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

(Exact name of registrant as specified in its charter)

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

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, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12B-2 of the Exchange Act.

Large Accelerated Filer þ       Accelerated Filer o       Non-Accelerated Filer 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		July 31, 2007
Common Stock, $1.00 Par Value		333,454,617 shares

 

 

SYNOVUS FINANCIAL CORP.

INDEX

Part I. Financial Information:
Item 1. Unaudited Financial Statements
Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006			3
Consolidated Statements of Income for the Six and Three Months Ended June 30, 2007 and 2006			4
Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income for the Six and Three Months Ended June 30, 2007 and 2006			5
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2006			6
Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3. Quantitative and Qualitative Disclosures About Market Risk			44
Item 4. Controls and Procedures			46
Part II. Other Information:
Item 1A. Risk Factors			47
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			47
Item 4. Submission of Matters to a Vote of Security Holders			48
Item 6. Exhibits			50
Signatures			51
Exhibit Index			52
EX-31.1 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
EX-31.2 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
EX-32 CERTIFICATION OF PERIODIC REPORT

PART I. FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

SYNOVUS FINANCIAL CORP.

		June 30,				December 31,
(In thousands, except share data)		2007				2006
ASSETS
Cash and due from banks		$	882,344				889,975
Interest earning deposits with banks			5,157				19,389
Federal funds sold and securities purchased under resale agreements			241,685				101,091
Trading account assets			70,626				15,266
Mortgage loans held for sale			190,587				175,042
Investment securities available for sale			3,558,813				3,352,357
Loans, net of unearned income			25,541,742				24,654,552
Allowance for loan losses			(331,130	)			(314,459	)
Loans, net			25,210,612				24,340,093
Premises and equipment, net			784,703				752,738
Contract acquisition costs and computer software, net			358,021				383,899
Goodwill			681,570				669,515
Other intangible assets, net			52,154				63,586
Other assets			1,184,534				1,091,822
Total assets		$	33,220,806				31,854,773
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Non-interest bearing retail and commercial deposits		$	3,595,117				3,538,598
Interest bearing retail and commercial deposits			18,126,823				17,741,354
Total retail and commercial deposits			21,721,940				21,279,952
Brokered time deposits			3,275,948				3,014,495
Total deposits			24,997,888				24,294,447
Federal funds purchased and other short-term liabilities			1,786,187				1,572,809
Long-term debt			1,673,124				1,350,139
Other liabilities			576,276				692,019
Total liabilities			29,033,475				27,909,414
Minority interest in consolidated subsidiaries			262,007				236,709
Shareholders’ equity:
Common stock — $1.00 par value. Authorized 600,000,000 shares; issued 333,078,474 in 2007 and 331,213,913 in 2006; outstanding 327,416,936 in 2007 and 325,552,375 in 2006			333,078				331,214
Additional paid-in capital			1,091,517				1,033,055
Treasury stock, at cost – 5,661,538 shares			(113,944	)			(113,944	)
Accumulated other comprehensive loss			(20,929	)			(2,129	)
Retained earnings			2,635,602				2,460,454
Total shareholders’ equity			3,925,324				3,708,650
Total liabilities and shareholders’ equity		$	33,220,806				31,854,773

SYNOVUS FINANCIAL CORP.

