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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

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		July 31, 2008
Common Stock, $1.00 Par Value		330,148,536 shares

 

 

SYNOVUS FINANCIAL CORP.

INDEX

Part I. Financial Information:
Item 1. Unaudited Financial Statements
Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007			3
Consolidated Statements of Income for the Six and Three Months Ended June 30, 2008 and 2007			4
Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income for the Six Months Ended June 30, 2008 and 2007			5
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2008 and 2007			6
Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3. Quantitative and Qualitative Disclosures About Market Risk			52
Item 4. Controls and Procedures			53
Part II. Other Information:
Item 1. Legal Proceedings			54
Item 1A. Risk Factors			56
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			58
Item 4. Submission of Matters to a Vote of Security Holders			59
Item 6. Exhibits			60
Signatures			61
Index to Exhibits			62
EX-10.1 FORM OF CHANGE OF CONTROL AGREEMENT
EX-10.2 AMENDED AND RESTATED SYNOVUS FINANCIAL DIRECTOR DEFERRED COMPENSATION PLAN
EX-10.3 SECOND AMENDED AND RESTATED DEFERRED COMPENSATION PLAN
EX-31.1 SECTION 302 CERTIFICATION OF CEO
EX-31.2 SECTION 302 CERTIFICATION OF CFO
EX-32 SECTION 906 CERTIFICATION OF CEO AND CFO

PART I. FINANCIAL INFORMATION

SYNOVUS FINANCIAL CORP.

		June 30,				December 31,
(In thousands, except share data)		2008				2007
ASSETS
Cash and due from banks		$	674,834				682,583
Interest earning deposits with banks			17,337				10,950
Federal funds sold and securities purchased under resale agreements			152,177				76,086
Trading account assets			20,204				17,803
Mortgage loans held for sale, at fair value			185,245				153,437
Impaired loans held for sale			6,365				—
Investment securities available for sale			3,814,384				3,666,974
Loans, net of unearned income			27,445,891				26,498,585
Allowance for loan losses			(417,813	)			(367,613	)
Loans, net			27,028,078				26,130,972
Premises and equipment, net			581,352				547,437
Goodwill			492,138				519,138
Other intangible assets, net			24,860				28,007
Other assets			1,230,327				1,185,065
Total assets		$	34,227,301				33,018,452
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Non-interest bearing retail and commercial deposits		$	3,553,342				3,472,423
Interest bearing retail and commercial deposits			17,887,708				17,734,851
Total retail and commercial deposits			21,441,050				21,207,274
Brokered deposits ($90,722 and $293,842 at fair value as of June 30, 2008 and December 31, 2007)			4,587,302				3,752,542
Total deposits			26,028,352				24,959,816
Federal funds purchased and securities sold under repurchase agreements			2,287,910				2,319,412
Long-term debt			2,121,625				1,890,235
Other liabilities			336,731				407,399
Total liabilities			30,774,618				29,576,862
Minority interest in consolidated subsidiaries			24,092				—
Shareholders’ equity:
Common stock — $1.00 par value. Authorized 600,000,000 shares; issued 335,825,867 in 2008 and 335,529,482 in 2007; outstanding 330,153,646 in 2008 and 329,867,944 in 2007			335,826				335,529
Additional paid-in capital			1,110,635				1,101,209
Treasury stock, at cost - 5,672,221 shares in 2008 and 5,661,538 shares in 2007			(114,075	)			(113,944	)
Accumulated other comprehensive income			30,190				31,439
Retained earnings			2,066,015				2,087,357
Total shareholders’ equity			3,428,591				3,441,590
Total liabilities and shareholders’ equity		$	34,227,301				33,018,452

See accompanying notes to consolidated financial statements.

SYNOVUS FINANCIAL CORP.

