UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

SYNOVUS FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

GEORGIA		58-1134883
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

1111 Bay Avenue, Suite # 500
P.O. Box 120
Columbus, Georgia 31902
(Address of principal executive offices)

(706) 649-2311
(Registrants’ telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ      No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer, large accelerated filer and smaller reporting company” in Rule 12B-2 of the Exchange Act.

Large Accelerated Filer þ		Accelerated Filer o		Non-Accelerated Filer o (Do not check if a smaller reporting company)		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12B-2 of the Exchange Act). Yes o      No þ

Indicate the number of shares outstanding of each of the issuer’s class of common stock, as of the latest practicable date.

Class		April 30, 2008
Common Stock, $1.00 Par Value		330,089,200 shares

 

 

SYNOVUS FINANCIAL CORP.

INDEX

Part I.		Financial Information:
Item 1.		Unaudited Financial Statements
		Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007			3
		Consolidated Statements of Income for the Three Months Ended March 31, 2008 and 2007			4
		Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income for the Three Months Ended March 31, 2008 and 2007			5
		Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007			6
		Notes to Consolidated Financial Statements			7
Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			47
Item 4.		Controls and Procedures			48
Part II.		Other Information:
Item 1A.		Risk Factors			49
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			50
Item 6.		Exhibits			51
Signatures					52
Index to Exhibits					53
EX-31.1 SECTION 302, CERTIFICATION OF THE CEO
EX-31.2 SECTION 302, CERTIFICATION OF THE CFO
EX-32 SECTION 906, CERTIFICATION OF PERIODIC REPORT

PART I. FINANCIAL INFORMATION

SYNOVUS FINANCIAL CORP.

		March 31,				December 31,
(In thousands, except share data)		2008				2007
ASSETS
Cash and due from banks		$	589,640				682,583
Interest earning deposits with banks			2,440				10,950
Federal funds sold and securities purchased under resale agreements			101,855				76,086
Trading account assets			34,730				17,803
Mortgage loans held for sale at fair value			141,598				153,437
Impaired loans held for sale			42,270				—
Investment securities available for sale			3,779,877				3,666,974
Loans, net of unearned income			27,117,510				26,498,585
Allowance for loan losses			(394,848	)			(367,613	)
Loans, net			26,722,662				26,130,972
Premises and equipment, net			565,887				547,437
Goodwill			519,138				519,138
Other intangible assets, net			26,156				28,007
Other assets			1,233,637				1,185,065
Total assets		$	33,759,890				33,018,452
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Non-interest bearing retail and commercial deposits		$	3,508,246				3,472,423
Interest bearing retail and commercial deposits			17,713,901				17,734,851
Total retail and commercial deposits			21,222,147				21,207,274
Brokered deposits ($232,626 and $293,842 at fair value as of March 31, 2008 and December 31, 2007)			4,441,040				3,752,542
Total deposits			25,663,187				24,959,816
Federal funds purchased and securities sold under repurchase agreements			2,108,109				2,319,412
Long-term debt			1,992,750				1,890,235
Other liabilities			442,270				407,399
Total liabilities			30,206,316				29,576,862
Minority interest in consolidated subsidiaries			22,772				—
Shareholders’ equity:
Common stock — $1.00 par value. Authorized 600,000,000 shares; issued 335,749,571 in 2008 and 335,529,482 in 2007; outstanding 330,088,033 in 2008 and 329,867,944 in 2007			335,750				335,529
Additional paid-in capital			1,106,049				1,101,209
Treasury stock, at cost — 5,661,538 shares			(113,944	)			(113,944	)
Accumulated other comprehensive income			92,076				31,439
Retained earnings			2,110,871				2,087,357
Total shareholders’ equity			3,530,802				3,441,590
Total liabilities and shareholders’ equity		$	33,759,890				33,018,452

See accompanying notes to consolidated financial statements.

SYNOVUS FINANCIAL CORP.

		Three Months Ended
		March 31,
(In thousands, except per share data)		2008				2007
Interest income:
Loans, including fees		$	455,307				502,056
Investment securities available for sale			45,156				40,453
Trading account assets			634				907
Mortgage loans held for sale			1,697				2,437
Federal funds sold and securities purchased under resale agreements			1,019				1,478
Interest earning deposits with banks			68				568
Total interest income			503,881				547,899
Interest expense:
Deposits			187,181				226,067
Federal funds purchased and securities sold under repurchase agreements			17,830				20,642
Long-term debt			20,221				18,241
Total interest expense			225,232				264,950
Net interest income			278,649				282,949
Provision for losses on loans			91,049				20,515
Net interest income after provision for losses on loans			187,600				262,434
Non-interest income:
Service charges on deposit accounts			28,391				26,370
Fiduciary and asset management fees			12,621				12,473
Brokerage and investment banking revenue			8,487				7,449
Mortgage banking income			8,161				7,226
Bankcard fees			12,218				11,880
Net gains (losses) on sales of available for sale investment securities			—				447
Other fee income			11,185				9,427
Other operating income			20,370				12,231
Proceeds from redemption of Visa shares			38,542				—
Total non-interest income			139,975				87,503
Non-interest expense:
Salaries and other personnel expense			122,130				113,927
Net occupancy and equipment expense			30,211				27,290
Other operating expenses			66,463				53,580
Visa litigation expense			(17,430	)			—
Total non-interest expense			201,374				194,797
Minority interest in consolidated subsidiaries			1,559				—
Income from continuing operations before income taxes			124,642				155,140
Income tax expense			43,648				54,733
Income from continuing operations			80,994				100,407
Income from discontinued operations, net of income taxes and minority interest			—				46,346
Net income		$	80,994				146,753
Basic earnings per share:
Income from continuing operations		$	0.25				0.31
Net income			0.25				0.45
Diluted earnings per share:
Income from continuing operations		$	0.24				0.30
Net income			0.24				0.45
Weighted average shares outstanding:
Basic			328,970				325,687
Diluted			331,719				329,573

See accompanying notes to consolidated financial statements.

SYNOVUS FINANCIAL CORP.

																		Accum
																		ulated
																		Other
																		Compre-
										Additional								hensive
		Shares				Common				Paid-In				Treasury				Income				Retained
(In thousands, except per share data)		Issued				Stock				Capital				Stock				(Loss)				Earnings				Total
Balance at December 31, 2006			331,214			$	331,214				1,033,055				(113,944	)			(2,129	)			2,460,454				3,708,650
Cumulative effect of adoption of FIN No. 48																							(230	)			(230	)
Net Income																							146,753				146,753
Other comprehensive income, net of tax:
Net unrealized gain on cash flow hedges																			1,511								1,511
Change in unrealized gains (losses) on investment securities available for sale, net of reclassification adjustment																			7,694								7,694
Loss on foreign currency translation																			(87	)							(87	)
Other comprehensive income																			9,118								9,118
Comprehensive income																											155,871
Cash dividends declared — $0.21 per share																							(67,004	)			(67,004	)
Issuance of non-vested stock			57				57				(57	)															—
Share-based compensation expense											5,711																5,711
Stock options exercised			1,179				1,179				21,939																23,118
Share-based tax benefit											4,869																4,869
Ownership change at majority-owned subsidiary											2,982																2,982
Issuance of common stock for acquisition			62				62				2,054																2,116
Balance at March 31, 2007			332,512			$	332,512				1,070,553				(113,944	)			6,989				2,539,973				3,836,083
Balance at December 31, 2007			335,529			$	335,529				1,101,209				(113,944	)			31,439				2,087,357				3,441,590
Cumulative effect of adoption of EITF Issue No. 06-4																							(1,420	)			(1,420	)
Cumulative effect of adoption of SFAS No. 159																							58				58
Net Income																							80,994				80,994
Other comprehensive income, net of tax:
Net unrealized gain on cash flow hedges																			12,301								12,301
Change in unrealized gains (losses) on investment securities available for sale, net of reclassification adjustment																			48,290								48,290
Amortization of post-retirement unfunded health benefit, net of tax																			46								46
Other comprehensive income																			60,637								60,637
Comprehensive income																											141,631
Cash dividends declared — $0.17 per share																							(56,118	)			(56,118	)
Issuance of non-vested stock, net			(17	)			(17	)			17																—
Share-based compensation expense											3,590																3,590
Stock options exercised			238				238				961																1,199
Share-based tax benefit											272																272
Balance at March 31, 2008			335,750			$	335,750				1,106,049				(113,944	)			92,076				2,110,871				3,530,802

See accompanying notes to consolidated financial statements

SYNOVUS FINANCIAL CORP.

