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COLUMBUS, Ga. (

TheStreet

) --

Synovus Financial

(SNV) - Get Synovus Financial Corp. Report

raised $600 million in common stock last week, about as much as it lost in the second quarter. The Columbus, Ga.-based bank now has more capital as well as an attractive share price. But investors ought to expect another year of outsized loan losses.

The company's shares closed at $3.90 on Tuesday after pulling back from $4.43 on Sept. 16, when the offering was priced at $4 a share. Still, Synovus has risen 48% since the S&P 400 Midcap Financials Index bottomed on March 6. At any other time, that would be a stellar performance, but Synovus underperformed the index's 83% advance.

Larger regional banks also outperformed Synovus.

FifthThird

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returned 695% and

Marshall & Ilsley

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jumped 173%.

Huntington Bancshares

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, which priced a $400 million stock offering yesterday, soared 346%.

Synovus, founded in the 1880s by the treasurer of a mill, had $34 billion in assets in June, spread across 35 bank subsidiaries mainly in Georgia, but also in Alabama, South Carolina, Florida and Tennessee.

Analysts were positive about Synovus' capital increase, with Kevin Fitzsimmons of

Sandler O'Neill

calling it "a game-changer for worst-case fears on SNV." Sandler O'Neill was a co-manager of the equity offering.

Some analysts were cautious, including Paul Miller of

FBR Capital Markets

, who said the increased capital helped "to buy SNV time." He reiterated his $3 price target for Synovus, saying the bank will need to raise even more.

Synovus' second-quarter results looked ugly. The company reported a net loss of $587 million as it made aggressive provisions for loan-loss reserves and charged-off $355 million in nonperforming loans, concentrated mainly in commercial construction and development loans. The annualized ratio of net charge-offs to average loans was 5.04%.

Even with the high rate of charge-offs, the ratio of nonperforming loans (including loans past due 90 or more days or in nonaccrual status) to total loans continued to increase, to 5.5% as of June 30, from 5.25% in the previous quarter and 2.42% a year earlier.

The second-quarter loss pushed the company's tier 1 leverage ratio down to 8.25% from 9.88% during the previous quarter and 10.28% at the end of 2008. Synovus received a $968 million infusion of government money via the Troubled Asset Relief Program, or TARP. While capital levels were still decent, it was clear the bank would need more money to ride out the blizzard of loan losses still to come.

It's reasonable to expect another share offering over the next year, or at least the conversion of debt to common equity, which would further erode common shareholders' stake in the company.

While Synovus has plans for a debt exchange to boost common equity, Albert Savastano of

Fox-Pitt Kelton

said the capital increase makes that step less likely. However, he also said Synovus was only "about 30% through the $3.4 billion of expected credit costs."

Factoring in the capital increase and an option for underwriters to purchase another 22.5 million shares (boosting common equity by another $90 million), Fox-Pitt Kelton provided a pro-forma June 30 tangible book value for Synovus of $5.35. In other words, the stock is trading at just 73% of tangible book.

For investors, while Synovus is more tempting now than it has been in at least a year, the stock-price volatility of the past week and the likelihood of a further dilution make it suitable only as a long-term play. It would be best to start small and build on the dips.

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Reported by Philip van Doorn in Jupiter, Fla.

Philip W. van Doorn joined TheStreet.com Ratings., Inc., in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a Bachelor of Science in business administration from Long Island University.