Synovus Financial (SNV) 10-K 2009 FY Annual report

Financial Appendix ­ ­ 

Exhibit 99.1

Consolidated Balance Sheets as of December 31, 2009 and 2008	F-2
Consolidated Statements of Income for the Years ended December 31, 2009, 2008, and 2007	F-3
Consolidated Statements of Changes in Equity and Comprehensive Income (Loss) for the Years ended December 31, 2009, 2008, and 2007	F-4
Consolidated Statements of Cash Flows for the Years ended December 31, 2009, 2008, and 2007	F-5
Notes to Consolidated Financial Statements	F-6
Report of Independent Registered Public Accounting Firm (Financial Statements)	F-58
Management’s Report on Internal Control Over Financial Reporting	F-59
Report of Independent Registered Public Accounting Firm (Internal Control)	F-60
Selected Financial Data	F-61
Management’s Discussion and Analysis	F-62
Non-GAAP Financial Measures	F-115
Summary of Quarterly Financial Data (Unaudited)	F-118

F-1

Consolidated Balance Sheets ­ ­ 

	December 31,
(In thousands, except share data)	2009			2008
ASSETS
Cash and due from banks, including $45,257 and $24,965 in 2009 and 2008, respectively, on deposit to meet Federal Reserve Bank requirements	$	564,482			524,327
Interest bearing funds with Federal Reserve Bank		1,901,847			1,206,168
Interest earning deposits with banks		12,534			10,805
Federal funds sold and securities purchased under resale agreements		203,959			388,197
Trading account assets, at fair value		14,370			24,513
Mortgage loans held for sale, at fair value		138,056			133,637
Other loans held for sale		36,816			3,527
Investment securities available for sale, at fair value		3,188,735			3,770,022
Loans, net of unearned income		25,383,068			27,920,177
Allowance for loan losses		(943,725	)		(598,301	)
Loans, net		24,439,343			27,321,876
Premises and equipment, net		580,375			605,019
Goodwill		24,431			39,521
Other intangible assets, net		16,649			21,266
Other assets		1,709,821			1,737,391
Total assets	$	32,831,418			35,786,269
LIABILITIES AND EQUITY
Liabilities:
Deposits:
Non-interest bearing deposits	$	4,172,697			3,563,619
Interest bearing deposits ($0 and $75,875, at fair value, in callable brokered certificates of deposit as of December 31, 2009 and 2008)		23,260,836			25,053,560
Total deposits		27,433,533			28,617,179
Federal funds purchased and other short-term borrowings		475,062			725,869
Long-term debt		1,751,592			2,107,173
Other liabilities		299,730			516,541
Total liabilities		29,959,917			31,966,762
Equity:
Shareholders’ equity:
Cumulative perpetual preferred stock — no par value. Authorized 100,000,000 shares; 967,870 shares issued and outstanding in 2009 and 2008		928,207			919,635
Common stock — $1.00 par value. Authorized 600,000,000 shares; issued 495,513,957 in 2009 and 336,010,941 in 2008; outstanding 489,828,319 in 2009 and 330,334,111 in 2008		495,514			336,011
Additional paid-in capital		1,605,097			1,165,875
Treasury stock, at cost — 5,685,638 shares in 2009 and 5,676,830 shares in 2008		(114,155	)		(114,117	)
Accumulated other comprehensive income		84,806			129,253
Accumulated (deficit) retained earnings		(148,428	)		1,350,501
Total shareholders’ equity		2,851,041			3,787,158
Non-controlling interest in subsidiaries		20,460			32,349
Total equity		2,871,501			3,819,507
Total liabilities and equity	$	32,831,418			35,786,269

See accompanying notes to consolidated financial statements.

F-2

Consolidated Statements of Income ­ ­ 

	Years Ended December 31,
(In thousands, except per share data)	2009			2008			2007
Interest income:
Loans, including fees	$	1,323,942			1,661,012			2,046,239
Investment securities available for sale:
U.S. Treasury and U.S. Government agency securities		65,447			82,856			89,597
Mortgage-backed securities		96,441			88,609			67,744
State and municipal securities		4,786			6,368			8,095
Other investments		2,270			5,415			7,290
Trading account assets		1,091			1,924			3,418
Mortgage loans held for sale		10,837			7,342			9,659
Other loans held for sale		45			93			—
Federal funds sold and securities purchased under resale agreements		356			3,382			5,258
Interest on Federal Reserve Bank balances		3,650			391			—
Interest earning deposits with banks		324			188			1,104
Total interest income		1,509,189			1,857,580			2,238,404
Interest expense:
Deposits		456,247			667,453			912,472
Federal funds purchased and other short-term borrowings		3,841			38,577			92,970
Long-term debt		38,791			73,657			84,014
Total interest expense		498,879			779,687			1,089,456
Net interest income		1,010,310			1,077,893			1,148,948
Provision for losses on loans		1,805,599			699,883			170,208
Net interest (expense) income after provision for losses on loans		(795,289	)		378,010			978,740
Non-interest income:
Service charges on deposit accounts		117,751			111,837			112,142
Fiduciary and asset management fees		44,168			48,779			50,761
Brokerage and investment banking revenue		28,475			33,119			31,980
Mortgage banking income		38,521			23,493			27,006
Bankcard fees		36,139			35,283			30,393
Net gains on sales of investment securities available for sale		14,067			45			980
Other fee income		31,200			37,246			39,307
Increase in fair value of private equity investments, net		1,379			24,995			16,497
Gain from sale of MasterCard shares		8,351			16,186			6,304
Gain from redemption of Visa shares		—			38,542			—
Gain from sale of Visa shares		51,900			—			—
Other non-interest income		38,719			47,716			56,268
Total non-interest income		410,670			417,241			371,638
Non-interest expense:
Salaries and other personnel expense		425,170			455,395			451,742
Net occupancy and equipment expense		123,105			123,529			112,026
FDIC insurance and other regulatory fees		76,314			25,161			10,347
Foreclosed real estate expense		354,269			136,678			15,736
Losses on other loans held for sale		1,703			9,909			—
Goodwill impairment		15,090			479,617			—
Professional fees		38,802			30,210			20,961
Data processing expense		45,131			46,914			45,435
Visa litigation (recovery) expense		(6,441	)		(17,473	)		36,800
Restructuring charges		5,995			16,125			—
Other operating expenses		142,151			149,992			137,296
Total non-interest expense		1,221,289			1,456,057			830,343
Income (loss) from continuing operations before income taxes		(1,605,908	)		(660,806	)		520,035
Income tax expense (benefit)		(171,977	)		(80,430	)		182,066
Income (loss) from continuing operations		(1,433,931	)		(580,376	)		337,969
Income from discontinued operations, net of income taxes and non-controlling interest		4,590			5,650			188,336
Net income (loss)		(1,429,341	)		(574,726	)		526,305
Net income attributable to non-controlling interest		2,364			7,712			—
Net income (loss) attributable to controlling interest		(1,431,705	)		(582,438	)		526,305
Dividends and accretion of discount on preferred stock		56,966			2,057			—
Net income (loss) available to common shareholders	$	(1,488,671	)		(584,495	)		526,305
Basic earnings (loss) per common share:
Net income (loss) from continuing operations available to common shareholders	$	(4.00	)		(1.79	)		1.03
Net income (loss) available to common shareholders		(3.99	)		(1.77	)		1.61
Diluted earnings (loss) per common share:
Net income (loss) from continuing operations available to common shareholders	$	(4.00	)		(1.79	)		1.02
Net income (loss) available to common shareholders		(3.99	)		(1.77	)		1.60
Weighted average common shares outstanding:
Basic		372,943			329,319			326,849
Diluted		372,943			329,319			329,863

See accompanying notes to consolidated financial statements.

F-3

Consolidated Statements of Changes in Equity and Comprehensive Income (Loss) ­ ­ 

												Accumulated			Accumulated
						Additional						Other			(Deficit)			Non-
	Preferred		Common			Paid-In			Treasury			Comprehensive			Retained			Controlling
(In thousands, except per share data)	Stock		Stock			Capital			Stock			Income (Loss)			Earnings			Interest			Total
Balance at December 31, 2006	$	—		331,214			1,033,055			(113,944	)		(2,129	)		2,460,454			—			3,708,650
Cumulative effect of adoption of ASC740-10-05-6		—		—			—			—			—			(230	)		—			(230	)
Net income		—		—			—			—			—			526,305			—			526,305
Other comprehensive income, net of tax:
Net unrealized gain on cash flow hedges		—		—			—			—			18,334			—			—			18,334
Change in unrealized gains/losses on investment securities available for sale, net of reclassification adjustment		—		—			—			—			31,251			—			—			31,251
Amortization of postretirement unfunded health benefit, net of tax		—		—			—			—			817			—			—			817
Gain on foreign currency translation		—		—			—			—			6,151			—			—			6,151
Other comprehensive income		—		—			—			—			56,553			—			—			56,553
Comprehensive income																						582,858
Cash dividends declared — $0.82 per share		—		—			—			—			—			(269,082	)		—			(269,082	)
Issuance (forfeitures) of non-vested stock, net		—		552			(552	)		—			—			—			—			—
Share-based compensation expense		—		—			21,540			—			—			—			—			21,540
Stock options exercised		—		3,702			60,148			—			—			—			—			63,850
Share-based compensation tax benefit		—		—			15,937			—			—			—			—			15,937
Issuance of common stock for acquisitions		—		61			2,054			—			—			—			—			2,115
Spin-off of TSYS		—		—			(30,973	)		—			(22,985	)		(630,090	)		—			(684,048	)
Balance at December 31, 2007		—		335,529			1,101,209			(113,944	)		31,439			2,087,357			—			3,441,590
Cumulative effect of adoption of ASC715-60-35-177		—		—			—			—			—			(2,248	)		—			(2,248	)
Cumulative effect of adoption of ASC825-10-25		—		—			—			—			—			58			—			58
Net income (loss)		—		—			—			—			—			(582,438	)		7,712			(574,726	)
Other comprehensive income, net of tax:
Net unrealized gain on cash flow hedges		—		—			—			—			21,589			—			—			21,589
Change in unrealized gains/losses on investment securities available for sale, net of reclassification adjustment		—		—			—			—			76,045			—			—			76,045
Amortization of postretirement unfunded health benefit, net of tax		—		—			—			—			180			—			—			180
														��
Other comprehensive income		—		—			—			—			97,814			—			—			97,814
Comprehensive loss																						(476,912	)
Cash dividends declared — $0.46 per share		—		—			—			—			—			(151,918	)		—			(151,918	)
Treasury shares purchased		—		—			—			(173	)		—			—			—			(173	)
Issuance (forfeitures) of non-vested stock, net		—		(39	)		39			—			—			—			—			—
Share-based compensation expense		—		—			13,716			—			—			—			—			13,716
Stock options exercised		—		521			2,481			—			—			—			—			3,002
Share-based compensation tax deficiency		—		—			(115	)		—			—			—			—			(115	)
Issuance of preferred stock and common stock warrants		919,325		—			48,545			—			—			—			—			967,870
Accretion of discount on preferred stock		310		—			—			—			—			(310	)		—			—
Change in ownership at majority-owned subsidiary		—		—			—			—			—			—			24,637			24,637
Balance at December 31, 2008		919,635		336,011			1,165,875			(114,117	)		129,253			1,350,501			32,349			3,819,507
Net income (loss)		—		—			—			—			—			(1,431,705	)		2,364			(1,429,341	)
Other comprehensive income (loss), net of tax:
Net unrealized loss on cash flow hedges		—		—			—			—			(19,483	)		—			—			(19,483	)
Change in unrealized gains/losses on investment securities available for sale, net of reclassification adjustment		—		—			—			—			(24,985	)		—			—			(24,985	)
Amortization of postretirement unfunded health benefit		—		—			—						21						—			21
Other comprehensive loss		—		—			—			—			(44,447	)		—			—			(44,447	)
Comprehensive loss																						(1,473,788	)
Cash dividends declared on common stock — $0.04 per share		—		—			—			—			—			(14,827	)		—			(14,827	)
Cash dividends paid on preferred stock — $45.28 per share		—		—			—			—			—			(43,823	)		—			(43,823	)
Accretion of discount on preferred stock		8,572		—			—			—			—			(8,572	)		—			—
Issuance of common stock, net of issuance costs		—		150,000			420,930			—			—			—			—			570,930
Treasury shares purchased		—		—			—			(38	)		—			—			—			(38	)
Issuance (forfeitures) of non-vested stock, net		—		(34	)		34			—			—			—			—			—
Restricted share unit activity		—		39			(37	)		—			—			(2	)		—			—
Share-based compensation expense		—		—			8,361			—			—			—			—			8,361
Stock options exercised		—		54			242			—			—			—			—			296
Share-based compensation tax deficiency		—		—			(2,770	)		—			—			—			—			(2,770	)
Change in ownership at majority-owned subsidiary		—		—			200			—			—			—			(14,253	)		(14,053	)
Exchange of subordinated notes due 2013 for common stock, net of issuance costs		—		9,444			12,262			—			—			—			—			21,706
Balance at December 31, 2009	$	928,207		495,514			1,605,097			(114,155	)		84,806			(148,428	)		20,460			2,871,501

See accompanying notes to consolidated financial statements.

F-4

Consolidated Statements of Cash Flows ­ ­ 

	Years Ended December 31,
	2009			2008			2007
(In thousands)
Operating Activities
Net (loss) income	$	(1,429,341	)		(574,726	)		526,305
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision for losses on loans		1,805,599			699,883			170,208
Depreciation, amortization, and accretion, net		37,350			70,615			208,270
Goodwill impairment		15,090			479,617			—
Equity in income of equity investments		—			(3,517	)		(10,463	)
Deferred income tax (benefit) expense		175,193			(107,601	)		(28,057	)
Decrease (increase) in interest receivable		44,040			72,611			(11,774	)
(Decrease) increase in interest payable		(64,465	)		(13,783	)		830
Minority interest in consolidated subsidiaries’ net income		—			—			47,521
Decrease (increase) in trading account assets		10,143			(6,710	)		(2,537	)
Originations of mortgage loans held for sale		(1,946,560	)		(1,098,582	)		(1,328,905	)
Proceeds from sales of mortgage loans held for sale		1,955,290			1,129,843			1,378,999
Gain on sale of mortgage loans held for sale		(16,520	)		(9,292	)		(27,105	)
(Increase) decrease in prepaid and other assets		(260,273	)		(186,048	)		(273,899	)
(Decrease) increase in accrued salaries and benefits		(12,084	)		(11,762	)		(33,428	)
(Decrease) increase in other liabilities		(118,885	)		184,873			(22,877	)
Net (gains) losses on sales of investment securities available for sale		(14,967	)		(45	)		(980	)
Loss on sale of other loans held for sale		1,703			9,909			—
Loss on other real estate		322,335			116,499			10,257
Net increase in fair value of private equity investments		(1,379	)		(24,995	)		(16,497	)
Gain from transfer of mutual funds		—			—			(6,885	)
Gain on sale of MasterCard shares		(8,351	)		(16,186	)		(6,304	)
Gain on redemption of Visa shares		—			(38,542	)		—
Gain on sale of Visa shares		(51,900	)		—			—
(Decrease) increase in accrual for Visa litigation		(6,441	)		(17,473	)		36,800
Gain on repurchase of subordinated debt		(5,860	)		—			—
Gain on exchange of subordinated debt for common stock		(6,114	)		—			—
Gain on sale of venture capital investments		(925	)		—			—
Share-based compensation		8,361			13,716			36,509
Excess tax benefit from share-based payment arrangements		(12	)		(870	)		(14,066	)
Impairment of developed software		—			—			1,740
Other, net		2,157			(8,096	)		1,108
Net cash provided by operating activities		433,184			659,338			634,770
Investing Activities
Net cash paid for acquisitions		—			—			(12,552	)
Net (increase) decrease in interest earning deposits with banks		(1,729	)		145			8,365
Net decrease (increase) in federal funds sold and securities purchased under resale agreements		184,238			(312,111	)		25,005
Net increase in interest bearing funds with Federal Reserve Bank		(695,679	)		(1,206,168	)		—
Proceeds from maturities and principal collections of investment securities available for sale		1,108,893			1,036,368			721,679
Proceeds from sales of investment securities available for sale		260,041			165,623			25,482
Purchases of investment securities available for sale		(805,760	)		(1,289,912	)		(1,015,303	)
Proceeds from sale of loans		388,541			—			—
Proceeds from sale of other loans held for sale		84,308			28,813			—
Proceeds from sale of other real estate		344,962			175,414			24,692
Net increase in loans		(112,659	)		(2,374,091	)		(2,071,602	)
Proceeds from sale of private equity investments		65,786			—			—
Purchases of premises and equipment		(34,732	)		(112,969	)		(168,202	)
Proceeds from disposals of premises and equipment		1,991			2,388			790
Net proceeds from transfer of mutual funds		—			—			6,885
Proceeds from sale of MasterCard shares		8,351			16,186			6,303
Proceeds from redemption of Visa shares		—			38,542			—
Proceeds from sale of Visa shares		51,900			—			—
Contract acquisition costs		—			—			(22,740	)
Additions to licensed computer software from vendors		—			—			(33,382	)
Additions to internally developed computer software		—			—			(17,785	)
Dividend paid by TSYS to minority shareholders		—			—			(126,717	)
Net cash provided by (used in) investing activities		848,452			(3,831,772	)		(2,649,082	)
Financing Activities
Net increase (decrease) in demand and savings deposits		439,449			620,287			666,484
Net (decrease) increase in certificates of deposit		(1,623,095	)		3,037,076			3,263
Net (decrease) increase in federal funds purchased and securities sold under repurchase agreements		(250,807	)		(1,593,543	)		736,925
Principal repayments on long-term debt		(1,024,660	)		(250,789	)		(294,269	)
Proceeds from issuance of long-term debt		720,000			429,300			1,087,079
Purchase of treasury shares		(38	)		(173	)		—
Excess tax benefit from share-based payment arrangements		12			870			14,066
Dividends paid to common shareholders		(29,745	)		(199,722	)		(264,930	)
Dividends paid to preferred shareholders		(43,823	)		—			—
Proceeds from issuance of preferred stock and common stock warrants		—			967,870			—
Proceeds from issuance of common stock		571,226			3,002			63,850
Net cash provided by (used in) financing activities		(1,241,481	)		3,014,178			2,012,468
Effect of exchange rate changes on cash and cash equivalent balances held in foreign currencies		—			—			4,970
Increase (decrease) in cash and cash equivalents		40,155			(158,256	)		3,126
Cash retained by Total System Services, Inc.		—			—			(210,518	)
Cash and due from banks at beginning of year		524,327			682,583			889,975
Cash and due from banks at end of year	$	564,482			524,327			682,583

See accompanying notes to consolidated financial statements.

F-5

Notes to Consolidated Financial Statements ­ ­ 

Note 1   Summary of Significant Accounting Policies

Business Operations

The consolidated financial statements of Synovus include the accounts of Synovus Financial Corp. (Parent Company) and its consolidated subsidiaries (collectively, Synovus). Synovus provides integrated financial services, including commercial and retail banking, financial management, insurance, and mortgage services through 30 wholly-owned subsidiary banks and other Synovus offices in Georgia, Alabama, South Carolina, Florida, and Tennessee.

Accounting Standards Codification

In June 2009, the Financial Accounting Standards Board (FASB) issued SFAS 168,The FASB Accounting Standards Codification^tm and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement 162 (ASC105-10). This statement established the FASB Accounting Standards Codification^tm (Codification or ASC) as the single source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification superseded all pre-existing non-SEC accounting and reporting standards. All non-grandfathered, non-SEC accounting literature not included in the Codification has become non-authoritative.

Following the Codification, the FASB will not issue new standards in the form of statements, FASB Staff Positions or Emerging Issues Task Force (EITF) Abstracts. Instead, the FASB will issue Accounting Standards Updates (ASU), which will serve to update the Codification, provide background information about the guidance, and provide the basis for conclusions on the changes to the Codification.

GAAP was not intended to be changed as a result of the Codification project, but it has changed the way that guidance is organized and presented. As a result, these changes have had a significant impact on how companies reference GAAP in their financial statements and in their accounting policies for financial statements issued for interim and annual periods ended after September 15, 2009, the effective date for the Codification. All accounting references have been updated, and therefore, Statement of Financial Accounting Standards (SFAS) references have been replaced with ASC references except for SFAS references which have not been integrated into the Codification. Adoption of the Codification did not impact Synovus’ financial position, results of operations, or cash flows.

Basis of Presentation

The accounting and reporting policies of Synovus conform to GAAP and to general practices within the banking and financial services industries. All significant intercompany accounts and transactions have been eliminated in consolidation.

In preparing the consolidated financial statements in accordance with GAAP, 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 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 relate to the determination of the fair value of investments; the allowance for loan losses; the valuation of other real estate; the valuation of impaired loans; the valuation of long-lived assets, goodwill, and other intangible assets; the valuation of deferred tax assets; and the disclosures for contingent assets and liabilities. In connection with the determination of the allowance for loan losses and the valuation of certain impaired loans and other real estate, management obtains independent appraisals for significant properties and properties collateralizing impaired loans.

On December 31, 2007, Synovus completed the tax-free spin-off of its shares of Total System Services, Inc. (TSYS) common stock to Synovus shareholders. Accordingly, the results of operations of Synovus’ former majority owned subsidiary, TSYS, have been reported as discontinued operations for the year ended December 31, 2007. As a result of the spin-off of TSYS, Synovus has only one business segment as defined by ASC 280, Segment Reporting. Synovus’ statement of cash flows for the year ended December 31, 2007 includes, without segregation, cash flows of both continuing operations and discontinued operations. See Note 2 for further discussion of discontinued operations and the TSYS spin-off.

During 2009, Synovus committed to a plan to sell its merchant services business. Accordingly, the revenues and expenses of the merchant services business have been reported as discontinued operations for the years ended December 31, 2009, 2008, and 2007. There are no significant assets or liabilities associated with the merchant services portfolio.

F-6

Notes to Consolidated Financial Statements ­ ­ 

Cash Flow Information

Supplemental disclosure of cash flow information is as follows:

	Years Ended December 31,
(In millions)	2009			2008		2007
Cash paid during the year for:
Income taxes (refunded) paid	$	(87.6	)		65.6		440.7
Interest		425.7			757.0		1,068.9
Non-cash investing and financing activities:
Loans receivable transferred to other real estate		664.5			436.5		111.1
Loans charged off to allowance for loan losses		1,492.6			486.3		131.2
Loans receivable transferred to other loans held for sale		136.6			50.6		—
Valuation allowance for deferred tax assets		438.2			5.1		—
Exchange of subordinated notes for common stock		29.8			—		—
Common stock issued in business combinations		—			—		1.9

The tax-free spin-off of TSYS common stock completed on December 31, 2007 represented a $684.0 million non-cash distribution of the net assets of TSYS, net of minority interest, to Synovus shareholders.

The following is a description of the more significant of Synovus’ accounting and reporting policies.

Federal Funds Sold, Federal Funds Purchased, Securities Purchased Under Resale Agreements, and Securities Sold Under Repurchase Agreements

Federal funds sold, federal funds purchased, securities purchased under resale agreements, and securities sold under repurchase agreements generally mature in one day.

Trading Account Assets

Trading account assets, which primarily consist of debt securities, are reported at fair value. Fair value adjustments and fees from trading account activities are included as a component of other fee income. Gains and losses realized from the sale of trading account assets are determined by specific identification and are included as a component of other fee income on the trade date. Interest income on trading assets is reported as a component of interest income.

Mortgage Loans Held for Sale

Mortgage loans held for sale are carried at fair value. 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 predominately used as collateral for securitizations, the valuation model represents the highest and best use of the loans in Synovus’ principal market.

Other Loans Held for Sale

Other loans held for sale are carried at the lower of cost or fair value. Loans or pools of loans are transferred to the other 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 determined primarily by analyzing the underlying collateral of the loans and the estimated sales prices for the portfolio. At the time of transfer, any excess of cost over fair value which is 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 gains or losses from sale of these loans are recognized as a component of non-interest income or expense.

Investment Securities Available for Sale

Available for sale securities are recorded at fair value. Fair value is determined based on quoted market prices. Unrealized gains and losses on securities available for sale, net of the related tax effect, are excluded from earnings and are reported as a separate component of equity, within accumulated other comprehensive income (loss), until realized.

A decline in the fair market value of any available for sale security below cost, that is deemed other than temporary, results in a charge to earnings and the establishment of a new cost basis for the security.

Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to the yield using the effective interest method and prepayment assumptions. Dividend and interest income are recognized when earned. Realized gains and losses for securities classified as available for sale are included in non-interest income and are derived using the specific identification method for determining the amortized cost of securities sold.

F-7

Notes to Consolidated Financial Statements ­ ­ 

Gains and losses on sales of investment securities are recognized on the settlement date based on the amortized cost of the specific security. The financial statement impact of settlement date accounting versus trade date accounting is inconsequential.

Loans and Interest Income

Loans are reported at principal amounts outstanding less unearned income, net deferred fees and expenses, and the allowance for loan losses.

Interest income on consumer loans, made on a discount basis, is recognized in a manner which approximates the level yield method. Interest income and deferred fees on substantially all other loans is recognized on a level yield basis.

Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. Accrual of interest on loans is discontinued when reasonable doubt exists as to the full collection of interest or principal, or when they become contractually in default for 90 days or more as to either interest or principal, unless they are both well-secured and in the process of collection. When a loan is placed on nonaccrual status, previously accrued and uncollected interest is charged to interest income on loans, unless management believes that the accrued interest is recoverable through the liquidation of collateral. Interest payments received on nonaccrual loans are applied as a reduction of principal. Loans are returned to accruing status when they are brought fully current with respect to interest and principal and when, in the judgment of management, the loans are estimated to be fully collectible as to both principal and interest. Interest is accrued on impaired loans as long as such loans do not meet the criteria for nonaccrual classification.

Synovus designates loan modifications as troubled debt restructurings (TDRs) when, for economic or legal reasons related to the borrower’s financial difficulties, it grants a concession to the borrower that it would not otherwise consider. Loans on nonaccrual status at the date of modification are initially classified as nonaccrual TDRs. Loans on accruing status at the date of modification are initially classified as accruing TDRs at the date of modification, if the note is reasonably assured of repayment and performance in accordance with its modified terms. Such loans may be designated as nonaccrual loans subsequent to the modification date if reasonable doubt exists as to the collection of interest or principal under the restructure agreement. TDRs are returned to accruing status when there is economic substance to the restructuring, any portion of the debt not expected to be repaid has been charged off, the remaining note is reasonably assured of repayment in accordance with its modified terms, and the borrower has demonstrated sustained repayment performance in accordance with the modified terms for a reasonable period of time (generally six months). At December 31, 2009, total TDRs were $588.8 million of which $213.6 million were accruing restructured loans. Synovus does not have significant commitments to lend additional funds to borrowers whose loans have been modified as a TDR.

Allowance for Loan Losses

The allowance for loan losses is established through the provision for losses on loans charged to operations. Loans are charged against the allowance for loan losses when management believes that the collection of principal is unlikely. Subsequent recoveries are added to the allowance. Management’s evaluation of the adequacy of the allowance for loan losses is based on a formal analysis which assesses the probable loss within the loan portfolio. This analysis includes consideration of loan portfolio quality, historical performance, current economic conditions, level of non-performing loans, loan concentrations, review of impaired loans, and management’s plan for disposition of non-performing loans.

As of December 31, 2009, management believes that the allowance for loan losses was adequate. While management uses available information to recognize losses on loans, future additions to the allowance for loan losses may be necessary based on a number of factors including changes in economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the subsidiary banks’ allowances for loan losses. Such agencies may recommend or require the subsidiary banks to recognize adjustments to the allowance for loan losses based on their judgments about information available to them at the time of their examination.

Management, considering current information and events regarding a borrowers’ ability to repay its obligations, considers a loan to be impaired when the ultimate collectability of all amounts due, according to the contractual terms of the loan agreement, is in doubt. When a loan is considered to be impaired, it is placed on nonaccrual status and the amount of impairment is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate. If the loan is collateral-dependent, the fair value of the collateral less estimated selling costs is used to determine the amount of impairment. Estimated losses on collateral-dependent impaired loans are typically charged off. Estimated losses on all other impaired loans are included in the allowance for loan losses through a charge to the provision for losses on loans.

The accounting for impaired loans described above applies to all loans, except for large pools of smaller-balance, homogeneous loans that are collectively evaluated for

F-8

Notes to Consolidated Financial Statements ­ ­ 

impairment, and loans that are measured at fair value or at the lower of cost or fair value. The allowance for loan losses for loans not considered impaired and for large pools of smaller-balance, homogeneous loans is established through consideration of such factors as changes in the nature and volume of the portfolio, overall portfolio quality, individual loan risk ratings, loan concentrations, and historical charge-off trends.

Premises and Equipment

Premises and equipment, including branch locations and leasehold improvements, are reported at cost, less accumulated depreciation and amortization, which are computed using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are depreciated over the shorter of estimated useful life or the remainder of the lease. Synovus reviews long-lived assets, such as premises and equipment, for impairment whenever events and circumstances indicate that the carrying amount of an asset may not be recoverable.

Goodwill and Other Intangible Assets

Goodwill, which represents the excess of cost over the fair value of net assets acquired of purchased businesses, is tested for impairment at least annually, and when events or circumstances indicate that the carrying amount may not be recoverable. Synovus has established its annual impairment test date as June 30.

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 fair 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.

Identifiable intangible assets relate primarily to core deposit premiums, resulting from the valuation of core deposit intangibles acquired in business combinations or in the purchase of branch offices, customer relationships, and customer contract premiums resulting from the acquisition of investment advisory businesses. These identifiable intangible assets are amortized using accelerated methods over periods not exceeding the estimated average remaining life of the existing customer deposits, customer relationships, or contracts acquired. Amortization periods range from 3 to 15 years. Amortization periods for intangible assets are monitored to determine if events and circumstances require such periods to be reduced.

Identifiable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the intangible assets is measured by a comparison of the carrying amount of the asset to future undiscounted cash flows expected to be generated by the asset. If such assets are considered impaired, the amount of impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds the fair value of the assets based on the discounted expected future cash flows to be generated by the assets. Assets to be disposed of are reported at the lower of their carrying value or fair value less costs to sell.

Other Assets

Other assets include accrued interest receivable and other significant balances as described below.

Investments in Company-Owned Life Insurance Programs

Investments in company-owned life insurance programs are recorded at the net realizable value of the underlying insurance contracts. The change in contract value during the period is recorded as an adjustment of premiums paid in determining the expense or income to be recognized under the contract during the period. Income or expense from company-owned life insurance programs is included as a component of other non-interest income.

Other Real Estate

Other real estate (ORE) consists of properties obtained through a foreclosure proceeding or through an in-substance foreclosure in satisfaction of loans. In accordance with the provisions of ASC310-10-35 regarding subsequent measurement of loans for impairments and ASC310-40-15 regarding accounting for troubled debt restructurings by a creditor, a loan is classified as an in-substance foreclosure when Synovus has taken possession of the collateral regardless of whether formal foreclosure proceedings have taken place.

ORE is reported at the lower of cost or fair value determined on the basis of current appraisals, comparable sales, and other estimates of fair value obtained principally from independent sources, adjusted for estimated selling costs. Management also considers other factors or recent developments, such as changes in absorption rates or market conditions from the time of valuation and anticipated sales values considering management’s plans for disposition, which could result in adjustment to the collateral value estimates indicated in the appraisals. At the time of foreclosure, any excess of the loan

F-9

Notes to Consolidated Financial Statements ­ ­ 

balance over the fair value of the real estate held as collateral is recorded as a charge against the allowance for loan losses. Subsequent declines in the fair value of ORE below the new cost basis are recorded through valuation adjustments. Management reviews the value of other real estate each quarter and adjusts the values as appropriate. Revenue and expenses from ORE operations as well as gains or losses on sales and any subsequent adjustments to the value are recorded as foreclosed real estate expense, a component of non-interest expense.