		Three Months Ended
		March 31,
(In thousands)		2008				2007
Operating activities:
Net income		$	80,994				146,753
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for losses on loans			91,049				20,515
Depreciation, amortization and accretion, net			26,650				48,027
Equity in loss (income) of equity investments			1,160				(2,334	)
Deferred tax expense (benefit)			1,159				(1,006	)
Decrease (increase) in interest receivable			23,867				(7,517	)
(Decrease) increase in interest payable			(4,588	)			4,183
Minority interest in subsidiaries’ net income			1,559				11,278
Increase in trading account assets			(16,927	)			(30,023	)
Originations of mortgage loans held for sale			(317,442	)			(394,538	)
Proceeds from sales of mortgage loans held for sale			329,104				388,372
Gain on sale of mortgage loans held for sale			(4,116	)			(2,880	)
Increase in prepaid and other assets			(4,819	)			(41,278	)
Decrease in accrued salaries and benefits			(22,488	)			(97,917	)
Increase in other liabilities			73,909				50,929
Net gains on sales of available for sale investment securities			—				(447	)
Increase in fair value of private equity investments			(4,946	)			—
Impairment of private equity investment			—				1,068
Gain on redemption of Visa shares			(38,542	)			—
Decrease in liability for Visa litigation			(17,430	)			—
Share-based compensation			3,653				7,339
Excess tax benefit from share-based payment arrangements			(230	)			(4,629	)
Impairment of developed software			—				620
Other, net			2,535				28,336
Net cash provided by operating activities			204,111				124,851
Investing activities:
Net decrease (increase) in interest earning deposits with banks			8,510				(16,197	)
Net increase in federal funds sold and securities purchased under resale agreements			(25,769	)			(89,423	)
Proceeds from maturities and principal collections of investment securities available for sale			413,453				217,908
Proceeds from sales of investment securities available for sale			—				7,010
Purchases of investment securities available for sale			(444,454	)			(390,631	)
Net increase in loans			(770,029	)			(569,493	)
Purchases of premises and equipment			(33,410	)			(40,989	)
Proceeds from disposals of premises and equipment			865				110
Net proceeds from redemption of Visa shares			38,542				—
Additions to other intangible assets			—				7,018
Contract acquisition costs			—				(7,144	)
Additions to licensed computer software from vendors			—				(3,884	)
Additions to internally developed computer software			—				(3,039	)
Net cash used by investing activities			(812,292	)			(888,754	)
Financing activities:
Net increase in demand and savings deposits			472,321				402,115
Net increase in certificates of deposit			231,050				145,816
Net decrease in federal funds purchased and other securities sold under repurchase agreements			(211,303	)			(12,279	)
Principal repayments on long-term debt			(66,432	)			(104,313	)
Proceeds from issuance of long-term debt			155,800				307,805
Excess tax benefit from share-based payment arrangements			230				4,629
Dividends paid to shareholders			(67,626	)			(63,476	)
Proceeds from issuance of common stock			1,198				23,118
Net cash provided by financing activities			515,238				703,415
Effect of exchange rate changes on cash and cash equivalent balances held in foreign currencies			—				(571	)
Decrease in cash and due from banks			(92,943	)			(61,059	)
Cash and due from banks at beginning of period			682,583				889,975
Cash and due from banks at end of period		$	589,640				828,916

See accompanying notes to consolidated financial statements.

SYNOVUS FINANCIAL CORP.

Note 1 — Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles. All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods covered by this report have been included. The accompanying unaudited consolidated financial statements should be read in conjunction with the Synovus Financial Corp. (Synovus) consolidated financial statements and related notes appearing in the 2007 Annual Report previously filed on Form 10-K.

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the respective balance sheets and the reported amounts of revenues and expenses for the periods presented. Actual results could differ significantly from those estimates.

Certain prior year amounts have been reclassified to conform to the presentation adopted in 2008.

Note 2 — Supplemental Cash Flow Information

For the three months ended March 31, 2008 and 2007, Synovus paid income taxes (net of refunds received) of $96 thousand and $53.6 million, respectively. The amount for the three months ended March 31, 2008 is impacted by tax overpayment credits from 2007 that were applied towards the 2008 income tax liability. For the three months ended March 31, 2008 and 2007, Synovus paid interest of $218.8 million and $256.2 million, respectively.

Non-cash investing activities consisted of loans of approximately $45.0 million and $7.8 million, which were foreclosed and transferred to other real estate during the three months ended March 31, 2008 and 2007, respectively, and impaired loans of approximately $42.3 million which were transferred to impaired loans held for sale during the three months ended March 31, 2008.

Note 3 — Comprehensive Income

Other comprehensive income (loss) consists of the change in net unrealized gains (losses) on cash flow hedges, the change in net unrealized gains (losses) on investment securities available for sale, gains (losses) on foreign currency translation, and the change in accumulated other comprehensive income related to post-retirement healthcare plans. Comprehensive income consists of net income plus other comprehensive income (loss).

Comprehensive income for the three months ended March 31, 2008 and 2007 is presented below:

		Three Months Ended
		March 31,
(in thousands)		2008				2007
Net income		$	80,994				146,753
Other comprehensive income, net of tax:
Change in net unrealized gains (losses) on cash flow hedges			12,301				1,511
Change in net unrealized gains (losses) on investment securities available for sale, net of reclassification adjustment			48,290				7,694
Gains on foreign currency translation			—				(87	)
Change in accumulated OCI related to postretirement healthcare plans			46				—
Other comprehensive income			60,637				9,118
Comprehensive income		$	141,631				155,871

Note 4 — Impaired Loans Held for Sale

Loans or pools of loans are transferred to the impaired loans held for sale portfolio when the intent to hold the loans has changed due to portfolio management or risk mitigation strategies and when there is a plan to sell the loans within a reasonable period of time. The value of the loans or pools of loans is primarily determined by analyzing the underlying collateral of the loan and the external market prices of similar assets. At the time of transfer, if the fair value is less than the cost, the difference attributable to declines in credit quality is recorded as a charge-off against the allowance for loan losses. Decreases in fair value subsequent to the transfer are recognized as a component of non-interest expense. During the three months ended March 31, 2008, Synovus transferred loans totaling $63.3 million to the impaired loans held for sale portfolio. At the time of the transfer, Synovus recognized a $21.0 million charge-off on these loans, which resulted in a new cost basis of $42.3 million at March 31, 2008.

Note 5 — Fair Value Accounting — Adoption of SFAS Nos. 157 and 159

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard No. 157, “Fair Value Measurements” (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value under U.S Generally Accepted Accounting Principles (GAAP), and expands disclosures about fair value measurements. This statement does not introduce any new requirements mandating the use of fair value; rather, it unifies the meaning of fair value and adds additional fair value disclosures. The provisions of this statement are effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Effective January 1, 2008, Synovus adopted SFAS No. 157 for financial assets and liabilities. As permitted under FASB Staff Position No. FAS 157-2, Synovus has elected to defer the application of SFAS No. 157 to non-financial assets and liabilities until January 1, 2009.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS No. 159). SFAS No.159 permits entities to make an irrevocable election, at specified election dates, to measure eligible financial instruments and certain other instruments at fair value. As of January 1, 2008, Synovus has elected the fair value option (FVO) for mortgage loans held for sale and certain callable brokered certificates of deposit. Accordingly, a cumulative adjustment of $58 thousand ($91 thousand less $33 thousand of income taxes) was recorded as an increase to retained earnings.

The following is a description of the assets and liabilities for which fair value has been elected, including the specific reasons for electing fair value.

Mortgage Loans Held for Sale

Mortgage loans held for sale (“MLHFS”) have been previously accounted for on a lower of aggregate cost or fair value basis pursuant to SFAS No. 65, “Accounting for Certain Mortgage Banking Activities” (SFAS No. 65). For certain mortgage loan types, fair value hedge accounting was utilized by Synovus to hedge a given mortgage loan pool, and the underlying mortgage loan balances were adjusted for the change in fair value related to the hedged risk (fluctuation in market interest rates) in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended and interpreted (SFAS No. 133). For those certain mortgage loan types, Synovus is still able to achieve an effective economic hedge by being able to mark-to-market the underlying mortgage loan balances through the income statement, but has eliminated the operational time and expense needed to manage a hedge accounting program under SFAS No. 133. Previously under SFAS No. 65, Synovus was exposed, from an accounting perspective, only to the downside risk of market volatilities; however by electing FVO, Synovus may now also recognize the associated gains on the mortgage loan portfolio as favorable changes in the market occur.