		Six Months Ended								Three Months Ended
		June 30,								June 30,
(In thousands, except per share data)		2007				2006				2007				2006
Interest income:
Loans, including fees		$	1,018,364				863,961				516,307				459,111
Investment securities available for sale			83,323				64,520				42,870				33,809
Trading account assets			1,877				1,384				970				685
Mortgage loans held for sale			4,959				4,274				2,522				2,340
Federal funds sold and securities purchased under resale agreements			2,850				2,946				1,372				1,705
Interest earning deposits with banks			969				121				401				63
Total interest income			1,112,342				937,206				564,442				497,713
Interest expense:
Deposits			453,825				312,171				231,088				171,757
Federal funds purchased and other short-term liabilities			41,760				37,162				21,187				21,065
Long-term debt			38,586				38,234				20,261				17,688
Total interest expense			534,171				387,567				272,536				210,510
Net interest income			578,171				549,639				291,906				287,203
Provision for losses on loans			40,797				38,083				20,281				18,534
Net interest income after provision for losses on loans			537,374				511,556				271,625				268,669
Non-interest income:
Electronic payment processing services			472,153				451,867				243,411				231,395
Merchant acquiring services			124,957				129,769				64,277				65,820
Other transaction processing services			107,970				89,947				54,847				45,001
Service charges on deposit accounts			54,421				54,988				28,050				28,800
Fiduciary and asset management fees			24,696				23,222				12,434				11,509
Brokerage and investment banking income			15,259				13,506				7,809				6,559
Mortgage banking income			14,920				13,978				7,695				8,105
Bankcard fees			23,447				21,647				11,567				11,093
Securities gains (losses), net			705				(1,136	)			258				(1,062	)
Other fee income			19,838				19,640				10,411				10,357
Other operating income			26,186				20,317				15,461				10,794
Non-interest income before reimbursable items			884,552				837,745				456,220				428,371
Reimbursable items			181,555				168,638				95,828				86,138
Total non-interest income			1,066,107				1,006,383				552,048				514,509
Non-interest expense:
Salaries and other personnel expense			516,721				461,605				261,768				233,847
Net occupancy and equipment expense			187,147				197,195				94,234				99,495
Other operating expenses			202,008				215,525				103,448				109,690
Non-interest expense before reimbursable items			905,876				874,325				459,450				443,032
Reimbursable items			181,555				168,638				95,828				86,138
Total non-interest expense			1,087,431				1,042,963				555,278				529,170
Minority interest in subsidiaries’ net income			24,465				20,905				13,187				11,165
Income from continuing operations before income taxes			491,585				454,071				255,208				242,843
Income tax expense			186,283				166,767				96,658				90,046
Income from continuing operations			305,302				287,304				158,550				152,797
Discontinued operations, net of income taxes			4,200				—				4,200				—
Net income		$	309,502				287,304				162,750				152,797
Net income per share:
Basic
Income from continuing operations		$	0.94				0.90				0.49				0.47
Net income			0.95				0.90				0.50				0.47
Diluted
Income from continuing operations		$	0.93				0.90				0.48				0.47
Net income			0.94				0.90				0.49				0.47
Weighted average shares outstanding:
Basic			326,051				318,236				326,410				322,783
Diluted			329,920				320,840				330,263				325,421

SYNOVUS FINANCIAL CORP.

																						Accum- ulated
																						Other
																						Compre-
																		Unearned				hensive
		Shares				Common				Additional				Treasury				Compen-				Income				Retained
(In thousands, except per share data)		Issued				Stock				Paid-In Capital				Stock				sation				(Loss)				Earnings				Total
Balance at December 31, 2005			318,301			$	318,301				686,447				(113,944	)			(3,126	)			(29,536	)			2,091,187				2,949,329
SAB No. 108 Adjustment to opening shareholders’ equity																							826				3,434				4,260
Net Income																											287,304				287,304
Other comprehensive income (loss), net of tax:
Net unrealized loss on cash flow hedges																							(1,054	)							(1,054	)
Change in unrealized losses on investment securities available for sale, net of reclassification adjustment																							(28,000	)							(28,000	)
Gain on foreign currency translation																							3,807								3,807
Other comprehensive loss																							(25,247	)							(25,247	)
Comprehensive income																															262,057
Cash dividends declared – $0.39 per share																											(124,258	)			(124,258	)
Reclassification of unearned compensation to additional paid-in capital upon adoption of SFAS No. 123(R)											(3,126	)							3,126												—
Issuance of non-vested stock			166				166				(166	)																			—
Share-based compensation expense											11,618																				11,618
Stock options exercised			1,787				1,787				31,507																				33,294
Share-based tax benefit											3,334																				3,334
Ownership change at majority-owned subsidiary											2,182																				2,182
Issuance of common stock for acquisition			8,843				8,843				227,060																				235,903
Balance at June 30, 2006			329,097				$ 329,097				958,856				(113,944	)			—				(53,957	)			2,257,667				3,377,719
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, net of tax:
Net unrealized loss on cash flow hedges																							(2,917	)							(2,917	)
Change in unrealized 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

SYNOVUS FINANCIAL CORP.