		Six Months Ended								Three Months Ended
		June 30,								June 30,
(In thousands, except per share data)		2008				2007				2008				2007
Interest income:
Loans, including fees		$	863,959				1,018,364				408,653				516,307
Investment securities available for sale			91,042				83,373				45,886				42,920
Trading account assets			1,022				1,877				388				970
Mortgage loans held for sale			3,997				4,959				2,301				2,522
Federal funds sold and securities purchased under resale agreements			1,875				2,850				855				1,372
Interest earning deposits with banks			125				968				57				401
Total interest income			962,020				1,112,391				458,140				564,492
Interest expense:
Deposits			342,726				460,334				155,546				234,268
Federal funds purchased and securities sold under repurchase agreements			29,480				42,198				11,650				21,619
Long-term debt			37,744				38,435				17,523				20,130
Total interest expense			409,950				540,967				184,719				276,017
Net interest income			552,070				571,424				273,421				288,475
Provision for losses on loans			184,665				40,797				93,616				20,281
Net interest income after provision for losses on loans			367,405				530,627				179,805				268,194
Non-interest income:
Service charges on deposit accounts			54,461				54,420				26,070				28,050
Fiduciary and asset management fees			25,519				25,129				12,898				12,657
Brokerage and investment banking income			17,693				15,259				9,206				7,809
Mortgage banking income			13,847				14,920				5,686				7,695
Bankcard fees			26,417				23,447				14,198				11,567
Net gains on sales of available for sale investment securities			—				705				—				258
Other fee income			21,266				19,838				10,081				10,411
Proceeds from sale of MasterCard shares			16,186				—				16,186				—
Proceeds from redemption of Visa shares			38,542				—				—				—
Other operating income			33,744				30,116				13,373				17,883
Total non-interest income			247,675				183,834				107,698				96,330
Non-interest expense:
Salaries and other personnel expense			232,614				229,749				110,483				115,822
Net occupancy and equipment expense			61,340				54,860				31,130				27,572
FDIC insurance and other regulatory fees			12,250				4,698				6,172				2,315
Impaired loans held for sale and other real estate			31,502				1,150				23,621				577
Goodwill impairment			27,000				—				27,000				—
Professional fees			16,697				10,245				11,756				4,743
Visa litigation expense			(17,430	)			—				—				—
Other operating expenses			103,365				91,755				55,802				46,631
Total non-interest expense			467,338				392,457				265,964				197,660
Minority interest in consolidated subsidiaries			1,697				—				138				—
Income from continuing operations before income taxes			146,045				322,004				21,401				166,864
Income tax expense			52,952				115,789				9,302				61,055
Income from continuing operations			93,093				206,215				12,099				105,809
Income from discontinued operations, net of income taxes and minority interest			—				103,287				—				56,941
Net income		$	93,093				309,502				12,099				162,750
Net income per share:
Basic
Income from continuing operations		$	0.28				0.63				0.04				0.32
Net income			0.28				0.95				0.04				0.50
Diluted
Income from continuing operations		$	0.28				0.63				0.04				0.32
Net income			0.28				0.94				0.04				0.49
Weighted average shares outstanding:
Basic			329,071				326,051				329,173				326,410
Diluted			331,568				329,920				331,418				330,263

See accompanying notes to consolidated financial statements.

SYNOVUS FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME
(unaudited)

																		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																							309,502				309,502
Other comprehensive income (loss), net of tax:
Net unrealized gain on cash flow hedges																			(2,917	)							(2,917	)
Change in unrealized gains (losses) on investment securities available for sale, net of reclassification adjustment																			(18,047	)							(18,047	)
Gain on foreign currency translation																			2,164								2,164
Other comprehensive loss																			(18,800	)							(18,800	)
Comprehensive income																											290,702
Cash dividends declared — $0.41 per share																							(134,124	)			(134,124	)
Issuance of non-vested stock			52				52				(52	)															—
Share-based compensation expense											11,126																11,126
Stock options exercised			1,750				1,750				31,800																33,550
Share-based tax benefit											7,741																7,741
Ownership change at majority-owned subsidiary											5,793																5,793
Issuance of common stock for acquisition			62				62				2,054																2,116
Balance at June 30, 2007			333,078			$	333,078				1,091,517				(113,944	)			(20,929	)			2,635,602				3,925,324
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																							(2,248	)			(2,248	)
Cumulative effect of adoption of SFAS No. 159																							58				58
Net Income																							93,093				93,093
Other comprehensive income (loss), net of tax:
Net unrealized gain on cash flow hedges																			475								475
Change in unrealized losses on investment securities available for sale, net of reclassification adjustment																			(1,816	)							(1,816	)
Amortization of post-retirement unfunded health benefit, net of tax																			92								92
Other comprehensive loss																			(1,249	)							(1,249	)
Comprehensive income																											91,844
Cash dividends declared — $0.34 per share																							(112,245	)			(112,245	)
Treasury shares purchased															(131	)											(131	)
Issuance of non-vested stock, net			(10	)			(10	)			10																—
Share-based compensation expense											7,675																7,675
Stock options exercised			307				307				1,342																1,649
Share-based tax benefit											399																399
Balance at June 30, 2008			335,826			$	335,826				1,110,635				(114,075	)			30,190				2,066,015				3,428,591