Certain Callable Brokered Certificates of Deposit

Synovus has elected FVO for certain callable brokered certificates of deposit (“CDs”) to ease the operational burdens required to maintain hedge accounting for such instruments under the constructs of SFAS No. 133. Prior to the adoption of SFAS No. 159, Synovus was highly effective in hedging the risk related to changes in fair value, due to fluctuations in market interest rates, by engaging in various interest rate derivatives. However, SFAS No. 133 requires an elaborate documentation process for each hedging relationship and an extensive process related to assessing the effectiveness and measuring ineffectiveness related to such hedges. By electing FVO on these previously hedged callable brokered CDs, Synovus is still able to achieve an effective economic hedge by being able to mark-to-market the underlying CDs through the income statement, but has eliminated the operational time and expense needed to manage a hedge accounting program under SFAS No. 133.

The following table summarizes the impact of adopting the fair value option for these financial instruments as of January 1, 2008. Amounts shown represent the carrying value of the affected instruments before and after the changes in accounting resulting from the adoption of SFAS No. 159.

		Ending								Opening
		Balance				Cumulative				Balance
		Sheet				Effect				Sheet
		December				Adjustment				January 1,
(Dollars in thousands)		31, 2007				Gain, net				2008
Mortgage loans held for sale		$	153,437			$	91			$	153,528
Certain callable brokered CDs			293,841				—				293,841
Pre-tax cumulative effect of adoption of the fair value option							91
Deferred tax liability							(33	)
Cumulative effect of adoption of the fair value option (increase to retained earnings)						$	58

Determination of Fair Value

SFAS No. 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS No. 157 also establishes a fair value hierarchy for disclosure of fair value measurements based on significant inputs used to determine the fair value. The three levels of inputs are as follows:

Level 1		Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include corporate debt and equity securities, certain derivative contracts, as well as certain U.S. Treasury and U.S. Government-sponsored enterprise debt securities that are highly liquid and are actively traded in over-the-counter markets.
Level 2		Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain U.S. Government-sponsored enterprises and agency mortgage-backed debt securities, obligations of states and municipalities, certain callable brokered certificates of deposit, collateralized mortgage obligations, corporate debt securities, derivative contracts, and mortgage loans held-for-sale.
Level 3		Unobservable inputs that are supported by little if any market activity for the asset or liability. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category primarily includes Federal Home Loan Bank and Federal Reserve Bank stock, collateral-dependent impaired loans, and certain private equity investments.

Following is a description of the valuation methodologies used for the major categories of financial assets and liabilities measured at fair value.

Trading Account Assets/Liabilities and Investment Securities Available for Sale

Where quoted market prices are available in an active market, securities are valued via independent providers at the last traded price by obtaining feeds from a number of live data sources including active market makers and inter-dealer brokers. These securities are classified as Level 1 within the valuation hierarchy and include U.S. Treasury securities, obligations of U.S. Government-sponsored enterprises, and corporate debt and equity securities. If quoted market prices are not available, then fair values are estimated by the independent providers using bid prices and quoted prices of pools or tranches of securities with similar characteristics. These types of securities are classified as Level 2 within the valuation hierarchy and consist of collateralized mortgage obligations, mortgage-backed securities, debt securities of U.S. Government-sponsored enterprises and agencies, and state and municipal bonds. In both cases, Synovus has evaluated the valuation methodologies of these third party providers to determine whether such valuations are representative of an exit price in the Synovus’ principal markets. In certain cases where there is limited activity or less transparency around inputs to valuation, securities are classified as Level 3 within the valuation hierarchy. These Level 3 items are primarily Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock.

Mortgage Loans Held for Sale

Since quoted market prices are not available, fair value is derived from a hypothetical-securitization model used to project the “exit price” of the loan in securitization. The bid pricing convention is used for loan pricing for similar assets. The valuation model is based upon forward settlement of a pool of loans of identical coupon, maturity, product, and credit attributes. The inputs to the model are continuously updated with available market and historical data. As the loans are predominantly used as collateral for securitizations, the valuation model represents the highest and best use of the loans in Synovus’ principal market. Mortgage loans held for sale are classified within Level 2 of the valuation hierarchy.

Private Equity Investments

Private equity investments consist primarily of investments in venture capital funds. The valuation of these instruments requires significant management judgment due to the absence of quoted market prices, inherent lack of liquidity, and the long-term nature of such assets. Based on these factors, the ultimate realizable value of Level 3 private equity investments could differ significantly from the values reflected in the accompanying financial statements. Private equity investments are valued initially based upon transaction price. Thereafter, Synovus uses information provided by the fund managers in the initial determination of estimated fair value. Valuation factors such as recent or proposed purchase or sale of debt or equity of the issuer, pricing by other dealers in similar securities, size of position held, liquidity of the market and changes in economic conditions affecting the issuer are used in the final determination of estimated fair value. These private equity investments are classified as Level 3 within the valuation hierarchy.

Private equity investments may also include investments in publicly traded equity securities, which have restrictions on their sale, generally obtained through an initial public offering. Investments in the restricted publicly traded equity securities are recorded at fair value based on the quoted market value less adjustments for regulatory or contractual sales restrictions. Discounts for restrictions are determined based upon the length of the restriction period and the volatility of the equity security. Investments in restricted publicly traded equity securities are classified as Level 2 within the valuation hierarchy.

Derivative Assets and Liabilities

Equity derivatives are valued using quoted market prices and are classified as Level 1 within the valuation hierarchy. All other derivatives are valued using internally developed models. These derivatives include interest rate swaps, floors, caps, and collars. To-be-announced option contracts to purchase or sell mortgage-backed securities in the future and mandatory forward sales commitments are derivatives utilized by Synovus’ mortgage subsidiary, and are valued by obtaining prices directly from dealers in the form of quotes for identical options using a bid pricing convention with a spread between bid and offer quotations. All of these types of derivatives are classified as Level 2 within the valuation hierarchy. The mortgage subsidiary also utilizes mortgage commitments to fund derivatives, and they are valued based on the other mortgage derivatives mentioned above except there is a fall-out ratio for interest rate lock commitments that is an additional input which is Level 3. Therefore, this type of derivative instrument is classified as Level 3 within the valuation hierarchy. These amounts, however, are insignificant.

Certain Callable Brokered Certificates of Deposit

The fair value of certain callable brokered certificates of deposit is derived using several inputs in a valuation model that calculates the discounted cash flows based upon a yield curve. Once the yield curve is constructed, it is applied against the standard certificate of deposit terms that may include the principal balance, payment frequency, term to maturity, and interest accrual to arrive at the discounted cash flow based fair value. When valuing the call option, as applicable, implied volatility is obtained for a similarly dated interest rate swaption, and it is also entered in the model. These types of certificates of deposit are classified as Level 2 within the valuation hierarchy.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents all financial instruments measured at fair value on a recurring basis, including financial instruments for which Synovus has elected the fair value option as of March 31, 2008 according to the SFAS No. 157 valuation hierarchy:

		March 31, 2008
														Total
														Assets/Liabilities at
(in thousands)		Level 1				Level 2				Level 3				Fair Value
Assets
Trading account assets		$	4,168				30,562				—			$	34,730
Mortgage loans held for sale			—				141,598				—				141,598
Investment securities available for sale			5,233				3,642,098				132,546	(2)			3,779,877
Private equity investments			—				—				61,082				61,082
Derivative assets			8,055				182,627				—				190,682
Liabilities
Brokered certificates of deposit (1)		$	—				232,626				—			$	232,626
Trading account liabilities			—				5,034				—				5,034
Derivative liabilities			8,055				100,917				—				108,972

Changes in Fair Value — FVO Items

The following table presents the changes in fair value included in the consolidated statement of income for items which the fair value election was made. The table does not reflect the change in fair value attributable to the related economic hedges Synovus used to mitigate interest rate risk associated with the financial instruments. These changes in fair value were recorded as a component of mortgage banking income and other operating income, as appropriate, and substantially offset the change in fair value of the financial instruments referenced below.

