Synovus Financial

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on late Thursday said its fourth-quarter loss was fueled by widening loan losses that forced it to take an even larger provision than it said it would take less than three weeks ago.

The Columbus, Ga.-based regional bank holding company reported a fourth quarter net loss of $63.7 million, or $1.93 per share after the market close. That follows a $40 million net loss for the third quarter and compares to a profit of $82 million for the fourth quarter of 2007.

The results were weighed by a $364 million provision for loan losses along with a $443 non-cash writedown of goodwill. The provision for loan losses exceeded even the "corrected updated outlook" projection of $350 million the company announced on Jan. 3, when


revised the projection from $250 million.

CEO Richard Anthony said the company, with $35.7 billion in total assets in 34 separate banks at last count, was taking aggressive steps to reduce the exposure to troubled credits, concentrated in its residential and construction loan portfolios in the Atlanta area.

Net loan charge-offs (actual loan losses) totaled $229 million, increasing dramatically from $105 million in the third quarter and $60 million in the fourth quarter of 2007.

The annualized ratio of net charge-offs to average loans was 3.25% for the fourth quarter. While the company's provision for loan loss reserves exceeded the charge-offs by $135 million, the ratio of reserves to total loans was only 2.14% as of Dec. 31. This means that if loan charge-offs continue at the fourth quarter pace, the company will have to continue making elevated loan loss provisions, which could lead to more net losses over the coming quarters.

Despite the high level of charge-offs, Synovus reported quarter-end ratio of nonperforming loans ratio of 3.30%, up from 2.78% the previous quarter and 1.29% at the end of 2007.

Synovus ranked second on

TheStreet Recommends's

list of large holding companies profitable for the year-to-date period ended Sept. 30 with the highest

dividend payouts

. The company's dividend payout ratio of 211.89% was exceeded only by

Fifth Third Bancorp


, which had a dividend payout ratio of 2,011.70. Fifth Third on Thursday

reported a fourth quarter loss

of $2.2 billion.

While Fifth Third on Dec. 16 said it was lowering its quarterly dividend on common shares to a penny, Synovus didn't discuss the dividend in its earnings release. It continues to pay 6 cents a share, for a yield of 5.05%, based on Thursday's market close of $4.75. Shares closed down 8.5% to $4.75 on Thursday.

The company on Dec. 19 issued $968 million in preferred shares to the Treasury, receiving an infusion of capital from the Troubled Assets Relief Program (TARP). This brought the company's leverage and risk-based capital ratios to 10.27% and 14.55% as of Dec. 31, up from 8.49% and 12.20% the previous quarter. While the improved capital ratios provide a great deal of comfort, it remains to be seen whether the company will soon turn the corner on loan losses.

Synovus paid $2.06 million in dividends on the preferred shares during the fourth quarter. Moving forward, the company will pay approximately $12.1 million in dividends on the preferred shares. The coupon on the preferred shares issued to the Treasury is 5% for the first five years, then rising to 9%. While the 5% cost of capital may appear inexpensive, it will probably be a drag on earnings even if Synovus fully leverages the new capital through lending or securities purchases, since the company's net interest margin (essentially the yield on loans and investments less its cost of funds) was 3.20%.

Philip W. van Doorn joined 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.