See accompanying notes to consolidated financial statements

CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

		Six Months Ended
		June 30,
(In thousands)		2008				2007
Operating activities:
Net income		$	93,093				309,502
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for losses on loans			184,665				40,797
Depreciation, amortization and accretion, net			27,715				89,405
Goodwill impairment			27,000				—
Equity in income of equity method investments			(1,412	)			(3,237	)
Deferred tax expense			1,125				(15,343	)
Decrease (increase) in interest receivable			59,348				(9,479	)
Decrease in interest payable			(33,283	)			(1,278	)
Minority interest in subsidiaries’ net income			1,697				24,465
Increase in trading account assets			(2,401	)			(55,360	)
Originations of mortgage loans held for sale			(625,996	)			(808,759	)
Proceeds from sales of mortgage loans held for sale			597,445				798,826
Gain on sale of mortgage loans held for sale			(5,831	)			(6,243	)
Loss on sale of impaired loans held for sale			10,126				—
Decrease (increase) in prepaid and other assets			71,989				(45,109	)
Decrease in accrued salaries and benefits			(20,676	)			(77,628	)
Increase (decrease) in other liabilities			35,846				(20,980	)
Net gains on sales of available for sale investment securities			—				(705	)
Increase in fair value of private equity investments			(4,946	)			(4,245	)
Gain from transfer of mutual funds			—				(6,885	)
Gain on sale of MasterCard shares			(16,186	)			—
Proceeds from redemption of Visa shares			(38,542	)			—
Decrease in liability for Visa litigation			(17,430	)			—
Share-based compensation			7,732				15,143
Excess tax benefit from share-based payment arrangements			(357	)			(7,398	)
Impairment of developed software			—				620
Other, net			(2,534	)			17,929
Net cash provided by operating activities			348,187				234,038
Investing activities:
Net (increase) decrease in interest earning deposits with banks			(6,387	)			14,232
Net increase in federal funds sold and securities purchased under resale agreements			(76,091	)			(140,594	)
Proceeds from maturities and principal collections of investment securities available for sale			669,286				376,654
Proceeds from sales of investment securities available for sale			3,309				21,501
Purchases of investment securities available for sale			(817,795	)			(642,529	)
Proceeds from sale of impaired loans held for sale			20,613				—
Net increase in loans			(1,290,126	)			(934,359	)
Purchases of premises and equipment			(63,012	)			(76,095	)
Proceeds from disposals of premises and equipment			2,115				1,914
Net proceeds from transfer of mutual funds			—				7,958
Proceeds from sale of MasterCard shares			16,186				—
Proceeds from redemption of Visa shares			38,542				—
Additions to other intangible assets			—				(77	)
Contract acquisition costs			—				(9,542	)
Additions to licensed computer software from vendors			—				(8,866	)
Additions to internally developed computer software			—				(7,458	)
Net cash used by investing activities			(1,503,360	)			(1,397,261	)
Financing activities:
Net increase in demand and savings deposits			230,526				549,601
Net increase in certificates of deposit			838,010				153,838
Net (decrease) increase in federal funds purchased and other securities sold under repurchase agreements			(31,502	)			213,378
Principal repayments on long-term debt			(38,041	)			(201,845	)
Proceeds from issuance of long-term debt			270,300				529,313
Treasury shares purchased			(131	)			—
Excess tax benefit from share-based payment arrangements			357				7,398
Dividends paid to shareholders			(123,744	)			(130,482	)
Proceeds from issuance of common stock			1,649				33,550
Net cash provided by financing activities			1,147,424				1,154,751
Effect of exchange rate changes on cash and cash equivalent balances held in foreign currencies			—				841
Decrease in cash and due from banks			(7,749	)			(7,631	)
Cash and due from banks at beginning of period			682,583				889,975
Cash and due from banks at end of period		$	674,834				882,344

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. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses, the valuation of impaired loans held for sale, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans and the fair value of intangible assets, including goodwill.