		Three Months Ended March 31, 2008
										Total
		Mortgage				Other				Changes in
		Banking				Operating				Fair Value
(in thousands)		Income				Income				Recorded
Mortgage loans held for sale		$	50,000				—			$	50,000
Certain callable brokered CDs		$	—				(1,878	)		$	1,878

Changes in Level Three Fair Value Measurements

As noted above, Synovus uses significant unobservable inputs (Level 3) to fair-value certain assets and liabilities as of March 31, 2008. The table below includes a roll forward of the balance sheet amount for the three months ended March 31, 2008 (including the change in fair value), for financial instruments of a material nature that are classified by Synovus within Level 3 of the fair value hierarchy and are measured at fair value on a recurring basis.

		Investment
		Securities
		Available				Private Equity
(in thousands)		for Sale				Investments
Beginning balance January 1, 2008		$	126,715				55,581
Total gains or (losses) (realized/unrealized), net of minority interest:
Included in earnings			—				3,702
Included in other comprehensive income			(73	)			—
Purchases, sales, issuances, and settlements, net			5,904				1,799
Transfers in and/or out of Level 3			—				—
Ending balance March 31, 2008		$	132,546				61,082
The amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at March 31, 2008		$	(73	)			3,702

The table below summarizes gains and losses due to changes in fair value, including both realized and unrealized gains and losses, recorded in earnings or changes in net assets for material Level 3 assets and liabilities for the three months ended March 31, 2008.

		Three Months Ended March 31, 2008
		Investment
		Securities
		Available				Private Equity
(in thousands)		for Sale				Investments
Total change in earnings, net of minority interest		$	—				3,404
Change in unrealized gains or losses relating to assets and liabilities still held at March 31, 2008		$	(73	)			—

Assets Measured at Fair Value on a Non-recurring Basis

Loans under the scope of SFAS No. 114, “Accounting by Creditors for Impairment of a Loan” (SFAS No. 114), are evaluated for impairment using the present value of the expected future cash flows discounted at the loan’s effective interest rate, or as a practical expedient, a loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. The measurement of impaired loans using future cash flows discounted at the loan’s effective interest rate rather than the market rate of interest is not a fair value measurement and is therefore excluded from the requirements of SFAS No. 157. Impaired loans measured by applying the practical expedient in SFAS No. 114 are included in the requirements of SFAS No. 157.

Under the practical expedient, Synovus measures the fair value of collateral-dependent impaired loans based on the fair value of the collateral securing these loans. These measurements are classified as Level 3 within the valuation hierarchy. All impaired loans are secured by real estate. The fair value of these real estate properties is generally determined based upon appraisals performed by a certified or licensed appraiser using inputs such as absorption rates, capitalization rates, and comparables. Management also considers other factors or recent developments which could result in adjustments to the collateral value estimates indicated in the appraisals such as changes in absorption rates or market conditions from the time of valuation. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors identified above.

The fair value of collateral-dependent impaired loans (including impaired loans held for sale) totaled $433.6 million at March 31, 2008, compared to $264.9 million at December 31, 2007.

Note 6 — Derivative Instruments

Synovus accounts for its derivative financial instruments as either assets or liabilities on the balance sheet at fair value through adjustments to either the hedged items, accumulated other comprehensive income (loss), or current earnings, as appropriate. As part of its overall interest rate risk management activities, Synovus utilizes derivative instruments to manage its exposure to various types of interest rate risk. These derivative instruments consist of interest rate swaps, commitments to sell fixed-rate mortgage loans, and interest rate lock commitments made to prospective mortgage loan customers. Interest rate lock commitments represent derivative instruments since it is intended that such loans will be sold.

Synovus originates first lien residential mortgage loans for sale into the secondary market and generally does not hold the originated loans for investment purposes. Mortgage loans are either converted to securities or are sold to a third party servicing aggregator.

At March 31, 2008, Synovus had commitments to fund fixed-rate mortgage loans to customers in the amount of $141.8 million. The fair value of these commitments at March 31, 2008 resulted in an unrealized gain of $1.7 million, which was recorded as a component of mortgage banking income in the consolidated statements of income.

At March 31, 2008, outstanding commitments to sell fixed-rate mortgage loans amounted to approximately $276.3 million. Such commitments are entered into to reduce the exposure to market risk arising from potential changes in interest rates, which could affect the fair value of mortgage loans held for sale and outstanding commitments to originate residential mortgage loans for resale.

The commitments to sell mortgage loans are at fixed prices and are scheduled to settle at specified dates that generally do not exceed 90 days. The fair value of outstanding commitments to sell mortgage loans at March 31, 2008 resulted in an unrealized loss of $887 thousand, which was recorded as a component of mortgage banking income in the consolidated statements of income.

Synovus utilizes interest rate swaps to manage interest rate risks, primarily arising from its core banking activities. These interest rate swap transactions generally involve the exchange of fixed and floating rate interest rate payment obligations without the exchange of underlying principal amounts. Entering into interest rate derivatives potentially exposes Synovus to the risk of counterparties’ failure to fulfill their legal obligations including, but not limited to, potential amounts due or payable under each derivative contract. Notional principal amounts are often used to express the volume of these transactions, but the amounts potentially subject to credit risk are much smaller.

The receive fixed interest rate swap contracts at March 31, 2008 are being utilized to hedge $750 million in floating rate loans and $1.56 billion in fixed-rate liabilities. A summary of interest rate swap contracts and their terms at March 31, 2008 is shown below. In accordance with the provisions of SFAS No. 133, the fair value (net unrealized gains and losses) of these contracts has been recorded on the consolidated balance sheets.

						Weighted-Average																				Net
														Maturity												Unrealized
(Dollars in		Notional				Receive				Pay				In				Unrealized								Gains
thousands)		Amount				Rate				Rate(*)				Months				Gains				Losses				(Losses)
Receive fixed swaps:
Fair value hedges		$	1,557,500				4.87	%			2.75	%			28			$	32,377				(7	)			32,370
Cash flow hedges			750,000				8.08	%			5.25	%			31				51,153				—				51,153
Total		$	2,307,500				5.91	%			3.56	%			29			$	83,530				(7	)			83,523

Synovus designates hedges of floating rate loans as cash flow hedges. These swaps hedge against the variability of cash flows from specified pools of floating rate prime based loans. Synovus calculates effectiveness of the hedging relationship quarterly using regression analysis for all cash flow hedges entered into after March 31, 2007. The cumulative dollar offset method is used for all hedges entered into prior to that date. As of March 31, 2008, cumulative ineffectiveness for Synovus’ portfolio of cash flow hedges represented a gain of approximately $1.4 million. Ineffectiveness from cash flow hedges is recognized in the consolidated statements of income as a component of other operating income.

Synovus expects to reclassify from accumulated other comprehensive income (loss) approximately $14.2 million as net-of-tax income during the next twelve months, as the related payments for interest rate swaps and amortization of deferred gains (losses) are recorded.

Synovus designates hedges of fixed rate liabilities as fair value hedges. These swaps hedge against the change in fair market value of various fixed rate liabilities due to changes in the benchmark interest rate LIBOR. Synovus calculates effectiveness of the hedging relationships quarterly using regression analysis for all fair value hedges entered into after March 31, 2007.

As of March 31, 2008, cumulative ineffectiveness for Synovus’ portfolio of fair value hedges represented a gain of approximately $1.8 million. Ineffectiveness from fair value hedges is recognized in the consolidated statements of income as other operating income.

Synovus also enters into derivative financial instruments to meet the financing and interest rate risk management needs of its customers. Upon entering into these instruments to meet customer needs, Synovus enters into offsetting positions in order to minimize the risk to Synovus. These derivative financial instruments are recorded at fair value with any resulting gain or loss recorded in current period earnings. As of March 31, 2008, the notional amount of customer related interest rate derivative financial instruments, including both the customer position and the offsetting position, was $3.47 billion, an increase of $512.0 million compared to December 31, 2007.

