualized charge-off rate approaching 5%. If loan losses continue at this pace, several more quarters of net losses will result.

The market would seem to agree, as United Community's shares sank 13% Tuesday, closing at $11.07, while the S&P 600 SmallCap Financials index was up 2%.

United Community Banks has received $180 million in TARP money.

Finally, Georgia's largest bank holding company, SunTrust Banks(STI Quote), saw shares fall 7% Monday following the Synovus announcement, closing at $27.88.