		Six Months Ended
		June 30,
(In thousands)		2007				2006
Cash flows from operating activities:
Net income		$	309,502				287,304
Income from discontinued operations, net of tax			(4,200	)			—
Income from continuing operations			305,302				287,304
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Provision for losses on loans			40,797				38,083
Depreciation, amortization and accretion, net			89,405				97,970
Increase in interest receivable			(9,479	)			(63,054	)
(Decrease) increase in interest payable			(1,278	)			25,311
Equity in income of unconsolidated subsidiaries			(3,237	)			(1,871	)
Minority interest in subsidiaries’ net income			24,465				20,905
Increase in trading account assets			(55,360	)			(19,617	)
Originations of mortgage loans held for sale			(808,759	)			(736,200	)
Proceeds from sales of mortgage loans held for sale			792,583				708,415
Increase in other assets			(45,109	)			(10,614	)
Decrease in other liabilities			(43,721	)			(8,614	)
Net (gains) losses on sales of available for sale investment securities			(705	)			1,136
Increase in fair value of private equity investments			(4,245	)			—
Impairment of computer software			620				—
Share-based compensation expense			15,143				13,334
Decrease in accrued salaries and employee benefits			(77,628	)			(63,362	)
Other, net			16,317				(298	)
Net cash provided by operating activities			235,111				288,828
Cash flows from investing activities:
Net cash received for acquisition			—				14,800
Net decrease (increase) in interest earning deposits with banks			14,232				(8,905	)
Net increase in federal funds sold and securities purchased under resale agreements			(140,594	)			(129,927	)
Proceeds from maturities and principal collections of investment securities available for sale			376,654				235,293
Proceeds from sales of investment securities available for sale			21,501				111,593
Purchases of investment securities available for sale			(642,529	)			(444,720	)
Net increase in loans			(934,359	)			(1,491,044	)
Purchases of premises and equipment			(76,095	)			(64,361	)
Proceeds from disposal of premises and equipment			1,914				348
Net proceeds from transfer of mutual funds			6,885				—
Additions to other intangible assets			(77	)			—
Increase in contract acquisition costs			(9,542	)			(22,339	)
Additions to licensed computer software from vendors			(8,866	)			(4,437	)
Additions to internally developed computer software			(7,458	)			(8,999	)
Net cash used by investing activities			(1,398,334	)			(1,812,698	)
Cash flows from financing activities:
Net increase in demand and savings deposits			549,601				449,389
Net increase in certificates of deposit			153,838				1,006,439
Net increase in federal funds purchased and other short-term liabilities			213,378				762,864
Principal repayments on long-term debt			(201,845	)			(570,679	)
Proceeds from issuance of long-term debt			529,313				23,500
Excess tax benefit from share-based payment arrangements			7,398				4,853
Dividends paid to shareholders			(130,482	)			(181,317	)
Proceeds from issuance of common stock			33,550				33,294
Net cash provided by financing activities			1,154,751				1,528,343
Effect of exchange rate changes on cash and cash equivalent balances held in foreign currencies			841				1,795
(Decrease) increase in cash and due from banks			(7,631	)			6,268
Cash and due from banks at beginning of period			889,975				880,886
Cash and due from banks at end of period		$	882,344				887,154

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 2006 Annual Report previously filed on Form 10-K. Certain prior year amounts have been reclassified to conform to the presentation adopted in 2007.

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.

Note 2 – Supplemental Cash Flow Information

For the six months ended June 30, 2007 and 2006, Synovus paid income taxes (net of refunds received) of $191.0 million and $190.4 million, respectively. For the six months ended June 30, 2007 and 2006, Synovus paid interest of $530.3 million and $362.8 million, respectively.

Non-cash investing activities consisted of loans of approximately $23.0 million and $19.9 million, which were foreclosed and transferred to other real estate during the six months ended June 30, 2007 and 2006, respectively.

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, and gains (losses) on foreign currency translation. Comprehensive income consists of net income plus other comprehensive income (loss).