Synovus also enters into derivative financial instruments to meet the equity risk management needs of its customers. Upon entering into these instruments to meet customer needs, Synovus enters into offsetting positions in order to minimize the risk to Synovus. These derivative financial instruments are recorded at fair value with any resulting gain or loss recorded in current period earnings. As of March 31, 2008, the notional amount of customer related equity derivative financial instruments, including both the customer position and the offsetting position, was $10.7 million.

Note 7 — Share-Based Compensation

General Description of Share-Based Compensation Plans

Synovus has various long-term incentive plans under which the Compensation Committee of the Board of Directors has the authority to grant share-based compensation to Synovus employees. At March 31, 2008, Synovus had a total of 19,944,889 shares of its authorized but unissued common stock reserved for future grants under the 2007 Omnibus Plan. The general terms of each of these plans are substantially the same, permitting the grant of share-based compensation including stock options, non-vested shares, restricted share units, and stock appreciation rights. These plans generally include vesting periods ranging from three to five years and contractual terms ranging from five to ten years. Stock options are granted at exercise prices which equal the fair market value of a share of common stock on the grant-date. Synovus historically issues new shares to satisfy share option exercises.

Share-Based Compensation Expense

Synovus’ share-based compensation costs are recorded as a component of salaries and other personnel expense in the consolidated statements of income. Share-based compensation expense is recognized for plan participants on a straight-line basis over the shorter of the vesting period or the period until reaching retirement eligibility. Share-based compensation expense from continuing operations recognized in income is presented below:

		Three Months Ended
		March 31,
(in thousands)		2008				2007
Share-based compensation expense:
Stock options		$	1,137				2,524
Non-vested shares			2,516				1,766
Total share-based compensation expense		$	3,653				4,290

Stock Option Awards

During the three months ended March 31, 2008, Synovus granted 3,042,911 options to purchase shares of Synovus common stock to certain key Synovus employees at a weighted-average exercise price of $13.18. At March 31, 2008, there were 31,643,702 options to purchase shares of Synovus common stock outstanding with a weighted-average exercise price of $10.86.

Non-Vested Shares and Restricted Share Units

During the three months ended March 31, 2008, Synovus awarded 94,709 restricted share units and 18,257 non-vested shares of non-transferable Synovus common stock to certain key employees and non-employee directors of Synovus. The weighted-average grant-date fair value of both the awarded stock and the stock units for the three months ended March 31, 2008 was $13.06. All holders of non-vested shares of Synovus common stock on December 31, 2007 received Total System Services, Inc. (TSYS) non-vested shares based on the distribution ratio applicable to all Synovus shares in connection with the spin-off of TSYS. At March 31, 2008, there were 1,011,183 non-vested Synovus shares and restricted share units outstanding and 433,470 non-vested shares of TSYS stock outstanding with a weighted-average grant-date fair value of $26.14.

In addition, 12,677 non-transferable non-vested shares of Synovus common stock and 6,135 non-vested shares of TSYS common stock were awarded to a key Synovus executive from a 2005 authorized grant of 63,386 shares under a performance vesting schedule during the three-month period ended March 31, 2008, with a grant-date fair value of $23.42.

Note 8 — Discontinued Operations

On December 31, 2007, Synovus completed the tax-free spin-off of its shares of TSYS common stock to Synovus shareholders. The distribution of approximately 80.6% of TSYS’ outstanding shares owned by Synovus was made to shareholders of record on December 18, 2007 (the “record date”). Each Synovus shareholder received 0.483921 of a share of TSYS common stock for each share of Synovus common stock held as of the record date. Synovus shareholders received cash in lieu of fractional shares for amounts of less than one share of TSYS common

stock. Pursuant to the agreement and plan of distribution, TSYS paid on a pro rata basis to its shareholders, including Synovus, a one-time cash dividend of $600 million or $3.0309 per TSYS share based on the number of TSYS shares outstanding as of the record date. Based on the number of TSYS shares owned by Synovus as of the record date, Synovus received $483.8 million in proceeds from this one-time cash dividend. The dividend was paid on December 31, 2007.

In accordance with the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” and SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” the historical consolidated results of operations of TSYS, as well as all costs associated with the spin-off of TSYS are now presented as a component of income from discontinued operations. The balance sheet for the periods ended March 31, 2008 and December 31, 2007 does not include assets and liabilities of TSYS.

The following amounts have been segregated from continuing operations and included in income from discontinued operations, net of income taxes and minority interest, in the consolidated statements of income:

		Three Months
		Ended
		March 31,
(In thousands)		2007
TSYS
TSYS revenues		$	436,606
TSYS income, net of minority interest and before taxes			81,237
Income tax expense			(34,891	)
Income from discontinued operations, net of income taxes		$	46,346

Cash flows of discontinued operations for the three months ended March 31, 2007 are presented below.

		Three Months
		Ended
		March 31,
(In thousands)		2007
Cash provided by operating activities		$	66,450
Cash used in investing activities			(31,772	)
Cash used in financing activities			(1,519	)
Effect of exchange rates on cash and cash equivalents			(571	)
Cash provided by discontinued operations		$	32,588

Note 9 — Goodwill and Other Intangible Assets

Goodwill at March 31, 2008 and December 31, 2007 was $519.1 million. An extended period of future significant deterioration in credit markets could impair Synovus’ goodwill in the future.

Intangible assets (excluding goodwill) net of accumulated amortization as of March 31, 2008 and December 31, 2007, respectively, are presented in the table below.

		March 31,				December 31,
(In thousands)		2008				2007
Other intangible assets:
Purchased trust revenues		$	2,292				2,362
Acquired customer contracts			2,246				2,407
Core deposit premiums			21,062				22,668
Other			556				570
Total carrying value		$	26,156				28,007

Note 10 — Income Taxes

Synovus files income tax returns in the U.S. Federal jurisdiction and various state jurisdictions, and is subject to examinations by these taxing authorities unless statutory examination periods lapse. Synovus’ U.S. Federal income tax return is filed on a consolidated basis. Most state income tax returns are filed on a separate entity basis. Synovus is no longer subject to U.S. Federal income tax examinations for years before 2004 and Synovus is no longer subject to income tax examinations from state and local tax authorities for years before 2001. There is currently no Federal tax examination in progress. However, certain state tax examinations are in progress by the relevant state tax authorities. Although Synovus is unable to determine the ultimate outcome of these examinations, Synovus believes that its liability for uncertain tax positions relating to these jurisdictions for such years is adequate.

During the three months ended March 31, 2008, Synovus increased its liability for uncertain income tax positions by a net amount of approximately $625 thousand (net of the Federal tax effect) including $27 thousand in interest and penalties. This net increase resulted from new information impacting the potential resolution of prior year’s uncertain tax positions which were partially reduced by expiring state audit period statutes and was recorded as an increase to state income tax expense in the quarter.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows ⁽¹⁾:

		Three Months				Three Months
		Ended				Ended
		March 31,				March 31,
(in thousands)		2008				2007
Beginning balance		$	7,074			$	9,057
Current activity:
Additions based on tax positions related to current year			171				285
Additions for tax positions of prior years			1,299				—
Reductions for tax positions of prior years			(337	)			(1,159	)
Settlements			—				—
Net, current activity			1,133				(874	)
Ending balance		$	8,207			$	8,183

Synovus recognizes accrued interest and penalties related to unrecognized income tax benefits as a component of income tax expense. Accrued interest and penalties on unrecognized tax benefits totaled $1.1 million and $1.2 million as of January 1, 2008 and March 31, 2008, respectively. The total amount of unrecognized income tax benefits as of January 1, 2008 and March 31, 2008 that, if recognized, would affect the effective tax rate is $5.4 million and $6.2 million (net of the Federal benefit on state tax issues), respectively, which includes interest and penalties of $745 thousand and $829 thousand.

The total liability for uncertain tax positions under FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” at March 31, 2008 is $6.2 million. Synovus is not able to reasonably estimate the amount by which the liability will increase or decrease over time; however, at this time, Synovus does not expect a significant payment related to these obligations within the next year. Synovus expects that approximately $447 thousand of uncertain tax positions will be either settled or resolved during the next twelve months.