Private Equity Investments

Private equity investments are recorded at fair value on the balance sheet with realized and unrealized gains and losses included in non-interest income in the results of operations in accordance with ASC 946, Financial Services — Investment Companies. For private equity investments, Synovus uses information provided by the fund managers in the initial determination of estimated fair value. Valuation factors, such as recent or proposed purchase or sale of debt or equity, pricing by other dealers in similar securities, size of position held, liquidity of the market, comparable market multiples, and changes in economic conditions affecting the issuer, are used in the final determination of estimated fair value.

Derivative Instruments

Synovus’ risk management policies emphasize the management of interest rate risk within acceptable guidelines. Synovus’ objective in maintaining these policies is to achieve consistent growth in net interest income while limiting volatility arising from changes in interest rates. Risks to be managed include both fair value and cash flow risks. Utilization of derivative financial instruments provides a valuable tool to assist in the management of these risks.

In accordance with ASC 815, Derivatives and Hedging, all derivative instruments are recorded on the consolidated balance sheet at their respective fair values, as components of other assets and other liabilities.

The accounting for changes in fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, on the reason for holding it. If certain conditions are met, entities may elect to designate a derivative instrument as a hedge of exposures to changes in fair values, cash flows, or foreign currencies. If the hedged exposure is a fair value exposure, the gain or loss on the derivative instrument is recognized in earnings in the period of change, together with the offsetting loss or gain on the hedged item attributable to the risk being hedged as a component of other non-interest income. If the hedged exposure is a cash flow exposure, the effective portion of the gain or loss on the hedged item is reported initially as a component of accumulated other comprehensive income (outside earnings), and subsequently reclassified into earnings when the forecasted transaction affects earnings. Any amounts excluded from the assessment of hedge effectiveness, as well as the ineffective portion of the gain or loss on the derivative instrument, are reported in earnings immediately as a component of other non-interest income. If the derivative instrument is not designated as a hedge, the gain or loss on the derivative instrument is recognized in earnings as a component of other non-interest income in the period of change. At December 31, 2009, Synovus does not have any derivative instruments which are measured for ineffectiveness using the short-cut method.

With the exception of certain commitments to fund and sell fixed-rate mortgage loans and derivatives utilized to meet the financing and interest rate risk management needs of its customers, all derivatives utilized by Synovus to manage its interest rate sensitivity are designed as either a hedge of a recognized fixed-rate asset or liability (a fair value hedge), or a hedge of a forecasted transaction or of the variability of future cash flows of a floating rate asset or liability (cash flow hedge). Synovus does not speculate using derivative instruments.

Synovus utilizes interest rate swap agreements to hedge the fair value risk of fixed-rate balance sheet liabilities, primarily deposit and long term debt liabilities. Fair value risk is measured as the volatility in the value of these liabilities as interest rates change. Interest rate swaps entered into to manage this risk are designed to have the same notional value, as well as similar interest rates and interest calculation methods. These agreements entitle Synovus to receive fixed-rate interest payments and pay floating-rate interest payments based on the notional amount of the swap agreements. Swap agreements structured in this manner allow Synovus to effectively hedge the fair value risks of these fixed-rate liabilities. Ineffectiveness from fair value hedges is recognized in the consolidated statements of income as other non-interest income.

Synovus is potentially exposed to cash flow risk due to its holding of loans whose interest payments are based on floating rate indices. Synovus monitors changes in these exposures and their impact on its risk management activities and uses interest rate swap agreements to hedge the cash flow risk. These agreements entitle Synovus to receive fixed-rate interest payments and pay floating-rate interest payments. The maturity date of the agreement with the longest remaining term to maturity is July 9, 2012. These agreements allow Synovus to offset the variability of floating rate loan interest received with the variable interest payments paid on the interest rate swaps. The ineffectiveness from cash flow hedges is recognized in the

F-10

Notes to Consolidated Financial Statements ­ ­ 

consolidated statements of income as other non-interest income.

In 2005, Synovus entered into certain forward starting swap contracts to hedge the cash flow risk of certain forecasted interest payments on a forecasted debt issuance. Upon the determination to issue debt, Synovus was potentially exposed to cash flow risk due to changes in market interest rates prior to the placement of the debt. The forward starting swaps allowed Synovus to hedge this exposure. Upon placement of the debt, these swaps were cash settled concurrent with the pricing of the debt. The effective portion of the cash flow hedge previously included in accumulated other comprehensive income is being amortized over the life of the debt issue as an adjustment to interest expense.

Synovus also holds derivative instruments which consist of commitments to fund fixed-rate mortgage loans to customers (interest rate lock commitments) and forward commitments to sell mortgage-backed securities and individual fixed-rate mortgage loans. Synovus’ objective in obtaining the forward commitments is to mitigate the interest rate risk associated with the commitments to fund the fixed-rate mortgage loans and the mortgage loans that are held for sale. Both the interest rate lock commitments and the forward commitments are reported at fair value, with adjustments being recorded in current period earnings in mortgage banking income.

Synovus also enters into interest swap agreements to meet the financing and interest rate risk management needs of its customers. Upon entering into these derivative instruments to meet customer needs, Synovus enters into offsetting positions to minimize interest rate risk. These derivative financial instruments are reported at fair value with any resulting gain or loss recorded in current period earnings in other non-interest income. These instruments, and their offsetting positions, are recorded in other assets and other liabilities on the consolidated balance sheets.

By using derivatives to hedge fair value and cash flow risks, Synovus exposes itself to potential credit risk from the counterparty to the hedging instrument. This credit risk is normally a small percentage of the notional amount and fluctuates as interest rates change. Synovus analyzes and approves credit risk for all potential derivative counterparties prior to execution of any derivative transaction. Synovus seeks to minimize credit risk by dealing with highly rated counterparties and by obtaining collateralization for exposures above certain predetermined limits. If significant counterparty risk is determined, Synovus adjusts the fair value of the derivative recorded asset balance to consider such risk.

Non-Interest Income

Service Charges on Deposit Accounts

Service charges on deposit accounts consist of non-sufficient funds fees, account analysis fees, and other service charges on deposits which consist primarily of monthly account fees. Non-sufficient funds fees are recognized at the time when the account overdraft occurs. Account analysis fees consist of fees charged to certain commercial demand deposit accounts based upon account activity (and reduced by a credit which is based upon cash levels in the account). These fees, as well as monthly account fees, are recorded under the accrual method of accounting.

Fiduciary and Asset Management Fees

Fiduciary and asset management fees are generally determined based upon market values of assets under management as of a specified date during the period. These fees are recorded under the accrual method of accounting as the services are performed.

Brokerage and Investment Banking Revenue

Brokerage revenue consists primarily of commission income, which represents the spread between buy and sell transactions processed, and net fees charged to customers on a transaction basis for buy and sell transactions processed. Commission income is recorded on a trade-date basis. Brokerage revenue also includes portfolio management fees which represent monthly fees charged on a contractual basis to customers for the management of their investment portfolios and are recorded under the accrual method of accounting.

Investment banking revenue represents fees for services arising from securities offerings or placements in which Synovus acts as an agent. It also includes fees earned from providing advisory services. Revenue is recognized at the time the underwriting is completed and the revenue is reasonably determinable.

Mortgage Banking Income

Mortgage banking income consists primarily of gains and losses from the sale of mortgage loans. Mortgage loans are sold servicing released, without recourse or continuing involvement and satisfy ASC860-10-65, Transfers and Servicing of Financial Assets, criteria for sale accounting. Gains (losses) on the sale of mortgage loans are determined and recognized at the time the sale proceeds are received and represent the difference between net sales proceeds and the carrying value of the loans at the time of sale.

F-11

Notes to Consolidated Financial Statements ­ ­ 

Bankcard Fees

Bankcard fees consist primarily of interchange fees earned, net of fees paid, on debit card and credit card transactions. Net fees are recognized into income as they are collected.

Income Taxes

Synovus is a domestic corporation that files a consolidated federal income tax return with its wholly-owned subsidiaries and files state income tax returns on a consolidated and a separate entity basis with the various taxing jurisdictions based on its taxable presence. Synovus accounts for income taxes in accordance with the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement (GAAP) carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in income in the period that includes the enactment date.

ASC740-30-25 provides accounting guidance for determining when a company is required to record a valuation allowance on its deferred tax assets. A valuation allowance is required for deferred tax assets if, based on available evidence, it is more likely than not that all or some portion of the asset may not be realized due to the inability to generate sufficient taxable income in the periodand/or of the character necessary to utilize the benefit of the deferred tax asset. In making this assessment, all sources of taxable income available to realize the deferred tax asset are considered including taxable income in prior carry-back years, future reversals of existing temporary differences, tax planning strategies and future taxable income exclusive of reversing temporary differences and carryforwards. The predictability that future taxable income, exclusive of reversing temporary differences, will occur is the most subjective of these four sources. The presence of cumulative losses in recent years is considered significant negative evidence, making it difficult for a company to rely on future taxable income, exclusive of reversing temporary differences and carryforwards, as a reliable source of taxable income to realize a deferred tax asset. Judgment is a critical element in making this assessment. Changes in the valuation allowance that result from favorable changes in circumstances that cause a change in judgment about the realization of deferred tax assets in future years are recorded through income tax expense.

Significant estimates used in accounting for income taxes relate to the determination of taxable income, the determination of temporary differences between book and tax bases, the valuation allowance for deferred tax assets, as well as estimates on the realizability of income tax credits and utilization of net operating losses.

Income tax expense or benefit for the year is allocated among continuing operations, discontinued operations, and other comprehensive income (loss), as applicable. The amount allocated to continuing operations is the income tax effect of the pretax income or loss from continuing operations that occurred during the year, plus or minus income tax effects of (a) changes in circumstances that cause a change in judgment about the realization of deferred tax assets in future years, (b) changes in income tax laws or rates, and (c) changes in income tax status, subject to certain exceptions.

Synovus accrues tax liabilities for uncertain income tax positions based on current assumptions regarding the ultimate outcome through an examination process by weighing the facts and circumstances available at the reporting date. If related tax benefits of a transaction are not more likely than not of being sustained upon examination, Synovus will accrue a tax liability for the expected taxes associated with the transaction. Events and circumstances on the estimates and assumptions used in the analysis of its income tax positions may change and, accordingly, Synovus’ effective tax rate may fluctuate in the future. Synovus also recognizes accrued interest and penalties related to unrecognized income tax benefits as a component of income tax expense.

Share-Based Compensation

Synovus has a long-term incentive plan under which the Compensation Committee of the Board of Directors has the authority to grant share-based awards to Synovus employees. Synovus’ share-based compensation costs are recorded as a component of salaries and other personnel expense in the statements of income. Share-based compensation expense for service-based awards is recognized net of estimated forfeitures for plan participants on a straight-line basis over the shorter of the vesting period or the period until reaching retirement eligibility.

Postretirement Benefits

Synovus sponsors a defined benefit health care plan for substantially all of its employees and certain early retirees. The expected costs of retiree health care and other postretirement benefits are being expensed over the period that employees provide service.

F-12

Notes to Consolidated Financial Statements ­ ­ 

Fair Value Accounting

In September 2006, the FASB issued authoritative guidance included in the provisions of ASC820-10, Fair Value Measurements and Disclosures. ASC820-10 defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. This statement did not introduce any new requirements mandating the use of fair value; rather, it unified the meaning of fair value and added additional fair value disclosures. The provisions of this guidance were 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 the provisions of ASC820-10 for financial assets and liabilities. As permitted under the implementation guidance included in ASC820-10-55, Synovus elected to defer the application of ASC820-10 to non-financial assets and liabilities until January 1, 2009.

In February 2007, the FASB issued authoritative guidance included in the provisions of ASC825-10-10, the fair value option. ASC825-10-10 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 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.

In October 2008, the FASB issued provisions included in ASC825-10-65-2 and ASC825-10-35-15A, Financial Assets in a Market that is Not Active. ASC825-10-35-15A is intended to provide additional guidance on how an entity should classify the application of ASC820-10-35-15A in an inactive market and illustrates how an entity should determine fair value in an inactive market. The provisions for this guidance were effective upon its issuance on October 10, 2008. The impact to Synovus was minimal as this guidance provided clarification to existing guidance.

Fair value estimates are made at a specific point in time, based on relevant market information and other information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale, at one time, the entire holdings of a particular financial instrument. Because no market exists for a portion of the financial instruments, fair value estimates are also based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing balance sheet financial instruments, without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include deferred income taxes, premises and equipment, equity method investments, goodwill and other intangible assets. In addition, the income tax ramifications related to the realization of the unrealized gains and losses on available for sale investment securities and cash flow hedges can have a significant effect on fair value estimates and have not been considered in any of the estimates.

Recently Adopted Accounting Standards

In September 2006, the FASB’s EITF reached a consensus on ASC715-60-35, Split-Dollar Life Insurance Arrangements, which requires an employer to recognize a liability for future benefits based on the substantive agreement with the employee. ASC715-60-35 requires a company to use the guidance prescribed in this ASC when entering into an endorsement split-dollar life insurance agreement and recognizing the liability. Synovus adopted the provisions of ASC715-60 effective January 1, 2008, and recognized approximately $2.2 million as a cumulative effect adjustment to retained earnings.

In November 2006, the FASB’s EITF reached a consensus on changes incorporated into ASC715-60-35. Under ASC715-60-35, 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. The provisions of ASC715-60-35 were effective for fiscal periods beginning after December 15, 2007. Synovus adopted the provisions of ASC715-60-35 effective January 1, 2008. There was no impact to Synovus upon adoption of these provisions.

In November 2007, the SEC issued Staff Accounting Bulletin (SAB) 109, Written Loan Commitments Recorded at Fair Value Through Earnings. SAB 109 supersedes SAB 105, Application of Accounting Principles to Loan Commitments. SAB 109, which has been incorporated in ASC 815, Derivatives and Hedging, is consistent with ASC860-50, Servicing Assets and Liabilities, and ASC 825, Financial Instruments. The guidance 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

F-13

Notes to Consolidated Financial Statements ­ ­ 

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 new provisions of ASC 815 were effective for derivative loan commitments issued or modified in fiscal quarters beginning after December 15, 2007. The impact of adoption was an increase in mortgage revenues of approximately $1.2 million for the year ended December 31, 2008.

In December 2007, the SEC issued SAB 110, Share-Based Payment, which was subsequently incorporated into ASC 718, and 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 does not provide a reasonable basis. Under SAB 107, Share-Based Payment, the simplified method was scheduled to expire for all grants made after December 31, 2007. The provisions of this bulletin were effective on January 1, 2008. Due to the spin-off of TSYS on December 31, 2007 and recent changes to the terms of stock option agreements, Synovus has elected to continue using the simplified method for determining the expected term component for share option grants.

In December 2007, the FASB issued revisions to the authoritative guidance for business combinations included in ASC 805, Business Combinations, as described in ASC805-10-65-1. The revisions described by ASC805-10-65-1 clarify the definitions of both a business combination and a business. All business combinations will be accounted for under the acquisition method (previously referred to as the purchase method). ASC 805 now defines the acquisition date as the only relevant date for recognition and measurement of the fair value of consideration paid. The new provisions of ASC 805 require the acquirer to expense all acquisition related costs and also requires acquired loans to be recorded at fair value on the date of acquisition. The revised guidance defines the measurement period as the time after the acquisition date during which the acquirer may make adjustments to the “provisional” amounts recognized at the acquisition date. This period cannot exceed one year, and any subsequent adjustments made to provisional amounts are done retrospectively and restate prior period data. The provisions of ASC 805, as described in ASC805-10-65, were adopted by Synovus effective January 1, 2009, and are applicable to business combinations entered into after December 15, 2008. The estimated impact of adoption will not be determined until Synovus enters into a business combination.

In December 2007, the FASB issued revisions to the authoritative guidance in ASC 810, Consolidation, regarding accounting for non-controlling interests in consolidated financial statements as described in ASC810-10-65. The revisions to ASC 810 require non-controlling interests to be treated as a separate component of equity, not as a liability or other item outside of equity. Disclosure requirements include net income and comprehensive income to be displayed for both the controlling and non-controlling interests and a separate schedule that shows the effects of any transactions with the non-controlling interests on the equity attributable to the controlling interests. Synovus adopted the new provisions of ASC 810 effective January 1, 2009. The impact of adoption resulted in a change in the balance sheet classification and presentation of non-controlling interests which is now reported as a separate component of equity.

In March 2008, the FASB issued revisions to ASC 815 regarding disclosures about derivative instruments and hedging activities as described in ASC815-10-65-1. The revisions to ASC 815 change the disclosure requirements for derivative instruments and hedging activities. Disclosure requirements include qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains/losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. Synovus adopted the new disclosure requirements of ASC 815.

In June 2008, the FASB issued revisions to ASC 260, Earnings per Share, regarding the determination of whether instruments granted in share-based payment transactions are participating securities, as described in ASC260-10-65-2. The new provisions of ASC 260 require that unvested share-based payment awards that have non-forfeitable rights to dividends or dividend equivalents are participating securities and therefore should be included in computing earnings per share using the two-class method. The amendments to ASC 260, as described in ASC260-10-65-2, were adopted by Synovus effective January 1, 2009. The impact of adoption was not material to Synovus’ financial position, results of operations, or cash flows.

In April 2009, the FASB issued revisions to the authoritative guidance included in ASC320-10, Investments — Debt and Equity Securities, as described in ASC320-10-65-1, which are intended to bring greater consistency to the timing of impairment recognition and provide greater clarity to investors about the credit and noncredit components of impaired debt securities that are not expected to be sold. The revised guidance provides that if a company does not have the intent to sell a debt security prior to recovery and it is more likely than not that it will not have to sell the security prior to recovery, the security would not be consideredother-than-temporarily-impaired unless there is a credit loss. If there is an impairment due to a credit loss, the credit loss component will be recorded in earnings and the remaining portion of the impairment loss

F-14

Notes to Consolidated Financial Statements ­ ­ 

would be recognized in other comprehensive income. The credit loss component must be determined based on the company’s best estimate of the decrease in cash flows expected to be collected. The provisions of the revised guidance were effective for interim and annual periods ended after June 15, 2009. Synovus adopted the provisions described in ASC320-10-65-1 effective April 1, 2009. The impact of adoption was not material to Synovus’ financial position, results of operations, or cash flows.

In April 2009, the FASB issued revisions to the authoritative guidance included in ASC 820, Fair Value Measurements and Disclosure, as described in ASC820-10-65-1, which relates to determining fair values when there is no active market or where the inputs being used represent distressed sales. These revisions reaffirm the need to use judgment to ascertain if a formerly active market has become inactive and also assists in determining fair values when markets have become inactive. ASC 820, as revised, defines fair value as the price that would be received to sell an asset in an orderly transaction (i.e. not a forced liquidation or distressed sale). Factors must be considered when applying this statement to determine whether there has been a significant decrease in volume and level of activity of the market for the asset. The provisions for this statement were effective for the interim and annual periods ended after June 15, 2009. Synovus adopted the provisions described in ASC820-10-65-1 effective April 1, 2009. The impact of adoption was not material to Synovus’ financial position, results of operations, or cash flows.

Subsequent Events

Synovus adopted the revised provisions of ASC855-10, Subsequent Events, during the three months ended June 30, 2009. ASC855-10, as revised, sets forth general standards for evaluation, recognition, and disclosure of events that occur after the balance sheet date. The impact of adoption was not material to Synovus’ financial position, results of operations, or cash flows. Synovus has evaluated all transactions, events, and circumstances for consideration or disclosure through March 1, 2010, the date these financial statements were issued, and has reflected or disclosed those items within the consolidated financial statements and related footnotes as deemed appropriate.

Reclassifications

Certain prior year’s amounts have been reclassified to conform to the presentation adopted in 2009.

Note 2   Discontinued Operations

Transfer of Mutual Funds

During 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 $8.0 million and incurred transaction related costs of $1.1 million, resulting in a pre-tax gain of $6.9 million, or $4.2 million after-tax. The net gain has been reported as a component of income from 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.

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 on December 31, 2007 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 of December 17, 2007. 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 included in sections 15 and 35 of ASC360-10 regarding accounting for the impairment or disposal of long-lived assets and ASC420-10, accounting for costs associated with exit or disposal activities, historical consolidated results of operations of TSYS, as well as all costs associated with the spin-off of TSYS, were presented as a component of income from discontinued operations.

Merchant Services

During 2009, Synovus committed to a plan to sell its merchant services business. As of December 31, 2009, the proposed sale transaction met the held for sale criteria under ASC360-10-15-49. Synovus expects the operations and cash flows of the merchant services business will be eliminated from its ongoing operations as a result of the proposed sale

F-15

Notes to Consolidated Financial Statements ­ ­ 

transaction. In addition, Synovus does not expect it will have significant continuing involvement in the operations of this component after the planned sale. Therefore, revenues and expenses of the merchant services business have been reported as a component of income from discontinued operations on the accompanying consolidated statements of income for the years ended December 31, 2009, 2008, and 2007. There are no significant assets, liabilities, or cash flows associated with the merchant services business.

The following amounts have been segregated from continuing operations and included in income from discontinued operations, net of income taxes and non-controlling interest, in the consolidated statements of income.

	Years Ended December 31,
(In thousands)	2009		2008		2007
TSYS revenues	$	—		—		1,835,412
Merchant services revenues		17,605		17,949		17,390
Total Revenue	$	17,605		17,949		1,852,802
TSYS income, before income taxes	$	—		—		335,567
Income tax expense		—		—		143,668
Income from discontinued operations, net of income taxes	$	—		—		191,899
Spin-off related expenses incurred by Synovus, before income taxes	$	—		—		13,858
Income tax benefit		—		—		(1,129	)
Spin-off related expenses incurred by Synovus, net of income tax benefit	$	—		—		12,729
Gain on transfer of mutual funds, before income taxes	$	—		—		6,885
Income tax expense		—		—		2,685
Gain on transfer of mutual funds, net of income taxes	$	—		—		4,200
Merchant services income, before income taxes	$	7,727		8,385		7,639
Income tax expense		3,137		2,735		2,673
Income from discontinued operations, net of income taxes	$	4,590		5,650		4,966
Income from discontinued operations, net of income taxes	$	4,590		5,650		188,336

Cash flows of discontinued operations from TSYS are presented below. Cash flows from the merchant services business were limited to transaction related clearing and operating income, are represented in the table above, and are considered inconsequential for presentation below.

	December 31,
(In thousands)	2007
Cash provided by operating activities	$	341,728
Cash used in investing activities		(162,476	)
Cash used in financing activities		(376,685	)
Effect of exchange rates on cash and cash equivalents		4,970
Cash used in discontinued operations	$	(192,463	)

Note 3   Restructuring Charges

Project Optimus, an initiative focused on operating efficiency gains and enhanced revenue growth, was launched in April 2008. Synovus expects to implement ideas associated with this project over a twenty-four month period which began in September 2008. Synovus incurred restructuring charges of approximately $22.1 million in conjunction with the project, including $10.7 million in severance charges and $11.4 million in other project related costs. For years ended December 31, 2009 and 2008, Synovus recognized a total of $6.0 million and $16.1 million in restructuring charges, respectively, including $5.5 million and $5.2 million in severance charges, respectively. At December 31, 2009, Synovus had an accrued liability of $532 thousand related to restructuring charges.

F-16

Notes to Consolidated Financial Statements ­ ­ 

Note 4   Trading Account Assets

The following table summarizes trading account assets at December 31, 2009 and 2008, which are reported at fair value.

(In thousands)	2009		2008
U.S. Treasury securities	$	3,017		—
Other U.S. Government agency securities		9		274
Government agency issued mortgage-backed securities		864		3,174
Government agency issued collateralized mortgage obligations		2,427		6,933
All other residential mortgage-backed securities		5,717		9,315
State and municipal securities		1,332		1,753
Other investments		1,004		3,064
Total	$	14,370		24,513

Note 5   Other Loans Held for Sale

With the exception of certain first lien residential mortgage loans, Synovus originates loans with the intent to hold to maturity. Loans or pools of loans are transferred to the other 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. The value of the loans or pools of loans is primarily determined by analyzing the underlying collateral of the loan, the external market prices of similar assets, and management’s disposition plan. 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 (gains) from sale of these loans are recognized as a component of non-interest expense.

At December 31, 2009 and 2008, the carrying value of other loans held for sale was $36.8 million and $3.5 million, respectively. All such loans were considered impaired as of December 31, 2009 and 2008. During the year ended December 31, 2009, Synovus transferred loans with a cost basis totaling $225.8 million to the other loans held for sale portfolio. Synovus recognized charge-offs totaling $89.2 million on these loans, resulting in a new cost basis for loans transferred to the other loans held for sale portfolio of $136.6 million. The $89.2 million in charge-offs were estimated based on the projected sales price of the loans considering management’s disposition plan. Subsequent to their transfer to the other loans held for sale portfolio, Synovus recognized additional write-downs of $6.7 million and recognized additional net losses on sales of $1.7 million. The additional write-downs were based on the estimated sales proceeds from pending sales.

Note 6  Investment Securities Available for Sale

The amortized cost, gross unrealized gains and losses, and estimated fair values of investment securities available for sale at December 31, 2009 and 2008 are summarized as follows:

	December 31, 2009
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
U.S. Treasury securities	$	121,505		167		(83	)		121,589
Other U.S. Government agency securities		900,984		27,174		(532	)		927,626
Government agency issued mortgage-backed securities		1,795,688		78,821		(529	)		1,873,980
Government agency issued collateralized mortgage obligations		83,632		3,271		—			86,903
State and municipal securities		80,931		2,029		(159	)		82,801
Equity securities		9,456		584		(59	)		9,981
Other investments		86,744		—		(889	)		85,855
Total	$	3,078,940		112,046		(2,251	)		3,188,735

F-17

Notes to Consolidated Financial Statements ­ ­ 

	December 31, 2008
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
U.S. Treasury securities	$	4,576		2		—			4,578
Other U.S. Government agency securities		1,474,409		78,227		—			1,552,636
Government agency issued mortgage-backed securities		1,888,128		68,411		(568	)		1,955,971
Government agency issued collateralized mortgage obligations		114,727		1,877		(162	)		116,442
State and municipal securities		120,552		3,046		(317	)		123,281
Equity securities		9,455		—		(1,288	)		8,167
Other investments		9,021		—		(74	)		8,947
Total	$	3,620,868		151,563		(2,409	)		3,770,022

At December 31, 2009 and 2008, investment securities with a carrying value of $2.4 billion and $3.1 billion, respectively, were pledged to secure certain deposits, securities sold under repurchase agreements, and Federal Home Loan Bank (FHLB) advances as required by law and contractual agreements.

Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2009 and 2008 were as follows:

	December 31, 2009
	Less than 12 Months					12 Months or Longer					Total Fair Value
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(In thousands)	Value		Losses			Value		Losses			Value		Losses
U.S. Treasury securities	$	19,681		(83	)		—		—			19,681		(83	)
Other U.S Government agency securities		71,689		(532	)		—		—			71,689		(532	)
Government agency issued mortgage-backed securities		145,461		(529	)		—		—			145,461		(529	)
Government agency issued collateralized mortgage obligations		—		—			—		—			—		—
State and municipal securities		5,833		(105	)		1,308		(54	)		7,141		(159	)
Equity securities		2,756		(59	)		—		—			2,756		(59	)
Other investments		79,813		(889	)		—		—			79,813		(889	)
Total	$	325,233		(2,197	)		1,308		(54	)		326,541		(2,251	)

	December 31, 2008
	Less than 12 Months					12 Months or Longer					Total Fair Value
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(In thousands)	Value		Losses			Value		Losses			Value		Losses
Government agency issued mortgage-backed securities	$	120,428		(437	)		18,480		(131	)		138,908		(568	)
Government agency issued collateralized mortgage obligations		19,410		(98	)		9,104		(64	)		28,514		(162	)
State and municipal securities		4,724		(142	)		2,246		(175	)		6,970		(317	)
Equity securities		4,012		(1,288	)		—		—			4,012		(1,288	)
Other investments		—		—			926		(74	)		926		(74	)
Total	$	148,574		(1,965	)		30,756		(444	)		179,330		(2,409	)

F-18

Notes to Consolidated Financial Statements ­ ­ 

Synovus holds two debt securities, classified as other investments within its portfolio of available for sale investment securities, for which the fair value isother-than-temporarily impaired. These securities were fully impaired and had no carrying value at December 31, 2009. At December 31, 2008, the carrying value of these securities was $819 thousand. During the twelve months ended December 31, 2009, Synovus recorded impairment charges of $819 thousand for theother-than-temporary impairment of these securities. These charges are fully credit related, and have been recognized as a component of non-interest income.

At December 31, 2009, Synovus has reviewed investment securities that are in an unrealized loss position in accordance with its accounting policy forother-than-temporary impairment and does not consider themother-than-temporarily impaired. Synovus does not intend to sell its debt securities and it is more likely than not that Synovus will not be required to sell the securities prior to recovery.

U.S. Treasury and U.S. Government agency securities.  As of December 31, 2009, the unrealized losses in this category consisted primarily of unrealized losses in direct obligations of the U.S. Government and U.S. Government agencies and were caused by interest rate increases. These investments were not considered to beother-than-temporarily impaired at December 31, 2009.

Government Agency Issued Mortgage-backed securities.  The unrealized losses on investment in mortgage-backed securities were caused by interest rate increases. At December 31, 2009, all of the collateralized mortgage obligations and mortgage-backed pass-through securities held by Synovus were issued or backed by U.S. Government agencies. These securities are rated AAA by both Moody’s and Standard and Poor’s. Because the decline in fair value is attributable to changes in interest rates and not credit quality, Synovus does not consider these investments to beother-than-temporarily impaired at December 31, 2009.

The amortized cost and estimated fair value by contractual maturity of investment securities available for sale at December 31, 2009 are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Estimated
(In thousands)	Cost		Fair Value
U.S. Treasury securities:
Within 1 year	$	25,248		25,248
1 to 5 years		96,257		96,341
5 to 10 years		—		—
More than 10 years		—		—
	$	121,505		121,589
U.S. Government agency securities:
Within 1 year	$	266,197		272,286
1 to 5 years		324,933		337,472
5 to 10 years		282,597		289,978
More than 10 years		27,257		27,890
	$	900,984		927,626
State and municipal securities:
Within 1 year	$	8,452		8,503
1 to 5 years		37,569		38,556
5 to 10 years		25,387		26,090
More than 10 years		9,523		9,652
	$	80,931		82,801
Other investments:
Within 1 year	$	—		—
1 to 5 years		81,699		80,810
5 to 10 years		900		900
More than 10 years		4,145		4,145
	$	86,744		85,855
Equity securities	$	9,456		9,981
Government agency issued mortgage-backed securities	$	1,795,688		1,873,980
Government agency issued collateralized mortgage obligations	$	83,632		86,903
Total investment securities	$	3,078,940		3,188,735

F-19

Notes to Consolidated Financial Statements ­ ­ 

	Amortized		Estimated
(In thousands)	Cost		Fair Value
Within 1 year	$	299,897		306,037
1 to 5 years		540,458		553,179
5 to 10 years		308,884		316,968
More than 10 years		40,925		41,687
Equity securities		9,456		9,981
Government agency issued mortgage-backed securities		1,795,688		1,873,980
Government agency issued collateralized mortgage obligations		83,632		86,903
Total investment securities	$	3,078,940		3,188,735

A summary of sales transactions in the investment securities available for sale portfolio for 2009, 2008, and 2007 is as follows:

			Gross		Gross
			Realized		Realized
(In thousands)	Proceeds		Gains		Losses
2009(1)	$	260,041		14,992		(925	)
2008		165,623		45		—
2007		25,482		1,056		(76	)

(1) Gross realized losses include a $900 thousand charge for other-than-temporary impairment.