Comprehensive income for the six and three months ended June 30, 2007 and 2006 is presented below:

		Six Months Ended										Three Months Ended
		June 30,										June 30,
(in thousands)		2007					2006					2007					2006
Net income		$	309,502					287,304					162,750					152,797
Other comprehensive loss, net of tax:
Change in net unrealized losses on cash flow hedges			(2,917	)				(3,771	)				(4,428	)				(2,744	)
Change in net unrealized gains/losses on investment securities available for sale, net of reclassification adjustment			(18,047	)				(25,283	)				(25,741	)				(12,321	)
Gains on foreign currency translation			2,164					3,807					2,251					3,472
Other comprehensive loss			(18,800	)				(25,247	)				(27,918	)				(11,593	)
Comprehensive income		$	290,702					262,057					134,832					141,204

Note 4 – 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. Mortgage 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 June 30, 2007, Synovus had commitments to fund fixed-rate mortgage loans to customers in the amount of $119.5 million. The fair value of these commitments at June 30, 2007 resulted in an unrealized loss of $611 thousand, which was recorded as a component of mortgage banking income in the consolidated statement of income.

At June 30, 2007, outstanding commitments to sell fixed-rate mortgage loans amounted to approximately $216.0 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, 2007 resulted in an unrealized gain of $982 thousand, which was recorded as a component of mortgage banking income in the consolidated statement 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 often are 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, 2007 are being utilized to hedge $800 million in floating rate loans and $2.38 billion in fixed-rate liabilities. A summary of interest rate swap contracts and their terms at June 30, 2007 is shown below:

							Weighted-Average																					Net
															Maturity													Unrealized
		Notional					Receive				Pay				In					Unrealized								Gains
(Dollars in thousands)		Amount					Rate				Rate(*)				Months					Gains				Losses				(Losses)
Receive fixed swaps:
Fair value hedges		$	2,382,500					5.03%				5.11%				25				$	24,330				(22,058	)			2,272
Cash flow hedges			800,000					8.03%				8.25%				37					995				(2,801	)			(1,806	)
Total		$	3,182,500					5.79%				5.90%				28				$	25,325				(24,859	)			466

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. Changes in the fair value of the cash flow hedges are recorded as a component of accumulated other comprehensive income (loss) within shareholders’ equity, net of the tax benefit or expense. 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 was used for all hedges entered into prior to that date. As of June 30, 2007, cumulative ineffectiveness for Synovus’ portfolio of cash flow hedges represented a gain of approximately $63 thousand. Ineffectiveness from cash flow hedges is recognized in the consolidated statements of income as other operating income.

Synovus expects to reclassify from accumulated other comprehensive income (loss) approximately $1.8 million as net-of-tax expense 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 LIBOR benchmark interest rate. Changes in the fair value of fair value hedges are recorded on the balance sheet as adjustments to the hedged fixed rate liabilities. Synovus calculates effectiveness of the hedging relationship quarterly using regression analysis for all fair value hedges entered into after March 31, 2007. The cumulative dollar offset method is used for all hedges entered into prior to those dates. As of June 30, 2007, cumulative ineffectiveness for Synovus’ portfolio of fair value hedges represented a gain of approximately $20 thousand. 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, 2007, the notional amount of customer related interest rate derivative financial instruments was $2.43 billion.

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, 2007, the notional amount of customer related equity derivative financial instruments was $19.8 million.

Note 5 – Share-Based Compensation

General Description of Share-Based Compensation Plans

Synovus’ long-term incentive plans authorize the Compensation Committee of the Board of Directors to grant share-based compensation to Synovus employees and non-employee directors. Synovus accounts for its share-based compensation arrangements in accordance with Statement of Financial Accounting Standards (SFAS) No. 123R, “Share-Based Payment.”

At December 31, 2006, Synovus had a total of 4.2 million shares of its authorized but unissued common stock reserved for future share-based grants under the Synovus Financial Corp. 2002 and 2000 Long-Term Incentive Plans (“2002 and 2000 Plans”). On February 15, 2007, the Board of Directors adopted the Synovus Financial Corp. 2007 Omnibus Plan (“2007 Plan”), subject to shareholder approval. The 2007 Plan was approved by shareholders on April 25, 2007. Due to the approval of the 2007 Plan, no further awards will be made under the 2002 and 2000 Plans. The aggregate number of shares of Synovus common stock which may be granted to participants pursuant to awards granted under the 2007 Plan may not exceed 18 million.