Note 11 — Visa Initial Public Offering and Litigation Expense

Synovus is a member of the Visa USA network. Under Visa USA bylaws, Visa members are obligated to indemnify Visa USA and/or its parent company, Visa, Inc., for potential future settlement of, or judgments resulting from, certain litigation, which Visa refers to as the “covered litigation.” Synovus’ indemnification obligation is limited to its membership proportion of Visa USA. On November 7, 2007, Visa announced the settlement of its American Express litigation, and disclosed in its annual report to the U.S. Securities and Exchange commission (SEC) on Form 10-K for the year ended September 30, 2007 that Visa had accrued a contingent liability for the estimated settlement of its Discover litigation. During the second half of 2007, Synovus recognized a contingent liability in the amount of $36.8 million as an estimate for its membership proportion of the American Express settlement and the potential Discover settlement, as well as its membership proportion of the amount that Synovus estimates will be required for Visa to settle the remaining covered litigation.

Visa, Inc. completed an initial public offering (the Visa IPO) in March 2008. Visa used a portion of the proceeds from the IPO to establish a $3.0 billion escrow for settlement of covered litigation and used substantially all of the remaining portion to redeem class B and class C shares held by Visa issuing members. During the three months ended March 31, 2008, Synovus recognized a pre-tax gain of $38.5 million on redemption proceeds received from Visa, Inc. and reduced the $36.8 million litigation accrual recognized in the second half of 2007 by $17.4 million for its pro-rata share of the $3.0 billion escrow funded by Visa, Inc. The redemption of shares and reduction of the accrued liability following the Visa IPO resulted in a gain of $34.1 million, net of tax, or $0.10 per diluted share for the three months ended March 31, 2008.

Note 12 — Recently Adopted Accounting Pronouncements

In September 2006, the FASB’s Emerging Issues Task Force (EITF) reached a consensus on EITF Issue No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements” (EITF 06-4). EITF 06-4 requires an employer to recognize a liability for future benefits based on the substantive agreement with the employee. EITF 06-4 requires a company to use the guidance prescribed in SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions” and Accounting Principles Board Opinion No. 12, “Omnibus Opinion,” when entering into an endorsement split-dollar life insurance agreement and recognizing the liability. EITF 06-4 was effective for fiscal periods beginning after December 15, 2007. Synovus adopted the provisions of EITF 06-4 effective January 1, 2008 and recognized approximately $1.4 million, net of tax, as a cumulative effect adjustment to retained earnings.

In November 2006, the EITF reached a consensus on EITF Issue No. 06-10, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Collateral Assignment Split-Dollar Life Insurance Arrangements” (EITF 06-10). Under EITF 06-10, an employer should recognize a liability for the postretirement benefit related to a collateral assignment split-dollar life insurance arrangement. The recognition of an asset should be based on the nature and substance of the collateral, as well as the terms of the arrangement such as (1) future cash flows to which the employer is entitled and (2) employee’s obligation (and ability) to repay the employer. EITF 06-10 was effective for fiscal periods beginning after December 15, 2007. Synovus adopted the provisions of EITF 06-10 effective January 1, 2008. There was no impact to Synovus upon adoption of EITF 06-10.

In November 2006, the EITF reached a consensus on EITF Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards” (EITF 06-11). Employees may receive dividend payments (or the equivalent of) on vested and non-vested share-based payment awards. Under EITF 06-11, the Task Force concluded that a realized income tax benefit from dividends (or dividend equivalents) that are charged to retained earnings and are paid to employees for equity classified nonvested equity shares, nonvested equity share units, and outstanding equity share options should be recognized as an increase in additional paid-in capital. Once the award is settled, the Company should determine whether the cumulative tax deduction exceeded the cumulative compensation cost recognized on the income statement. If the total tax benefit exceeds the tax effect of the cumulative compensation cost, the excess would be an increase to additional paid-in capital. EITF 06-11 was effective for fiscal periods beginning after September 15, 2007. The impact of adoption of EITF 06-11 was not material to Synovus’ financial position, results of operations or cash flows.

In November 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 109, “Written Loan Commitments Recorded at Fair Value Through Earnings.” SAB 109 supercedes SAB 105, “Application of Accounting Principles to Loan Commitments.” SAB 109, consistent with SFAS No. 156, “Accounting for Servicing of Financial Assets,” and SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” requires that the expected net future cash flows related to the associated servicing of the loan should be included in the measurement of all written loan commitments that are accounted for at fair value through earnings. A separate and distinct servicing asset or liability is not recognized for accounting purposes until the servicing rights have been contractually separated from the underlying loan by sale or securitization of the loan with servicing retained. The provisions of this bulletin were effective for derivative loan commitments issued or modified in fiscal quarters beginning after December 15, 2007. The impact of adoption of SAB 109 was an increase in mortgage revenues of approximately $1.2 million for the three months ended March 31, 2008.

In December 2007, the SEC issued SAB 110, “Share-Based Payment.” SAB 110 allows eligible public companies to continue to use a simplified method for estimating the expected term of stock options if their own historical exercise data no longer provides a reasonable basis. Under SAB 107, “Share-Based Payment,” the simplified method was scheduled to expire for all grants made after December 31, 2007. The provisions of this bulletin were effective on January 1, 2008. Due to the spin-off of TSYS on December 31, 2007 and recent changes to the terms of stock option agreements, Synovus elected to continue using the simplified method for determining the expected term component for all share options granted during 2008.

ITEM 2 MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Executive Summary

The following financial review provides a discussion of Synovus’ financial condition, changes in financial condition, and results of operations.

Synovus is a financial services holding company, based in Columbus, Georgia, with approximately $34 billion in assets. Synovus provides integrated financial services including banking, financial management, insurance, mortgage, and leasing services through 37 wholly-owned subsidiary banks and other Synovus offices in Georgia, Alabama, South Carolina, Tennessee, and Florida. At March 31, 2008, our banks ranged in size from $110.8 million to $6.09 billion in total assets.

In terms of how we measure success in our business, the following are our key financial performance indicators:

		• Loan Growth		• Credit Quality
		• Core Deposit Growth		• Fee Income Growth
		• Net Interest Margin		• Expense Management

2008 Financial Performance Highlights

	•		Net income of $81.0 million, down 19.3%, for the three months ended March 31, 2008 as compared to income from continuing operations for the prior year (down 53.3% excluding the net gain from the Visa IPO).
	•		Diluted earnings per share (EPS): $0.24, down 19.9% from continuing operations for 2007 (down 53.6% excluding the net gain from the Visa IPO).
	•		Net interest margin: 3.71% for the three months ended March 31, 2008, compared to 4.05% for the three months ended March 31, 2007, and down 15 basis points from 3.86% for the three months ended December 31, 2007 (excluding the impact of credit costs, down 12 basis points on a sequential quarter basis).
	•		Loan growth: increase of 7.5% from March 31, 2007 and 9.4% annualized increase from December 31, 2007.
	•		Credit quality:

	•		Non-performing assets ratio of 2.49%, compared to 1.67% at December 31, 2007 and 0.68% at March 31, 2007.
	•		Past dues over 90 days and still accruing interest as a percentage of total loans of 0.16%, compared to 0.13% at December 31, 2007 and 0.11% at March 31, 2007.
	•		Total past dues over 30 days and still accruing interest as a percentage of total loans of 1.39% compared to 1.02% at December 31, 2007 and 0.60% at March 31, 2007.
	•		Net charge-off ratio of 0.95% for the three months ended March 31, 2008 compared to 0.91% for the three months ended

December 31, 2007, and 0.13% for the three months ended March 31, 2007.

	•		Core deposits (total deposits less brokered deposits): declined by 2.0% from March 31, 2007.
	•		Non-interest income: up 60.0% for the three months ended March 31, 2008 compared to the corresponding period in the prior year. (up 15.9% excluding the gain from the Visa IPO).
	•		Non-interest expense up 3.4% for the three months ended March 31, 2008, compared to the corresponding period in the prior year (up 12.3% excluding the reduction in the Visa litigation accrual).

Other highlights at Synovus include:

•

Visa, Inc. completed an initial public offering (the Visa IPO) in March 2008. Visa used a portion of the proceeds from the Visa IPO to establish a $3.0 billion escrow for settlement of covered litigation and used substantially all of the remaining portion to redeem class B and class C shares held by Visa issuing members. Synovus recognized a pre-tax gain of $38.5 million on redemption proceeds received from Visa, Inc. and reduced the $36.8 million litigation accrual recognized in the second half of 2007 by $17.4 million for its pro-rata share of the $3.0 billion escrow funded by Visa. Inc, The redemption proceeds and reduction of the Visa litigation accrual resulted in a gain of $34.1 million, net of tax, or $0.10 per diluted share. Synovus currently holds 1.4 million Visa class B shares which are subject to certain restrictions on sale.