Note 7   Loans and Allowance for Loan Losses

Loans outstanding, by classification, are summarized as follows:

	December 31,
(In thousands)	2009			2008
Commercial:
Commercial, financial, and agricultural	$	6,118,516			6,747,928
Owner occupied		4,584,278			4,499,339
Real estate — construction		5,208,218			7,295,727
Real estate — mortgage		5,279,174			5,024,640
Total commercial		21,190,186			23,567,634
Retail:
Real estate — mortgage		3,352,972			3,488,524
Retail loans — credit card		294,126			295,055
Retail loans — other		565,132			606,347
Total retail		4,212,230			4,389,926
Total loans		25,402,416			27,957,560
Unearned income		(19,348	)		(37,383	)
Total loans, net of unearned income	$	25,383,068			27,920,177

Total commercial real estate loans represent 41.3% of the total loan portfolio at December 31, 2009. Due to declines in economic indicators and real estate values, the loans in the commercial real estate portfolio may have a greater risk of non-collection than other loans.

Activity in the allowance for loan losses is summarized as follows:

	Years Ended December 31,
(In thousands)	2009			2008			2007
Balance at beginning of year	$	598,301			367,613			314,459
Provision for losses on loans		1,805,599			699,883			170,208
Recoveries of loans previously charged off		32,431			17,076			14,155
Loans charged off		(1,492,606	)		(486,271	)		(131,209	)
Balance at end of year	$	943,725			598,301			367,613

At December 31, 2009, the recorded investment in loans that were considered to be impaired (including accruing TDRs) was $1.53 billion. Included in this amount is $792.6 million of impaired loans (which consist primarily of collateral dependent loans) for which there is no related allowance for loan losses determined in accordance with provisions included in sections 35 and 55 of ASC310-10, Accounting by Creditors for Impairment of a Loan. The allowance on these loans is zero because estimated losses on collateral dependent impaired loans included in this total have been charged-off. Impaired loans (including accruing TDRs) at December 31, 2009 also include $733.8 million of impaired loans for which the related allowance for loan losses is $150.5 million. At December 31, 2009, all impaired loans, other than $213.6 million of accruing TDRs, were on non-accrual status.

At December 31, 2008, the recorded investment in loans that were considered to be impaired (including accruing TDRs) was $727.3 million. Included in this amount was $618.2 million of impaired loans (which consisted primarily of collateral dependent loans) for which there was no related allowance for loan losses determined in accordance with provisions included in sections. The allowance on these loans was zero because estimated losses on collateral dependent impaired loans included in this total have been charged-off. Impaired loans at December 31, 2008 (including accruing TDRs) also included $109.2 million of impaired loans for which the related allowance for loan losses was $26.2 million. At December 31, 2008, all impaired loans, other than $1.2 million of accruing TDR’s, were on non-accrual status.

F-20

Notes to Consolidated Financial Statements ­ ­ 

The allowance for loan losses on impaired loans, with the exception of accruing TDRs, was determined using either the fair value of the loan’s collateral, less estimated selling costs, or discounted cash flows. The average recorded investment in impaired loans was approximately $1.37 billion, $576.6 million, and $149.5 million for the years ended December 31, 2009, 2008, and 2007, respectively. Excluding accruing TDRs, there was no interest income recognized for the investment in impaired loans for the years ended December 31, 2009, 2008, and 2007. Interest income recognized for accruing TDRs was approximately $8.9 million, $60 thousand, and $70 thousand for the years ended December 31, 2009, 2008, and 2007 respectively.

Loans on nonaccrual status were $1.56 billion and $920.5 million at December 31, 2009 and 2008, respectively.

Interest income on non-accrual loans outstanding at December 31, 2009 and 2008, that would have been recorded if the loans had been current and performed in accordance with their original terms was $145.0 million and $96.8 million for the years ended December 31, 2009 and 2008, respectively. Interest income recorded on these loans for the years ended December 31, 2009 and 2008, respectively, was $67.3 million and $52.2 million.

A substantial portion of the loan portfolio is secured by real estate in markets in which subsidiary banks are located throughout Georgia, Alabama, Tennessee, South Carolina, and Florida. Accordingly, the ultimate collectability of a substantial portion of the loan portfolio and the recovery of a substantial portion of the carrying amount of real estate owned are susceptible to changes in market conditions in these areas.

In the ordinary course of business, Synovus’ subsidiary banks have made loans to certain of their executive officers and directors (including their associates and affiliates) and of the Parent Company and its significant subsidiaries, as defined. Significant subsidiaries consist of Columbus Bank and Trust Company, Bank of North Georgia, and The National Bank of South Carolina. Management believes that such loans are made substantially on the same terms, including interest rate and collateral, as those prevailing at the time for comparable transactions with unaffiliated customers. The following is a summary of such loans outstanding and the activity in these loans for the year ended December 31, 2009.

(In thousands)
Balance at December 31, 2008	$	468,808
Adjustment for executive officer and director changes		(2,277	)
Adjusted balance at December 31, 2008		466,531
New loans		219,375
Repayments		(198,169	)
Loans charged-off		(49,660	)
Balance at December 31, 2009	$	438,077

At December 31, 2009, loans to executive officers and directors (including their associates and affiliates) above include $88.0 million of loans that were classified as nonaccrual, greater than 90 days past due, or potential problem loans. Such loans are primarily to affiliatesand/or associates of directors and executive officers of certain Significant Subsidiaries and, other than one loan with an outstanding balance of $2.8 million at December 31, 2009, do not involve loans directly to, or guaranteed by, any directors or executive officers of the Parent Company or any Significant Subsidiary. In addition, the $49.7 million in loans charged-off were related to loans to affiliatesand/or associates of directors and executive officers of certain Significant Subsidiaries and were not related to loans directly to, or guaranteed by, any directors or executive officers of the Parent Company or any Significant Subsidiary.

Note 8   Goodwill and Other Intangible Assets

The following table shows the changes in the carrying amount of goodwill for the years ended December 31, 2009 and 2008.

	December 31,
(In thousands)	2009		2008
Balance as of January 1:
Goodwill	$	519,138		519,138
Accumulated impairment losses		479,617		—
Goodwill, net at January 1,		39,521		519,138
Impairment losses		15,090		479,617
Balance as of December 31:
Goodwill		519,138		519,138
Accumulated impairment losses		494,707		479,617
Goodwill, net at December 31,	$	24,431		39,521

At June 30, 2008, Synovus conducted its annual goodwill impairment evaluation. As a result of this evaluation, Synovus recognized a non-cash charge for impairment of goodwill on one of its reporting units of $36.9 million. The impairment charge was primarily related to a decrease in valuation based on market trading and transaction multiples of tangible book value.

At December 31, 2008, Synovus determined that goodwill impairment should be reevaluated based on an adverse change in the general business environment, significantly higher loan losses, reduced interest margins, and a decline in Synovus’ market capitalization during the second half of 2008. Historically, Synovus determined the fair value of its reporting units based on a combination of the income approach (utilizing the

F-21

Notes to Consolidated Financial Statements ­ ­ 

discounted cash flows (DCF) method), the public company comparables approach (utilizing multiples of tangible book value), and the transaction approach (utilizing readily observable market valuation multiples for closed transactions). At December 31, 2008, due to the lack of observable market data, management enhanced the valuation methodology by using discounted cash flow analyses to estimate the fair values of its reporting units.

In performing Step 1 of the goodwill impairment testing and measurement process, the estimated fair values of the reporting units with goodwill were developed using the DCF method. The results of the DCF method were corroborated with estimates of fair value utilizing market price to earnings, price to book value, price to tangible book value, and Synovus’ market capitalization plus a control premium. The results of this Step 1 process indicated potential impairment in four reporting units, as the book values of each reporting unit exceeded their respective estimated fair values.

As a result, Synovus performed Step 2 to quantify the goodwill impairment, if any, for these four reporting units. In Step 2, the estimated fair values for each of the four reporting units were allocated to their respective assets and liabilities in order to determine an implied value of goodwill, in a manner similar to the calculation performed in a business combination. Based on the results of Step 2, Synovus recognized a $442.7 million (pre-tax and after-tax) charge for goodwill impairment during the three months ended December 31, 2008, which represented a total goodwill write-off for the four reporting units. The primary driver of the goodwill impairment for these four reporting units was the decline in Synovus’ market capitalization, which declined 31% from June 30, 2008 to December 31, 2008.

During 2009, Synovus recognized an additional charge of $15.1 million for impairment of goodwill. The 2009 impairment charge was due to a decline in Synovus’ market capitalization as well as further financial deterioration in the associated banking reporting units. At December 31, 2009, the remaining goodwill of $24.4 million consists of goodwill associated with two financial management services reporting units.

Other intangible assets as of December 31, 2009 and 2008 are presented in the following table.

	2009
	Gross
	Carrying		Accumulated
(In thousands)	Amount		Amortization			Impairment		Net
Other intangible assets:
Purchased trust revenues	$	4,210		(2,409	)		—		1,801
Acquired customer contracts		5,270		(4,883	)		—		387
Core deposit premiums		46,331		(32,330	)		—		14,001
Other		665		(205	)		—		460
Total carrying value	$	56,476		(39,827	)		—		16,649

	2008
	Gross
	Carrying		Accumulated
	Amount		Amortization			Impairment			Net
Other intangible assets:
Purchased trust revenues	$	4,210		(2,128	)		—			2,082
Acquired customer contracts		5,270		(3,467	)		(1,049	)		754
Core deposit premiums		46,331		(28,416	)		—			17,915
Other		666		(151	)		—			515
Total carrying value	$	56,477		(34,162	)		(1,049	)		21,266

Aggregate other intangible assets amortization expense for the years ended December 31, 2009, 2008, and 2007 was $4.6 million, $5.6 million, and $5.1 million, respectively. Aggregate estimated amortization expense over the next five years is: $4.1 million in 2010, $3.7 million in 2011, $3.2 million in 2012, $1.6 million in 2013, and $1.1 million in 2014.

Synovus recorded an acquired customer contracts asset impairment charge of $1.0 million during the year ended

F-22

Notes to Consolidated Financial Statements ­ ­ 

December 31, 2008. The impairment charge was recorded based on management’s estimate that the recorded values would not be recoverable. The charge is represented as a component of other operating expenses in the consolidated statement of income.

Note 9   Other Assets

Significant balances included in other assets at December 31, 2009 and 2008 are as follows:

(In thousands)	2009		2008
Accrued interest receivable	$	127,869		171,909
Accounts receivable		24,471		45,331
Cash surrender value of bank owned life insurance		247,220		384,579
Other real estate (ORE)		238,807		246,121
FHLB/FRB Stock		142,001		122,126
Private equity investments		48,463		123,475
FDIC prepaid deposit insurance assessments		188,855		—
Other prepaid expenses		20,741		23,941
Net current income tax benefit		335,656		82,921
Net deferred income tax assets		11,945		163,270
Derivative asset positions		114,535		307,771
Miscellaneous other assets		209,258		65,947
Total other assets	$	1,709,821		1,737,391

Synovus’ investment in company-owned life insurance programs was approximately $247.2 million at December 31, 2009, which included approximately $82.9 million of separate account life insurance policies covered by stable value agreements. At December 31, 2009, the market value of the investments underlying the separate account policies was within the coverage provided by the stable value agreements.

Note 10   Interest Bearing Deposits

A summary of interest bearing deposits at December 31, 2009 and 2008 is as follows:

(In thousands)	2009		2008
Interest bearing demand deposits	$	3,894,243		3,359,410
Money market accounts		7,363,677		8,094,452
Savings accounts		463,967		437,656
Time deposits		11,538,949		13,162,042
Total interest bearing deposits	$	23,260,836		25,053,560

Interest bearing deposits include the unamortized balance of purchase accounting adjustments and the fair value basis adjustment for those time deposits which are hedged with interest rate swaps. The aggregate amount of time deposits of $100,000 or more was $8.75 billion at December 31, 2009 and $9.89 billion at December 31, 2008.

The following table presents scheduled cash maturities of time deposits at December 31, 2009.

(In thousands)
Maturing within one year	$	8,430,495
between 1 — 2 years		2,233,808
2 — 3 years		676,516
3 — 4 years		107,997
4 — 5 years		72,508
Thereafter		17,625
	$	11,538,949

F-23

Notes to Consolidated Financial Statements ­ ­ 

Note 11   Long-Term Debt and Short-Term Borrowings

Long-term debt at December 31, 2009 and 2008 consists of the following:

(In thousands)	2009		2008
Parent Company:
4.875% subordinated notes, due February 15, 2013, with semi-annual interest payments and principal to be paid at maturity	$	206,750		272,190
5.125% subordinated notes, due June 15, 2017, with semi-annual interest payments and principal to be paid at maturity		450,000		450,000
LIBOR + 1.80% debentures, due April 19, 2035 with quarterly interest payments and principal to be paid at maturity (rate of 2.05% at December 31, 2009)		10,014		10,082
Hedge-related basis adjustment		35,017		50,111
Total long-term debt — Parent Company		701,781		782,383
Subsidiaries:
Federal Home Loan Bank advances with interest and principal payments due at various maturity dates through 2018 and interest rates ranging from 0.23% to 6.09% at December 31, 2009 (weighted average interest rate of 0.96% at December 31, 2009)		1,043,546		1,317,992
Other notes payable and capital leases with interest and principal payments due at various maturity dates through 2031 (weighted average interest rate of 4.18% at December 31, 2009)		6,265		6,798
Total long-term debt — subsidiaries		1,049,811		1,324,790
Total long-term debt	$	1,751,592		2,107,173

The 4.875% subordinated notes due February 15, 2013 decreased by $65.4 million during 2009. $35.6 million of these debentures were repurchased in open market transactions during the first quarter of 2009. Synovus recognized a gain of $6.1 million on the repurchase of these notes, which represents the difference between the price paid and the recorded value of these notes. Also, $29.8 million of these debentures were exchanged for common stock during the fourth quarter of 2009. See Note 12, Equity, for further discussion of the exchange of subordinated debentures for common stock.

The provisions of the indentures governing Synovus’ subordinated notes and debentures contain certain restrictions, within specified limits, on mergers, disposition of common stock or assets, and investments in subsidiaries, and limit Synovus’ ability to pay dividends on its capital stock if there is an event of default under the applicable indenture. As of December 31, 2009, Synovus and its subsidiaries were in compliance with the covenants in these agreements.

The FHLB advances are secured by certain loans receivable of approximately $4.0 billion, as well as investment securities with a fair market value of approximately $59.2 million at December 31, 2009.

Required annual principal payments on long-term debt for the five years subsequent to December 31, 2009 are shown on the following table:

	Parent
(In thousands)	Company		Subsidiaries		Total
2010	$	—		621,289		621,289
2011		—		103,949		103,949
2012		—		313,481		313,481
2013		206,750		5,716		212,466
2014		—		480		480

The following table sets forth certain information regarding federal funds purchased and securities sold under repurchase agreements, the principal components of short-term borrowings.

(Dollars in thousands)	2009			2008			2007
Balance at December 31	$	475,062			725,869			2,319,412
Weighted average interest rate at December 31		.53	%		.68	%		3.81	%
Maximum month end balance during the year	$	1,580,259			2,544,913			2,767,055
Average amount outstanding during the year		918,736			1,719,978			1,957,990
Weighted average interest rate during the year		0.42	%		2.24	%		4.75	%

F-24

Notes to Consolidated Financial Statements ­ ­ 

Note 12   Equity

The following table shows the change in shares outstanding for the three years ended December 31, 2009.

	Preferred		Common			Treasury
	Shares		Shares			Shares
(In thousands)	Issued		Issued			Held
Balance at December 31, 2006		—		331,214			5,662
Issuance of non-vested stock		—		552			—
Stock options exercised		—		3,702			—
Issuance of common stock for acquisitions		—		61			—
Balance at December 31, 2007		—		335,529			5,662
Issuance (forfeitures) of non-vested stock, net		—		(39	)		—
Stock options exercised		—		521			—
Treasury shares purchased		—		—			15
Issuance of preferred stock		968		—			—
Balance at December 31, 2008		968		336,011			5,677
Issuance (forfeitures) of non-vested stock, net		—		(34	)		—
Restricted share unit activity		—		39			—
Stock options exercised		—		54			—
Treasury shares purchased		—		—			9
Issuance of common stock		—		150,000			—
Exchange of subordinated notes due 2013 for common stock		—		9,444			—
Balance at December 31, 2009		968		495,514			5,686

Cumulative Perpetual Preferred Stock

On December 19, 2008, Synovus issued to the Treasury 967,870 shares of Synovus’ Fixed Rate Cumulative Perpetual Preferred Stock, Series A, without par value (the Series A Preferred Stock), having a liquidation amount per share equal to $1,000, for a total price of $967,870,000. The Series A Preferred Stock pays cumulative dividends at a rate of 5% per year for the first five years and thereafter at a rate of 9% per year. Synovus may not redeem the Series A Preferred Stock during the first three years except with the proceeds from a qualified equity offering of not less than $241,967,500. After February 15, 2012, Synovus may, with the consent of the Federal Deposit Insurance Corporation, redeem, in whole or in part, the Series A Preferred Stock at the liquidation amount per share plus accrued and unpaid dividends. The Series A Preferred Stock is generally non-voting. Prior to December 19, 2011, unless Synovus has redeemed the Series A Preferred Stock or the Treasury has transferred the Series A Preferred Stock to a third party, the consent of the Treasury will be required for Synovus to (1) declare or pay any dividend or make any distribution on common stock, par value $1.00 per share, other than regular quarterly cash dividends of not more than $0.06 per share, or (2) redeem, repurchase or acquire Synovus common stock or other equity or capital securities, other than in connection with benefit plans consistent with past practice. A consequence of the Series A Preferred Stock purchase includes certain restrictions on executive compensation that could limit the tax deductibility of compensation that Synovus pays to executive management.

As part of its purchase of the Series A Preferred Stock, Synovus issued the Treasury a warrant to purchase up to 15,510,737 shares of Synovus common stock (Warrant) at an initial per share exercise price of $9.36. The Warrant provides for the adjustment of the exercise price and the number of shares of Synovus common stock issuable upon exercise pursuant to customary anti-dilution provisions, such as upon stock splits or distributions of securities or other assets to holders of Synovus common stock, and upon certain issuances of Synovus common stock at or below a specified price relative to the initial exercise price. The Warrant expires on December 19, 2018. Pursuant to the Securities Purchase Agreement, the Treasury has agreed not to exercise voting power with respect to any shares of common stock issued upon exercise of the Warrant.

The offer and sale of the Series A Preferred Stock and the Warrant were effected without registration under the Securities Act in reliance on the exemption from registration under Section 4(2) of the Securities Act. Synovus has allocated the

F-25

Notes to Consolidated Financial Statements ­ ­ 

total proceeds received from the United States Department of the Treasury based on the relative fair values of the Series A Preferred Stock and the Warrants. This allocation resulted in the preferred shares and the Warrants being initially recorded at amounts that are less than their respective fair values at the issuance date.

The $48.5 million discount on the Series A Preferred Stock is being accreted using a constant effective yield over the five-year period preceding the 9% perpetual dividend. Synovus records increases in the carrying amount of the preferred shares resulting from accretion of the discount by charges against retained earnings.

Common Stock

On September 22, 2009, Synovus completed a public offering of 150,000,000 shares of Synovus’ $1.00 par value common stock at a price of $4.00 per share, generating proceeds of $570.9 million, net of issuance costs.

Exchange of Subordinated Debt for Common Stock

On November 5, 2009, Synovus completed an exchange offer (Exchange Offer) of $29,820,000 in aggregate principal amount of its outstanding 4.875% Subordinated Notes Due 2013 (the “Notes”). The Notes exchanged in the Exchange Offer represent 12.6% of the $236,570,000 aggregate principal amount of the Notes outstanding prior to the Exchange Offer. Pursuant to the terms of the Exchange Offer, Synovus issued 9.44 million shares of Synovus’ common stock as consideration for the Notes. The Exchange Offer resulted in a pre-tax gain of $6.1 million which was recognized as other non-interest income during the fourth quarter of 2009.

Note 13   Regulatory Capital

Synovus is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, Synovus must meet specific capital levels that involve quantitative measures of both on- and off-balance sheet items as calculated under regulatory capital guidelines. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

As a financial holding company, Synovus and its subsidiary banks are required to maintain capital levels required for a well-capitalized institution, as defined by federal banking regulations. The capital measures used by the federal banking regulators include the total risk-based capital ratio, Tier 1 risk-based capital ratio, and the leverage ratio. Under the regulations, a national or state chartered bank will be well-capitalized if it has a total capital ratio of 10% or greater, a Tier 1 capital ratio of 6% or greater, a leverage ratio of 5% or greater, and is not subject to any written agreement, order, capital directive, or prompt corrective action directive by a federal bank regulatory agency to meet and maintain a specific capital level for any capital measure. However, even if a bank satisfies all applicable quantitative criteria to be considered well-capitalized, the regulations also establish procedures for “downgrading” an institution to a lower capital category based on supervisory factors other than capital. At December 31, 2009, several of Synovus’ subsidiary state chartered banks were required to and currently maintain regulatory capital levels in excess of minimum well-capitalized requirements primarily as a result of increases in non-performing assets. As of December 31, 2009, Synovus and its subsidiary banks meet all capital requirements to which they are subject.

Management currently believes, based on internal capital analysis and projections, that Synovus’ capital position is adequate under current regulatory standards. However, if economic conditions or other factors worsen to a greater degree than the assumptions underlying Synovus’ internal assessment of its capital position, if minimum regulatory capital requirements for Synovus or its subsidiary banks increase as the result of formal regulatory directives or if Synovus’ capital projections for any reason fail to adequately address some of the more complex aspects of the current operating structure, then Synovus may be required to seek additional capital from external sources. In light of the current banking environment, as well as continuing discussions with regulators, Synovus is identifying, considering, and pursuing additional strategic initiatives to bolster its capital position. Given current economic and market conditions and Synovus’ recent financial performance and related credit ratings, there can be no assurance that additional capital will be available on favorable terms, if at all.

F-26

Notes to Consolidated Financial Statements ­ ­ 

The following table summarizes regulatory capital information at December 31, 2009 and 2008 on a consolidated basis and for each significant subsidiary, defined as any direct subsidiary of Synovus with assets or net income levels exceeding 10% of the consolidated totals.

	Actual					For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions(1)
(Dollars in thousands)	2009			2008		2009		2008		2009		2008
Synovus Financial Corp.
Tier I capital	$	2,721,287			3,602,848		1,071,279		1,284,260		n/a		n/a
Total risk-based capital		3,637,712			4,674,476		2,142,558		2,568,520		n/a		n/a
Tier I capital ratio		10.16	%		11.22		4.00		4.00		n/a		n/a
Total risk-based capital ratio		13.58			14.56		8.00		8.00		n/a		n/a
Leverage ratio		8.12			10.28		4.00		4.00		n/a		n/a
Columbus Bank and Trust Company(2)
Tier I capital	$	667,687			732,725		201,276		210,993		301,913		316,490
Total risk-based capital		731,704			798,896		402,551		421,987		503,189		527,483
Tier I capital ratio		13.27	%		13.89		4.00		4.00		6.00		6.00
Total risk-based capital ratio		14.54			15.15		8.00		8.00		10.00		10.00
Leverage ratio		8.17			12.67		4.00		4.00		5.00		5.00
Bank of North Georgia(2)
Tier I capital	$	434,894			557,413		170,381		215,881		255,571		323,822
Total risk-based capital		489,206			625,767		340,762		431,763		425,952		539,704
Tier I capital ratio		10.21	%		10.33		4.00		4.00		6.00		6.00
Total risk-based capital ratio		11.49			11.59		8.00		8.00		10.00		10.00
Leverage ratio		8.48			8.79		4.00		4.00		5.00		5.00
The National Bank of South Carolina
Tier I capital	$	400,473			450,512		156,720		191,055		235,080		286,583
Total risk-based capital		450,733			510,517		313,441		382,111		391,801		477,639
Tier I capital ratio		10.22	%		9.43		4.00		4.00		6.00		6.00
Total risk-based capital ratio		11.50			10.69		8.00		8.00		10.00		10.00
Leverage ratio		8.80			9.04		4.00		4.00		5.00		5.00

(1)

The prompt corrective action provisions are applicable at the bank level only.

(2)

The bank subsidiary entered into a memorandum of understanding with the FDIC and the state of Georgia during 2009 and early 2010 and has agreed to maintain minimum capital ratios at specified levels higher than those otherwise required by applicable regulation as follows: Tier 1 capital to total average assets (leverage ratio)−8% and total capital to risk-weighted assets (total risk-based capital ratio)−10%.

F-27

Notes to Consolidated Financial Statements ­ ­ 

Note 14   Other Comprehensive Income (Loss)

The components of other comprehensive income (loss) for the years ended December 31, 2009, 2008, and 2007 are as follows:

	2009									2008									2007
	Before-			Tax			Net of			Before-			Tax			Net of			Before-			Tax			Net of
	Tax			(Expense)			Tax			Tax			(Expense)			Tax			Tax			(Expense)			Tax
(In thousands)	Amount			or Benefit			Amount			Amount			or Benefit			Amount			Amount			or Benefit			Amount
Net unrealized gains/losses on cash flow hedges	$	(31,887	)		12,404			(19,483	)		34,928			(13,339	)		21,589			29,859			(11,525	)		18,334
Net unrealized gains/losses on investment securities available for sale:
Unrealized gains/losses arising during the year		(25,292	)		8,991			(16,301	)		123,137			(47,064	)		76,073			51,794			(19,940	)		31,854
Reclassification adjustment for (gains)losses realized in net income		(14,067	)		5,383			(8,684	)		(45	)		17			(28	)		(980	)		377			(603	)
Net unrealized gains/losses		(39,359	)		14,374			(24,985	)		123,092			(47,047	)		76,045			50,814			(19,563	)		31,251
Amortization of postretirement unfunded health benefit, net of tax		35			(14	)		21			290			(110	)		180			1,315			(498	)		817
Foreign currency translation (gains) losses		—			—			—			—			—			—			7,621			(1,470	)		6,151
Other comprehensive income(loss)	$	(71,211	)		26,764			(44,447	)		158,310			(60,496	)		97,814			89,609			(33,056	)		56,553

Cash settlements on cash flow hedges were $33.4 million, $20.3 million, and ($1.4) million for the years ended December 31, 2009, 2008, and 2007, respectively, all of which were included in earnings. During 2009, 2008, and 2007, Synovus recorded cash (payments) receipts on terminated cash flow hedges of $10.3 million, $2.2 million, and ($1.3) million, respectively, which were deferred and are being amortized into earnings over the shorter of the remaining contract life or the maturity of the designated instrument as an adjustment to interest income (expense). There were three terminated cash flow hedges during 2009, one terminated cash flow hedge during 2008, and two terminated cash flow hedges during 2007. The amortization on all previously terminated cash flow hedge settlements was approximately $4.0 million, $17 thousand, and ($816) thousand in 2009, 2008, and 2007, respectively. The change in unrealized gains (losses) on cash flow hedges was approximately ($27.8) million in 2009, $32.8 million in 2008, and $30.3 million in 2007.

F-28

Notes to Consolidated Financial Statements ­ ­ 

Note 15   Earnings (Loss) Per Common Share

The following table displays a reconciliation of the information used in calculating basic and diluted earnings (loss) per common share (EPS) for the years ended December 31, 2009, 2008, and 2007.

	Years Ended December 31,
(In thousands, except per share data)	2009			2008			2007
Income (loss) from continuing operations	$	(1,433,931	)		(580,376	)		337,969
Income from discontinued operations, net of income taxes and non-controlling interest		4,590			5,650			188,336
Net income (loss)		(1,429,341	)		(574,726	)		526,305
Net income attributable to non-controlling interest		2,364			7,712			—
Net income (loss) attributable to controlling interest		(1,431,705	)		(582,438	)		526,305
Dividends and accretion of discount on preferred stock		56,966			2,057			—
Net income (loss) available to common shareholders	$	(1,488,671	)		(584,495	)		526,305
Income (loss) from continuing operations	$	(1,433,931	)		(580,376	)		337,969
Net income attributable to non-controlling interest		2,364			7,712			—
Dividends and accretion of discount on preferred stock		56,966			2,057			—
Net income (loss) from continuing operations available to common shareholders	$	(1,493,261	)		(590,145	)		337,969
Weighted average common shares outstanding:
Basic	$	372,943			329,319			326,849
Potentially dilutive shares from assumed exercise of securities or other contracts to purchase common stock*		—			—			3,014
Diluted	$	372,943			329,319			329,863
Basic earnings (loss) per common share:
Net income (loss) from continuing operations attributable to common shareholders	$	(4.00	)		(1.79	)		1.03
Net income (loss) attributable to common shareholders		(3.99	)		(1.77	)		1.61
Diluted earnings (loss) per common share:
Net income (loss) from continuing operations attributable to common shareholders	$	(4.00	)		(1.79	)		1.02
Net income (loss) attributable to common shareholders		(3.99	)		(1.77	)		1.60

* Due to the net loss attributable to common shareholders for the years ended December 31, 2009 and 2008, potentially dilutive shares were excluded from the earnings per share calculation as including such shares would have been antidilutive.

Basic earnings per common share is computed by dividing net income (loss) by the average common shares outstanding for the period. Diluted earnings per common share reflects the dilution that could occur if securities or other contracts to issue common stock were exercised or converted. The dilutive effect of outstanding options and restricted shares is reflected in diluted earnings per share by application of the treasury stock method.

F-29

Notes to Consolidated Financial Statements ­ ­ 

The following represents potentially dilutive shares including options and warrants to purchase shares of Synovus common stock and non-vested shares that were outstanding during the periods noted below, but were not included in the computation of diluted earnings per common share because the exercise price for options and warrants and fair value of non-vested shares was greater than the average market price of the common shares during the period.

			Weighted Average
	Number		Exercise Price
Quarter Ended	of Shares		Per Share
December 31, 2009(1)		—		—
September 30, 2009(1)		—		—
June 30, 2009(1)		—		—
March 31, 2009(1)		—		—
December 31, 2008(1)		—		—
September 30, 2008(1)		—		—
June 30, 2008(1)		—		—
March 31, 2008(1)		—		—
December 31, 2007		12,577,751	$	27.69	(2)
September 30, 2007		4,902,564		29.38
June 30, 2007		2,500		32.57
March 31, 2007		2,500		32.57

(1)	Due to the net loss attributable to common shareholders for the years ended December 31, 2009 and 2008, potentially dilutive shares were excluded from the earnings per common share calculation as including such shares would have been antidilutive.
(2)	See the summary of stock option activity table in Note 22 for the adjustment to the exercise price of all options outstanding at December 31, 2007 in connection with the TSYS spin-off.

Note 16   Fair Value Accounting

Effective January 1, 2008, Synovus adopted provisions included in ASC820-10 regarding fair value measurements and disclosures and provisions of ASC825-10 regarding the fair value option as described in ASC825-10-10. ASC820-10 defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. The provisions of ASC820-10 did not introduce any new requirements mandating the use of fair value; rather, it unified the meaning of fair value and added additional fair value disclosures.

ASC825-10 includes provisions that permit entities to make an irrevocable election, at specified election dates, to measure eligible financial instruments and certain other instruments at fair value. After the initial adoption, the election is made at the acquisition of an eligible financial asset, financial liability, or firm commitment or when certain specified reconsideration events occur. At January 1, 2008, Synovus elected the fair value option (FVO) for mortgage loans held for sale and certain callable brokered certificates of deposit. Accordingly, a cumulative effect 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) were previously accounted for on a lower of aggregate cost or fair value basis pursuant to ASC948-310-35 regarding accounting for certain mortgage banking activities. 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 provisions of ASC815-20-25 and ASC815-25-35 regarding accounting for fair value hedges as derivative instruments. 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 ASC815-25-35. Previously under ASC948-310-35, Synovus was exposed, from an accounting perspective, only to the downside risk of market volatilities; however, by electing the FVO, Synovus can 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 the 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 ASC 815. Prior to the adoption of the provisions included in ASC825-10-10, 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, ASC 815 requires an extensive documentation process for each hedging relationship and an extensive process related to assessing the effectiveness and measuring the ineffectiveness related to such hedges. By electing the 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

F-30

Notes to Consolidated Financial Statements ­ ­ 

underlying CDs through the income statement, while eliminating the operational time and expense needed to manage a hedge accounting program under ASC 815. During 2009, all of these callable brokered certificates of deposit were either called or matured.