A substantial portion of Synovus’ loans are secured by real estate in five southeastern states (Georgia, Alabama, Florida, South Carolina, and Tennessee). Accordingly, the ultimate collectibility of a substantial portion of Synovus’ loan portfolio is susceptible to changes in market conditions in these areas. Management believes that the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review Synovus’ allowance for loan losses. Such agencies may require Synovus to make changes to the allowance for loan losses based on their judgment about information available to them at the time of their examination.

Synovus conducted its annual assessment of goodwill for impairment during the three months ended June 30, 2008. Determining the fair value of Synovus’ reporting units requires management to make certain judgments and assumptions related to various items, including discount rates, future estimates of operating results, etc. Management believes that the estimates and assumptions used in the goodwill impairment analysis for its business units are reasonable; however, if actual results and market conditions differ from the assumptions or estimates used, the fair value of each reporting unit could be different in the future.

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

Note 2 — Supplemental Cash Flow Information

For the six months ended June 30, 2008 and 2007, Synovus paid income taxes (net of refunds received) of $56.4 million and $191.0 million, respectively. The amount for the six months ended June 30, 2008 is impacted by tax overpayment credits from 2007 that were applied towards the 2008 income tax liability. For the six months ended June 30, 2008 and 2007, Synovus paid interest of $372.9 million and $530.3 million, respectively.

Non-cash investing activities consisted of loans of approximately $171.3 million and $23.0 million, which were foreclosed and transferred to other real estate during the six months ended June 30, 2008 and 2007, respectively, and impaired loans of approximately $42.3 million which were transferred to impaired loans held for sale during the six months ended June 30, 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 amortization of the post-retirement unfunded health benefit. Comprehensive income consists of net income plus other comprehensive income (loss).

Comprehensive income (loss) for the six and three months ended June 30, 2008 and 2007 is presented below:

		Six Months Ended								Three Months Ended
		June 30,								June 30,
(in thousands)		2008				2007				2008				2007
Net income		$	93,093				309,502				12,099				162,750
Other comprehensive income (loss), net of tax:
Change in net unrealized gains (losses) on cash flow hedges			475				(2,917	)			(11,825	)			(4,428	)
Change in net unrealized gains (losses) on investment securities available for sale, net of reclassification adjustment			(1,816	)			(18,047	)			(50,107	)			(25,741	)
Gains on foreign currency translation			—				2,164				—				2,251
Amortization of postretirement unfunded health benefit, net of tax			92				—				46				—
Other comprehensive loss			(1,249	)			(18,800	)			(61,886	)			(27,918	)
Comprehensive income (loss)		$	91,844				290,702				(49,787	)			134,832

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 as well as losses from sale of these loans are recognized as a component of non-interest expense. During the three months ended March 31, 2008, Synovus transferred loans with a cost basis 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. The $21.0 million charge-off was estimated based on the estimated sales price of the portfolio through bulk sales. During the three months ended June 30, 2008, Synovus recognized a loss of $4.7 million from the sale of impaired loans held for sale and recognized additional write-downs of $5.4 million on the loans remaining in the portfolio. The $5.4 million write-down was based upon the estimated sales proceeds from a pending liquidation sale.

Note 5 — Other Real Estate

Other real estate, consisting of properties obtained through foreclosure or in satisfaction of loans, is reported at the lower of cost or fair value, determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources, adjusted for estimated selling costs. At the time of foreclosure, any excess of the loan balance over the fair value of the real estate held as collateral is treated as a charge against the allowance for loan losses. Gains or losses on sale and any subsequent adjustments to the value are recorded as a component of non-interest expense.

The carrying value of other real estate was $197.3 million and $101.5 million at June 30, 2008 and December 31, 2007, respectively. During the six and three months ended June 30, 2008, approximately $169.8 million of loans and $1.5 million of impaired loans held for sale were foreclosed and transferred to other real estate. The increased in other real estate is the result of negative migration in credit quality, the declining value of real estate in certain parts of Florida and the excess supply of residential real estate in the Atlanta area. During the six and three months ended June 30, 2008, Synovus recognized other real estate costs of $21.4 million and $13.5 million, respectively. These costs primarily relate to losses from the liquidation of other real estate through bulk sales and auctions as well as further write-downs due to declines in fair value subsequent to the date of foreclosure and, to a lesser degree, carrying costs associated with other real estate.

