Synovus stock falls 13% after bank boosts loan loss fund

Shares of Synovus, Georgia’s second-largest bank, fell Monday as investors digested the company’s weekend announcement that it expected to set aside $350 million to cover potential loan losses.

That marks a whopping 75 percent increase in the company’s loan loss allowance, which stood at $464 million at the end of the third quarter.

Synovus’ stock price fell 13 percent Monday, to $7.13 per share.

Synovus, Georgia’s second-largest bank, said the move would help cover losses tied to the recession and to metro Atlanta’s real estate market, which has imploded.

The company broke the news last Friday after the markets closed, initially announcing a $250 million increase in the loan loss reserve in the fourth quarter. The following day, the company issued a correction that put the figure even higher, at $350 million.

Tommy Prescott, Synovus’ chief financial officer, said the company “made an estimate and subsequently discovered additional adjustments that warranted an update. We regret any confusion caused by this.”

Analyst Robert Patten at Morgan Keegan downgraded Synovus on Monday to “market perform” from “outperform.”

Synovus’s stock price dropped sharply after the opening bell Monday, at one point falling more than 17 percent in morning trading before recovering a bit.

While losses are mounting, Synovus recently received a $1 billion cash infusion from the U.S. Treasury as part of the government’s $250 billion effort to shore up the banking industry.

Some analysts applauded the company’s move to write off losses, saying it could help the bank stabilize in the coming year.

Synovus has more than $34 billion in assets and operates in five Southern states. It’s known for buying smaller community banks and allowing them to operate somewhat independently.

In metro Atlanta, Synovus owns Bank of North Georgia and Bank of Coweta.

Also Monday, Blairsville-based United Community Bank, the state’s third-largest bank, announced that it expected to boost its loan loss provision in the fourth quarter by $11 million, to $85 million.

Like Synovus, United Community traced its problems to the sluggish economy and the hard-hit Atlanta real estate market.