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 ASC825-10-10.

	Ending		Cumulative			Opening
	Balance Sheet		Effect			Balance Sheet
	December 31,		Adjustment			January 1,
(Dollars in thousands)	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

ASC820-10 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. During the three months ended June 30, 2009, Synovus adopted provisions included in ASC820-10 as described in ASC820-10-65-4 regarding determination of fair value when the volume and level of activity for the asset or liability have significantly decreased and identifying transactions that are not orderly. These provisions of ASC820-10 are intended to determine the fair value when there is no active market or where the inputs being used represent distressed sales. The impact to Synovus was insignificant. ASC820-10 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 1Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include equity securities as well as certain U.S. Treasury securities that are highly liquid and are actively traded in over-the-counter markets.

Level 2Observable 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 3Unobservable 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 collateral-dependent impaired loans, other loans held for sale, other real estate, certain equity investments, certain private equity investments, and goodwill.

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 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

F-31

Notes to Consolidated Financial Statements ­ ­ 

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.

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.

During the fourth quarter of 2009, Synovus completed the sale of its ownership interest in certain private equity investments. Synovus received total proceeds of $65.8 million related to the sale.

Derivative Assets and Liabilities

Derivative instruments 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 are 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.

In November 2009, Synovus sold certain Visa Class B shares to another Visa USA member financial institution. The sales price was based on the Visa stock conversion ratio in effect at the time for conversion of Visa Class B shares to Visa Class A unrestricted shares. In conjunction with the sale, Synovus entered into a derivative contract with the purchaser which provides for settlements between the parties based upon a change in the ratio for conversion of Visa Class B shares to Visa Class A shares. The fair value conversion rate derivative is measured using a discounted cash flow methodology for estimated future cash flows determined through use of probability weighting for estimates of Visa’s aggregate exposure to the covered litigation. The conversion rate derivative is classified as Level 3 within the valuation hierarchy as the value is determined using discounted cash flow methodologies and involves unobservable inputs which are not supported by market activity for the liability.

F-32

Notes to Consolidated Financial Statements ­ ­ 

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 is also entered in the model. These types of certificates of deposit are classified as Level 2 within the valuation hierarchy. As of December 31, 2009, all of these callable brokered certificates of deposit either had been called or had matured.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present 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 December 31, 2009 and 2008 according to the valuation hierarchy included in ASC820-10:

	December 31, 2009
							Total
							Assets/Liabilities
							at
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Assets
Trading account assets	$	725		13,645		—		14,370
Mortgage loans held for sale		—		138,056		—		138,056
Investment securities available for sale:
U.S. Treasury securities		121,589		—		—		121,589
Other U.S. Government agency securities		—		927,626		—		927,626
Government agency issued mortgage-backed securities		—		1,873,980		—		1,873,980
Government agency issued collateralized mortgage obligations		—		86,903		—		86,903
State and municipal securities		—		82,801		—		82,801
Equity securities		2,697		—		7,284		9,981
Other investments		—		79,813		6,042		85,855
Total investment securities available for sale	$	124,286		3,051,123		13,326		3,188,735
Private equity investments		—		—		48,463		48,463
Derivative assets		—		114,336		199		114,535
Liabilities
Trading account liabilities	$	—		7,070		—		7,070
Derivative liabilities		—		86,170		12,862		99,032

F-33

Notes to Consolidated Financial Statements ­ ­ 

	December 31, 2008
							Total
							Assets/Liabilities
(In thousands)	Level 1		Level 2		Level 3		at Fair Value
Assets
Trading account assets	$	103		24,410		—		24,513
Mortgage loans held for sale		—		133,637		—		133,637
Investment securities available for sale:
U.S. Treasury securities		4,578		—		—		4,578
Other U.S. Government agency securities		—		1,552,636		—		1,552,636
Government agency issued mortgage-backed securities		—		1,955,971		—		1,955,971
Government agency issued collateralized mortgage obligations		—		116,442		—		116,442
State and municipal securities		—		123,281		—		123,281
Equity securities		2,756		—		5,411		8,167
Other investments		—		—		8,947		8,947
Total investment securities available for sale	$	7,334		3,748,330		14,358		3,770,022
Private equity investments		—		—		123,475		123,475
Derivative assets		—		305,383		2,388		307,771
Liabilities
Brokered certificates of deposit(1)	$	—		75,875		—		75,875
Trading account liabilities		—		17,287		—		17,287
Derivative liabilities		—		206,340		—		206,340

(1) Amounts represent the value of certain callable brokered certificates of deposit for which Synovus has elected the fair value option under ASC825-10-10.

Changes in Fair Value — FVO Items

The following table presents the changes in fair value included in the consolidated statements of income for items for 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 non-interest income, as appropriate, and substantially offset the change in fair value of the financial instruments referenced below.

	Year Ended December 31, 2009
	Mortgage			Other		Total Changes in
	Banking			Operating		Fair Value
(In thousands)	Income			Income		Recorded
Mortgage loans held for sale	$	(3,442	)		—		(3,442	)
Certain callable brokered CDs		—			520		(520	)

	Year Ended December 31, 2008
	Mortgage		Other			Total Changes in
	Banking		Operating			Fair Value
(In thousands)	Income		Income			Recorded
Mortgage loans held for sale	$	2,519		—			2,519
Certain callable brokered CDs		—		(2,994	)		2,994

F-34

Notes to Consolidated Financial Statements ­ ­ 

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 December 31, 2009 and 2008. The tables below include a roll forward of the balance sheet amount for the year ended December 31, 2009 and 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.

	2009
	Investment			Private
	Securities			Equity			Net Derivative
(In thousands)	Available for Sale			Investments			Liabilities
Beginning balance, January 1	$	14,358			123,475			—
Total gains (losses) (realized/unrealized):
Included in earnings		—			1,379			—
Unrealized gains (losses) included in other comprehensive income		1,058			—			—
Purchases, sales, issuances, and settlements, net		(2,090	)		(76,391	)		—
Transfers in and/or out of Level 3		—			—			12,862
Ending balance, December 31	$	13,326			48,463			12,862
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets still held at December 31	$	1,058			1,379			—

	2008
	Investment			Private
	Securities			Equity
(In thousands)	Available for Sale			Investments
Beginning balance, January 1	$	14,619			78,693
Total gains (losses) (realized/unrealized):
Included in earnings		—			24,995
Unrealized gains (losses) included in other comprehensive income		(1,312	)		—
Purchases, sales, issuances, and settlements, net		1,051			19,787
Transfers in and/or out of Level 3		—			—
Ending balance, December 31	$	14,358			123,475
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets still held at December 31	$	(1,312	)		24,995

F-35

Notes to Consolidated Financial Statements ­ ­ 

The table below summarizes gains and losses (realized and unrealized) included in earnings for the year ended December 31, 2009 and 2008 in other non-interest income as follows:

	Year Ended
	December 31, 2009
	Investment			Private
	Securities			Equity
(In thousands)	Available for Sale			Investments
Total change in earnings	$	—			1,379
Change in unrealized losses to assets and liabilities still held at December 31, 2009	$	1,058			—
	Year Ended
	December 31, 2008
	Investment			Private
	Securities			Equity
(In thousands)	Available for Sale			Investments
Total change in earnings	$	—			24,995
Change in unrealized losses to assets and liabilities still held at December 31, 2008	$	(1,312	)		—

Assets Measured at Fair Value on a Non-recurring Basis

In February 2008, the FASB issued provisions included in ASC820-10-15-1A which delayed the effective date for application of the provisions included in ASC825-10 regarding fair value measurements and disclosures for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. As of January 1, 2009, Synovus adopted the provisions of ASC820-10-15-1A for all non-financial assets and non-financial liabilities.

Certain assets and liabilities are measured at fair value on a non-recurring basis. These assets and liabilities are measured at fair value on a non-recurring basis and are not included in the tables above. These assets and liabilities primarily include impaired loans, other loans held for sale, other real estate, and goodwill. The amounts below represent only balances measured at fair value during the period and still held as of the reporting date.

	December 31, 2009
(In millions)	Level 1		Level 2		Level 3
Goodwill	$	—		—		24.4
Impaired loans(1)		—		—		1,021.5
Other loans held for sale		—		—		36.8
Other real estate		—		—		238.8

	December 31, 2008
(In millions)	Level 1		Level 2		Level 3
Impaired loans(1)	$	—		—		729.6

(1) Impaired loans are collateral-dependent.

Loans are evaluated for impairment in accordance with provisions of ASC310-10-35 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. Impaired loans measured by applying the practical expedient in ASC310-10-35 are included in the requirements of ASC820-10.

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. Substantially 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, adjusted for estimated selling costs. Management also considers other factors or recent developments such as changes in absorption rates or market conditions from the time of valuation, and anticipated sales values considering management plans for disposition, which could result in adjustment to the collateral value estimates indicated in the appraisals. 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 ORE is determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources, adjusted for estimated selling costs. An asset that is acquired through, or in lieu of, loan foreclosures is valued at the fair value of the asset less the estimated cost to sell. The transfer at fair value results in a new cost basis for the asset. Subsequent to

F-36

Notes to Consolidated Financial Statements ­ ­ 

foreclosure, valuations are updated periodically, and assets are marked to current fair value, but not to exceed the new cost basis. Determination of fair value subsequent to foreclosure also considers management’s plans for disposition, including liquidation sales, which could result in adjustment to the collateral value estimates indicated in the appraisals.

In accordance with the provisions of ASC 350, goodwill with a carrying amount of $39.5 million was written down during 2009 to its implied fair value of $24.4 million, resulting in an impairment charge of $15.1 million, which was included in earnings for the period. For further discussion regarding the goodwill evaluation see Note 8.

Fair Value of Financial Instruments

ASC825-10-50 requires the disclosure of the estimated fair value of financial instruments including those financial instruments for which Synovus did not elect the fair value option. The following table presents the carrying and estimated fair values of on-balance sheet financial instruments at December 31, 2009 and 2008. The fair value represents management’s best estimates based on a range of methodologies and assumptions.

Cash and due from banks, interest bearing funds with the Federal Reserve Bank, interest earning deposits with banks, and federal funds sold and securities purchased under resale agreements are repriced on a short-term basis; as such, the carrying value closely approximates fair value.

The fair value of loans is estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type, such as commercial, mortgage, home equity, credit card, and other consumer loans. Commercial loans are further segmented into certain collateral code groupings. The fair value of the loan portfolio is calculated, in accordance with ASC825-10-50, by discounting contractual cash flows using estimated market discount rates which reflect the credit and interest rate risk inherent in the loan. This method of estimating fair value does not incorporate the exit-price concept of fair value prescribed by ASC820-10 and generally produces a higher value than an exit approach.

The fair value of deposits with no stated maturity, such as non-interest bearing demand accounts, interest bearing demand deposits, money market accounts, and savings accounts, is estimated to be equal to the amount payable on demand as of that respective date. The fair value of time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities. Short-term debt that matures within ten days is assumed to be at fair value. The fair value of other short-term and long-term debt with fixed interest rates is calculated by discounting contractual cash flows using estimated market discount rates.

F-37

Notes to Consolidated Financial Statements ­ ­ 

	December 31, 2009				December 31, 2008
	Carrying		Estimated		Carrying		Estimated
(In thousands)	Value		Fair Value		Value		Fair Value
Financial assets
Cash and due from banks	$	564,482		564,482		524,327		524,327
Interest bearing funds with Federal Reserve Bank		1,901,847		1,901,847		1,206,168		1,206,168
Interest earning deposits with banks		12,534		12,534		10,805		10,805
Federal funds sold and securities purchased under resale agreements		203,959		203,959		388,197		388,197
Trading account assets		14,370		14,370		24,513		24,513
Mortgage loans held for sale		138,056		138,056		133,637		133,637
Other loans held for sale		36,816		36,816		3,527		3,527
Investment securities available for sale		3,188,735		3,188,735		3,770,022		3,770,022
Private equity investments		48,463		48,463		123,475		123,475
Loans, net		24,439,343		24,082,061		27,321,876		27,227,473
Derivative asset positions		114,535		114,535		307,771		307,771
Financial liabilities
Non-interest bearing deposits		4,172,697		4,172,697		3,563,619		3,563,619
Interest bearing deposits		23,260,836		23,349,007		25,053,560		25,209,084
Federal funds purchased and other short- term borrowings		475,062		475,062		725,869		725,869
Trading account liabilities		7,070		7,070		17,287		17,827
Long-term debt		1,751,592		1,543,015		2,107,173		1,912,679
Derivative liability positions	$	99,032		99,032		206,340		206,340

Note 17   Derivative Instruments

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 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.

The receive fixed interest rate swap contracts at December 31, 2009 are being utilized to hedge $550.0 million in floating rate loans and $265.0 million in fixed-rate liabilities. A summary of interest rate contracts and their terms at December 31, 2009 and 2008 is shown below. In accordance with the provisions of ASC 815, the fair value (net unrealized gains and losses) of these contracts has been recorded on the consolidated balance sheets.

F-38

Notes to Consolidated Financial Statements ­ ­ 

			Weighted-Average
	Notional		Receive			Pay			Maturity		Fair Value
(Dollars in thousands)	Amount		Rate			Rate(*)			in Months		Assets		Liabilities
December 31, 2009
Receive fixed swaps:
Fair value hedges	$	265,000		1.32	%		0.40	%		6	$	1,020		29
Cash flow hedges		550,000		7.97			3.25			16		27,394		—
Total	$	815,000		5.80	%		2.32	%		13		28,414		29
December 31, 2008
Receive fixed swaps:
Fair value hedges	$	993,936		3.88	%		1.52	%		25	$	38,482		1
Cash flow hedges		850,000		7.86			3.25			25		65,125		—
Total	$	1,843,936		5.72	%		2.31	%		25	$	103,607		1

* Variable pay rate based upon contract rates in effect at December 31, 2009 and 2008.

Cash Flow Hedges

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. The effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings. Ineffectiveness from cash flow hedges is recognized in the consolidated statements of income as a component of other non-interest income. As of December 31, 2009, cumulative ineffectiveness for Synovus’ portfolio of cash flow hedges represented a gain of approximately $44 thousand.

Synovus expects to reclassify from accumulated other comprehensive income (loss) approximately $24.2 million as pre-tax income during the next twelve months, as the related payments for interest rate swaps and amortization of deferred gains (losses) are recorded.

During 2009 and 2008, Synovus terminated certain cash flow hedges which resulted in net pre-tax gains of $10.3 million and $2.2 million, respectively. These gains have been included as a component of accumulated other comprehensive income and are being amortized over the shorter of the remaining contract life or the maturity of the designated instrument as an adjustment to interest income. The remaining unamortized deferred gain (loss) balances of all previously terminated cash flow hedges at December 31, 2009 and 2008 were $4.2 million and ($2.1) million, respectively.

Fair Value Hedges

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 fair value hedges quarterly using regression analysis. As of December 31, 2009, cumulative ineffectiveness for Synovus’ portfolio of fair value hedges represented a gain of approximately $19 thousand. Ineffectiveness from fair value hedges is recognized in the consolidated statements of income as a component of other non-interest income.

During 2009 and 2008, Synovus terminated certain fair value hedges which resulted in net pre-tax gains of $24.1 million and $18.9 million, respectively. These gains have been recorded as an adjustment to the carrying value of the hedged debt obligations and are being amortized over the shorter of the remaining contract life or the maturity of the designated instrument as an adjustment to interest expense. The remaining unamortized deferred gain balances of all previously terminated fair value hedges at December 31, 2009 and 2008 were $35.0 million and $18.9 million, respectively.

Customer Related Derivative Positions

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 interest rate risk. These derivative financial instruments are recorded at fair value with any

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Notes to Consolidated Financial Statements ­ ­ 

resulting gain or loss recorded in current period earnings. As of December 31, 2009 and 2008, the notional amounts of customer related interest rate derivative financial instruments, including both the customer position and the offsetting position, were $2.78 billion and $3.70 billion, respectively.

Mortgage Derivatives

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 whole loans to investors either individually or in bulk.

At December 31, 2009, Synovus had commitments to fund primarily fixed-rate mortgage loans to customers in the amount of $107.9 million. The fair value of these commitments at December 31, 2009 resulted in an unrealized gain of $199 thousand, which was recorded as a component of mortgage banking income in the consolidated statements of income.

At December 31, 2009, outstanding commitments to sell primarily fixed-rate mortgage loans amounted to approximately $259.5 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 December 31, 2009 resulted in an unrealized gain of $1.9 million, which was recorded as a component of mortgage banking income in the consolidated statements of income.

Other Derivative Contract

In November 2009, Synovus sold certain Visa Class B shares to another Visa USA member financial institution. In conjunction with the sale, Synovus entered into a derivative contract with the purchaser which provides for settlements between the parties based upon a change in the ratio for conversion of Visa Class B shares to Visa Class A shares. The fair value of the derivative is measured using a discounted cash flow methodology for estimated future cash flows determined through use of probability weighting for estimates of Visa’s aggregate exposure to the covered litigation.

Counterparty Credit Risk and Collateral

Entering into 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. Synovus assesses the credit risk of its counterparties regularly, monitoring publicly available credit rating information as well as other market based or, where applicable, customer specific credit metrics. Collateral requirements are determined via policies and procedures and in accordance with existing agreements. Synovus minimizes credit risk by dealing with highly rated counterparties and by obtaining collateral as required by policy. Management closely monitors credit conditions within the customer swap portfolio. Credit related fair value adjustments are recorded against the asset value of the derivative as deemed necessary based upon an analysis which includes consideration of the current asset value of the swap, customer credit rating, collateral value, and current economic conditions.

Collateral Contingencies

Certain of Synovus’ derivative instruments contain provisions that require Synovus to maintain an investment grade credit rating from each of the major credit rating agencies. Should Synovus’ credit rating fall below investment grade, these provisions allow the counterparties of the derivative instrument to request immediate termination or demand immediate and ongoing full collateralization on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that are in a liability position on December 31, 2009 is $100.9 million. During the second quarter of 2009, Moody’s and Standard and Poor’s downgraded Synovus and its subsidiary banks’ ratings to below investment grade. Due to these downgrades, Synovus was required to post additional collateral of $122.7 million against these positions. As of December 31, 2009, collateral, in the form of cash and U.S. government issued securities, has been pledged to fully collateralize these derivative liability positions. Also as a result of these downgrades, Synovus received notification from two counterparties who exercised their provision to terminate their swap positions with Synovus. Synovus received $17.9 million as net settlements during the year ended December 31, 2009 as a result of these terminations, including terminations of swaps in both asset and liability positions.

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Notes to Consolidated Financial Statements ­ ­ 

The impact of derivatives on the balance sheet at December 31, 2009 and 2008 is presented below:

	Fair Value of Derivative Assets					Fair Value of Derivative Liabilities
	Balance Sheet	December 31,				Balance Sheet	December 31,
(In thousands)	Location	2009		2008		Location	2009			2008
Derivatives Designated as Hedging Instruments
Interest rate contracts:
Fair value hedges	Other assets	$	1,020		38,482	Other liabilities	$	29			1
Cash flow hedges	Other assets		27,394		65,125	Other liabilities		—			—
Total derivatives designated as hedging instruments		$	28,414		103,607		$	29			1
Derivatives Not Designated as Hedging Instruments
Interest rate contracts	Other assets	$	85,922		201,776	Other liabilities	$	88,019			202,863
Mortgage derivatives	Other assets		199		2,388	Other liabilities(1)		(1,878	)		3,476
Other contract	Other assets		—		—	Other liabilities		12,862			—
Total derivatives not designated as hedging instruments		$	86,121		204,164		$	99,003			206,339
Total derivatives		$	114,535		307,771		$	99,032			206,340

(1) As of December 31, 2009, the fair value of commitments to sell mortgage loans resulted in an unrealized gain of $1.9 million. Such amount was reflected as a contra-liability as of December 31, 2009.

The effect of cash flow hedges on the consolidated statements of income for the twelve months ended December 31, 2009 and 2008 is presented below:

							Location of
	Amount of Gain						Gain (Loss)	Amount of Gain
	(Loss) Recognized in						Reclassified	(Loss) Reclassified							Location of
	OCI on Derivative						from OCI	from OCI into Income							Gain (Loss)
	Effective Portion						into	Effective Portion							Recognized	Amount of Gain (Loss) Recognized in Income Ineffective Portion
	Twelve Months Ended						Income	Twelve Months Ended							in Income	Twelve Months Ended
	December 31,						Effective	December 31,							Ineffective	December 31,
(In thousands)	2009		2008		2007		Portion	2009		2008		2007			Portion	2009			2008		2007
Interest rate contracts	$	2,726		36,169		17,273	Interest Income (Expense)	$	22,209		14,579		(1,061	)	Other Non-Interest Income	$	(198	)		202		(38	)

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Notes to Consolidated Financial Statements ­ ­ 

The effect of fair value hedges on the consolidated statements of income for the twelve months ended December 31, 2009 and 2008 is presented below:

	Derivative
	Location of										Hedged Item
	Gain (Loss)	Amount of Gain (Loss)									Location of	Amount of Gain (Loss)
	Recognized	Recognized in Income on Derivative									Gain (Loss)	Recognized in Income On Hedged Item
	in Income	Twelve Months Ended									Recognized in	Twelve Months Ended
	on	December 31,									Income on	December 31,
(In thousands)	Derivative	2009			2008			2007			Hedged Item	2009		2008			2007
Derivatives Designated in Fair Value Hedging Relationships
Interest rate contracts(1)	Other Non- Interest Income	$	(13,368	)		20,399			182		Other Non- Interest Income	$	12,404		(19,815	)		7
Total		$	(13,368	)		20,399			182			$	12,404		(19,815	)		7
Derivatives Not Designated as Hedging Instruments
Interest rate contracts(2)	Other Non- Interest Income (Expense)	$	(14,184	)		212			133
Mortgage derivatives(3)	Mortgage Revenues		3,165			(244	)		(908	)
Total		$	(11,019	)		(32	)		(775	)

(1)	Gain (loss) represents fair value adjustments recorded for fair value hedges designated in hedging relationships and related hedged items.
(2)	Gain (loss) represents net fair value adjustments (including credit related adjustments) for customer swaps and offsetting positions.
(3)	Gain (loss) represents net fair value adjustments recorded for interest rate lock commitments and commitments to sell mortgage loans.

Note 18   Visa Shares and Litigation Expense

Synovus is a member of the Visa USA network. Synovus received shares of Visa Class B common stock in exchange for its membership interest in Visa USA as Visa, Inc. prepared for an initial public offering (Visa IPO). Visa Class B shares will convert to Class A shares upon the release from transfer restrictions described below using a conversion ratio maintained by Visa. The Visa IPO was completed in March 2008. Under Visa USA bylaws, Visa members are obligated to indemnify Visa USAand/or its parent company, Visa, Inc., for potential future settlement of, or judgments resulting from, certain litigation (Visa litigation), which Visa refers to as the “covered litigation.” Visa’s retrospective responsibility plan provides for settlementsand/or judgments from covered litigation to be paid from a litigation escrow which was established from proceeds from the sale of Visa Class B shares, which would otherwise have been available for conversion to Visa Class A shares and then sold by Visa USA members upon the release from transfer restrictions. When proceeds are deposited to the escrow, the conversion ratio is adjusted whereby a greater amount of Class B shares will be required to convert to one Class A share.

In the fourth quarter of 2007, Synovus recognized a $36.8 million contingent liability for its membership proportion of the amount which Synovus estimated would be required for Visa to settle the covered litigation. In March 2008, Visa used $3.0 billion of the proceeds from the Visa IPO to establish an escrow for settlement of covered litigation and used substantially all of the remaining portion of the proceeds to redeem Class B and Class C shares held by Visa issuing members. Synovus recognized a pre-tax gain of $38.5 million on redemption proceeds received from Visa, Inc. and reduced the litigation accrual for its pro-rata share of Visa’s deposit to establish the litigation escrow. Following the redemption, Synovus held approximately 1.43 million shares of Visa Class B common stock which were subject to restrictions until the later of March 2011 or settlement of all covered litigation. Synovus further adjusted the litigation accrual in September 2008 following Visa’s settlement of its Discover litigation, and again following Visa’s deposit to the litigation escrow in December 2008. In July 2009, Synovus reduced its litigation accrual by $4.1 million following Visa’s $700 million deposit to the litigation escrow.

F-42

Notes to Consolidated Financial Statements ­ ­ 

In November 2009, Synovus sold its remaining Visa Class B shares to another Visa USA member financial institution for $51.9 million and recognized a gain on sale of $51.9 million. In conjunction with the sale, Synovus entered into a derivative contract with the purchaser which provides for settlements between the parties based upon a change in the ratio for conversion of Visa Class B shares to Visa Class A shares. The fair value conversion rate derivative is measured using a discounted cash flow methodology for estimated future cash flows determined through use of probability weighting for estimates of Visa’s aggregate exposure to the covered litigation. At December 31, 2009, the fair value of the derivative liability of $12.9 million is an estimate of Visa’s exposure to liability based upon probability-weighted potential outcomes of the covered litigation. Management believes that the estimate of Visa’s exposure to litigation liability is adequate based on current information; however, future developments in the litigation could require changes to the estimate.

Note 19   Commitments and Contingencies

Synovus is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby and commercial letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated financial statements.

The carrying amount of loan commitments and letters of credit closely approximates the fair value of such financial instruments. Carrying amounts include unamortized fee income and, in some instances, allowances for any estimated credit losses from these financial instruments. These amounts are not material to Synovus’ consolidated balance sheets.

The exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, and standby and commercial letters of credit, is represented by the contract amount of those instruments. Synovus uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, total commitment amounts do not necessarily represent future cash requirements.

Loan commitments and letters of credit at December 31, 2009 include the following:

(In thousands)
Standby and commercial letters of credit	$	503,196
Commitments to fund commercial real estate, construction, and land development loans		572,253
Unused credit card lines		1,527,830
Commitments under home equity lines of credit		796,196
Other loan commitments		3,191,528
Total	$	6,591,003

Lease Commitments

Synovus and its subsidiaries have entered into long-term operating leases for various facilities and equipment. Management expects that as these leases expire they will be renewed or replaced by similar leases based on need.

At December 31, 2009, minimum rental commitments under all such non-cancelable leases for the next five years and thereafter are as follows:

(In thousands)
2010	$	20,487
2011		20,099
2012		19,735
2013		19,145
2014		16,442
Thereafter		125,788
Total	$	221,696

Rental expense on facilities was $30.6 million, $28.4 million, and $24.4 million for the years ended December 31, 2009, 2008, and 2007, respectively.

Note 20   Legal Proceedings

Synovus and its subsidiaries are subject to various legal proceedings and claims that arise in the ordinary course of its business. In the ordinary course of business, Synovus and its subsidiaries are also subject to regulatory examinations, information gathering requests, inquiries and investigations. Synovus establishes accruals for litigation and regulatory matters when those matters present loss contingencies that Synovus determines to be both probable and reasonably estimable. Based on current knowledge, advice of counsel and available insurance coverage, management does not believe that the eventual outcome of pending litigationand/or regulatory matters, including those described below, will have a material

F-43

Notes to Consolidated Financial Statements ­ ­ 

adverse effect on Synovus’ consolidated financial condition, results of operations or cash flows. However, in the event of unexpected future developments, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to Synovus’ results of operations for any particular period.

Synovus is a member of the Visa USA network. Under Visa USA bylaws, Visa members are obligated to indemnify Visa USAand/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. See Note 18 for further discussion of the Visa litigation.

As previously disclosed, the Federal Deposit Insurance Corporation (FDIC), conducted an investigation of the policies, practices and procedures used by Columbus Bank and Trust Company (CB&T), a wholly owned banking subsidiary of Synovus Financial Corp. (Synovus), in connection with the credit card programs offered pursuant to its Affinity Agreement with CompuCredit Corporation (CompuCredit). CB&T issues credit cards that are marketed and serviced by CompuCredit pursuant to the Affinity Agreement. A provision of the Affinity Agreement generally requires CompuCredit to indemnify CB&T for losses incurred as a result of the failure of credit card programs offered pursuant to the Affinity Agreement to comply with applicable law. Synovus is subject to a per event 10% share of any such loss, but Synovus’ 10% payment obligation is limited to a cumulative total of $2 million for all losses incurred.

On June 9, 2008, the FDIC and CB&T entered into a settlement related to this investigation. CB&T did not admit or deny any alleged violations of law or regulations or any unsafe and unsound banking practices in connection with the settlement. As a part of the settlement, CB&T and the FDIC entered into a Cease and Desist Order and Order to Pay whereby CB&T agreed to: (1) pay a civil money penalty in the amount of $2.4 million; (2) institute certain changes to CB&T’s policies, practices and procedures in connection with credit card programs; (3) continue to implement its compliance plan to maintain a sound risk-based compliance management system and to modify them, if necessary, to comply with the Order; and (4) maintain its previously established Director Compliance Committee to oversee compliance with the Order. CB&T has paid the civil money penalty, and that payment is not subject to the indemnification provisions of the Affinity Agreement described above.

CB&T and the FDIC also entered into an Order for Restitution pursuant to which CB&T agreed to establish and maintain an account in the amount of $7.5 million to ensure the availability of restitution with respect to categories of consumers, specified by the FDIC, who activated Aspire credit card accounts issued pursuant to the Affinity Agreement on or before May 31, 2005. The FDIC may require the account to be applied if, and to the extent that, CompuCredit defaults, in whole or in part, on its obligation to pay restitution to any consumers required under the settlement agreements CompuCredit entered into with the FDIC and the Federal Trade Commission (FTC) on December 19, 2008. Those settlement agreements require CompuCredit to credit approximately $114 million to certain customer accounts that were opened between 2001 and 2005 and subsequently charged off or were closed with no purchase activity. CompuCredit has stated that this restitution involves mostly non-cash credits — in effect, reversals of amounts for which payments were never received. In addition, CompuCredit has stated that cash refunds to consumers are estimated to be approximately $3.7 million. This $7.5 million account represents a contingent liability of CB&T. At December 31, 2009, CB&T has not recorded a liability for this contingency. Any amounts paid from the restitution account are expected to be subject to the indemnification provisions of the Affinity Agreement described above. Synovus does not currently expect that the settlement will have a material adverse effect on its consolidated financial condition, results of operations or cash flows.

On May 23, 2008, CompuCredit and its wholly owned subsidiary, CompuCredit Acquisition Corporation, sued CB&T and Synovus in the State Court of Fulton County, Georgia, alleging breach of contract with respect to the Affinity Agreement. This case has subsequently been transferred to Georgia Superior Court, CompuCredit Corp,. v. Columbus Bank and Trust Co., CaseNo. 08-CV-157010 (Ga. Super Ct.) (the “Superior Court Litigation”). CompuCredit seeks compensatory and general damages in an unspecified amount, a full accounting of the shares received by CB&T and Synovus in connection with the MasterCard and Visa initial public offerings and remittance of certain of those shares to CompuCredit, and the transfer of accounts under the Affinity Agreement to a third-party. The parties are actively engaged in settlement discussions to resolve the Superior Court Litigation. Although no assurances can be given as to whether the litigation will settle, Synovus recorded a contingent liability in the amount of $10.5 million in the third quarter of 2009 relating to this potential settlement. CB&T and Synovus intend to continue to vigorously defend themselves against these allegations. Based on current knowledge and advice of counsel, management does not believe that the eventual outcome of this case will have a material adverse effect on Synovus’ consolidated financial condition, results of operations or cash flows. It is possible, however, that in the event of unexpected future

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Notes to Consolidated Financial Statements ­ ­ 

developments the ultimate resolution of this matter, if unfavorable, may be material to Synovus’ results of operations for any particular period.