Note 6 — 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 extensive 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			293,842				—				293,842
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, 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 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, fair values are estimated by 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 debt 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 its third party valuation providers to determine whether such valuations are representative of an exit price in 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 sold in the secondary market and 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 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 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 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. The sale of To-be-announced (TBA) mortgage-backed securities for current month delivery or in the future and the purchase of option contracts of similar duration are derivatives utilized by Synovus’ mortgage subsidiary, and are valued by obtaining prices directly from dealers in the form of quotes for identical securities or 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 originates mortgage loans which are classified as derivatives prior to the loan closing when there is a lock commitment outstanding to a borrower to close a loan at a specific interest rate. These derivatives are valued based on the other mortgage derivatives mentioned above except there is fall-out ratios for interest rate lock commitments that have an additional input

which is considered 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 June 30, 2008 according to the SFAS No. 157 valuation hierarchy:

														Total
														Assets/Liabilities at
(in thousands)		Level 1				Level 2				Level 3				Fair Value
Assets
Trading account assets		$	780				19,424				—			$	20,204
Mortgage loans held for sale			—				185,245				—				185,245
Investment securities available for sale			5,730				3,673,742				134,912	(2)			3,814,384
Private equity investments			—				—				65,049				65,049
Derivative assets			6,914				102,261				—				109,175
Liabilities
Brokered certificates of deposit (1)		$	—				90,722				—			$	90,722
Trading account liabilities			—				10,611				—				10,611
Derivative liabilities			6,914				59,208				—				66,122

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 June 30, 2008												Six Months Ended June 30, 2008
										Total												Total
		Mortgage				Other				Changes in				Mortgage				Other				Changes in
		Banking				Operating				Fair Value				Banking				Operating				Fair Value
(in thousands)		Income				Income				Recorded				Income				Income				Recorded
Mortgage loans held for sale		$	(2,370	)			—			$	(2,370	)		$	(2,320	)			—			$	(2,320	)
Certain callable brokered CDs		$	—				988			$	(988	)		$	—				(1,262	)		$	1,262

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 June 30, 2008. The table below includes a roll forward of the balance sheet amount for the six months ended June 30, 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			—				3,577
Included in other comprehensive income			(126	)			—
Purchases, sales, issuances, and settlements, net			8,323				5,891
Transfers in and/or out of Level 3			—				—
Ending balance June 30, 2008		$	134,912				65,049
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 June 30, 2008		$	(126	)			3,577

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 June 30, 2008.

		Three Months Ended June 30,								Six Months Ended June 30,
		2008								2008
		Investment								Investment
		Securities								Securities
		Available for				Private Equity				Available for				Private Equity
(in thousands)		Sale				Investments				Sale				Investments
Total change in earnings, net of minority interest		$	—				(234	)		$	—				3,577
Change in unrealized losses to assets and liabilities still held at June 30, 2008		$	(53	)			—			$	(126	)			—

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 this real estate 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 $485.7 million at June 30, 2008, compared to $433.6 million at March 31, 2008, and $264.9 million at December 31, 2007.

Note 7 — 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 sold by Synovus for conversion to securities and the servicing is sold to a third party servicing aggregator, or the mortgage loans are sold as a whole loan to an investor either individually or in bulk.

At June 30, 2008, Synovus had commitments to fund primarily fixed-rate mortgage loans to customers in the amount of $72.0 million. The fair value of these commitments at June 30, 2008 resulted in an unrealized gain of $1.1 million, which was recorded as a component of mortgage banking income in the consolidated statements of income.