Share-Based Compensation Expense

Synovus’ share-based compensation expense is recorded as a component of salaries and other personnel expense in the consolidated statements of income. Share-based compensation expense recognized in income is presented below:

		Six Months Ended										Three Months Ended
		June 30,										June 30,
(In thousands)		2007					2006					2007					2006
Share-based compensation expense:
Stock options		$	8,427					11,347					4,244					4,773
Non-vested shares			6,716					1,987					3,560					1,114
Total share-based compensation expense		$	15,143					13,334					7,804					5,887

Stock Option Awards

During the six months ended June 30, 2007, Synovus granted 246,660 options to purchase shares of Synovus common stock to certain key Synovus employees at a weighted-average exercise price of $31.93. No options to purchase shares of Synovus common stock were issued during the three months ended June 30, 2007. Stock options granted in 2007 generally become exercisable over a three-year period, with one-third of the total grant amount vesting on each anniversary of the grant-date, and expire ten years from the date of grant. 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. At June 30, 2007, there were 21,588,878 options

to purchase shares of Synovus common stock outstanding with a weighted-average exercise price of $23.29.

The weighted-average grant-date fair value of stock options granted to key Synovus employees during the six months ended June 30, 2007 and 2006 was $7.22 and $6.40, respectively, and during the three months ended June 30, 2006 was $6.52. The fair value of the option grants during the six months ended June 30, 2007 was determined using the Black-Scholes-Merton option-pricing model with the following weighted-average assumptions: risk free interest rate of 4.78%, expected stock price volatility of 21.76%, dividend yield of 2.6% and an expected life of 6.0 years.

Non-Vested Shares

During the six months ended June 30, 2007, 59,194 non-transferable non-vested shares of Synovus common stock with a weighted-average grant date fair value of $31.97 were awarded to certain key employees and non-employee directors of Synovus. There were no awards of non-vested shares during the three months ended June 30, 2007. Non-vested shares granted in 2007 generally vest over a three-year period, with one-third of the total grant amount vesting on each anniversary of the grant-date. Share-based compensation expense is recognized for plan participants on a straight-line basis over the vesting period. At June 30, 2007, there were 671,422 non-vested shares outstanding with a weighted-average grant-date fair value of $27.59.

In addition to the non-vested shares described above, during the six months ended June 30, 2007, 12,677 non-transferable non-vested shares of Synovus common stock with a grant date fair value of $31.64 were awarded to a key Synovus executive under a performance-vesting schedule.

TSYS Share-Based Compensation

Total System Services, Inc. (TSYS), an 81% owned subsidiary, also grants share-based compensation to certain executives and non-employee directors in the form of options to purchase shares of TSYS common stock (TSYS stock options) or non-vested shares of TSYS common stock (TSYS non-vested shares).

During the six months ended June 30, 2007, TSYS awarded 241,260 non-transferable non-vested shares of TSYS common stock with a grant-date fair value of $31.37 to certain key employees and non-employee directors of TSYS. The fair value of the common stock at the date of issuance will be amortized over the shorter of the vesting period or the period until reaching retirement. TSYS did not grant any options for purchase of TSYS common stock during the six months ended June 30, 2007.

Note 6 – Business Combinations and Discontinued Operations

Acquisitions

On July 11, 2006, TSYS completed the acquisition of Card Tech, Ltd., a privately owned London-based payments firm, and related companies. TSYS rebranded the group of companies as TSYS Card Tech. TSYS paid aggregate consideration of approximately $59.5 million, including direct acquisition costs. TSYS is in the process of allocating the purchase price to the respective assets and liabilities acquired, and has preliminarily allocated approximately $32.7 million to goodwill, approximately $19.1 million to other identifiable intangible assets and the remaining amounts to other identifiable assets and liabilities acquired.

Effective on March 25, 2006, Synovus acquired all of the issued and outstanding common shares of Riverside Bancshares, Inc., the parent company of Riverside Bank, and effective on April 1, 2006, Synovus acquired all of the issued and outstanding common shares of Banking Corporation of Florida, the parent company of First Florida Bank. The results of operations for these acquisitions have been included in Synovus’ consolidated financial statements beginning March 25, 2006 and April 1, 2006, respectively.

Pro forma information related to the impact of these acquisitions on Synovus’ consolidated financial

statements, assuming such acquisitions had occurred at the beginning of the periods reported, is not presented as such impact is not significant.

Discontinued Operations

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 for 2007 and 2006, of the business associated with the Synovus Funds, 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.