On October 24, 2008, a putative class action lawsuit was filed against CompuCredit and CB&T in the United States District Court for the Northern District of California, Greenwood v. CompuCredit, et. al., CaseNo. 4:08-cv-04878 (CW) (“Greenwood”), alleging that the solicitations used in connection with the credit card programs offered pursuant to the Affinity Agreement violated the Credit Repair Organization Act, 15 U.S.C. § 1679 (“CROA”), and the California Unfair Competition Law, Cal. Bus. & Prof. Code § 17200. CB&T intends to vigorously defend itself against these allegations. On January 22, 2009, the court in the Superior Court Litigation ruled that CompuCredit must pay the reasonable attorneys’ fees incurred by CB&T in connection with the Greenwood case pursuant to the indemnification provision of the Affinity Agreement described above. Any losses that CB&T incurs in connection with Greenwood are also expected to be subject to the indemnification provisions of the Affinity Agreement described above. Based on current knowledge and advice of counsel, management does not believe that the eventual outcome of this case will have a material adverse effect on Synovus’ consolidated financial condition, results of operations or cash flows.

On July 7, 2009, the City of Pompano Beach General Employees’ Retirement System filed suit against Synovus, and certain of Synovus’ current and former officers, in the United States District Court, Northern District of Georgia (Civil Action File No. 1 09-CV-1811) (the “Securities Class Action”) alleging, among other things, that Synovus and the named individual defendants misrepresented or failed to disclose material facts that artificially inflated Synovus’ stock price in violation of the federal securities laws, including purported exposure to Synovus’ Sea Island Company lending relationship and the impact of real estate values as a threat to Synovus’ credit, capital position, and business, and failed to adequately and timely record losses for impaired loans. The plaintiffs in the Securities Class Action seek damages in an unspecified amount.

On November 4, 2009, a shareholder filed a putative derivative action purportedly on behalf of Synovus in the United States District Court, Northern District of Georgia (Civil Action File No. 1 09-CV-3069) (the “Federal Shareholder Derivative Lawsuit”), against certain currentand/or former directors and executive officers of Synovus. The Federal Shareholder Derivative Lawsuit asserts that the individual defendants violated their fiduciary duties based upon substantially the same facts as alleged in the Securities Class Action described above. The plaintiff is seeking to recover damages in an unspecified amount and equitableand/or injunctive relief.

On December 1, 2009, the Court consolidated the Securities Class Action and Federal Shareholder Derivative Lawsuit for discovery purposes, captionedIn re Synovus Financial Corp., 09-CV-1811-JOF, holding that the two cases involve “common issues of law and fact.”

On December 21, 2009, a shareholder filed a putative derivative action purportedly on behalf of Synovus in the Superior Court of Fulton County, Georgia (the “State Shareholder Derivative Lawsuit”), against certain currentand/or former directors and executive officers of Synovus. The State Shareholder Derivative Lawsuit asserts that the individual defendants violated their fiduciary duties based upon substantially the same facts as alleged in the Federal Shareholder Derivative Lawsuit described above. The plaintiff is seeking to recover damages in an unspecified amount and equitableand/or injunctive relief.

Synovus and the individual named defendants collectively intend to vigorously defend themselves against the Securities Class Action and Shareholder Derivative Lawsuit allegations. There are significant uncertainties involved in any potential class action and derivative litigation. Based upon information that presently is available to it, Synovus’ management is unable to predict the outcome of the purported Securities Class Action and Shareholder Derivative Lawsuits and cannot currently reasonably determine the probability of a material adverse result or reasonably estimate a range of potential exposure, if any. Although the ultimate outcome of these lawsuits cannot be ascertained at this time, based upon information that presently is available to it, Synovus presently does not believe that the Securities Class Action or the Shareholder Derivative Lawsuits, when resolved, will have a material adverse effect on Synovus’ consolidated financial condition, results of operations, or cash flows.

Synovus has received a letter from the SEC Atlanta regional office, dated December 15, 2009, informing Synovus that it is conducting an informal inquiry “to determine whether any person or entity has violated the federal securities laws”. The SEC has not asserted, nor does management believe, that Synovus or any person or entity has committed any securities violations. Synovus intends to cooperate fully with the SEC’s informal inquiry. Based upon information presently available to it, Synovus’ management is unable to predict the outcome of the informal SEC inquiry and cannot currently reasonably determine the probability of a material adverse result or reasonably estimate a range of potential exposure, if any.

Note 21   Employment Expenses and Benefit Plans

Synovus has three separate non-contributory retirement and benefit plans consisting of money purchase pension, profit sharing, and 401(k) plans which cover all eligible employees.

F-45

Notes to Consolidated Financial Statements ­ ­ 

Annual discretionary contributions to these plans are set each year by the respective Boards of Directors of each subsidiary, but cannot exceed amounts allowable as a deduction for federal income tax purposes. For the year ended December 31, 2009, Synovus will make an aggregate contribution for eligible employees to the money purchase pension plan of 3.8%. Synovus made an aggregate contribution for eligible employees to the money purchase pension plan of 7.0% for each year ended December 31, 2008 and 2007. The expense recorded for the years ended December 31, 2009, 2008, and 2007 was approximately $10.2 million, $22.5 million, and $19.2 million, respectively. For the years ended December 31, 2009, 2008, and 2007, Synovus did not make contributions to the profit sharing and 401(k) plans.

Synovus has stock purchase plans for directors and employees whereby Synovus makes contributions equal to one-half of employee and director voluntary contributions. The funds are used to purchase outstanding shares of Synovus common stock. Synovus recorded as expense $6.5 million, $7.5 million, and $7.3 million for contributions to these plans in 2009, 2008, and 2007, respectively.

Synovus has entered into salary continuation agreements with certain employees for past and future services which provide for current compensation in addition to salary in the form of deferred compensation payable at retirement or in the event of death, total disability, or termination of employment. The aggregate cost of these salary continuation plans and associated agreements is not material to the consolidated financial statements.

Synovus provides certain medical benefits to qualified retirees through a postretirement medical benefits plan. The benefit expense and accrued benefit cost is not material to the consolidated financial statements.

Note 22   Share-Based Compensation

General Description of Share-Based Plans

Synovus has a long-term incentive plan under which the Compensation Committee of the Board of Directors has the authority to grant share-based awards to Synovus employees. At December 31, 2009, Synovus had a total of 22,723,782 shares of its authorized but unissued common stock reserved for future grants under the 2007 Omnibus Plan. The Plan permits grants of share-based compensation including stock options, non-vested shares, and restricted share units. The grants generally include vesting periods ranging from three to five years and contractual terms of 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. Non-vested shares and restricted share units are awarded at no cost to the recipient upon their grant. Synovus has historically issued new shares to satisfy share option exercises and share unit conversions.

During 2009, no share-based incentive awards were granted to executive officers as a result of a decision in early 2009 to suspend share-based compensation in light of business performance and economic conditions. Additionally, no share-based incentive awards were granted to non-executive employees during 2009 with the exception of two insignificant grants made under employment agreements.

Stock options granted in 2008 and 2007 include retention stock options granted to certain key employees during 2008. During 2008, Synovus granted retention stock options that contain a five year graded vesting schedule with one-third of the total grant amount vesting on each of the third, fourth, and fifth anniversaries of the grant date. Other grants of stock options during 2008 and 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. The retention stock options granted in 2008 do not include provisions for accelerated vesting upon retirement, but do allow for continued vesting after retirement at age 65. Vesting for all other stock options granted during 2008 and 2007 generally accelerates upon retirement for plan participants who have reached age 62 and who also have no less than fifteen years of service at the date of their election to retire.

Non-vested shares and restricted share units granted in 2008 and 2007 generally vest over a three-year period, with one-third of the total grant amount vesting on each anniversary of the grant-date. Vesting for restricted share units granted during 2008 accelerates upon retirement for plan participants who have reached age 62 and who also have no less than fifteen years of service at the date of their election to retire. Non-vested shares granted to Synovus employees during 2007 do not contain accelerated vesting provisions for retirement. Vesting for non-vested shares granted to Synovus directors during 2008 and 2007 accelerates upon retirement for plan participants who have reached age 72. Dividends are paid on non-vested shares during the holding period and the non-vested shares are entitled to voting rights. Dividend equivalents are paid on outstanding restricted share units in the form of additional restricted share units that vest over the same vesting period as the original restricted share unit grant.

Impact of TSYS Spin-Off

As described in Note 2 to the consolidated financial statements, Synovus completed the tax-free spin-off of its shares of TSYS common stock to Synovus shareholders on December 31, 2007. Synovus’ share-based plans covering the

F-46

Notes to Consolidated Financial Statements ­ ­ 

majority of outstanding stock options on December 31, 2007 contained mandatory antidilution provisions designed to equalize the fair value of an award in an equity restructuring. Approximately 216,000 of outstanding Synovus stock options were issued under plans of acquired banks which did not contain mandatory antidilution provisions. These options were fully vested. Thus, as a result of the spin-off transaction, all outstanding Synovus stock options were modified as described below. Additionally, all holders of non-vested shares received TSYS shares based on the distribution ratio applicable to all Synovus shares in connection with the spin-off which are subject to the same vesting period as their non-vested Synovus shares.

Outstanding Synovus stock options held by TSYS employees on December 31, 2007 were converted to TSYS stock options utilizing an adjustment ratio of the post-spin stock price (TSYS10-day volume-weighted average post-spin stock price) to the pre-spin stock price (Synovus closing stock price immediately pre-spin).

The pre-spin and the post-spin fair value of Synovus’ stock options was measured using the Black-Scholes option pricing model. Outstanding options were grouped and separately measured based on their remaining estimated life. The risk-free interest rate and expected stock price volatility assumptions were matched to the remaining estimated life of the options. The expected volatility for the pre-spin calculation was based on Synovus’ historical stock price volatility, and for the post-spin calculation, was determined using historical volatility of peer companies. The dividend yield included in the pre-spin calculation was 3.4% while the dividend yield assumption in the post-spin calculation was 6.3%.

As a result of this modification, TSYS recognized in 2007 an expense of $5.5 million for outstanding vested options. This expense is included as a component of discontinued operations in the accompanying consolidated statement of income, net of minority interest. Outstanding Synovus stock options held by Synovus employees were converted to equalize their fair value utilizing an adjustment ratio of the post-spin stock price (Synovus10-day volume-weighted average post-spin stock price) to the pre-spin stock price (Synovus closing stock price immediately pre-spin). As a result of this modification, Synovus recognized in 2007 an expense of $2.0 million principally due to the modification of the outstanding Synovus stock options which were issued under plans of acquired banks that did not contain mandatory antidilutive provisions. This expense is included as a component of discontinued operations in the accompanying consolidated statement of income. The changes that resulted from the aforementioned conversion of stock options due to the spin-off of TSYS are reflected in Synovus’ outstanding options as of December 31, 2007 in the tables that follow.

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 for service-based awards is recognized net of estimated forfeitures for plan participants on a straight-line basis over the shorter of the vesting period or the period until reaching retirement eligibility. Total share-based compensation expense for continuing operations was $8.4 million, $13.7 million, and $15.9 million for 2009, 2008, and 2007, respectively. The total income tax benefit recognized in the consolidated statements of income for share-based compensation arrangements was approximately $1.0 million, $5.2 million, and $5.6 million for 2009, 2008, and 2007, respectively.

No share-based compensation costs have been capitalized for the years ended December 31, 2009, 2008, and 2007. Aggregate compensation expense recognized in 2007 with respect to Synovus stock options included $2.3 million that would have been recognized in previous years had the policy under ASC 718 with respect to retirement eligibility been applied to awards granted prior to January 1, 2006.

As of December 31, 2009, unrecognized compensation cost related to the unvested portion of share-based compensation arrangements involving shares of Synovus stock was approximately $5.5 million.

Stock Options

The fair value of option grants used in measuring compensation expense was determined using the Black-Scholes option pricing model with the following weighted-average assumptions:

	Years Ended December 31,
	2009			2008		2007
Risk-free interest rate		2.8	%		3.4		4.8
Expected stock price volatility		40.0			23.7		21.7
Dividend yield		1.0			5.2		2.6
Expected life of options		6.0 years			6.8 years		6.0 years

The expected volatility for the award in 2009 was based on Synovus’ historical stock price volatility. The expected volatility of the stock option awards in 2008 was based on historical volatility of peer companies and the expected volatility for stock option awards in 2007 was determined with equal weighting of Synovus’ implied and historical volatility. The expected life for stock options granted during 2009, 2008, and 2007 was calculated using the “simplified” method as

F-47

Notes to Consolidated Financial Statements ­ ­ 

prescribed by the SAB 107 and SAB 110. See Note 1 for a summary description of the provisions of SAB 110.

The grant-date fair value of the single option granted during 2009 was $1.53 and the weighted-average grant-date fair value of stock options granted during 2008 and 2007 was $1.85 and $7.22, respectively.

A summary of stock option activity (including performance-accelerated stock options as described below) and changes during the three years ended December 31, 2009 is presented below:

	2009					2008					2007
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
				Exercise					Exercise					Exercise
Stock Options	Shares			Price		Shares			Price		Shares			Price
Outstanding at beginning of year		30,954,180		$	10.89		28,999,602		$	10.58		23,639,261		$	22.83
Options granted		20,000			3.96		3,090,911			13.17		246,660			31.93
Options exercised		(17,256	)		2.47		(722,244	)		7.18		(4,362,785	)		18.74
Options forfeited		(400,000	)		13.18		(90,702	)		13.54		(471,600	)		19.34
Options expired		(2,389,913	)		9.99		(323,387	)		12.36		(68,079	)		19.19
Options converted to TSYS options on December 31, 2007 due to TSYS spin-off		—			—		—			—		(5,437,719	)		27.32
Options outstanding and price adjustment due to TSYS spin-off on December 31, 2007		—			—		—			—		15,453,864			(12.06	)
Options outstanding at end of year		28,167,011		$	10.94		30,954,180		$	10.89		28,999,602		$	10.58
Options exercisable at end of year		25,552,988		$	10.71		27,259,468		$	10.58		25,148,449		$	10.10

For both outstanding and exercisable stock options at December 31, 2009, there was no aggregate intrinsic value. The weighted average remaining contractual life was 3.04 years for options outstanding and 2.52 years for options exercisable as of December 31, 2009.

The intrinsic value of stock options exercised during the years ended December 31, 2009, 2008, and 2007 was $31 thousand, $2.7 million, and $44.6 million, respectively. The total grant date fair value of stock options vested during 2009, 2008, and 2007 was $1.2 million, $13.1 million, and $33.5 million, respectively. At December 31, 2009, total unrecognized compensation cost related to non-vested stock options was approximately $2.4 million. This cost is expected to be recognized over a weighted-average remaining period of 1.73 years.

Synovus granted performance-accelerated stock options to certain key executives in 2000 that fully vested during 2007. The exercise price per share was equal to the fair market value at the date of grant. The grant-date fair value was amortized on a straight-line basis over seven years with the portion related to periods from January 1, 2006 through the vesting date in 2007 being recognized in the Consolidated Statements of Income.

Summary information regarding these performance-accelerated stock options including adjustments resulting from the December 31, 2007 spin-off of TSYS is presented below. There were no performance-accelerated stock options granted during 2009, 2008, or 2007.

					Options
Year	Number		Exercise		Outstanding at
Options	of Stock		Price		December 31,
Granted	Options		Per Share		2009
2000		8,777,563	$	8.27-8.44		7,921,210

Non-Vested Shares and Restricted Share Units

Compensation expense is measured based on the grant date fair value of non-vested shares and restricted share units. The fair value of non-vested shares and restricted share units is equal to the market price of Synovus’ common stock on the grant date. During 2009, Synovus granted a single award of 5,556 restricted share units at a grant-date fair value of $3.48. The weighted-average grant-date fair value of non-vested shares and restricted share units granted during 2008 and 2007 was $12.87 and $28.37, respectively. The total fair value of non-vested shares and restricted share units vested during

F-48

Notes to Consolidated Financial Statements ­ ­ 

2009, 2008, and 2007 was $10.6 million, $11.2 million, and $5.9 million, respectively.

A summary of non-vested shares outstanding (excluding the performance-vesting shares described below) and changes during the three years ended December 31, 2009 is presented below:

				Weighted-
				Average
				Grant-Date
Non-Vested Shares	Shares			Fair Value
Outstanding at January 1, 2007		684,554		$	27.19
Granted		574,601			28.37
Vested		(215,666	)		27.32
Forfeited		(20,946	)		27.23
Outstanding at December 31, 2007		1,022,543			27.83
Granted		24,391			12.44
Vested		(406,215	)		27.61
Forfeited		(63,235	)		27.67
Outstanding at December 31, 2008		577,484		$	27.35
Granted		—			—
Vested		(360,072	)		27.62
Forfeited		(29,179	)		27.82
Outstanding at December 31, 2009		188,233		$	26.75

Additionally, holders of non-vested Synovus common shares also hold 100,747 non-vested shares of TSYS common stock as of December 31, 2009 as a result of the spin-off of TSYS on December 31, 2007.

A summary of restricted share units outstanding and changes during the years ended December 31, 2009 and 2008 is presented below:

				Weighted-
				Average
				Grant-Date
Restricted Share Units	Share Units			Fair Value
Outstanding at January 1, 2008		—		$	—
Granted		125,415			12.95
Dividend equivalents granted		5,010			10.20
Vested		—			—
Forfeited		(4,000	)		12.50
Outstanding at December 31, 2008		126,425		$	12.86
Granted		5,556			3.48
Dividend equivalents granted		1,071			2.90
Vested		(42,203	)		12.85
Forfeited		(16,034	)		12.89
Outstanding at December 31, 2009		74,815		$	12.01

As of December 31, 2009, total unrecognized compensation cost related to the foregoing non-vested shares and restricted share units was approximately $3.2 million. This cost is expected to be recognized over a weighted-average remaining period of 1.02 years.

During 2005, Synovus authorized a total grant of 63,386 shares of non-vested stock to a key executive with a performance-vesting schedule (performance-vesting shares). These performance-vesting shares have seven one-year performance periods(2005-2011) during each of which the Compensation Committee establishes an earnings per share goal and, if such goal is attained during any performance period, 20% of the performance-vesting shares will vest. Compensation expense for each tranche of this grant is measured based on the quoted market value of Synovus stock as of the date that each period’s earnings per share goal is determined and is recorded as a charge to expense on a straight-line basis during each year in which the performance criteria is met. The total fair value of performance-vesting shares vested during 2009 was $119 thousand. No performance vesting shares vested in 2008. The total fair value of performance-vesting shares vested during 2007 was $351 thousand. At December 31, 2009 there

F-49

Notes to Consolidated Financial Statements ­ ­ 

remained 25,355 performance-vesting shares to be granted in 2010 and 2011.

Cash received from option exercises under all share-based payment arrangements of Synovus common stock for the years ended December 31, 2009, 2008, and 2007 was $296 thousand, $3.0 million, and $63.9 million, respectively.

As stock options for the purchase of Synovus common stock are exercised and non-vested shares and share units vest, Synovus recognizes a tax benefit or deficiency which is recorded as a component of additional paid-in capital within equity for tax amounts not recognized in the Consolidated Statements of Income. Synovus recognized net tax deficiencies of $2.8 million and $115 thousand for the years ended December 31, 2009 and 2008, respectively. Synovus recognized a net tax benefit of $15.9 million for the year ended December 31, 2007.

The following table provides aggregate information regarding grants under all Synovus equity compensation plans through December 31, 2009:

						(c)
	(a)			(b)		Number of shares
	Number of securities			Weighted-average		remaining available for
	to be issued			exercise price of		issuance excluding
	upon exercise of			outstanding		shares reflected
Plan Category(1)	outstanding options			options		in column(a)
Shareholder approved equity compensation plans for shares of Synovus stock		27,620,140	(2)	$	11.04		22,723,782	(3)
Non-shareholder approved equity compensation plans		—			—		—
Total		27,620,140		$	11.04		22,723,782

(1)	Does not include information for equity compensation plans assumed by Synovus in mergers. A total of 546,871 shares of common stock were issuable upon exercise of options granted under plans assumed in mergers and outstanding at December 31, 2009. The weighted average exercise price of all options granted under plans assumed in mergers and outstanding at December 31, 2009 was $5.70. Synovus cannot grant additional awards under these assumed plans.
(2)	Does not include an aggregate number of 288,403 shares of non-vested stock and restricted share units which will vest over the remaining years through 2011.
(3)	Includes 22,723,782 shares available for future grants as share awards under the 2007 Omnibus Plan.

F-50

Notes to Consolidated Financial Statements ­ ­ 

Note 23   Income Taxes

The aggregate amount of income taxes included in the consolidated statements of income and in the consolidated statements of changes in equity for each of the years in the three-year period ended December 31, 2009, is presented below:

(In thousands)	2009			2008			2007
Consolidated Statements of Income:
Income tax (benefit) expense related to continuing operations	$	(171,977	)		(80,430	)		182,066
Income tax expense related to discontinued operations		3,137			2,735			147,897
Consolidated Statements of Changes in Equity:
Income tax (benefit) expense related to:
Cumulative effect of a change in accounting principle		—			33			230
Postretirement unfunded health benefit obligation		14			110			498
Unrealized gains (losses) on investment securities available for sale		(14,374	)		47,047			19,563
Unrealized gains (losses) on cash flow hedges		(12,404	)		13,339			11,525
Gains and losses on foreign currency translation		—			—			1,470
Share-based compensation		2,770			115			(15,937	)
Total	$	(192,834	)		(17,051	)		347,312

For the years ended December 31, 2009, 2008, and 2007, income tax expense (benefit) consists of:

(In thousands)	2009			2008			2007
Current:
Federal	$	(337,421	)		17,191			200,456
State		(9,749	)		9,980			14,955
		(347,170	)		27,171			215,411
Deferred:
Federal		161,838			(87,810	)		(29,272	)
State		13,355			(19,791	)		(4,073	)
		175,193			(107,601	)		(33,345	)
Total income tax (benefit) expense	$	(171,977	)		(80,430	)		182,066

F-51

Notes to Consolidated Financial Statements ­ ­ 

Income tax expense (benefit) as shown in the consolidated statements of income differed from the amounts computed by applying the U.S. federal income tax rate of 35% to (loss) income from continuing operations before income taxes as a result of the following:

(Dollars in thousands)	2009			2008			2007
Taxes at statutory federal income tax rate	$	(562,069	)		(233,980	)		182,012
Tax-exempt income		(3,257	)		(3,043	)		(3,249	)
State income tax (benefit) expense, net of federal income tax (benefit) expense, before valuation allowance		(50,947	)		(11,445	)		7,073
Tax credits		(1,555	)		(2,474	)		(2,643	)
Goodwill impairment		5,282			167,866			—
Other, net		2,305			(2,422	)		(1,127	)
Sub-total income tax (benefit) expense before valuation allowance		(610,241	)		(85,498	)		182,066
Change in valuation allowance for deferred tax assets		438,264			5,068			—
Total income tax (benefit) expense	$	(171,977	)		(80,430	)		182,066
Effective income tax rate before valuation allowance		38.00	%		12.17			35.01
Effective income tax rate after valuation allowance		10.71			12.17			35.01

F-52

Notes to Consolidated Financial Statements ­ ­ 

The tax effects of temporary differences that gave rise to significant portions of the deferred income tax assets and liabilities at December 31, 2009 and 2008 are presented below:

(In thousands)	2009			2008
Deferred income tax assets:
Provision for losses on loans	$	443,152			239,558
Finance lease transactions		19,754			19,216
Non-accrual interest		639			16,964
Share-based compensation		10,955			11,987
Deferred compensation		5,332			11,965
Tax credit and net operating loss carryforward		82,110			9,067
Litigation expense		4,893			7,360
Deferred revenue		3,752			6,664
Unrealized loss on derivative instruments		—			1,194
Other		14,469			8,154
Total gross deferred income tax assets		585,056			332,129
Less valuation allowance		(443,332	)		(5,068	)
Total deferred income tax assets		141,724			327,061
Deferred income tax liabilities:
Excess tax over financial statement depreciation		(59,102	)		(58,753	)
Net unrealized gain on investment securities available for sale		(43,013	)		(57,387	)
Net unrealized gain on cash flow hedges		(11,354	)		(23,758	)
Purchase accounting adjustments		(6,332	)		(8,944	)
Ownership interest in partnership		(3,233	)		(7,993	)
Other		(6,745	)		(6,956	)
Total gross deferred income tax liabilities		(129,779	)		(163,791	)
Net deferred income tax assets	$	11,945			163,270

At December 31, 2009, Synovus had total alternative minimum tax (AMT) and other credits of $42.8 million that will be available to reduce the regular income tax liability in future years. There is an unlimited carryforward period for the $19.3 million of AMT credits and the other credits expire in annual installments through the year 2019. The federal and state net operating loss carryforwards (NOLs) outstanding at December 31, 2009 are $778.1 million which will be available to reduce taxable income in future years. These carryforwards expire in annual installments beginning in 2018 and run through 2029.

A valuation allowance is recognized against deferred tax assets when, based on the consideration of all available evidence using a more likely than not criteria, it is determined that some portion of these tax benefits may not be realized. This assessment requires consideration of all sources of taxable income available to realize the deferred tax asset including, taxable income in prior carry-back years, future reversals of existing temporary differences, tax planning strategies and future taxable income exclusive of reversing temporary differences and carryforwards. The predictability that future taxable income, exclusive of reversing temporary differences, will occur is the most subjective of these four sources. The presence of cumulative losses in recent years is considered significant negative evidence, making it difficult for a company to rely on future taxable income, exclusive of reversing temporary differences and carryforwards, as a reliable source of future taxable income to realize a deferred tax asset. Judgment is a critical element in making this assessment.

During 2009, Synovus reached a three-year cumulative pre-tax loss position. The positive evidence considered in support of its use of future earnings as a source of realizing deferred tax assets was insufficient to overcome the negative

F-53

Notes to Consolidated Financial Statements ­ ­ 

evidence. Synovus estimated its realization of future tax benefits based on taxable income in available prior year carryback periods, future reversals of existing taxable temporary differences and prudent and feasible state tax planning strategies. Significant existing taxable temporary differences include depreciation of fixed assets and unrealized gains on securities. Each state tax planning strategy involves a plan to collapse one or more wholly-owned subsidiaries with income into an entity with losses.

Synovus recorded a valuation allowance of $5.1 million in 2008 and $438.2 million in 2009 for a total of $443.3 million (net of the federal benefit on state income taxes). At December 31, 2009, management also concluded that it is more likely than not that $11.9 million of its deferred tax assets will be realized. This amount of deferred tax assets is based on actual separate entity state income tax liabilities and tax planning strategies.

Synovus’ income tax returns are subject to review and examination by federal, state, and local taxing jurisdictions. Synovus is no longer subject to U.S. federal income tax examinations by the IRS for years before 2005 and, with few exceptions, is no longer subject to income tax examinations from state and local income tax authorities for years before 2006. Currently, there are no years for which a federal income tax return is under examination by the IRS. However, certain state income tax examinations are currently in progress. Although Synovus is unable to determine the ultimate outcome of these examinations, Synovus believes that current income tax accruals are adequate for any uncertain income tax positions relating to these jurisdictions. The income tax accruals were determined in accordance with sections 25 and 40 of ASC740-10 and ASC835-10-60-14 regarding accounting for uncertainty in income taxes as described in ASC740-10-05-6. Adjustments to income tax accruals are made when necessary to reflect a change in the probability outcome. The establishment and calculation of the deferred tax asset valuation allowance took into consideration the reserve for uncertain income tax positions.

A reconciliation of the beginning and ending amount of unrecognized income tax benefits is as follows (unrecognized state income tax benefits are not adjusted for the federal income tax impact):

	Years Ended December 31,
(In thousands)	2009			2008
Balance at January 1,	$	8,021			7,074
Additions based on income tax positions related to current year		243			766
Additions for income tax positions of prior years		114			2,353
Deductions for income tax positions of prior years		(205	)		(1,690	)
Settlements		(899	)		(482	)
Balance at December 31,	$	7,274			8,021

Accrued interest and penalties on unrecognized income tax benefits totaled $1.5 million as of December 31, 2009 and 2008, respectively. The total amount of unrecognized income tax benefits as of December 31, 2009 and 2008 that, if recognized, would affect the effective income tax rate is $5.8 million and $6.2 million (net of the federal benefit on state income tax issues) respectively, which includes interest and penalties of $1.0 million and $1.1 million, respectively.

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 $1.3 million of uncertain income tax positions will be either settled or resolved during the next twelve months.

F-54

Notes to Consolidated Financial Statements ­ ­ 

Note 24   Condensed Financial Information of Synovus Financial Corp. (Parent Company only)

Condensed Balance Sheets

	December 31,
(In thousands)	2009			2008
Assets
Cash and due from banks	$	30,103			2,797
Investment in consolidated bank subsidiaries, at equity		2,888,134			3,450,142
Investment in consolidated nonbank subsidiaries, at equity(1)		(32,042	)		149,300
Notes receivable from bank subsidiaries		421,317			363,941
Notes receivable from nonbank subsidiaries		397,519			438,134
Other assets		309,729			286,226
Total assets	$	4,014,760			4,690,540
Liabilities and Equity
Liabilities:
Long-term debt	$	701,781			782,383
Other liabilities		461,938			120,999
Total liabilities		1,163,719			903,382
Shareholders’ equity:
Preferred stock		928,207			919,635
Common stock		495,514			336,011
Additional paid-in capital		1,605,097			1,165,875
Treasury stock		(114,155	)		(114,117	)
Accumulated other comprehensive income		84,806			129,253
Accumulated (deficit) retained earnings		(148,428	)		1,350,501
Total shareholders’ equity		2,851,041			3,787,158
Total liabilities and shareholders’ equity	$	4,014,760			4,690,540

(1) Includes non-bank subsidiary formed during 2008 that has incurred losses on the disposition of non-performing assets.

F-55

Notes to Consolidated Financial Statements ­ ­ 

Condensed Statements of Income

	Years Ended December 31,
(In thousands)	2009			2008			2007
Income:
Cash dividends received from bank subsidiaries	$	64,044			349,462			365,024
Management and information technology fees from affiliates		162,648			115,050			117,934
Interest income		50,174			26,868			6,693
Other income		74,771			55,294			42,347
Total income		351,637			546,674			531,998
Expenses:
Interest expense		25,081			33,041			41,224
Other expenses		234,083			219,382			250,944
Total expenses		259,164			252,423			292,168
Income (loss) before income taxes and equity in undistributed net income (loss) of subsidiaries		92,473			294,251			239,830
Allocated income tax (benefit) expense		229,680			(18,390	)		(50,854	)
Income before equity in undistributed net income (loss) of subsidiaries		(137,207	)		312,641			290,684
Equity in undistributed (loss) income of subsidiaries		(1,299,088	)		(900,729	)		47,285
(Loss) income from continuing operations attributable to controlling interest		(1,436,295	)		(588,088	)		337,969
Income from discontinued operations, net of income taxes		4,590			5,650			188,336
Net (loss) income		(1,431,705	)		(582,438	)		526,305
Dividends and accretion of discount on preferred stock		56,966			2,057			—
Net (loss) income available to common shareholders	$	(1,488,671	)		(584,495	)		526,305

F-56

Notes to Consolidated Financial Statements ­ ­ 

Condensed Statements of Cash Flows

	Years Ended December 31,
(In thousands)	2009			2008			2007
Operating Activities
Net (loss) income	$	(1,431,705	)		(582,438	)		526,305
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Equity in undistributed loss (income) of subsidiaries		1,294,497			895,079			(244,150	)
Equity in undistributed income of equity method investees		—			(3,517	)		(6,107	)
Provision for deferred income taxes		286,404			—			—
Depreciation, amortization, and accretion, net		(68	)		24,395			20,063
Share-based compensation		8,361			13,716			21,540
Net increase (decrease) in other liabilities		439,398			(19,029	)		18,034
Gain on redemption of Visa shares		—			(38,450	)		—
Gain on sale of Visa shares		(51,900	)		—			—
Net increase in other assets		(497,644	)		(71,513	)		(95,108	)
Other, net		83,371			109,325			53,797
Net cash provided by operating activities		130,714			327,568			294,374
Investing Activities
Net investment in subsidiaries		(632,459	)		(408,119	)		(71,963	)
Equity method investments		—			—			(12,186	)
Purchases of investment securities available for sale		(24,974	)		—			(5,600	)
Purchases of premises and equipment		(14,835	)		(41,265	)		(22,670	)
Proceeds from sale of private equity investments		65,786			—			—
Proceeds from redemption of Visa shares		—			38,450			—
Proceeds from sale of Visa shares		51,900			—			—
Net (increase) decrease in short-term notes receivable from bank subsidiaries		(57,376	)		(223,409	)		26,907
Net (increase) decrease in short-term notes receivable from non-bank subsidiaries		40,615			(435,752	)		1,391
Net cash used in investing activities		(571,343	)		(1,070,095	)		(84,121	)
Financing Activities
Dividends paid to common and preferred shareholders		(73,568	)		(199,722	)		(264,930	)
Principal repayments on long-term debt		(29,685	)		(27,810	)		(10,310	)
Purchase of treasury shares		(38	)		(173	)		—
Proceeds from issuance of preferred stock		—			967,870			—
Proceeds from issuance of common stock		571,226			3,002			63,850
Net cash (used in) provided by financing activities		467,935			743,167			(211,390	)
Increase (decrease) in cash		27,306			640			(1,137	)
Cash at beginning of year		2,797			2,157			3,294
Cash at end of year	$	30,103			2,797			2,157

For the year ended December 31, 2009, the Parent Company received income tax refunds of $87.3 million and paid interest in the amount of $36.1 million. For the years ended December 31, 2008 and 2007, the Parent Company paid income taxes (net of refunds received) of $57.1 million and $429.8 million and interest in the amount of $38.1 million and $41.5 million, respectively.

