Synovus Financial's ( SNV - Get Report) recent $200 million increase to its fourth-quarter loan-loss provision illustrates the folly of critics' cries for banks to immediately use government bailout money to begin making loans again.

Synovus, the Columbus, Ga., holding company, saw shares close down 13% to $7.17 Monday, after it said over the weekend that its fourth-quarter provision for loan losses would increase $200 million from the third quarter to $350 million -- not $250 million, as it announced on Friday. Several prominent analysts responded by lowering their earnings estimates. The Thomson Reuters fourth-quarter consensus was a loss of 36 cents per share. The company is scheduled to report earnings on Jan. 22.

In the case of Synovus, which has received $968 million from the Treasury's $700 billion Troubled Assets Relief Program, or TARP, it's pretty clear that expected loan losses could eat up a significant portion of that capital over the next year.

Objections to the capital infusions were expressed in the Dec. 10 "First Report," of the Congressional Oversight Panel for Economic Stabilization, chaired by Harvard law professor Elizabeth Warren.

The panel asked if the capital infusions had "increased lending and unfrozen the credit markets or simply bolstered banks' books," a jab that signaled some hostility to the industry. Treasury, in its Dec. 31 response to the panel's report, said its efforts had mitigated the risk of a wider systematic breakdown.

But considering that it takes time for loan losses to play out, "bolstering bank's books" may just be the right medicine to help a company like Synovus ride out the losses.

Synovus is not the only Georgia holding company padding its loan-loss cushion. United Community Banks ( UCBI - Get Report) 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 - Get Report), saw shares fall 7% Monday following the Synovus announcement, closing at $27.88.

SunTrust received a second helping of TARP money on Dec. 31, bringing its total capital infusion from the Treasury to $4.9 billion. After not taking the maximum allowed capital infusion of 3% of risk-weighted assets back in October, the company changed its mind in early December.

"Given the increasingly uncertain economic outlook, we have concluded that further augmenting our capital at this point is a prudent step," CEO James M. Wells III said.

Looking back, and considering the political uncertainty in light of the controversy surrounding the TARP, a prudent approach in this environment is to take the capital when you can get it.

SunTrust is scheduled to announce its fourth-quarter results before the market opens on Jan. 22. SunTrust reported a 42% sequential slide in profits to $312 million in the third quarter.

2008 was a rough year for Georgia banks, with five failing, the most recent being Haven Trust Bank, which was closed by regulators on Dec. 12. Haven was acquired by BB&T Corp. ( BBT - Get Report), following a trend of large regional banks expanding their deposit base with dirt-cheap acquisitions of failed institutions.

SunTrust acquired the branches and insured deposits of the failed First Priority Bank of Bradenton, Fla., back in August.

Regions Financial ( RF - Get Report) acquired Integrity Bank of Alpharetta, Ga.'s branches when it was shuttered later in August.

Fifth Third ( FITB - Get Report) acquired all of the deposits and branches of Freedom Bank, Bradenton, Fla., on Halloween.

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.