Critical Accounting Policies

The accounting and financial reporting policies of Synovus conform to U.S. generally accepted accounting principles and to general practices within the banking industry. Synovus has identified certain of its accounting policies as “critical accounting policies.” In determining which accounting policies are critical in nature, Synovus has identified the policies that require significant judgment or involve complex estimates. The application of these policies has a significant impact on Synovus’ financial statements. Synovus’ financial results could differ significantly if different judgments or estimates are applied in the application of these policies.

Allowance for Loan Losses

Notes 1 and 6 to the consolidated financial statements in Synovus’ 2007 annual report contain a discussion of the allowance for loan losses. The allowance for loan losses at March 31, 2008 was $394.8 million.

The allowance for loan losses is determined based on an analysis which assesses the probable loss within the loan portfolio. The allowance for loan losses consists of two components: the allocated and unallocated allowances. Both components of the allowance are available to cover inherent losses in the portfolio. Significant judgments or estimates made in the determination of the allowance for loan losses consist of the risk ratings for loans in the commercial loan portfolio, the valuation of the collateral for loans that are classified as collateral-dependent impaired loans, and the loss factors.

Commercial Loans — Risk Ratings and Expected Loss Factors

Commercial loans are assigned a risk rating on a nine point scale. For commercial loans that are not considered impaired, the allocated allowance for loan losses is determined based upon the expected loss percentage factors that correspond to each risk rating.

The risk ratings are based on the borrowers’ credit risk profile, considering factors such as debt service history and capacity, inherent risk in the credit (e.g., based on industry type and source of repayment), and collateral position. Ratings 6 through 9 are modeled after the bank regulatory classifications of special mention, substandard, doubtful, and loss. Expected loss percentage factors are based on the probable loss including qualitative factors. The probable loss considers the probability of default, the loss given default, and certain qualitative factors as determined by loan category and risk rating. The probability of default and loss given default are based on industry data. Industry data will continue to be used until sufficient internal data becomes available. The qualitative factors consider credit concentrations, recent levels and trends in delinquencies and nonaccrual loans, and growth in the loan portfolio. The occurrence of certain events could result in changes to the expected loss factors. Accordingly, these expected loss factors are reviewed periodically and modified as necessary.

Each loan is assigned a risk rating during the approval process. This process begins with a rating recommendation from the loan officer responsible for originating the loan. The rating recommendation is subject to approvals from other members of management and/or loan committees depending on the size and type of credit. Ratings are re-evaluated at least every twelve months in connection with the loan review process at each bank. Additionally, an independent holding company credit review function evaluates each bank’s risk rating process at least every twelve to eighteen months.

Impaired Loans

Management considers a loan to be impaired when the ultimate collectibility of all amounts due according to the contractual terms of the loan agreement are in doubt. A majority of our impaired loans are collateral-dependent. The net carrying amount of collateral-dependent impaired loans is equal to the fair value of the collateral (less estimated costs to sell) not only at the date at which impairment is initially recognized, but also at each subsequent reporting period. Accordingly, our policy requires that we update the fair value of the collateral securing collateral-dependent impaired loans each calendar quarter. Impaired loans had a net carrying value of $391.3 million at March 31, 2008. These loans are secured by real estate, with the majority classified as collateral-dependent loans. The fair value of the real estate securing these loans is generally determined based upon appraisals performed by a certified or licensed appraiser. Management also considers other factors or recent developments which could result in adjustments to the collateral value estimates indicated in the appraisals.

Estimated losses on collateral-dependent impaired loans are typically charged-off. At March 31, 2008, $336.5 million or 65.3% of non-performing loans consisted of collateral-dependent impaired loans for which there is no allowance for loan losses as the estimated losses have been charged-off. These loans are recorded at the estimated fair value of the underlying collateral net of selling costs. However, if a collateral-dependent loan is placed on impaired status at or near the end of a calendar quarter, management records an allowance for loan losses based on the loan’s risk rating while an appraisal is being obtained. At March 31, 2008, Synovus had $54.8 million in collateral-dependent impaired loans with a recorded allocated allowance for loan losses of $13.1 million, or 23.9% of the principal balance. The estimated losses on these loans

will be recorded as a charge-off during the second quarter of 2008 after the receipt of a current appraisal or fair value estimate based on current market conditions, including absorption rates. Management does not expect a material difference between the current allocated allowance on these loans and the actual charge-off.

Retail Loans — Expected Loss Factors

The allocated allowance for loan losses for retail loans is generally determined by segregating the retail loan portfolio into pools of homogeneous loan categories. Expected loss factors applied to these pools are based on the probable loss including qualitative factors. The probable loss considers the probability of default, the loss given default, and certain qualitative factors as determined by loan category and risk rating. Through December 31, 2007, the probability of default loss factors were based on industry data. Beginning January 1, 2008, the probability of default loss factors are based on internal default experience because this was the first reporting period when sufficient internal default data became available. Synovus believes that this data provides a more accurate estimate of probability of default considering the lower inherent risk of the retail portfolio and lower than expected charge-offs. This change resulted in a reduction in the allocated allowance for loan losses for the retail portfolio of approximately $19 million during the three months ended March 31, 2008. The loss given default factors continue to be based on industry data because sufficient internal data is not yet available. The qualitative factors consider credit concentrations, recent levels and trends in delinquencies and nonaccrual loans, and growth in the loan portfolio. The occurrence of certain events could result in changes to the loss factors. Accordingly, these loss factors are reviewed periodically and modified as necessary.

Unallocated Component

The unallocated component of the allowance for loan losses is considered necessary to provide for certain environmental and economic factors that effect the probable loss inherent in the entire loan portfolio. Unallocated loss factors included in the determination of the unallocated allowance are economic factors, changes in the experience, ability, and depth of lending management and staff, and changes in lending policies and procedures, including underwriting standards. Certain macro- economic factors and changes in business conditions and developments could have a material impact on the collectibility of the overall portfolio. As an example, a rapidly rising interest rate environment could have a material impact on certain borrowers’ ability to pay. The unallocated component is meant to cover such risks.

Income Taxes

Note 17 to the consolidated financial statements in Synovus’ 2007 Annual Report contains a discussion of income taxes. The calculation of Synovus’ income tax provision is complex and requires the use of estimates and judgments in its determination. As part of Synovus’ overall business strategy, management must consider tax laws and regulations that apply to the specific facts and circumstances under consideration. This analysis includes the amount and timing of the realization of income tax liabilities or benefits. Management closely monitors tax developments on both the state and federal level in order to evaluate the effect they may have on Synovus’ overall tax position. At March 31, 2008, Synovus concluded that it did not need a valuation allowance for its deferred income tax assets and had a net accrual of $6.2 million for unrecognized tax benefits.

Asset Impairment

Goodwill

The net carrying value of goodwill was $519.1 million at March 31, 2008 and December 31, 2007.

Under SFAS No. 142 (SFAS No. 142), “Goodwill and Other Intangible Assets,” goodwill is required to be tested for impairment annually. The combination of the income approach utilizing the discounted cash flow (DCF) method and the market approach, utilizing readily available market valuation multiples, is used to estimate the fair value of the reporting unit.

Under the DCF method, the fair value of the reporting unit reflects the present value of the projected earnings that will be generated by each reporting unit after taking into account the revenues and expenses associated with the reporting unit, the relative risk that the cash flows will occur, the contribution of other assets, and an appropriate discount rate to reflect the value of invested capital. Cash flows are estimated for future periods based on historical data and projections provided by management. If the actual cash flows are not consistent with Synovus’ estimates, an impairment charge may result.

Under the market approach, the fair value of the reporting unit reflects the price at which similar companies are exchanged. The multiples utilized are the average price to tangible book value, and the average price to the previous twelve months’ earnings multiple.

An extended period of future significant deterioration in credit markets could impair Synovus’ goodwill.

Long-Lived Assets and Other Intangibles

Synovus reviews long-lived assets, such as property and equipment and other intangibles subject to amortization, including core deposit premiums and customer relationships, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the actual cash flows are not consistent with Synovus’ estimates, an impairment charge may result.