F-57

 ­ ­ 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

Synovus Financial Corp.:

We have audited the accompanying consolidated balance sheets of Synovus Financial Corp. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of income, changes in equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Synovus Financial Corp. and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, Synovus Financial Corp. changed its method of accounting for split-dollar life insurance arrangements and elected the fair value option for mortgage loans held for sale and certain callable brokered certificates of deposit in 2008.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Synovus Financial Corp.’s internal control over financial reporting as of December 31, 2009, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 1, 2010 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Atlanta, Georgia

March 1, 2010

F-58

 ­ ­ 

MANAGEMENT’S REPORT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING

The management of Synovus Financial Corp. (the Company) is responsible for establishing and maintaining adequate internal control over financial reporting as defined inRule 13a-15(f) under the Securities Exchange Act of 1934.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control — Integrated Framework.

Based on our assessment, we believe that, as of December 31, 2009, the Company’s internal control over financial reporting is effective based on the criteria set forth inInternal Control — Integrated Framework.

Management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2009 has been audited by KPMG LLP, the independent registered public accounting firm which also audited the Company’s consolidated financial statements. KPMG LLP’s attestation report on management’s assessment of the Company’s internal control over financial reporting appears onpage F-60 hereof.

Richard E. Anthony	Thomas J. Prescott
Chairman &	Executive Vice President &
Chief Executive Officer	Chief Financial Officer

F-59

 ­ ­ 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

Synovus Financial Corp.:

We have audited Synovus Financial Corp.’s internal control over financial reporting as of December 31, 2009, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Synovus Financial Corp.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Synovus Financial Corp. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Synovus Financial Corp. as of December 31, 2009 and 2008, and the related consolidated statements of income, changes in equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2009, and our report dated March 1, 2010 expressed an unqualified opinion on those consolidated financial statements.

Atlanta, Georgia

March 1, 2010

F-60

Selected Financial Data ­ ­ 

	Years Ended December 31,
(In thousands, except per share data)	2009			2008			2007			2006			2005
Income Statement:
Total revenues(a)	$	1,406,913			1,495,090			1,519,606			1,472,347			1,284,015
Net interest income		1,010,310			1,077,893			1,148,948			1,125,789			965,216
Provision for losses on loans		1,805,599			699,883			170,208			75,148			82,532
Non-interest income		410,670			417,241			371,638			344,440			319,262
Non-interest expense		1,221,289			1,456,057			830,343			756,746			642,521
(Loss) income from continuing operations, net of income taxes		(1,433,931	)		(580,376	)		337,969			410,431			365,517
Income from discontinued operations, net of income taxes and minority interest(b)		4,590			5,650			188,336			206,486			159,929
Net (loss) income		(1,429,341	)		(574,726	)		526,305			616,917			516,446
Net income attributable to non-controlling interest		2,364			7,712			—			—			—
Net income (loss) attributable to controlling interest		(1,431,705	)		(582,438	)		526,305			616,917			516,446
Dividends on and accretion of discount on preferred stock		56,966			2,057			—			—			—
Net (loss) income available to common shareholders		(1,488,671	)		(584,495	)		526,305			616,917			516,446
Per share data:
Basic earnings (loss) per common share:
(Loss) income from continuing operations		(4.00	)		(1.79	)		1.03			1.28			1.14
Net (loss) income		(3.99	)		(1.77	)		1.61			1.92			1.66
Diluted earnings (loss) per common share:
(Loss) income from continuing operations		(4.00	)		(1.79	)		1.02			1.27			1.13
Net (loss) income		(3.99	)		(1.77	)		1.60			1.90			1.64
Cash dividends declared on common stock		0.04			0.46			0.82			0.78			0.73
Book value per common share(e)		3.93			8.68			10.43			11.39			9.43
Balance Sheet:
Investment securities		3,188,735			3,770,022			3,554,878			3,263,483			2,852,075
Loans, net of unearned income		25,383,068			27,920,177			26,498,585			24,654,552			21,392,347
Deposits		27,433,534			28,617,179			24,959,816			24,528,463			20,806,979
Long-term debt		1,751,592			2,107,173			1,890,235			1,343,358			1,928,005
Shareholders’ equity		2,851,041			3,787,158			3,441,590			3,708,650			2,949,329
Average total shareholders’ equity		3,285,014			3,435,574			3,935,910			3,369,954			2,799,496
Average total assets		34,423,617			34,051,637			32,895,295			29,831,172			26,293,003
Performance ratios and other data:
Return on average assets from continuing operations		(4.17	)%		(1.70	)		1.03			1.39			1.37
Return on average assets		(4.16	)		(1.72	)		1.60			2.07			1.96
Return on average equity from continuing operations		(43.65	)		(16.89	)		8.59			12.24			12.83
Return on average equity		(43.58	)		(16.95	)		13.37			18.19			18.45
Net interest margin		3.19			3.47			3.97			4.27			4.18
Dividend payout ratio(c)		nm			nm			51.25			40.99			44.51
Average shareholders’ equity to average assets		9.54			10.09			11.96			11.30			10.65
Tangible common equity to risk-adjusted assets(d)		7.03			8.74			9.19			10.55			9.93
Tangible common equity to tangible assets		5.74			7.86			8.90			10.54			9.92
Earnings to fixed charges ratio		(2.17x	)		0.16	x		1.47	x		1.71	x		2.04	x
Average common shares outstanding, basic		372,943			329,319			326,849			321,241			311,495
Average common shares outstanding, diluted		372,943			329,319			329,863			324,232			314,815

(a)	Consists of net interest income and non-interest income, excluding securities gains (losses).
(b)	On December 31, 2007, Synovus completed the tax-free spin-off of its shares of TSYS common stock to Synovus shareholders. In accordance with the provisions of ASC360-10-35, Accounting for the Impairment or Disposal of Long-Lived Assets, and ASC420-10-50, Exit or Disposal Cost Obligations, the historical consolidated results of operations and financial position of TSYS, as well as all costs recorded by Synovus associated with the spin-off of TSYS, are now presented as discontinued operations. Additionally, discontinued operations for the year ended December 31, 2007 include a $4.2 million after-tax gain related to the transfer of Synovus’ proprietary mutual funds to a non-affiliated third party. During 2009, Synovus committed to a plan to sell its merchant services business. As of December 31, 2009, the proposed sale transaction met the held for sale criteria under ASC 360-10-15-49, and accordingly, the revenues and expenses of the merchant services business have been reported as a component of discontinued operations.
(c)	Determined by dividing cash dividends declared per common share by diluted net income per share.
(d)	The tangible common equity to risk-weighted assets ratio is a non-GAAP measure which is calculated as follows: (total shareholders’ equity minus preferred stock minus goodwill minus other intangible assets) divided by total risk-adjusted assets (see “Non-GAAP Financial Measures”).
(e)	Total shareholders’ equity less cumulative perpetual preferred stock, divided by common stock outstanding.

(nm) Not meaningful.

F-61

Management’s Discussion and Analysis ­ ­ 

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, and Section 21E of the Securities Exchange Act of 1934, as amended (the “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 Synovus’ actual results, performance, or achievements 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 performanceand/or the performance of the commercial banking industry and economy in general. 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) further deteriorations in credit quality, particularly in residential construction and commercial development real estate loans, may continue to result in increased non-performing assets and credit losses, which could adversely impact Synovus’ earnings and capital; (3) declining values of residential and commercial real estate may result in further write-downs of assets and realized losses on disposition of non-performing assets, which may increase Synovus’ credit losses and negatively affect Synovus’ financial results; (4) continuing weakness in the residential real estate environment, which may negatively impact Synovus’ ability to liquidate non-performing assets; (5) the impact on Synovus’ borrowing costs, capital costs, and liquidity due to further adverse changes in credit ratings; (6) the risk that Synovus’ allowance for loan losses may prove to be inadequate or may be negatively affected by credit risk exposures; (7) Synovus’ ability to manage fluctuations in the value of assets and liabilities to maintain sufficient capital and liquidity to support operations; (8) the concentration of Synovus’ non-performing assets by loan type, in certain geographic regions and with affiliated borrowing groups; (9) the risk of additional future losses if the proceeds Synovus receives upon the liquidation of assets are less than the carrying value of such assets; (10) changes in the interest rate environment which may increase funding costs or reduce earning asset yields, thus reducing margins; (11) restrictions or limitations on access to funds from subsidiaries and potential obligations to contribute additional capital to subsidiaries, which may restrict Synovus’ ability to make payments on its obligations or dividend payments; (12) the availability and cost of capital and liquidity on favorable terms, if at all; (13) changes in accounting standards or applications and determinations made thereunder; (14) slower than anticipated rates of growth in non-interest income and increased non-interest expense; (15) 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 further reduction in debt ratings; (16) the risk that the recoverability of the deferred tax asset balance may extend beyond 2010; (17) the strength of the U.S. economy in general and the strength of the local economies and financial markets in which operations are conducted may be different than expected; (18) the effects of and changes in trade, monetary and fiscal policies, and laws including interest rate policies of the Federal Reserve Board; (19) inflation, interest rate, market and monetary fluctuations; (20) the impact of the Emergency Economic Stabilization Act of 2008 (EESA), the American Recovery and Reinvestment Act (ARRA), the Financial Stability Plan, and other recent and proposed 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, increased capital requirements, limitationsand/or penalties arising from banking, securities and insurance laws, regulations and examinations; (21) the risk that Synovus will not be able to complete the proposed consolidation of its subsidiary banks or, if completed, realize the anticipated benefits of the proposed consolidation; (22) the impact on Synovus’ financial results, reputation, and business if Synovus is unable to comply with all applicable federal and state regulations and applicable memoranda of understanding, other supervisory actions, and any necessary capital initiatives;

F-62

Management’s Discussion and Analysis ­ ­ 

(23) the costs and effects of litigation, investigations, inquiries, or similar matters, or adverse facts and developments related thereto; (24) the volatility of Synovus’ stock price; (25) the impact on the valuation of investments due to market volatility or counterparty payment risk; (26) the risks that Synovus may be required to seek additional capital to satisfy applicable regulatory capital standards and pressures in addition to the capital realized through the execution of Synovus’ capital plan announced during 2009; (27) the risk that, if economic conditions worsen or regulatory capital requirements for our subsidiary banks are modified, Synovus may be required to seek additional capital at the holding company from external sources; (28) the costs of services and products to us by third parties, whether as a result of financial condition, credit ratings, the way Synovus is perceived by such parties, the economy, or otherwise; (29) the risk that Synovus could have an “ownership change” under Section 382 of the Internal Revenue Code, which could impair Synovus’ ability to timely and fully utilize net operating losses and built-in losses that may exist when our “ownership change” occurs; and (30) other factors and other information contained in this document and in other reports and filings that Synovus makes with the SEC under the Exchange Act, including, without limitation, Part I — Item 1A — Risk Factors — of Synovus’ Annual Report onForm 10-K for 2009.

For a discussion of these and other risks that may cause actual results to differ from expectations, refer to Part I — Item 1A — Risk Factors — and other information of Synovus’ Annual Report onForm 10-K for 2009, and other periodic filings, including quarterly reports onForm 10-Q and current reports onForm 8-K, that Synovus files with the SEC. All written or oral forward-looking statements that are made by or are attributable to Synovus are expressly qualified by this cautionary notice. Undue reliance on any forward-looking statements should not be placed given that 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 as well as a summary of Synovus’ critical accounting policies. This section should be read in conjunction with the preceding audited consolidated financial statements and accompanying notes.

About Our Business

Synovus Financial Corp. (Parent Company) is a financial services holding company, based in Columbus, Georgia, with approximately $32.8 billion in assets. Synovus provides integrated financial services including commercial and retail banking, financial management, insurance, and mortgage services through 30 wholly-owned subsidiary banks and other Synovus offices in Georgia, Alabama, South Carolina, Tennessee, and Florida (collectively, Synovus). At December 31, 2009, Synovus banks ranged in size from $221.5 million to $7.20 billion in total assets.

Industry Overview

2009 continued to reflect the adverse impact of severe macro economic conditions which have negatively impacted liquidity, credit quality, and capital. Concerns regarding increased credit losses from the weakening economy have negatively affected capital and earnings of most financial institutions. Financial institutions experienced significant declines in the value of collateral for real estate loans and heightened credit losses, which have resulted in record levels of non-performing assets, charge-offs, foreclosures and losses on disposition of the underlying assets. The federal funds rate set by the Federal Reserve has remained in a range of 0% to 0.25% since December 2008, following a decline from 4.25% to 0.25% during 2008 through a series of seven rate reductions.

It is uncertain how long the economic pressures will continue before the U.S. economy shows signs of a sustained recovery; however, the economy may remain challenging through at least the first half of 2010. Accordingly, financial institutions like Synovus could continue to experience heightened credit losses and higher levels of non-performing assets, charge-offs and foreclosures. In light of these conditions, financial institutions also face heightened levels of scrutiny and capital and liquidity requirements from federal and state regulators. As a result, financial institutions experienced, and could continue to experience, pressure on credit costs, liquidity, and capital.

Strategic Highlights

During 2009, Synovus took a number of steps to position itself to emerge from the current economic crisis as a stronger organization prepared to capture the growth opportunities that Synovus expects will present themselves:

•  Capital position— Synovus announced and executed a number of capital initiatives to bolster Synovus’ capital position against further credit deterioration

F-63

Management’s Discussion and Analysis ­ ­ 

and to provide additional capital as Synovus pursued its aggressive asset disposition strategy. Through a combination of a public equity offering, liability management, and strategic dispositions, Synovus generated $644 million of Tier 1 capital during 2009. Synovus is identifying, considering, and pursuing additional capital management strategies to bolster its capital position.

•  Risk management—  Synovus completed the centralization of a number of key functions, including credit and loan review, deposit operations, loan operations, procurement and facilities management. These changes emphasize a one-company view of Synovus’ operating structure and reduce the risks of managing these complex internal functions.

•  Aggressive management of credit issues—  Synovus announced and executed an aggressive strategy to dispose of non-performing assets and manage credit quality. In 2009, Synovus disposed of an aggregate of $1.18 billion of non-performing assets.

•  Deposit growth— Synovus’ deposits remain a strength of its business. As of December 31, 2009, total deposits were $27.43 billion. Synovus continues to focus on improving the mix of deposits. As of December 31, 2009, non-interest-bearing deposits (DDA’s), were $4.17 billion, a 17.1% increase compared to December 31, 2008. In addition, non-CD deposits, excluding national market brokered money market accounts, as of December 31, 2009 were $14.80 billion, an increase of 9.9% compared to December 31, 2008.

•  Focus on expense control— Synovus has controlled expenses and reduced fundamental non-interest expense in each of the last four quarters. Synovus continually reviews its operations to identify ways to enhance efficiency and create an enhanced banking experience for customers. Total non-interest expense for 2009 was $1.22 billion compared to $1.46 billion for 2008. Excluding discontinued operations, other credit costs, FDIC insurance expense, restructuring charges, net litigation contingency expense, and goodwill impairment charges, non-interest expense for 2009 was $743.8 million compared to $794.9 million for 2008. The total number of full-time employees at December 31, 2009 was 6,385 compared to 6,876 at December 31, 2008.

Charter Consolidation

In January 2010, Synovus announced its intention to transition from 30 subsidiary banks with 30 individual charters to a single subsidiary bank with a single charter, pending receipt of all required regulatory approvals. Synovus believes that this legal change in charter structure will:

•  simplify regulatory oversight;

•  improve capital efficiency;

•  enhance risk management;

•  increase opportunities for efficiency; and

•  better position Synovus to emerge stronger from the current economic downturn.

The announced charter consolidation is only a change in the legal structure of Synovus’ organization and does not change the relationship-banking business model. Synovus presently expects to complete the consolidation of bank charters into a single charter by mid-2010, subject to receipt of the required regulatory approvals. See Part I — Item 1A — Risk Factors — of Synovus’ Annual Report onForm 10-K for 2009 — Synovus may be unable to successfully implement the Charter Consolidation and Synovus may not realize the expected benefits from the Charter Consolidation.

Key Financial Performance Indicators

In terms of how Synovus measures success in business, the following are key financial performance indicators:

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

Overview of 2009

On January 28, 2010, Synovus reported results of operations for the three and twelve months ended December 31, 2009. The results included a net loss available to common shareholders of $264 million and $1,470 million for the three and twelve months ended December 31, 2009, respectively. The accompanying statement of income for the year ended December 31, 2009 reflects an $18.7 million non-cash reduction in the income tax benefit for the three and twelve months ended December 31, 2009, as compared to the previously reported results on January 28, 2010. The decrease in the tax benefit is due to the determination of a limitation on the amount that can be currently recovered through the carryback provisions of the federal income tax code. This limitation has resulted in an $18.7 million reduction of the previously recorded federal income tax refund receivable (for taxes paid in 2007 and 2008) of $346 million and has yielded a corresponding $18.7 million federal Alternative Minimum Tax credit carryforward (AMT credit carryforward) which is recorded on the accompanying balance sheet as a deferred tax asset

F-64

Management’s Discussion and Analysis ­ ­ 

(previously recorded as a current income tax receivable). While the federal AMT credit has an indefinite life, the resulting deferred tax asset is subject to the same valuation allowance requirements as the other deferred tax asset, thus requiring a corresponding $18.7 million increase in the valuation allowance. The AMT credit carryforward is available for an indefinite period to offset futurenon-AMT federal income tax obligations.

Accordingly, the net loss for the year ended December 31, 2009 was $1.43 billion, or $3.99 per common share. The results for 2009 were impacted by non-cash charges of approximately $438 million to record an increase in the valuation allowance for deferred tax assets. Total credit costs (including provision for losses on loans, losses on ORE, reserve for unfunded commitments and charges related to impaired loans held for sale) for the year ended December 31, 2009 were $2.19 billion, including provision for losses on loans of $1.81 billion and charges related to foreclosed real estate of $354.3 million. The credit costs were largely driven by valuation charges on new non-performing loans and existing non-performing assets, losses from dispositions of non-performing assets, as well as charges for estimated losses on future asset dispositions. Problem asset dispositions totaled $1.18 billion in 2009.

The loss from continuing operations before income taxes for 2009 and 2008 was $1.61 billion and $660.8, which included total credit costs of $2.19 billion and $862.7 million, respectively. Pre-tax, pre-credit costs income (which excludes provision for losses on loans, other credit costs, and certain other items), was $553.9 million for 2009, down $87.7 million from 2008. See “Non-GAAP Financial Measures” herein. The net interest margin decreased 28 basis points to 3.19% for 2009 compared to 3.47% for 2008. The net interest margin in 2009 was impacted by a net decrease in loans outstanding, an excess liquidity position, and the negative impact of non-performing assets. Excluding the negative impact of non-performing assets, the net interest margin was 3.56% in 2009 compared to $3.71% for 2008. See “Non-GAAP Financial Measures” herein.

Average total deposits were $27.97 billion in 2009, increasing $1.47 billion, or 5.5%, as compared to 2008. Average core deposits in 2009 grew by $1.25 billion, or 5.8%, as compared to 2008. See “Non-GAAP Financial Measures” herein. Average non-interest bearing deposits grew by $475.9 million, or 13.8%, as compared to the prior year.

Non-interest expense decreased $235 million, or 16.1%, to $1.22 billion in 2009. Fundamental non-interest expense (non-interest expense excluding other credit costs, FDIC insurance expense, restructuring charges, net litigation (recovery) expense, and goodwill impairment charges) in 2009 declined to $743.7 million, or 6.4%, from the prior year. See “Non-GAAP Financial Measures” herein. Lower salaries and other personnel expense contributed significantly to the reduced expenses. Total employees (6,385 at December 31, 2009) are down 7.1% from year end 2008, and 12.9% from the peak level of 7,331 in the first quarter of 2008.

F-65

Management’s Discussion and Analysis ­ ­ 

Financial Performance Summary

A summary of Synovus’ financial performance for the years ended December 31, 2009 and 2008, is set forth in the table below.

Table 1 Financial Performance Summary

	Years Ended December 31,
(In thousands)	2009			2008			Change
Loss from continuing operations before income taxes	$	(1,605,908	)		(660,806	)		nm
Pre-tax, pre-credit costs income		553,919			641,591			(13.6	)%
Net loss from continuing operations		(1,433,931	)		(580,376	)		nm
Net loss attributable to controlling interest		(1,431,705	)		(582,438	)		nm
Diluted earnings (loss) per share (EPS):
Loss from continuing operations available to common shareholders	$	(4.00	)		(1.79	)		nm
Net loss available to common shareholders		(3.99	)		(1.77	)		nm
Loans, net of unearned income	$	25,383,068			27,920,177			(9.1	)
Average core deposits		22,613,900			21,368,657			5.8
Net interest margin		3.19	%		3.47			(28	)bp
Non-performing assets ratio		7.14			4.15			299	bp
Past dues over 90 days		0.08			0.14			(6	)bp
Net charge-off ratio		5.37			1.71			366	bp
Non-interest income	$	410,670			417,241			(1.6	)%
Non-interest expense		1,221,289			1,456,057			(16.1	)
Fundamental non-interest expense		743,709			794,933			(6.4	)
Return on assets		(4.16	)		(1.71	)		(245	) bp
Return on equity		(43.58	)		(16.95	)		(2,663	)

Critical Accounting Policies

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

Allowance for Loan Losses

Notes 1 and 7 to Synovus’ consolidated financial statements contain a discussion of the allowance for loan losses. The allowance for loan losses at December 31, 2009 was $943.7 million.

The allowance for loan losses is a significant estimate and is regularly evaluated by Synovus for adequacy. The allowance for loan losses is determined based on an analysis which assesses the probable loss within the loan portfolio. The allowance for loan losses consists of two components: the allocated and unallocated allowances. Both components of the allowance are available to cover inherent losses in the portfolio. Significant judgments or estimates made in the determination of the allowance for loan losses consist of the risk ratings for loans in the commercial loan portfolio, the valuation of the collateral for loans that are classified as impaired loans, the qualitative loss factors, and management’s plan for disposition of non-performing loans. In determining an adequate allowance for loan losses, management makes numerous assumptions, estimates, and assessments which are inherently subjective and subject to change. The use of different estimates or assumptions could produce different provisions for losses on loans.

Commercial Loans — Risk Ratings and Loss Factors

Commercial loans are assigned a risk rating on a nine point scale. For commercial loans that are not considered impaired, the allocated allowance for loan losses is determined

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based upon the expected loss percentage factors that correspond to each risk rating.

The risk ratings are based on the borrowers’ credit risk profile considering factors such as debt service history and capacity, inherent risk in the credit (e.g., based on industry type and source of repayment), and collateral position. Ratings 7 through 9 are modeled after the bank regulatory classifications of substandard, doubtful, and loss. Expected loss percentage factors are based on the probable loss including qualitative factors. The probable loss considers the probability of default, the loss given default, and certain qualitative factors as determined by loan category and risk rating. Through March 31, 2009, the probability of default loss factors were based on industry data. Beginning April 1, 2009, the probability of default loss factors are based on internal default experience because this was the first reporting period when sufficient internal default data became available. This change resulted in a net increase in the allocated allowance for loan losses for the commercial portfolio of approximately $30 million during the three months ended June 30, 2009. The loss given default factors are based on industry data, which will continue to be used until sufficient internal data becomes available. The qualitative factors consider credit concentrations, recent levels and trends in delinquencies and nonaccrual loans, and growth in the loan portfolio. The occurrence of certain events could result in changes to the expected loss factors. Accordingly, these expected loss factors are reviewed periodically and modified as necessary.

Each loan is assigned a risk rating during the approval process. This process begins with a rating recommendation from the loan officer responsible for originating the loan. The rating recommendation is subject to approvals from other members of managementand/or loan committees depending on the size and type of credit. For larger credits, ratings are re-evaluated no less frequently than annually and more frequently when there is an indication of potential deterioration of a specific credit relationship. Additionally, an independent Parent Company loan review function evaluates each bank’s risk rating process quarterly.

Impaired Loans

Management considers a loan to be impaired when the ultimate collectability of all amounts due according to the contractual terms of the loan agreement are in doubt. A majority of Synovus’ impaired loans are collateral-dependent. The net carrying amount of collateral-dependent impaired loans is equal to the lower of the loans’ principal balance or the fair value of the collateral (less estimated costs to sell) not only at the date at which impairment is initially recognized, but also at each subsequent reporting period. Accordingly, policy requires that Synovus update the fair value of the collateral securing collateral-dependent impaired loans each calendar quarter. Impaired loans (excluding accruing restructured loans of $213.6 million) had a net carrying value of $1.31 billion at December 31, 2009. Most of these loans are secured by real estate, with the majority classified as collateral-dependent loans. The fair value of the real estate securing these loans is generally determined based upon appraisals performed by a certified or licensed appraiser. Management also considers other factors or recent developments, such as selling costs and anticipated sales values considering management’s plans for disposition, which could result in adjustments to the collateral value estimates indicated in the appraisals.

Total collateral dependent impaired loans had a carrying value of $1.02 billion at December 31, 2009. Estimated losses on collateral-dependent impaired loans are typically charged-off. At December 31, 2009, $784.6 million, or 59.8%, of impaired loans consisted of collateral-dependent impaired loans for which there is no allowance for loan losses as the estimated losses have been charged-off. These loans are recorded at the lower of cost or estimated fair value of the underlying collateral net of selling costs. However, if a collateral-dependent loan is placed on impaired status at or near the end of a calendar quarter, management records an allowance for loan losses based on the loan’s risk rating while an updated appraisal is being obtained. The estimated losses on these loans will be recorded as a charge-off during the following quarter after the receipt of a current appraisal or fair value estimate based on current market conditions, including absorption rates. At December 31, 2009, Synovus had $236.4 million in collateral-dependent impaired loans with a recorded allocated allowance for loan losses of $68.9 million, or 29.2% of the principal balance. Management does not expect a material difference between the current allocated allowance on these loans and the actual charge-off. Total impaired loans also include $291.9 million in loans which are not collateral dependent and for which impairment is measured based upon the present value of discounted cash flows.

Synovus has a significant amount of non-performing assets. In order to reduce non-performing asset levels, Synovus began aggressively selling non-performing loans during 2009. During the second quarter of 2009, Synovus was able to significantly accelerate the pace of asset dispositions. This experience provided management a basis to estimate the loan sales (consisting primarily of non-performing loans) that would be completed over the next two quarters. This accelerated sales strategy puts pressure on pricing and has resulted in liquidation type yields rather than pricing that might be realized under a traditional sales life cycle. In addition, some sales have been conducted through auctions and packaged sales to

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investors. These types of sales yield lower proceeds than traditional sales. Based upon this, beginning in the second quarter of 2009, the allowance for loan losses includes management’s estimate of losses associated with planned asset dispositions that are both probable and can be reasonably estimated. Such losses are not directly allocated on an asset by asset basis due to the fact that the specific assets to be sold have not yet been individually identified.

The amount of the allowance allocated for losses on asset dispositions is estimated by projecting the book value of assets to be disposed of within a six month period and applying an assumed additional loss factor on those dispositions. Loss factors are determined based upon a combination of historical sales prices and current indicative market pricing. When determining loss factors, consideration is given to anticipated exit mechanisms, expected market activity as well as the marketability of the non-performing asset portfolio. Asset disposition projections are developed by senior credit officers based upon historical trends, projected available inventory, and anticipated market appetite. Synovus only considers a six month period of projected dispositions for purposes of recording these allowances as that time period is all that management believes is appropriate for determining dispositions that are probable of occurring given the current economic environment and the level of non-performing assets. The loss factors and projected volume of dispositions can be impacted significantly by changes in the asset disposition market including number of market participants as well as market demand. Accordingly, these expected loss factors are reviewed quarterly and modified as deemed necessary.

Retail Loans — Loss Factors

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

Unallocated Component

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

Other Real Estate

Other real estate (ORE), consisting of properties obtained through foreclosure or through an in-substance foreclosure 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. Management also considers other factors, or recent developments, such as management’s plans for disposition, which have resulted in adjustments to the value estimates indicated in certain appraisals. At the time of foreclosure or initial possession of collateral, 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 foreclosed real estate expense. Significant judgments and complex estimates are required in estimating the fair value of other real estate, and the period of time within which such estimates can be considered current is significantly shortened during periods of market volatility, as experienced during 2008 and 2009. In response to market conditions and other economic factors, management may utilize liquidation sales as part of its problem asset disposition strategy. As a result of the significant judgments required in estimating fair value and the variables involved in different methods of disposition, the net proceeds realized from sales

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transactions could differ significantly from appraisals, comparable sales, and other estimates used to determine the fair value of other real estate.

Private Equity Investments

Private equity investments are recorded at fair value on the balance sheet with realized and unrealized gains and losses included in non-interest income in the results of operations in accordance with the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide for Investment Companies. For private equity investments, Synovus uses information provided by the fund managers in the initial determination of estimated fair value. Valuation factors such as recent or proposed purchase or sale of debt or equity, pricing by other dealers in similar securities, size of position held, liquidity of the market, comparable market multiples, and changes in economic conditions affecting the issuer are used in the final determination of estimated fair value. The valuation of private equity investments requires significant management judgment due to the absence of quoted market prices, inherent lack of liquidity and the long-term nature of such investments. As a result, the net proceeds realized from transactions involving these assets could differ significantly from their estimated fair value.

Income Taxes

Synovus is a domestic corporation that files a consolidated federal income tax return with its wholly-owned subsidiaries and files state income tax returns on a consolidated and a separate entity basis with the various taxing jurisdictions based on its taxable presence. Synovus accounts for income taxes in accordance with the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement (GAAP) carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in income in the period that includes the enactment date.