At June 30, 2008, outstanding commitments to sell primarily fixed-rate mortgage loans amounted to approximately $231.0 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 June 30, 2008 resulted in an unrealized gain of $877 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 June 30, 2008 are being utilized to hedge $850 million in floating rate loans and $1.38 billion in fixed-rate liabilities. A summary of interest rate swap contracts and their terms at June 30, 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
		Notional				Receive				Pay				In				Unrealized								Gains
(Dollars in thousands)		Amount				Rate				Rate(*)				Months				Gains				Losses				(Losses)
Receive fixed interest swaps:
Fair value hedges		$	1,377,500				4.08	%			2.64	%			29			$	13,276				(1,414	)			11,862
Cash flow hedges			850,000				7.86	%			5.00	%			30				31,440				(1,242	)			30,198
Total		$	2,227,500				5.52	%			3.54	%			30			$	44,716				(2,656	)			42,060

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 June 30, 2008, cumulative ineffectiveness for Synovus’ portfolio of cash flow hedges represented a gain of approximately $20 thousand. 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 $11.7 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 June 30, 2008, cumulative ineffectiveness for Synovus’ portfolio of fair value hedges represented a gain of approximately $1.3 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 June 30, 2008, the notional amount of customer related interest rate derivative financial instruments, including both the customer position and the offsetting position, was $3.76 billion, an increase of $799.3 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 June 30, 2008, the notional amount of customer related equity derivative financial instruments, including both the customer position and the offsetting position, was $10.7 million, unchanged from December 31, 2007.

Note 8 — 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 June 30, 2008, Synovus had a total of 19,872,818 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:

		Six Months Ended								Three Months Ended
		June 30,								June 30,
(In thousands)		2008				2007				2008				2007
Share-based compensation expense:
Stock options		$	2,360				5,084				1,223				2,559
Non-vested shares			5,399				3,463				2,883				1,697
Total share-based compensation expense		$	7,759				8,547				4,106				4,256

Stock Option Awards

Synovus granted 3,090,911 and 48,000 options to purchase shares of Synovus common stock to certain key Synovus employees during the six and three months ended June 30, 2008, at a weighted-average exercise price of $13.17 and $12.50, respectively. At June 30, 2008, there were 31,601,244 options to purchase shares of Synovus common stock outstanding with a weighted-average exercise price of $10.87.

Non-Vested Shares and Restricted Share Units

During the six and three months ended June 30, 2008, Synovus awarded 122,309 and 27,600, respectively, restricted share units and 24,391 and 6,134, respectively, 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 six months ended June 30, 2008 was $12.93.

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 June 30, 2008, there were 1,028,223 non-vested Synovus shares and restricted share units outstanding and 426,087 non-vested shares of TSYS stock outstanding with a combined weighted-average grant date fair value of $25.67.

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 six-month period ended June 30, 2008, with a grant date fair value of $23.42.

Note 9 — Discontinued Operations

TSYS Spin-off

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 June 30, 2008 and December 31, 2007 does not include assets and liabilities of TSYS.

Transfer of Mutual Funds

During the three months ended June 30, 2007, Synovus transferred its proprietary mutual funds (Synovus Funds) to a non-affiliated third party. As a result of the transfer, Synovus received gross proceeds of $7.96 million and incurred transaction related costs of $1.07 million, resulting in a pre-tax gain of $6.89 million or $4.20 million, after-tax. The net gain has been reported as discontinued operations on the accompanying consolidated statements of income. Financial results of the business associated with the Synovus Funds for 2007 have not been presented as discontinued operations as such amounts are inconsequential. This business did not have significant assets, liabilities, revenues, or expenses associated with it.

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:

		Six Months				Three Months
		Ended				Ended
(In thousands)		June 30, 2007				June 30, 2007
TSYS
TSYS revenues		$	903,155			$	466,546
TSYS income, net of minority interest and before taxes			169,946				88,707
Income tax expense			(70,496	)			(35,603	)
Income from discontinued operations related to TSYS, net of income taxes			99,450				53,104
Spin-off related expenses incurred by Synovus, net of income tax benefit			(363	)			(363	)
Gain on sale of mutual funds, net of income taxes			4,200				4,200
Income from discontinued operations, net of income taxes and minority interest		$	103,287			$	56,941

Cash flows of discontinued operations for the six months ended June 30, 2007 are presented below.