Note 7 – Operating Segments

Synovus has two reportable segments: Financial Services and Transaction Processing Services, which is comprised of TSYS. The Financial Services segment provides financial services including banking, financial management, insurance, mortgage and leasing services through 39 subsidiary banks and other Synovus offices in Georgia, Alabama, South Carolina, Florida, and Tennessee. TSYS provides electronic payment processing and other related services to card-issuing institutions in the United States, and internationally. All inter-segment services provided are charged at the same rates as those charged to unaffiliated customers. Such services are included in the results of operations of the respective segments and are eliminated to arrive at consolidated totals.

Segment information as of and for the six months ended June 30, 2007 and 2006, respectively, is presented in the following table:

							Financial
(In thousands)							Services					TSYS (a)					Eliminations					Consolidated
Interest income			2007				$	1,112,391					6,899					(6,948)	(b)				1,112,342
			2006					937,207					3,553					(3,554)	(b)				937,206
Interest expense			2007					540,967					152					(6,948)	(b)				534,171
			2006					391,043					78					(3,554)	(b)				387,567
Net interest income			2007					571,424					6,747					—					578,171
			2006					546,164					3,475					—					549,639
Provision for losses on loans			2007					40,797					—					—					40,797
			2006					38,083					—					—					38,083
Net interest income after provision for losses on loans			2007					530,627					6,747					—					537,374
			2006					508,081					3,475					—					511,556
Total non-interest income			2007					183,834					896,408					(14,135)	(c)				1,066,107
			2006					172,517					845,618					(11,752)	(c)				1,006,383
Total non-interest expense			2007					392,819					708,747					(14,135)	(c)				1,087,431
			2006					369,796					684,919					(11,752)	(c)				1,042,963
Income from continuing operations before income taxes			2007					321,642					194,408					(24,465)	(d)				491,585
			2006					310,802					164,174					(20,905)	(d)				454,071
Income tax expense			2007					115,787					70,496					—					186,283
			2006					110,657					56,110					—					166,767
Income from continuing operations			2007					205,855					123,912					(24,465)	(d)				305,302
			2006					200,145					108,064					(20,905)	(d)				287,304
Discontinued operations, net of tax			2007					4,200					—					—					4,200
			2006					—					—					—					—
Net income			2007				$	210,055					123,912					(24,465)	(d)				309,502
			2006					200,145					108,064					(20,905)	(d)				287,304
Total assets			2007				$	31,860,937					1,677,646					(317,777)	(e)				33,220,806
			2006					29,311,947					1,426,850					(211,709)	(e)				30,527,088

Segment information as of and for the three months ended June 30, 2007 and 2006, respectively, is presented in the following table:

							Financial
(In thousands)							Services					TSYS (a)					Eliminations					Consolidated
Interest income			2007				$	564,492					3,500					(3,550)	(b)				564,442
			2006					497,713					2,034					(2,034)	(b)				497,713
Interest expense			2007					276,017					69					(3,550)	(b)				272,536
			2006					212,499					45					(2,034)	(b)				210,510
Net interest income			2007					288,475					3,431					—					291,906
			2006					285,214					1,989					—					287,203
Provision for losses on loans			2007					20,281					—					—					20,281
			2006					18,534					—					—					18,534
Net interest income after provision for losses on loans			2007					268,194					3,431					—					271,625
			2006					266,680					1,989					—					268,669
Total non-interest income			2007					96,331					463,115					(7,398)	(c)				552,048
			2006					89,453					431,212					(6,156)	(c)				514,509
Total non-interest expense			2007					198,022					364,654					(7,398)	(c)				555,278
			2006					190,850					344,476					(6,156)	(c)				529,170
Income from continuing operations before income taxes			2007					166,503					101,892					(13,187)	(d)				255,208
			2006					165,283					88,725					(11,165)	(d)				242,843
Income tax expense			2007					61,055					35,603					—					96,658
			2006					58,899					31,147					—					90,046
Income from continuing operations			2007					105,448					66,289					(13,187)	(d)				158,550
			2006					106,384					57,578					(11,165)	(d)				152,797
Discontinued operations, net of tax			2007					4,200					—					—					4,200
			2006					—					—					—					—
Net income			2007				$	109,648					66,289					(13,187)	(d)				162,750
			2006					106,384					57,578					(11,165)	(d)				152,797
Total assets			2007				$	31,860,937					1,677,646					(317,777)	(e)				33,220,806
			2006					29,311,947					1,426,850					(211,709)	(e)				30,527,088