ASC 740-30-25 provides accounting guidance for determining when a company is required to record a valuation allowance on its deferred tax assets. A valuation allowance is required for deferred tax assets if, based on available evidence, it is more likely than not that all or some portion of the asset may not be realized due to the inability to generate sufficient taxable income in the period and/or of the character necessary to utilize the benefit of the deferred tax asset. In making this assessment, all sources of taxable income available to realize the deferred tax asset are considered including taxable income in prior carry-back years, future reversals of existing temporary differences, tax planning strategies and future taxable income exclusive of reversing temporary differences and carryforwards. The predictability that future taxable income, exclusive of reversing temporary differences, will occur is the most subjective of these four sources. The presence of cumulative losses in recent years is considered significant negative evidence, making it difficult for a company to rely on future taxable income, exclusive of reversing temporary differences and carryforwards, as a reliable source of taxable income to realize a deferred tax asset. Judgment is a critical element in making this assessment. Changes in the valuation allowance that result from favorable changes in circumstances that cause a change in judgment about the realization of deferred tax assets in future years are recorded through income tax expense.

Significant estimates used in accounting for income taxes relate to the determination of taxable income, the determination of temporary differences between book and tax bases, and the valuation allowance for deferred tax assets, as well as estimates on the realizability of income tax credits and utilization of net operating losses.

Income tax expense or benefit for the year is allocated among continuing operations, discontinued operations, and other comprehensive income (loss), as applicable. The amount allocated to continuing operations is the income tax effect of the pretax income or loss from continuing operations that occurred during the year, plus or minus income tax effects of (a) changes in circumstances that cause a change in judgment about the realization of deferred tax assets in future years, (b) changes in income tax laws or rates, and (c) changes in income tax status, subject to certain exceptions.

Synovus accrues tax liabilities for uncertain income tax positions based on current assumptions regarding the ultimate outcome through an examination process by weighing the facts and circumstances available at the reporting date. If related income tax benefits of a transaction are not more likely than not of being sustained upon examination, Synovus will accrue a tax liability for the expected taxes associated with the transaction. Events and circumstances on the estimates and assumptions used in the analysis of its income tax positions may change and, accordingly, Synovus’ effective tax rate may fluctuate in the future. Synovus also recognizes accrued interest and penalties related to unrecognized income tax benefits as a component of income tax expense.

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Asset Impairment

Long-Lived Assets and Other Intangibles

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

Discontinued Operations

Transfer of Mutual Funds

During 2007, Synovus transferred its proprietary mutual funds to a non-affiliated third party. As a result of the transfer, Synovus received gross proceeds of $8.0 million and incurred transaction related costs of $1.1 million, resulting in a pre-tax gain of $6.9 million, or $4.2 million, after tax. The net gain has been reported as a component of income from discontinued operations on the 2007 consolidated statement of income. Financial results for 2007 of the business 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.

TSYS Spin-off

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

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 of December 17, 2007. 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 included in sections 15 and 35 of ASC360-10 regarding accounting for the impairment or disposal of long-lived assets and ASC420-10, the current period and historical consolidated results of operations of TSYS, as well as all costs associated with the spin-off of TSYS, are now presented as income from discontinued operations.

Merchant Services

During 2009, Synovus committed to a plan to sell its merchant services business. As of December 31, 2009, the proposed sale transaction met the held for sale criteria under ASC360-10-15-49. Synovus expects the operations and cash flows of the merchant services business will be eliminated from the ongoing operations of Synovus as a result of the proposed sales transaction. In addition, Synovus does not expect it will have significant continuing involvement in the operations of this component after the planned sale. Therefore, the 2009, 2008, and 2007 revenues and expenses of the merchant services business have been reported as a component of income from discontinued operations on the accompanying consolidated statements of income. There were no significant assets or liabilities associated with the merchant services business.

The following table shows the components of income from discontinued operations for the years ended December 31, 2009, 2008, and 2007.

Table 2  Discontinued Operations

	Years Ended December 31,
(In thousands)	2009		2008		2007
Merchant services net income	$	4,590		5,650		4,966
TSYS net income, (excluding spin-off related expenses)		—		—		210,147
Spin-off related expenses, net of income taxes:
TSYS		—		—		(18,248	)
Synovus		—		—		(12,729	)
Gain on transfer of mutual funds, net of income taxes		—		—		4,200
Total income from discontinued operations, net of income taxes	$	4,590		5,650		188,336

See note 2 to the consolidated financial statements for further discussion regarding discontinued operations.

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Capital

Cumulative Perpetual Preferred Stock

On December 19, 2008, Synovus issued to the Treasury 967,870 shares of Synovus’ Fixed Rate Cumulative Perpetual Preferred Stock, Series A, without par value (the Series A Preferred Stock), having a liquidation amount per share equal to $1,000, for a total price of $967,870,000. The Series A Preferred Stock pays cumulative dividends at a rate of 5% per year for the first five years and thereafter at a rate of 9% per year. Synovus may not redeem the Series A Preferred Stock during the first three years except with the proceeds from a qualified equity offering of not less than $241,967,500. After February 15, 2012, Synovus may, with the consent of the Federal Deposit Insurance Corporation, redeem, in whole or in part, the Series A Preferred Stock at the liquidation amount per share plus accrued and unpaid dividends. The Series A Preferred Stock is generally non-voting. Prior to December 19, 2011, unless Synovus has redeemed the Series A Preferred Stock or the Treasury has transferred the Series A Preferred Stock to a third party, the consent of the Treasury will be required for Synovus to (1) declare or pay any dividend or make any distribution on common stock, par value $1.00 per share, other than regular quarterly cash dividends of not more than $0.06 per share, or (2) redeem, repurchase or acquire Synovus common stock or other equity or capital securities, other than in connection with benefit plans consistent with past practice. A consequence of the Series A Preferred Stock purchase includes certain restrictions on executive compensation that could limit the tax deductibility of compensation that Synovus pays to executive management.

As part of its purchase of the Series A Preferred Stock, Synovus issued the Treasury a warrant to purchase up to 15,510,737 shares of Synovus common stock (the Warrant) at an initial per share exercise price of $9.36. The Warrant provides for the adjustment of the exercise price and the number of shares of Synovus common stock issuable upon exercise pursuant to customary anti-dilution provisions, such as upon stock splits or distributions of securities or other assets to holders of Synovus common stock, and upon certain issuances of Synovus common stock at or below a specified price relative to the initial exercise price. The Warrant expires on December 19, 2018. If, on or prior to December 31, 2009, Synovus receives aggregate gross cash proceeds of not less than $967,870,000 from “qualified equity offerings” announced after October 13, 2008, the number of shares of common stock issuable pursuant to the Treasury’s exercise of the Warrant will be reduced by one-half of the original number of shares, taking into account all adjustments, underlying the Warrant. Pursuant to the Securities Purchase Agreement, the Treasury has agreed not to exercise voting power with respect to any shares of common stock issued upon exercise of the Warrant.

The offer and sale of the Series A Preferred Stock and the Warrant were effected without registration under the Securities Act in reliance on the exemption from registration under Section 4(2) of the Securities Act. Synovus has allocated the total proceeds received from the United States Department of the Treasury based on the relative fair values of the Series A Preferred Stock and the Warrants. This allocation resulted in the preferred shares and the Warrants being initially recorded at amounts that are less than their respective fair values at the issuance date.

The $48.5 million discount on the Series A Preferred Stock is being accreted using a constant effective yield over the five-year period preceding the 9% perpetual dividend. Synovus records increases in the carrying amount of the preferred shares resulting from accretion of the discount by charges against retained earnings.

Common Stock

On September 22, 2009, Synovus completed a public offering of 150,000,000 shares of Synovus’ $1.00 par value common stock at a price of $4.00 per share, generating proceeds of $570.9 million, net of issuance costs.

Exchange of Subordinated Debt for Common Stock

On November 5, 2009, Synovus completed an exchange offer (Exchange Offer) of $29,820,000 in aggregate principal amount of its outstanding 4.875% Subordinated Notes Due 2013 (the “Notes”). The notes exchanged in the Exchange Offer represent 12.6% of the $236,570,000 aggregate principal amount of the Notes outstanding prior to the Exchange Offer. Pursuant to the terms of the Exchange Offer, Synovus has issued 9.44 million shares of Synovus common stock as consideration for the Notes. The Exchange Offer resulted in a pre-tax gain of $6.1 million which was recognized as other non-interest income during the fourth quarter of 2009.

Goodwill Impairment

Synovus performed its annual goodwill evaluation at June 30, 2008. The Step 1 testing indicated potential impairment at one reporting unit, and accordingly, a Step 2 evaluation was performed. Synovus recognized a preliminary $27.0 million non-cash impairment charge during the three months ended June 30, 2008 as Step 2 calculations were not complete at the time. An additional $9.9 million non-cash goodwill impairment charge was recognized when Step 2 calculations were completed for this reporting unit during the three months ended September 30, 2008. The impairment charges for this reporting unit were primarily related to a decrease in valuation based on

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lower market capitalization, transaction multiples of tangible book value, and lower expected operating performance.

At December 31, 2008, Synovus determined that goodwill should be reevaluated for impairment based on an adverse change in the general business environment, significantly higher loan losses, reduced net interest margins, and a decline in Synovus’ market capitalization during the second half of 2008. Historically, Synovus determined fair value of reporting units based on the combination of the income approach, utilizing DCF method; the public company comparables approach, utilizing multiples of tangible book value; and the transaction approach, utilizing readily observable market valuation multiples for closed transactions. At December 31, 2008, management enhanced the valuation methodology by using a discounted cash flows analysis due to the lack of observable market data. Thus, in performing the Step 1 of the goodwill impairment testing and measurement process, the estimated fair values of the reporting units with goodwill were developed using the DCF method. The results of the DCF method were corroborated with market price to earnings, price to book value, price to tangible book value, and Synovus’ market capitalization plus a control premium. The results of this Step 1 process indicated potential impairment in four reporting units, as the book values of each reporting unit exceeded their respective estimated fair values. As a result, Synovus performed Step 2 to quantify the goodwill impairment, if any, for these four reporting units. In Step 2, the estimated fair values for each of the four reporting units were allocated to their respective assets and liabilities in order to determine an implied value of goodwill, in a manner similar to the calculation performed in a business combination. Based on the results of Step 2, Synovus recognized a $442.7 million (pre-tax and after-tax) charge for goodwill impairment during the three months ended December 31, 2008, which represented a total goodwill write-off for each of the four reporting units. The primary driver of the goodwill impairment for these four reporting units was the decline in Synovus’ market capitalization, which declined 31% from June 30, 2008 to December 31, 2008.

During 2009, Synovus recognized an additional charge of $15.1 million for impairment of goodwill. The 2009 impairment charge was due to a decline in Synovus’ market capitalization as well as further financial deterioration in the associated banking reporting units. At December 31, 2009, the remaining goodwill of $24.4 million consists of goodwill associated with two financial management services reporting units.

Restructuring Charges

Project Optimus, launched in April 2008, is a team member-driven effort to create an enhanced banking experience for customers and a more efficient organization that delivers greater value for Synovus shareholders. As a result of this process, Synovus expects to achieve $75 million in annual run rate pre-tax earnings benefit by late 2010. This benefit consists of approximately $50 million in efficiency gains and $25 million in earnings from new revenue growth initiatives. Revenue growth is expected primarily through new sales initiatives, improved product offerings, and improved pricing strategies for consumer and commercial assets and liabilities. Cost savings are expected to be generated primarily through increased process efficiencies and streamlining of support functions. Synovus incurred restructuring charges of approximately $22.1 million in conjunction with the project, including approximately $10.7 million in severance charges. For years ended December 31, 2009 and 2008, Synovus recognized a total of $6.0 million and $16.1 million in restructuring charges, respectively, including $5.5 million and $5.2 million in severance charges, respectively.

Visa Shares and Litigation Expense

Synovus is a member of the Visa USA network. Synovus received shares of Visa Class B common stock in exchange for its membership interest in Visa USA as Visa, Inc. prepared for an initial public offering (Visa IPO). Visa Class B shares will convert to Class A shares upon the release from transfer restrictions described below using a conversion ratio maintained by Visa. The Visa IPO was completed in March 2008. Under Visa USA bylaws, Visa members are obligated to indemnify Visa USAand/or its parent company, Visa, Inc., for potential future settlement of, or judgments resulting from, certain litigation (Visa litigation), which Visa refers to as the “covered litigation.” Visa’s retrospective responsibility plan provides for settlementsand/or judgments from covered litigation to be paid from a litigation escrow which was established from proceeds from the sale of Visa Class B shares, which would otherwise have been available for conversion to Visa Class A shares and then sold by Visa USA members upon the release from transfer restrictions. When proceeds are deposited to the escrow, the conversion ratio is adjusted whereby a greater amount of Class B shares will be required to convert to one Class A share.

In the fourth quarter of 2007, Synovus recognized a $36.8 million contingent liability for its membership proportion of the amount which Synovus estimated would be required for Visa to settle the covered litigation. In March 2008, Visa used $3.0 billion of the proceeds from the Visa IPO to establish an escrow for settlement of covered litigation and used substantially all of the remaining portion of the proceeds to redeem Class B and Class C shares held by Visa issuing members. Synovus recognized a pre-tax gain of $38.5 million on

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redemption proceeds received from Visa, Inc. and reduced the litigation accrual for its pro-rata share of Visa’s deposit to establish the litigation escrow. Following the redemption, Synovus held approximately 1.43 million shares of Visa Class B common stock which were subject to restrictions until the later of March 2011 or settlement of all covered litigation. Synovus further adjusted the litigation accrual in September 2008 following Visa’s settlement of its Discover litigation, and again following Visa’s deposit to the litigation escrow in December 2008. The total reduction in the Visa litigation accrual in 20089 was $17.5 million. In July 2009, Synovus reduced its litigation accrual by $4.1 million following Visa’s $700 million deposit to the litigation escrow.

In November 2009, Synovus sold its remaining Visa Class B shares to another Visa USA member financial institution for $51.9 million and recognized a gain on sale of $51.9 million. In conjunction with the sale, Synovus entered into a derivative contract with the purchaser which provides for settlements between the parties based upon a change in the ratio for conversion of Visa Class B shares to Visa Class A shares. The fair value of the conversion rate derivative is measured using a discounted cash flow methodology for estimated future cash flows determined through use of probability weighting for estimates of Visa’s aggregate exposure to the covered litigation. At December 31, 2009, the fair value of the derivative liability was $12.9 million. Management believes that the estimate of Visa’s exposure to litigation liability is adequate based on current information; however, future developments in the litigation could require changes to the estimate.

Fair Value Accounting

ASC820-10 establishes a framework for measuring fair value in accordance with GAAP, clarifies the definition of fair value within that framework, and expands disclosures about the use of fair value measurements. ASC820-10 permits entities to make an irrevocable election, at specified election dates, to measure eligible financial instruments and certain other items at fair value. Fair value is used on a recurring basis for certain assets and liabilities in which fair value is the primary basis of accounting. Fair value is used on a non-recurring basis for collateral-dependent impaired loans, goodwill, and other real estate. Examples of recurring use of fair value include trading account assets, mortgage loans held for sale, investment securities available for sale, private equity investments, derivative instruments, and trading account liabilities. The extent to which fair value is used on a recurring basis was expanded upon the adoption of ASC820-10 during the first quarter, effective on January 1, 2008. At December 31, 2009, approximately $4.8 billion, or 14.7%, of total assets were recorded at fair value, which includes items measured on a recurring and non-recurring basis.

Fair value is the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value determination in accordance with ASC820-10 requires that a number of significant judgments be made. The standard also establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Synovus has an established and well-documented process for determining fair values and fair value hierarchy classifications. Fair value is based upon quoted market prices, where available (Level 1). Where prices for identical assets and liabilities are not available, ASC820-10 requires that similar assets and liabilities are identified (Level 2). If observable market prices are unavailable or impracticable to obtain, or similar assets cannot be identified, then fair value is estimated using internally-developed valuation modeling techniques such as discounted cash flow analyses that primarily use as inputs market-based or independently sourced market parameters (Level 3). These modeling techniques incorporate assessments regarding assumptions that market participants would use in pricing the asset or the liability. The assessments with respect to assumptions that market participants would make are inherently difficult to determine and use of different assumptions could result in material changes to these fair value measurements.

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Management’s Discussion and Analysis ­ ­ 

The following table summarizes the assets accounted for at fair value on a recurring basis by level within the valuation hierarchy at December 31, 2009.

Table 3  Assets Accounted for at Fair Value on a Recurring Basis

	December 31, 2009
				Mortgage		Investment
	Trading			Loans		Securities		Private
	Account			Held		Available		Equity		Derivative
(Dollars in millions)	Assets			for Sale		for Sale		Investments		Assets		Total
Level 1		5	%		—		4		—		—		4
Level 2		95			100		96		—		100		94
Level 3		—			—		—		100		—		2
Total		100	%		100		100		100		100		100
Total assets held at fair value on the balance sheet	$	14.4			138.1		3,188.7		48.5		114.5		3,504.2
Level 3 assets as a percentage of total assets measured at fair value													1.77	%

The following table summarizes the liabilities accounted for at fair value on a recurring basis by level within the valuation hierarchy at December 31, 2009.

Table 4  Liabilities Accounted for at Fair Value on a Recurring Basis

	December 31, 2009
	Trading
	Account			Derivative
(Dollars in millions)	Liabilities			Liabilities		Total
Level 1		—	%		—		—
Level 2		100			87		88
Level 3		—			13		12
Total		100	%		100		100
Total liabilities held at fair value on the balance sheet	$	7.1			99.0		106.1
Level 3 liabilities as a percentage of total assets measured at fair value							0.37	%

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

The valuation for mortgage loans held for sale (MLHFS) is based upon forward settlement of a pool of loans of identical coupon, maturity, product, and credit attributes. The model is continuously updated with available market and historical data. The valuation methodology of nonpublic private equity investments requires significant management judgment due to

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Management’s Discussion and Analysis ­ ­ 

the absence of quoted market prices, inherent lack of liquidity, and the long-term nature of such assets. Private equity investments are valued initially based upon transaction price. Thereafter, Synovus uses information provided by the fund managers in the initial determination of estimated fair value. Valuation factors such as recent or proposed purchase or sale of debt or equity of the issuer, pricing by other dealers in similar securities, size of position held, liquidity of the market and changes in economic conditions affecting the issuer are used in the final determination of estimated fair value.

Valuation methodologies are reviewed each quarter to ensure that fair value estimates are appropriate. Any changes to the valuation methodologies are reviewed by management to confirm the changes are justified. As markets and products develop and the pricing for certain products becomes more or less transparent, Synovus continues to refine its valuation methodologies. For a detailed discussion of valuation methodologies, refer to Note 16 to the consolidated financial statements as of and for the year ended December 31, 2009.

Earning Assets, Sources of Funds, and Net Interest Income

Earning Assets and Sources of Funds

Average total assets for 2009 increased $371.6 million to $34.42 billion, an increase of 1.1% over average total assets for 2008. Average earning assets increased $640.9 million, or 2.1%, in 2009 as compared to the prior year. Average earning assets represented 92.6% and 91.7% of average total assets for 2009 and 2008, respectively. The primary funding source supporting this growth in average total assets and average earning assets was a $1.47 billion increase in average deposits, including core deposit growth of $1.25 billion. A portion of the funding described above was used to reduce average short-term borrowings and long-term debt by $801.2 million and $87.1 million, respectively. The primary components of the $640.9 million earning asset growth were a $1.37 billion increase in balances held with the Federal Reserve Bank, offset in part by decreases in net loans and investment securities of $606.0 million and $260.8 million, respectively.

Average total assets for 2008 were $34.05 billion, or 3.5% over 2007 average total assets of $32.90 billion. Average earning assets for 2008 were $31.23 billion, which represented 91.7% of average total assets. Average earning assets increased $2.12 billion, or 7.3%, over 2007. The $2.12 billion increase consisted primarily of a $1.86 billion increase in average net loans and a $110.2 million increase in average investment securities available for sale. The primary funding sources for the growth in interest earning assets were a $1.68 billion increase in average deposits and a $432.0 million increase in average long-term debt. For more detailed information on the average balance sheets for the years ended December 31, 2009, 2008, and 2007, refer to Table 6.

Net Interest Income

Net interest income (interest income less interest expense) is a major component of net income, representing the earnings of the primary business of gathering funds from customer deposits and other sources and investing those funds in loans and investment securities. Synovus’ long-term objective is to manage those assets and liabilities to maximize net interest income while balancing interest rate, credit, liquidity, and capital risks.

Net interest income is presented in this discussion on a tax-equivalent basis, so that the income from assets exempt from federal income taxes is adjusted based on a statutory marginal federal tax rate of 35% in all years (See Table 5). The net interest margin is defined as taxable-equivalent net interest income divided by average total interest earning assets and provides an indication of the efficiency of the earnings from balance sheet activities. The net interest margin is affected by changes in the spread between interest earning asset yields and interest bearing liability costs (spread rate), and by the percentage of interest earning assets funded by non-interest bearing funding sources.

Net interest income for 2009 was $1.01 billion, down $67.6 million, or 6.3%, from 2008. On a taxable equivalent basis, net interest income decreased $67.6 million, or 6.2%, from 2008. During 2009, average interest earning assets increased $640.9 million, or 2.1%, which primarily results from an increased balance held with the Federal Reserve Bank, offset in part by declines in net loans and investment securities.

Net interest income for 2008 was $1.08 billion, down $71.1 million, or 6.2%, from 2007. On a taxable-equivalent basis, net interest income was $1.08 billion, down $71.2 million, or 6.2%, over 2007. During 2008, average interest earning assets increased $2.12 billion, or 7.3%, with the majority of this increase attributable to loan growth. Increases in the level of deposits and long term debt were the primary funding sources for the increase in earning assets.

Net Interest Margin

The net interest margin was 3.19% for 2009, down 28 basis points from 2008. The yield on earning assets decreased 121 basis points, which was partially offset by a 93 basis point decrease in the effective cost of funds. The effective cost of funds includes non-interest bearing funding sources, primarily consisting of demand deposits.

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Management’s Discussion and Analysis ­ ­ 

The primary components of the yield on interest earning assets are the yield on investment securities and loan yields. Yields on investment securities increased 5 basis points primarily due to higher realized yields on mortgage-backed securities. Loan yields, which decreased 113 basis points, were unfavorably impacted by a 184 basis point decrease in the average prime rate and increased costs to carry elevated levels of non-performing assets in 2009 as compared to 2008. The yield on interest earning assets was also impacted by a higher level of short term liquidity in 2009. A significant portion of this liquidity resulted from capital raised in December 2008 and September 2009 from the issuance of preferred and common stock, respectively, plus the decline in net loans. Synovus expects to continue holding a higher level of liquidity in 2010, relative to prior periods, due to the continued difficult economic and capital market conditions.

The primary factors driving the 93 basis point decrease in the effective cost of funds in 2009 were a 112 basis point decrease in the cost of money market accounts and a 103 basis point decrease in the cost of time deposits. The downward re-pricing of maturing time deposits during 2009 is expected to further benefit the net interest margin in 2010.

The net interest margin was 3.47% for 2008, down 50 basis points from 2007. The yield on earning assets decreased 175 basis points, which was partially offset by a 125 basis point decrease in the effective cost of funds.

Yields on investment securities increased 17 basis points, primarily due to higher spreads on government agency debentures and mortgage-backed securities. Loan yields, which decreased 198 basis points, were unfavorably impacted by a 296 basis point decrease in the average prime rate in 2008 as compared to 2007 and the maturity and repricing of higher yielding fixed rate loans throughout the year. Loan yields were negatively impacted as well by an increase in the cost to carry elevated levels of non-performing assets in 2008 compared to 2007.

The primary factors driving the 125 basis point decrease in the effective cost of funds were a 251 basis point decrease in the cost of federal funds purchased and securities sold under repurchase agreements, a 209 basis point decrease in the cost of money market accounts, and a 108 basis point decrease in the cost of time deposits. The effective cost of funds was also negatively influenced by significant deposit pricing competition. Promotional rates on time deposit and money market products were prevalent in 2008 in Synovus’ local markets. These pricing pressures limited the ability to lower rates on these products in line with prime rate decreases. This competitive environment additionally resulted in a deposit mix shift to higher cost time deposit and brokered deposits.

Table 5  Net Interest Income

	Years Ended December 31,
(In thousands)	2009		2008		2007
Interest income	$	1,509,189		1,857,580		2,238,404
Taxable-equivalent adjustment		4,846		4,909		5,059
Interest income, taxable-equivalent		1,514,035		1,862,489		2,243,463
Interest expense		498,879		779,687		1,089,456
Net interest income, taxable-equivalent	$	1,015,156		1,082,802		1,154,007

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Management’s Discussion and Analysis ­ ­ 

Table 6  Consolidated Average Balances, Interest, and Yields

	2009									2008									2007
	Average						Yield/			Average						Yield/			Average						Yield/
(Dollars in thousands)	Balance			Interest			Rate			Balance			Interest			Rate			Balance			Interest			Rate
Assets
Interest earning assets:
Taxable loans, net(a)(b)	$	27,053,391			1,319,404			4.88	%	$	27,382,247			1,657,647			6.05	%	$	25,467,316			2,043,589			8.02	%
Tax-exempt loans, net(a)(b)(c)		169,349			7,003			4.14			88,191			5,262			5.97			55,007			3,987			7.25
Allowance for loan losses		(777,332	)		—			—			(418,984	)		—			—			(335,032	)		—			—
Loans, net		26,445,408			1,326,407			5.02			27,051,454			1,662,909			6.15			25,187,291			2,047,576			8.13
Investment securities available for sale:
Taxable investment securities		3,249,124			162,956			5.02			3,477,025			172,335			4.96			3,327,981			158,538			4.76
Tax-exempt investment securities(c)		102,681			7,210			7.02			135,590			9,468			6.98			174,430			11,817			6.77
Total investment securities		3,351,805			170,166			5.08			3,612,615			181,803			5.03			3,502,411			170,355			4.86
Trading account assets		17,556			1,091			6.21			30,870			1,924			6.23			52,274			3,418			6.53
Interest earning deposits with banks		50,267			324			0.64			12,075			188			1.56			21,025			1,104			5.25
Due from Federal Reserve Bank		1,461,965			3,650			0.25			90,543			391			0.43			—			—			—
Federal funds sold and securities purchased under resale agreements		207,618			357			0.17			193,895			3,386			1.75			97,462			5,258			5.39
Federal Home Loan Bank and Federal Reserve Bank stock		132,415			1,203			0.91			119,311			4,551			3.81			101,195			6,093			6.02
Mortgage loans held for sale		206,085			10,837			5.26			121,425			7,342			6.05			152,007			9,659			6.35
Total interest earning assets		31,873,119			1,514,035			4.75			31,232,188			1,862,494			5.96			29,113,665			2,243,463			7.71
Cash and due from banks		522,256									505,374									529,306
Premises and equipment, net		596,148									581,508									514,280
Other real estate		262,600									180,493									52,735
Other assets(d)		1,169,494									1,552,451									1,355,137
Assets of discontinued operations(e)		—									—									1,330,172
Total assets	$	34,423,617								$	34,052,014								$	32,895,295
Liabilities and Equity
Interest bearing liabilities:
Interest bearing demand deposits	$	3,586,798			15,916			0.44	%	$	3,158,228			35,792			1.13	%	$	3,125,802			68,779			2.20	%
Money market accounts		7,943,855			91,199			1.15			7,984,231			181,482			2.27			7,714,360			336,286			4.36
Savings deposits		469,419			711			0.15			452,661			1,137			0.25			483,368			2,525			0.52
Time deposits		12,050,867			348,422			2.89			11,463,905			449,041			3.92			10,088,353			504,882			5.00
Federal funds purchased and securities sold under repurchase agreements		918,735			3,840			0.42			1,719,978			38,583			2.24			1,957,990			92,970			4.75
Long-term debt		1,964,411			38,791			1.97			2,051,521			73,657			3.59			1,619,536			84,014			5.19
Total interest bearing liabilities		26,934,085			498,879			1.85			26,830,524			779,692			2.91			24,989,409			1,089,456			4.36
Non-interest bearing demand deposits		3,915,925									3,440,047									3,409,506
Other liabilities		252,254									319,396									246,213
Liabilities of and minority interest in discontinued operations(e)		—									—									314,257
Equity		3,321,353									3,462,047									3,935,910
Total liabilities and equity	$	34,423,617								$	34,052,014								$	32,895,295
Net interest income/margin					1,015,156			3.19	%					1,082,802			3.47	%					1,154,007			3.97	%
Taxable-equivalent adjustment					(4,846	)								(4,909	)								(5,059	)
Net interest income, actual					1,010,310									1,077,893									1,148,948

(a)	Average loans are shown net of unearned income. Non-performing loans are included.
(b)	Interest income includes loan fees as follows: 2009 — $22.8 million, 2008 — $29.5 million, 2007 — $36.2 million.
(c)	Reflects taxable-equivalent adjustments, using the statutory federal income tax rate of 35%, in adjusting interest on tax-exempt loans and investment securities to a taxable-equivalent basis.
(d)	Includes average net unrealized gains (losses) on investment securities available for sale of $133.1 million, $46.7 million, and ($15.1) million for the years ended December 31, 2009, 2008, and 2007, respectively.
(e)	On December 31, 2007, Synovus completed the tax-free spin-off of its shares of TSYS common stock to Synovus shareholders; accordingly, the assets and liabilities of TSYS are presented as discontinued operations.

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Management’s Discussion and Analysis ­ ­ 

Table 7  Rate/Volume Analysis

	2009 Compared to 2008									2008 Compared to 2007
	Change Due to(a)									Change Due to(a)
(In thousands)	Volume			Yield/Rate			Net Change			Volume			Yield/Rate			Net Change
Interest earned on:
Taxable loans, net	$	(19,896	)		(318,347	)		(338,243	)		153,577			(539,519	)		(385,942	)
Tax-exempt loans, net(b)		4,845			(3,104	)		1,741			2,406			(1,131	)		1,275
Taxable investment securities		(11,304	)		1,925			(9,379	)		7,095			6,702			13,797
Tax-exempt investment securities(b)		(2,297	)		39			(2,258	)		(2,630	)		281			(2,349	)
Trading account assets		(829	)		(4	)		(833	)		(1,398	)		(96	)		(1,494	)
Interest earning deposits with banks		596			(460	)		136			(470	)		(446	)		(916	)
Due from Federal Reserve Bank		5,897			(2,638	)		3,259			391			—			391
Federal funds sold and securities purchased under resale agreements		240			(3,269	)		(3,029	)		5,198			(7,070	)		(1,872	)
Federal Home Loan Bank and Federal Reserve Bank stock		499			(3,847	)		(3,348	)		1,091			(2,633	)		(1,542	)
Mortgage loans held for sale		5,122			(1,627	)		3,495			(1,942	)		(375	)		(2,317	)
Total interest income		(17,127	)		(331,332	)		(348,459	)		163,318			(544,287	)		(380,969	)
Interest paid on:
Interest bearing demand deposits		4,843			(24,719	)		(19,876	)		713			(33,700	)		(32,987	)
Money market accounts		(917	)		(89,366	)		(90,283	)		11,766			(166,570	)		(154,804	)
Savings deposits		42			(468	)		(426	)		(160	)		(1,228	)		(1,388	)
Time deposits		23,009			(123,628	)		(100,619	)		68,778			(124,619	)		(55,841	)
Federal funds purchased and securities sold under repurchase agreements		(17,948	)		(16,795	)		(34,743	)		(11,306	)		(43,081	)		(54,387	)
Other borrowed funds		(3,127	)		(31,739	)		(34,866	)		22,420			(32,777	)		(10,357	)
Total interest expense		5,902			(286,715	)		(280,813	)		92,211			(401,975	)		(309,764	)
Net interest income	$	(23,029	)		(44,617	)		(67,646	)		71,107			(142,312	)		(71,205	)

(a)	The change in interest due to both rate and volume has been allocated to the yield/rate component.
(b)	Reflects taxable-equivalent adjustments, using the statutory federal income tax rate of 35%, in adjusting interest on tax-exempt loans and investment securities to a taxable-equivalent basis.

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Management’s Discussion and Analysis ­ ­ 

Non-Interest Income

Non-interest income consists of a wide variety of fee generating services. Total non-interest income was $410.7 million in 2009, down 1.6% compared to 2008. Total non-interest income for 2008 was $417.2 million, up 12.3% over 2007. The following table shows the principal components of non-interest income.