		Six Months
		Ended
(In thousands)		June 30, 2007
Cash provided by operating activities		$	119,506
Cash used in investing activities			(43,720	)
Cash used in financing activities			(13,556	)
Effect of exchange rates on cash and cash equivalents			841
Cash provided by discontinued operations		$	63,071

Note 10 — Goodwill and Other Intangible Assets

Under SFAS No. 142 (SFAS No. 142), “Goodwill and Other Intangible Assets,” goodwill is required to be tested for impairment annually, or more frequently if events or circumstances indicate that there may be impairment. The combination of the income approach utilizing the

discounted cash flow (DCF) method, the public company comparables approach, utilizing multiples of tangible book value, and the transaction approach, utilizing readily available market valuation multiples for closed transactions, is used to estimate the fair value of the reporting unit.

Impairment is tested at the reporting unit (sub-segment) level involving two steps. Step 1 compares the fair value of the reporting unit to its carrying value. If the fair value is greater than carrying value, there is no indication of impairment. Step 2 is performed when the fair value determined in Step 1 is less than the carrying value. Step 2 involves a process similar to business combination accounting where fair values are assigned to all assets, liabilities, and intangibles. The result of Step 2 is the implied fair value of goodwill. If the Step 2 implied value of goodwill is less than the recorded goodwill, an impairment charge is recorded for the difference. The total of all reporting unit fair values is compared for reasonableness to Synovus’ market capitalization plus a control premium.

Goodwill at June 30, 2008 and December 31, 2007 was $492.1 million and $519.1 million, respectively. During the three months ended June 30, 2008, Synovus conducted its annual goodwill impairment evaluation. As a result of this evaluation, Synovus recognized a goodwill impairment charge of $27.0 million (pre-tax and after-tax) on one of its reporting units. The charge has been recorded as a component of non-interest expense. The goodwill impairment charge was primarily related to a decrease in valuation based on market trading and transaction multiples.

The goodwill impairment charge is preliminary and is subject to the finalization of the Step 2 calculation; however, based on preliminary Step 2 results, Synovus does not expect a significant change in the impairment charge.

Intangible assets (excluding goodwill) net of accumulated amortization as of June 30, 2008 and December 31, 2007, respectively, are presented in the table below.

		June 30,				December 31,
(In thousands)		2008				2007
Other intangible assets:
Purchased trust revenues		$	2,222				2,362
Acquired customer contracts			2,098				2,407
Core deposit premiums			19,998				22,668
Other			542				570
Total carrying value		$	24,860				28,007

Note 11 — 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.

In connection with the spin-off of TSYS, Synovus entered into a tax sharing agreement with TSYS, which requires TSYS to indemnify Synovus from potential income tax liabilities that may

arise in future examinations as a result of TSYS’ inclusion in Synovus’ consolidated tax return filings for calendar years prior to 2008.

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

		Six Months				Three Months
		Ended				Ended
(in thousands)		June 30, 2008				June 30, 2008
Beginning balance		$	7,074			$	8,207
Current activity:
Additions based on tax positions related to current year			493				322
Additions for tax positions of prior years			1,299				—
Reductions for tax positions of prior years			(337	)			—
Settlements			—				—
Net, current activity			1,455				322
Ending balance		$	8,529			$	8,529

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 December 31, 2007 and June 30, 2008, respectively. The total amount of unrecognized income tax benefits as of December 31, 2007 and June 30, 2008 that, if recognized, would affect the effective tax rate is $5.4 million and $6.4 million (net of the Federal benefit on state tax issues), respectively, which includes interest and penalties of $745 thousand and $780 thousand.

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 $450 thousand of uncertain tax positions will be either settled or resolved during the next twelve months.

Note 12 — 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 six months ended June 30, 2008.

Note 13 — 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 $2.4 million 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). 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 No. 110, “Share-Based Payment,” (SAB 110) 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 No. 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

Forward-Looking Statements

Certain statements made or incorporated by reference in this document which are not statements of historical fact, including those under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this document, constitute forward-looking statements within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). Forward-looking statements include statements with respect to Synovus’ beliefs, plans, objectives, goals, targets, expectations, anticipations, assumptions, estimates, intentions and future performance and involve known and unknown risks, many of which are beyond Synovus’ control and which may cause the actual results, performance or achievements of Synovus or the commercial banking industry or economy generally, to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