Discontinued Operations

Refer to Note 8 to the consolidated financial statements (unaudited) as of and for the three months ended March 31, 2008 for a discussion of discontinued operations.

Balance Sheet

During the first three months of 2008, total assets increased $741.4 million. The more significant increases consisted of loans, net of unearned income, up $618.9 million and investment securities available for sale up $112.9 million.

Providing the necessary funding for the balance sheet growth during the first three months of 2008, brokered deposits grew $688.5 million, Federal Home Loan Bank advances (a component of long-term debt) increased $89.4 million, and shareholders’ equity increased $89.2 million compared to the prior quarter.

Adoption of SFAS Nos. 157 and 159

SFAS No. 157 establishes a framework for measuring fair value in accordance with U.S. GAAP, clarifies the definition of fair value within that framework, and expands disclosures about the use of fair value measurements. SFAS No. 159 permits entities to make an irrevocable election, at specified election dates, to measure eligible financial instruments and certain other items at fair value. Fair value is used on a recurring basis for certain assets and liabilities in which fair value is the primary basis of accounting. Fair value is used on a non-recurring basis for collateral-dependent impaired loans. Examples of recurring use of fair value include trading account assets, mortgage loans held for sale, investment securities available for sale, private equity investments, derivative instruments, and trading account liabilities. The extent to which fair value is used on a recurring basis was expanded upon the adoption of SFAS No. 159 during the first quarter, effective on January 1, 2008. At March 31, 2008, approximately $4.64 billion, or 13.7%, of total assets were recorded at fair value, which includes items measured on a recurring and non-recurring basis.

Fair value is the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value determination in accordance with SFAS No. 157 requires that a number of significant judgments be made. The standard also establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Synovus has an established and well-documented process for determining fair values and fair value hierarchy classifications. Fair value is based upon quoted market prices, where available (Level 1). Where prices for identical assets and liabilities are not available, SFAS No. 157 requires that similar assets and liabilities are identified (Level 2). If observable market prices are unavailable or impracticable to obtain, or similar assets cannot be identified, then fair value is estimated using internally-developed valuation modeling techniques such as discounted cash flow analyses that primarily use as inputs market-based or independently sourced market parameters (Level 3). These modeling techniques incorporate assessments regarding assumptions that market participants would use in pricing the asset or the liability. The assessments with respect to assumptions that market participants would make are inherently difficult to determine and use of different assumptions could result in material changes to these fair value measurements.

The following table summarizes the assets accounted for at fair value on a recurring basis by level within the valuation hierarchy at March 31, 2008.

		March 31, 2008
										Investment
		Trading				Mortgage				securities
		account				loans held				available for				Private equity				Derivative
(dollars in millions)		assets				for sale				sale				investments				assets				Total
Level 1			12	%			—				—				—				4				—	%
Level 2			88				100				96				—				96				95
Level 3			—				—				4				100				—				5
Total			100	%			100	%			100	%			100	%			100	%			100	%
Total assets held at fair value on the balance sheet		$	34.7			$	141.6			$	3,779.9			$	61.1			$	190.7			$	4,208.0
Level 3 assets as a percentage of total assets measured at fair value																							4.60	%

The following table summarizes the liabilities accounted for at fair value on a recurring basis by level within the valuation hierarchy at March 31, 2008.

		March 31, 2008
		Brokered
		certificates of				Trading account				Derivative
(dollars in millions)		deposit				liabilities				liabilities				Total
Level 1			—	%			—				7				2	%
Level 2			100				100				93				98
Level 3			—				—				—				—
Total			100	%			100	%			100	%			100	%
Total liabilities held at fair value on the balance sheet		$	232.6			$	5.0			$	109.0			$	346.6
Level 3 liabilities as a percentage of total liabilities measured at fair value															—	%

In estimating the fair values for investment securities and most derivative financial instruments, independent, third-party market prices are the best evidence of exit price and where available, Synovus bases estimates on such prices. If such third-party market prices are not available on the exact securities that Synovus owns, fair values are based on the market prices of similar instruments, third-party broker quotes, or are estimated using industry-standard or proprietary models whose inputs may be unobservable. When market observable data is not available, the valuation of financial instruments becomes more subjective and involves substantial judgment. The need to use unobservable inputs generally results from the lack of market liquidity for certain types of loans and securities, which results in diminished observability of both actual trades and assumptions that would otherwise be available to value these instruments. When fair values are estimated based on internal models, relevant market indices that correlate to the underlying collateral are considered, along with assumptions such as interest rates, prepayment speeds, default rates, and discount rates.

The valuation for MLHFS is based upon forward settlement of a pool of loans of identical coupon, maturity, product, and credit attributes. The model is continuously updated with available market and historical data. The valuation methodology of nonpublic private equity investments requires significant management judgment due to the absence of quoted market prices, inherent lack of liquidity, and the long-term nature of such assets. Private equity investments are valued initially based upon transaction price. Thereafter, Synovus uses information provided by the fund managers in the initial determination of estimated fair value. Valuation factors such as recent or proposed purchase or sale of debt or equity of the issuer, pricing by other dealers in similar securities, size of position held, liquidity of the market and changes in economic conditions affecting the issuer are used in the final determination of estimated fair value.

Valuation methodologies are reviewed each quarter to ensure that fair value estimates are appropriate. Any changes to the valuation methodologies are reviewed by management to confirm the changes are justified. As markets and products develop and the pricing for certain products becomes more or less transparent, Synovus continues to refine its valuation methodologies. For a detailed discussion of valuation methodologies, refer to Note 5 to the consolidated financial statements (unaudited) as of and for the three months ended March 31, 2008.

Trading Account Assets

The trading account assets portfolio is substantially comprised of mortgage-backed securities which are bought and held principally for sale and delivery to correspondent and retail customers of Synovus. Trading account assets are reported on the consolidated balance sheets at fair value, with unrealized gains and losses included in other operating income on the consolidated statements of income. Synovus recognized a net gain on trading account assets of $758 thousand for the three months ended March 31, 2008, compared to a net gain of $238 thousand for the same period in the prior year.

Loans

The following table compares the composition of the loan portfolio at March 31, 2008, December 31, 2007, and March 31, 2007.

										Total Loans
										March 31,								March 31,
										2008 vs.								2008 vs.
		Total Loans								Dec. 31,								March 31,
(Dollars in thousands)		March 31,				Dec. 31,				2007				March 31,				2007
Loan Type		2008				2007				% change(1)				2007				% change
Multi-family		$	505,828			$	452,163				47.7	%		$	519,219				(2.6	)%
Hotels			707,916				614,979				60.8				661,985				6.9
Office buildings			983,935				953,093				13.0				852,973				15.4
Shopping centers			890,651				834,025				27.3				742,344				20.0
Commercial development			891,681				961,271				(29.1	)			866,921				2.9
Other investment property			835,686				714,296				68.4				563,993				48.2
Total Investment Properties			4,815,697				4,529,827				25.4				4,207,435				14.5
1-4 family construction			2,153,555				2,238,925				(15.3	)			2,404,235				(10.4	)
1-4 family perm /mini-perm			1,310,397				1,273,843				11.5				1,145,235				14.4
Residential development			2,314,776				2,311,459				0.6				2,178,573				6.3
Total 1-4 Family Properties			5,778,728				5,824,227				(3.1	)			5,728,043				0.9
Land Acquisition			1,545,146				1,545,933				(0.2	)			1,516,526				1.9
Total Commercial Real Estate			12,139,571				11,899,987				8.1				11,452,004				6.0
Commercial, financial, and agricultural			6,657,591				6,420,689				14.8				6,052,487				10.0
Owner-occupied			4,315,945				4,226,707				8.5				4,090,859				5.5
Total Commercial and Industrial			10,973,536				10,647,396				12.3				10,143,346				8.2
Home equity			1,584,299				1,543,701				10.6				1,401,898				13.0
Consumer mortgages			1,663,132				1,667,924				(1.2	)			1,518,168				9.5
Credit card			297,099				291,149				8.2				273,462				8.6
Other retail loans			503,943				494,591				7.6				483,412				4.2
Total Retail			4,048,473				3,997,365				5.1				3,676,940				10.1
Unearned Income			(44,070	)			(46,163	)			(18.2	)			(48,609	)			(9.3	)
Total		$	27,117,510			$	26,498,585				9.4	%		$	25,223,681				7.5	%