All statements other than statements of historical fact are forward-looking statements. You can identify these forward-looking statements through Synovus’ use of words such as “believes,” “anticipates,” “expects,” “may,” “will,” “assumes,” “should,” “predicts,” “could,” “should,” “would,” “intends,” “targets,” “estimates,” “projects,” “plans,” “potential” and other similar words and expressions of the future or otherwise regarding the outlook for Synovus’ future business and financial performance and/or the performance of the commercial banking industry and economy generally. Forward-looking statements are based on the current beliefs and expectations of Synovus’ management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statements in this document. Many of these factors are beyond Synovus’ ability to control or predict. These factors include, but are not limited to: (1) competitive pressures arising from aggressive competition from other financial service providers; (2) deteriorating credit quality, particularly in residential construction and development loans, may result in increased delinquencies and credit losses, which will adversely impact us; (3) declining values of residential and commercial real estate may increase our credit losses and negatively affect our financial results; (4) the concentration of our nonperforming assets in certain geographic regions and with affiliated borrower groups; (5) inadequacy of our allowance for loan loss reserve, or the risk that the allowance may prove to be inadequate or may be negatively affected by credit risk exposures; (6) changes in the interest rate environment which expand or reduce interest margins, impact funding sources or adversely affect critical estimates, as applied, and fair value of assets; (7) slower than anticipated rates of growth in non-interest income; (8) changes in the cost and availability of funding due to changes in the deposit market and credit market, or the way in which Synovus is perceived in such markets, including a reduction in our debt ratings; (9) inability to access the capital markets on terms that are satisfactory; (10) the strength of the U.S. economy in general and the strength of the local economies in which operations are conducted may be different than expected; (11) the effects of and changes in trade, monetary and fiscal policies, and laws, including interest rate policies of the Federal Reserve Board; (12) inflation, interest rate, market and monetary fluctuations; (13) restrictions or limitations on access to funds from subsidiaries, thereby restricting our ability to make payments on our obligations or dividend payments; (14) the effect of changes in governmental policy, laws and regulations, including proposed and recently enacted changes in

the regulation of banks and financial institutions, or the interpretation or application thereof, including restrictions, limitations and/or penalties arising from banking, securities and insurance laws, regulations and examinations; (15) the costs and effects of litigation, investigations or similar matters, or adverse facts and developments related thereto, including, without limitation, the pending litigation with CompuCredit Corporation relating to CB&T’s Affinity Agreement with CompuCredit; (16) Synovus’ indemnification obligation in connection with the Visa covered litigation may be greater than expected; (17) the volatility of our stock price; and (18) other factors and other information contained in this document and in other reports and filings that Synovus makes with the Securities and Exchange Commission under the Exchange Act.

All written or oral forward-looking statements that are made by or are attributable to Synovus are expressly qualified by this cautionary notice. You should not place undue reliance on any forward-looking statements, since those statements speak only as of the date on which the statements are made. Synovus undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made to reflect the occurrence of new information or unanticipated events, except as may otherwise be required by law.

Executive Summary

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

Industry Overview

The first half of 2008 has been marked by challenging financial and credit markets, building on issues that began in the sub-prime mortgage market in the second half of 2007 and which led to declines in real estate and home values. Consumer confidence declined as rising costs fueled by unprecedented prices for crude oil have paralleled the downturns in housing and mortgage related financial services. The supply of housing has surged as new and existing home sales declined sharply and foreclosures reached record levels.

The Federal Reserve Bank (Federal Reserve) responded, lowering the federal funds rate by 200 basis points in the first quarter and another 25 basis points in the second quarter. Despite these rate cuts and other measures taken by the Federal Reserve to provide additional liquidity in financial markets, consumer confidence has remained weak.

The economic environment for the financial services industry as a whole has been affected in a variety of ways, as evidenced by heightened levels of credit losses, declining value of real property as collateral for loans, record levels of non-performing assets, charge-offs and foreclosures. While these factors have negatively influenced earning asset yields, the average cost of funds has risen in an intensely competitive market for deposits. As a result, financial institutions have experienced pressure on credit costs, loan yields, deposit and other borrowing costs, and capital.

About Our Business

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 35 wholly-owned subsidiary banks and other Synovus offices in Georgia, Alabama, South Carolina, Tennessee, and Florida. At June 30, 2008, our banks ranged in size from $113.1 million to $5.76 billion in total assets.

Our Key Financial Performance Indicators

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

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