Table 8  Non-Interest Income

	Years Ended December 31,
(In thousands)	2009		2008		2007
Service charges on deposit accounts	$	117,751		111,837		112,142
Fiduciary and asset management fees		44,168		48,779		50,761
Brokerage and investment banking revenue		28,475		33,119		31,980
Mortgage banking income		38,521		23,493		27,006
Bankcard fees		36,139		35,283		30,393
Net gains on sales of investment securities available for sale		14,067		45		980
Other fee income		31,200		37,246		39,307
Increase in fair value of private equity investments, net		1,379		24,995		16,497
Proceeds from sale of MasterCard shares		8,351		16,186		6,304
Proceeds from redemption of Visa shares		—		38,542		—
Gain from sale of Visa shares		51,900		—		—
Other non-interest income		38,719		47,716		56,268
Total non-interest income	$	410,670		417,241		371,638

Service charges on deposit accountsrepresent the single largest fee income component. Service charges on deposits totaled $117.8 million in 2009, an increase of 5.3% from the previous year, and $111.8 million in 2008, a decrease of 0.3% from 2007. Service charges on deposit accounts consist of non-sufficient funds (NSF) fees (which represent approximately 60.9% of the total for 2009), account analysis fees, and all other service charges. NSF fees decreased by $321 thousand or 0.5% from 2008. Account analysis fees were up $4.8 million or 20.7% from 2008 levels. The increase in account analysis fees was primarily due to lower earnings credits on commercial demand deposit accounts. All other service charges on deposit accounts, which consist primarily of monthly fees on consumer demand deposit and savings accounts, were up $1.4 million or 8.5% compared to 2008. The increase in all other service charges was driven by improvement in pricing strategies implemented through Project Optimus.

Synovus anticipates that changes to Regulation E, which are effective beginning in 2010, will have a negative impact on NSF revenues. These changes limit the ability of a financial institution to assess an overdraft fee for paying ATM and one-time debit card transactions that overdraw a customer’s account, unless the customer affirmatively consents, or opts-in, to the institution’s payment of overdrafts for these transactions. Synovus is not able to estimate the impact of this change on its results of operations at the present time.

Fiduciary and asset management feesare derived from providing estate administration, employee benefit plan administration, personal trust, corporate trust, investment management and financial planning services. Fiduciary and asset management fees were $44.2 million for 2009, a decrease of 9.5% from the prior year, and $48.8 million for 2008, a decrease of 3.9% from 2007. The decrease in fiduciary and asset management fees for 2009 from 2008 is primarily due to market decline, a decline in employer contributions to managed plans, and the tendency of certain customers to move to more conservative investment vehicles in the current volatile market (e.g. certificates of deposit). The decrease for 2008 from 2007 is primarily due to lower market value of assets under management.

At December 31, 2009, 2008 and 2007, the market value of assets under management was approximately $7.61 billion, $7.39 billion and $9.56 billion, respectively. Assets under management at December 31, 2009 and 2008 increased 2.9% and decreased 22.7% from December 31, 2008 and 2007, respectively. Assets under management consist of all assets where Synovus has investment authority. Assets under advisement were approximately $3.19 billion, $3.38 billion, and $3.53 billion at December 31, 2009, 2008 and 2007, respectively. Assets under advisement consist of non-managed assets as well as non-custody assets where Synovus earns a consulting fee. Assets under advisement at December 31, 2009 and 2008 decreased 5.5% and decreased 4.2% from December 31, 2008 and 2007, respectively. Total assets under management and advisement were $10.80 billion at December 31, 2009 compared to $10.77 billion at December 31, 2008 and $13.09 billion at December 31, 2007. Many of the fiduciary and asset management fees charged are based on asset values, and changes in these values directly impact fees earned.

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Management’s Discussion and Analysis ­ ­ 

Brokerage and investment banking revenuewas $28.5 million in 2009, a 14.0% decrease from the $33.1 million reported in 2008. Brokerage assets were $3.98 billion and $3.64 billion as of December 31, 2009 and 2008, respectively. The decrease in revenue was driven by general declines in market value as well as modest declines in brokerage trading value. Advisory fees, which are based upon market value of assets, were $2.4 million in 2009, a decrease of 38.7% from 2008. Brokerage commissions were $25.5 million in 2009, a decrease of 8.1% from 2008.

Total brokerage and investment banking revenue for 2008 was $33.1 million, up 3.6% over 2007. The increase in revenue was primarily driven by increased activity within the capital markets division especially in the first half of 2008.

Mortgage banking incomewas $38.5 million in 2009, a 64.0% increase from 2008 levels. Mortgage production volume was $2.04 billion in 2009, up 68.5% compared to 2008. The increase in mortgage banking income and production volume in 2009 compared to 2008 is primarily due to an increase in refinance activity as a result of Federal Reserve Bank purchases of agency MBS which drove down mortgage rates to near record lows. Also, mortgage volumes experienced a slight increase in purchase business resulting from the government’s attempt to stabilize the purchase market with the first time home buyer credits and an increase in home affordability following market depreciation.

Total mortgage banking income for 2008 was $23.5 million, a 13.0% decrease from 2007 levels. Total mortgage production volume was $1.21 billion in 2008, down 15.6% compared to 2007. The decline in mortgage banking income and production volume in 2008 compared to 2007 is primarily due to the slow-down in residential housing during 2008. The 2008 results included a $1.2 million increase in mortgage revenues due to the adoption of the SAB 109, Written Loan Commitments Recorded at Fair Value through Earnings.

Bankcard feestotaled $36.1 million in 2009, an increase of 2.4% over the previous year, and $35.3 million in 2008, an increase of 16.1% from 2007. Bankcard fees consist of credit card interchange fees and debit card interchange fees. Debit card interchange fees were $21.4 million in 2009, an increase of 6.1% over the previous year, and $20.2 million in 2008, an increase of 30.5% from 2007. The increase in debit card interchange fees for 2009 and 2008 was primarily driven by an increase in volume. Credit card fees were $14.7 million in 2009, a decrease of 2.4% compared to 2008, and $15.1 million in 2008, an increase of 1.1% compared to 2007.

Other fee incomeincludes fees for letters of credit, safe deposit box fees, access fees for automatic teller machine use, official check issuance fees, customer swap dealer fees, and other miscellaneous fee-related income. Other fee income was $31.2 million in 2009, a decrease of 16.2% from 2008, and $37.2 million in 2008, a decrease of 5.2% compared to 2007. The decline in 2009 from 2008 was driven by customer swap dealer fees and letter of credit fees, which were down approximately $7.0 million and $4.0 million, respectively. The volumes for these two types of transactions significantly declined in 2009.

Gain from sale of Visa sharestotaled $51.9 million in 2009. For further discussion of Visa, see the section titled “Visa Shares and Litigation Expense.”

Gain from redemption of Visa sharestotaled $38.5 million in 2008. This represents the redemption of a portion of Synovus’ membership interest in Visa, Inc. as a result of the Visa IPO. For further discussion of Visa, see the section titled “Visa Shares and Litigation Expense.”

Other non-interest incomewas $38.7 million in 2009, compared to $47.7 million in 2008. The main components of other non-interest income are income from company-owned life insurance policies, insurance commissions, card service fees and other miscellaneous items. The decline in other non-interest income was driven by the decline in the crediting rate of the underlying company-owned life insurance policies.

Non-Interest Expense

Non-interest expense for 2009 was $1.22 billion, down $234.8 million or 16.1% from 2008. The following table summarizes this data for the years ended December 31, 2009, 2008, and 2007.

Table 9  Non-Interest Expense

	Years Ended December 31,
(In thousands)	2009			2008			2007
Salaries and other personnel expense	$	425,170			455,395			451,742
Net occupancy and equipment expense		123,105			123,529			112,026
FDIC insurance and other regulatory fees		76,314			25,161			10,347
Foreclosed real estate expense		354,269			136,678			15,736
Losses on other loans held for sale		1,703			9,909			—
Goodwill impairment		15,090			479,617			—
Professional fees		38,802			30,210			20,961
Data processing expense		45,131			46,914			45,435
Visa litigation (recovery) expense		(6,441	)		(17,473	)		36,800
Restructuring charges		5,995			16,125			—
Other operating expenses		142,151			149,992			137,296
Total non-interest expense	$	1,221,289			1,456,057			830,343

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Management’s Discussion and Analysis ­ ­ 

2009 vs. 2008

Total salaries and other personnel expensedeclined $30.2 million, or 6.6%, in 2009 compared to 2008. Total employees were 6,385 at December 31, 2009, down 491 or 7.1% from 6,876 employees at December 31, 2008. The decline in expense was largely due to planned reductions in headcount that resulted from the Project Optimus initiative launched by Synovus in April, 2008. Additionally, employee retirement and share-based compensation expense declined as a result of decisions in early 2009 to reduce contributions to the employee money purchase plan and suspend share-based awards in light of business performance and economic conditions.

Net occupancy and equipment expensedeclined $424 thousand, or 0.3% during 2009 with savings realized from Project Optimus ideas and 9 branch closings.

FDIC insurance and other regulatory feesincreased $51.2 million, or 203.3% over 2008. The increase in FDIC insurance and other regulatory fees is primarily a result of the FDIC’s increase in base assessment rates during 2009 as well as a $16.2 million special assessment in June 2009, which was assessed as 5 basis points of total assets minus Tier 1 capital. The increase in FDIC insurance expense is also a result of Synovus’ voluntary participation in the FDIC Temporary Liquidity Guarantee Program. This FDIC program allows Synovus to offer 100% deposit protection for non-interest bearing deposit transaction accounts regardless of dollar amount at FDIC-insured institutions.

Foreclosed real estate costsincreased $217.6 million in 2009 as a result of heightened levels of foreclosures. These costs primarily consist of charges related to declines in fair value or reductions in estimated realizable value subsequent to the date of foreclosure. For further discussion of foreclosed real estate, see the section captioned “Other Real Estate.”

Goodwill impairmentwas evaluated during 2009 and resulted in non-cash charges for goodwill impairment of $15.1 million. Goodwill impairment non-cash charges in 2008 totaled $479.6 million. For further discussion, see the section titled “Goodwill Impairment” and Note 8 to the consolidated financial statements.

Professional feesincreased $8.6 million, or 28.4% in 2009 compared to 2008. The increase in professional fees includes increased legal fees paid in connection with sales ofnon-performing assets during 2009.

Visa litigationresulted in a net recovery of $6.4 million in 2009 compared to a net recovery of $17.5 million in 2008. During 2009, Synovus reduced its litigation accrual by $4.0 million for its membership proportion of the amount which Visa deposited to the litigation escrow during the year, and adjusted its litigation accrual by $2.4 million upon sale of Synovus’ remaining Visa Class B shares. For further discussion of the Visa litigation expense, see the section titled “Visa Shares and Litigation Expense.”

Restructuring chargesof $6 million in 2009 are comprised of implementation costs for Project Optimus and reflect a decline of $10.1 million from prior year restructuring charges. During 2009, Synovus recognized a total of $6 million in restructuring charges including $5.5 million in severance charges. For further discussion of restructuring charges, see the section titled “Restructuring Charges.”

Other operating expensesdeclined $7.8 million, or 5.2%, from 2008 due to savings realized from Project Optimus ideas and overall efforts to manage the organization more tightly.

2008 vs. 2007

Reported total non-interest expense for 2008 was $1.46 billion, up $625.7 million or 75.4% over 2007.

Total salaries and other personnel expenseincreased $3.7 million, or 0.8%, in 2008 compared to 2007. Total employees were 6,876 at December 31, 2008, down 509 or 6.9% from 7,385 employees at December 31, 2007. The most significant driver for this expense line was the decrease in the average number of employees (140) as well as the absence of executive bonuses in 2008, which were partially offset by annual merit raises and higher employee insurance costs.

Net occupancy and equipment expenseincreased $11.5 million, or 10.3% during 2008. Rent expense and building depreciation expense increased approximately $4.8 million, driven by the net addition of 7 branches in 2008 consisting of 15 branch additions, 7 closings, and 1 sale, in addition to other rent increases across Synovus. Other depreciation expense increased by $3.7 million in 2008 as compared to 2007 as a result of several information technology projects.

FDIC insurance and other regulatory feesincreased $14.8 million, or 143.2% over 2007. During 2007, the FDIC reinstituted the FDIC insurance assessment. In conjunction with the reinstituted assessment, the FDIC granted credits, which were fully utilized by early 2008.

Foreclosed real estate costsincreased $120.9 million in 2008. The increase is primarily due to additional write-downs to current fair value of other real estate, which increased $76.4 million, and net losses on the sale of other real estate, which increased $29.8 million, compared to the prior year. For further discussion of foreclosed real estate, see the section captioned “Other Real Estate.”

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Management’s Discussion and Analysis ­ ­ 

Losses on other loans held for salewere $9.9 million. For further discussion, see the section titled “Other Loans Held for Sale.”

Visa litigationresulted in a net recovery of $17.5 million in 2008 compared to a $36.8 million expense in 2007. During 2008, Synovus decreased its litigation accrual by a net amount of $17.5 million including a decrease for Synovus’ membership proportion of amounts deposited by Visa into a litigation escrow, and an increase in Synovus’ accrual in connection with Visa’s announcement of its litigation settlement with Discover Financial Services. For further discussion of the Visa litigation expense, see the section titled “Visa Shares and Litigation Expense.”

Goodwill impairmentwas evaluated at June 30, 2008 and again at December 31, 2008, resulting in non-cash charges for goodwill impairment of $479.6 million in 2008. For further discussion, see the section titled “Goodwill Impairment” and Note 8 to the consolidated financial statements.

Professional feesincreased $9.2 million, or 44.1% in 2008 compared to 2007. The increase in professional fees includes legal fees paid in connection with the FDIC investigation. Legal fees paid in connection with the FDIC investigation and Synovus’ litigation with CompuCredit is discussed in further detail in the section titled “Legal Proceedings”.

Restructuring chargesof $16.1 million in 2008 are comprised of implementation costs for Project Optimus. During 2008, Synovus recognized a total of $16.1 million in restructuring charges including $5.2 million in severance charges. For further discussion of restructuring charges, see the section titled “Restructuring Charges.”

Other operating expensesincreased $12.7 million, or 9.2%, over 2007. The increase was largely driven by provision for losses on unfunded commitments of $8.8 million.

Other Loans Held for Sale

With the exception of certain first lien residential mortgage loans, Synovus originates loans with the intent to hold to maturity. Loans or pools of loans are transferred to the other 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. 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 (gains) from sale of these loans are recognized as a component of non-interest expense.

At December 31, 2009 and 2008, the carrying value of other loans held for sale was $36.8 million and $3.5 million, respectively. All such loans were considered impaired as of December 31, 2009 and 2008. During the year ended December 31, 2009, Synovus transferred loans with a cost basis totaling $225.8 million to the other loans held for sale portfolio. Synovus recognized charge-offs totaling $89.2 million on these loans, resulting in a new cost basis for loans transferred to the other loans held for sale portfolio of $136.6 million. The $89.2 million in charge-offs were estimated based on the projected sales price of the loans. Subsequent to their transfer to the other loans held for sale portfolio, Synovus recognized additional write-downs of $6.7 million and recognized additional net losses on sales of $1.7 million. The additional write-downs were based on the estimated sales proceeds from pending sales.

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 fair value obtained principally from independent sources and adjusted for estimated selling costs. Management also considers other factors or recent developments such as changes in absorption rates or market conditions from the time of valuation and anticipated sales values considering management’s plans for disposition which could result in adjustment to the collateral value estimates indicated in the appraisals. At the time of foreclosure, any excess of the loan balance over the fair value of the real estate held as collateral is recorded as a charge against the allowance for loan losses. Subsequent declines in the fair value of ORE below the new cost basis are recorded through use of a valuation allowance. Management reviews the value of other real estate each quarter and adjusts the valuation allowance as appropriate. Revenue and expenses from ORE operations, as well as gains or losses on sales and any subsequent adjustments to the value, are recorded as foreclosed real estate expense, a component of non-interest expense.

The carrying value of other real estate was $238.8 million and $246.1 million at December 31, 2009 and 2008 respectively. During the twelve months ended December 31, 2009, approximately $664.5 million of loans and $1.7 million of other loans held for sale were foreclosed and transferred to other real estate. During the years ended December 31, 2009, 2008, and 2007, Synovus recognized foreclosed real estate costs of $354.3 million, $136.7 million, and $15.7 million, respectively. These costs primarily consist of charges related to declines in

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Management’s Discussion and Analysis ­ ­ 

fair value or reductions in estimated realizable value subsequent to the date of foreclosure.

Investment Securities Available for Sale

The investment securities portfolio consists principally of debt and equity securities classified as available for sale. Investment securities available for sale provide Synovus with a source of liquidity and a relatively stable source of income. The investment securities portfolio also provides management with a tool to balance the interest rate risk of its loan and deposit portfolios. See Table 11 for maturity and average yield information of the investment securities available for sale portfolio.

The investment strategy focuses on the use of the investment securities portfolio to manage the interest rate risk created by the inherent mismatch between the loan and deposit portfolios. Synovus held portfolio duration at a relatively constant level for most of 2009, though the size of the portfolio decreased from the prior year. The average duration of Synovus’ investment securities portfolio was 3.21 years at December 31, 2009 compared to 3.02 years at December 31, 2008.

Synovus also utilizes a significant portion of its investment portfolio to secure certain deposits and other liabilities requiring collateralization. At December 31, 2009, approximately $2.4 billion of these investment securities were pledged as required collateral for certain deposits, securities sold under repurchase agreements, and FHLB advances. As such, the investment securities are primarily U.S. government agencies and government agency sponsored mortgage-backed securities, both of which have a high degree of liquidity and limited credit risk. A mortgage-backed security depends on the underlying pool of mortgage loans to provide a cash flow pass-through of principal and interest. At December 31, 2009, all of the collateralized mortgage obligations and mortgage-backed pass-through securities held by Synovus were issued or backed by federal agencies.

As of December 31, 2009 and 2008, the estimated fair value of investment securities available for sale as a percentage of their amortized cost was 103.6% and 104.1%, respectively. The investment securities available for sale portfolio had gross unrealized gains of $112.0 million and gross unrealized losses of $2.2 million, for a net unrealized gain of $109.8 million as of December 31, 2009. As of December 31, 2008, the investment securities available for sale portfolio had gross unrealized gains of $151.6 million and gross unrealized losses of $2.4 million, for a net unrealized gain of $149.2 million. Shareholders’ equity included net unrealized gains of $67.1 million and $92.1 million on the available for sale portfolio as of December 31, 2009 and 2008, respectively.

During 2009, the average balance of investment securities available for sale decreased to $3.35 billion from $3.61 billion in 2008. Synovus earned a taxable-equivalent rate of 5.08% and 5.03% for 2009 and 2008, respectively, on its investment securities available for sale portfolio. As of December 31, 2009 and 2008, average investment securities available for sale represented 10.52% and 11.57%, respectively, of average interest earning assets.

The calculation of weighted average yields for investment securities available for sale in Table 11 is based on the amortized cost and effective yields of each security. The yield on state and municipal securities is computed on a taxable-equivalent basis using the statutory federal income tax rate of 35%. Maturity information is presented based upon contractual maturity. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Table 10  Investment Securities Available for Sale

(In thousands)	2009		2008
U.S. Treasury	$	121,589		4,578
Other U.S. Government agency securities		927,626		1,552,636
Government agency issued mortgage-backed securities		1,873,980		1,955,971
Government agency issued collateralized mortgage obligations		86,903		116,442
State and municipal securities		82,801		123,281
Equity securities		9,981		8,167
Other investments		85,855		8,947
Total	$	3,188,735		3,770,022

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Management’s Discussion and Analysis ­ ­ 

Table 11  Maturities and Average Yields of Investment Securities Available for Sale

	December 31, 2009
	Investment Securities
	Available for Sale
	Estimated		Average
(Dollars in thousands)	Fair Value		Yield
U.S. Treasury:
Within 1 year	$	25,248		0.26	%
1 to 5 years		96,341		2.21
5 to 10 years		—		—
More than 10 years		—		—
Total	$	121,589		1.80	%
U.S. Government agency securities:
Within 1 year	$	272,286		4.94	%
1 to 5 years		337,472		3.93
5 to 10 years		289,978		4.77
More than 10 years		27,890		5.24
Total	$	927,626		4.71	%
State and municipal securities:
Within 1 year	$	8,503		6.72	%
1 to 5 years		38,556		7.14
5 to 10 years		26,090		6.97
More than 10 years		9,652		6.79
Total	$	82,801		7.00	%
Other investments:
Within 1 year	$	—		—	%
1 to 5 years		80,810		1.59
5 to 10 years		900		—
More than 10 years		4,145		6.30
Total	$	85,855		1.80	%
Equity securities	$	9,981		3.43	%
Government agency issued mortgage-backed securities	$	1,873,980		4.94	%
Government agency issued collateralized mortgage obligations	$	86,903		4.92	%
Total investment securities	$	3,188,735		4.71	%
Total investment securities:
Within 1 year	$	306,037		4.59	%
1 to 5 years		553,179		3.79
5 to 10 years		316,968		4.93
More than 10 years		41,687		5.71
Equity securities		9,981		3.43
Government agency issued mortgage-backed securities		1,873,980		4.94
Government agency issued collateralized mortgage obligations		86,903		4.92
Total	$	3,188,735		4.71	%

F-84

Management’s Discussion and Analysis ­ ­ 

Loans

Table 12  Loans by Type

	2009						2008
(Dollars in thousands)	Total Loans			% *			Total Loans			% *
Multi-family	$	925,017			3.6	%	$	589,708			2.1	%
Hotels		1,018,460			4.0			965,886			3.5
Office buildings		1,010,212			4.0			1,036,837			3.7
Shopping centers		1,087,181			4.3			1,090,807			3.9
Commercial development		608,333			2.4			763,962			2.7
Warehouses		493,455			1.9			461,402			1.7
Other investment property		547,406			2.2			614,149			2.2
Total investment properties		5,690,064			22.4			5,522,751			19.8
1-4 family construction		715,315			2.8			1,611,779			5.8
1-4 family perm/mini-perm		1,310,324			5.2			1,441,798			5.1
Residential development		1,361,264			5.3			2,123,669			7.6
Total 1-4 family properties		3,386,903			13.3			5,177,246			18.5
Land acquisition		1,410,425			5.6			1,620,370			5.8
Total commercial real estate		10,487,392			41.3			12,320,367			44.1
Commercial, financial, and agricultural		6,118,516			24.1			6,747,928			24.2
Owner-occupied		4,584,278			18.1			4,499,339			16.1
Total commercial and industrial		10,702,794			42.2			11,247,267			40.3
Home equity		1,714,994			6.8			1,725,075			6.2
Consumer mortgages		1,637,978			6.5			1,763,449			6.3
Credit card		294,126			1.2			295,055			1.0
Other retail loans		565,132			2.1			606,347			2.2
Total retail		4,212,230			16.6			4,389,926			15.7
Unearned income		(19,348	)		(0.1	)		(37,383	)		(0.1	)
Total loans, net of unearned income	$	25,383,068			100.0	%	$	27,920,177			100.0	%

*  Loan balance in each category expressed as a percentage of total loans, net of unearned income.

F-85

Management’s Discussion and Analysis ­ ­ 

Portfolio Composition

The loan portfolio spreads across five southeastern states within Synovus’ footprint as follows:

Table 13  Loans by State

	December 31, 2009					December 31, 2008
			As a% of					As a% of
			Total Loan					Total Loan
(Dollars in thousands)	Total Loans		Portfolio			Total Loans		Portfolio
Georgia	$	13,754,691		54.2	%	$	14,663,865		52.6	%
Atlanta		4,023,982		15.9			5,287,116		18.9
Florida		3,224,642		12.7			3,631,524		13.0
South Carolina		3,539,635		13.9			4,245,765		15.2
Tennessee		1,085,311		4.3			1,348,649		4.8
Alabama		3,778,789		14.9			4,030,374		14.4
Consolidated	$	25,383,068		100.0	%	$	27,920,177		100.0	%

At December 31, 2009, total loans outstanding were $25.38 billion, a decrease of 9.1% from 2008. Average loans decreased 2.2%, or $606.0 million, compared to 2008, representing 83.0% of average earning assets and 76.8% of average total assets. The decline in loan balances was driven by reduced demand in the commercial loan portfolio as commercial customers have a propensity to de-leverage in a weak economic environment. The decline was also impacted by charge-offs and the deliberate reduction of non-performing assets through Synovus’ aggressive asset disposition strategy.

Total commercial loans at December 31, 2009 were $21.19 billion, or 83.5% of the total loan portfolio. The commercial loan portfolio consists of commercial and industrial loans and commercial real estate loans. Driven by lower demand, charge-offs, and asset dispositions, total commercial loans declined by $2.38 billion or 10.1% from December 31, 2008.

Total commercial real estate loans, which represent 41.3% of the total loan portfolio at December 31, 2009, were $10.49 billion, a decline of $1.83 billion or 14.9% from year-end 2008. The commercial real estate loan portfolio at December 31, 2009 and 2008 includes loans in the Atlanta market totaling $1.94 billion and $2.86 billion, respectively, of which $403.0 million and $1.09 billion, respectively, at each year end are a combination of 1-4 family construction and residential development loans. The South Carolina market represents $1.67 billion and $2.07 billion of the total commercial real estate portfolio as of December 31, 2009 and 2008, respectively, of which $550.1 million and $756.3 million, respectively, at each year end are a combination of 1-4 family construction and residential development loans.

As shown in Table 12, the commercial real estate loan portfolio is diversified among various property types: investment properties, 1-4 family properties, and land acquisition. The investment properties portfolio comprises 54.3% of the total commercial real estate portfolio. Synovus’ investment properties portfolio is diverse with no concentrations by property type, geography, or tenants. Investment property loans are generally recourse in nature with short-term maturities (3 years or less), allowing for restructuring opportunities which reduces vintage exposures. In addition, as part of its risk management strategy, in early 2008, Synovus placed restrictions on both hotel and shopping center lending.

Total residential construction and development loans (consisting of 1-4 family construction loans and residential development loans) were $2.08 billion at December 31, 2009, a decline of 44.4% from December 31, 2008. Synovus’ exposure on performing residential construction and development loans has declined $1.7 billion or 52.9% from December 31, 2008, with the greatest decline in the Atlanta market.

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Management’s Discussion and Analysis ­ ­ 

Table 14  Residential Construction and Development Loans by State

	December 31, 2009
									% of
			% of Total				1-4 Family		1-4 Family
	1-4 Family		1-4 Family				Construction		Construction
	Construction		Construction				and		and
	and		and				Residential		Residential
	Residential		Residential				Development		Development
(Dollars in thousands)	Development		Development				NPL		NPL
Georgia	$	993,737		47.9	%		$	388,508		71.4	%
Atlanta		402,960		19.4		��		183,732		33.8
Florida		244,559		11.8				47,008		8.6
South Carolina		550,102		26.4				88,368		16.3
Tennessee		49,627		2.4				6,232		1.2
Alabama		238,553		11.5				13,685		2.5
Consolidated	$	2,076,578		100.0	%		$	543,801		100.0	%

	December 31, 2008
								% of
			% of Total			1-4 Family		1-4 Family
	1-4 Family		1-4 Family			Construction		Construction
	Construction		Construction			and		and
	and		and			Residential		Residential
	Residential		Residential			Development		Development
(Dollars in thousands)	Development		Development			NPL		NPL
Georgia	$	2,102,290		56.3	%	$	387,973		79.7	%
Atlanta		1,088,738		29.1			221,080		45.4
Florida		417,818		11.2			47,894		9.8
South Carolina		756,313		20.2			12,612		2.6
Tennessee		119,806		3.2			10,385		2.1
Alabama		339,221		9.1			28,059		5.8
Consolidated	$	3,735,448		100.0	%	$	486,923		100.0	%

Total commercial and industrial loans at December 31, 2009 were $10.70 billion, down $544.5 million or 4.8% from 2008. Commercial and industrial loan demand remained relatively low throughout 2009 due to borrowers’ prudent efforts to de-leverage in the current economic environment. Synovus’ commercial and industrial portfolio has diverse industry exposure. The portfolio is relationship focused; Synovus lenders have in-depth knowledge of the borrowers, most of which have guaranty arrangements. Synovus concentrates on small to middle market commercial and industrial lending, and the portfolio is disbursed throughout the southeast. At December 31, 2009, $4.58 billion of total commercial and industrial loans represent loans for the purpose of financing owner-occupied properties. The primary source of repayment on these loans is revenue generated from products or services offered by the business or organization. The secondary source of repayment on these loans is the real estate.

Total retail loans as of December 31, 2009 were $4.21 billion. Retail loans consist of residential mortgages, home equity lines, credit card loans, and other retail loans. Synovus does not have indirect automobile loans. Retail lending decisions are made based upon the cash flow or earning power of the borrower that represents the primary source of repayment. However, in many lending transactions, collateral is taken to provide an additional measure of security. Collateral securing these loans provides a secondary source of repayment in that the collateral may be liquidated. Synovus determines the need for collateral on acase-by-case basis. Factors considered include the purpose of the loan, current and prospective credit-worthiness of the customer, terms of the loan, and economic conditions. Synovus’ home equity loan portfolio

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Management’s Discussion and Analysis ­ ­ 

consists primarily of loans with strong credit scores, conservativedebt-to-income ratios, andloan-to-value ratios based upon prudent guidelines. These loans are primarily extended to customers who have an existing banking relationship with Synovus. Synovus does not encourage high loan-to-value lending. The utilization rate (total amount outstanding as a percentage of total available lines) of this portfolio at December 31, 2009 and 2008 was approximately 62% and 61%, respectively. Synovus continuously monitors this portfolio and maintains allowances that management believes are sufficient to absorb probable losses. Retail loans decreased by $177.7 million or 4.0% from year-end 2008, driven by a $135.6 million, or 3.9%, decline in mortgage loans.

At December 31, 2009, Synovus had 36 loan relationships with total commitments of $50 million or more (including amounts funded). The average funded balance of these relationships at December 31, 2009 was approximately $74 million.

Table 15  Five Year Composition of Loan Portfolio

	December 31,
	2009						2008						2007						2006						2005
(Dollars in thousands)	Amount			% *			Amount			% *			Amount			% *			Amount			% *			Amount			% *
Commercial
Commercial, financial, and agricultural	$	6,118,516			24.1	%	$	6,747,928			24.2	%	$	6,420,689			24.2	%	$	5,874,204			23.8	%	$	5,268,042			24.6	%
Owner occupied		4,584,278			18.1			4,499,339			16.1			4,226,707			16.0			4,054,728			16.4			3,685,026			17.2
Real estate — construction		5,208,218			20.5			7,295,727			26.1			8,022,179			30.3			7,517,611			30.5			5,745,169			26.8
Real estate — mortgage		5,279,174			20.8			5,024,640			18.0			3,877,808			14.6			3,595,798			14.6			3,392,989			15.9
Total commercial		21,190,186			83.5			23,567,634			84.4			22,547,383			85.1			21,042,341			85.3			18,091,226			84.5
Retail
Real estate — mortgage		3,352,972			13.2			3,488,524			12.5			3,211,625			12.1			2,881,880			11.8			2,559,339			12.0
Retail loans — credit card		294,126			1.2			295,055			1.0			291,149			1.1			276,269			1.1			268,348			1.3
Retail loans — other		565,132			2.2			606,347			2.2			494,591			1.9			500,757			2.0			521,521			2.4
Total retail		4,212,230			16.6			4,389,926			15.7			3,997,365			15.1			3,658,906			14.9			3,349,208			15.7
Total loans		25,402,416						27,957,560						26,544,748						24,701,247						21,440,434
Unearned income		(19,348	)		(0.1	)		(37,383	)		(0.1	)		(46,163	)		(0.2	)		(46,695	)		(0.2	)		(48,087	)		(0.2	)
Total loans, net of unearned income	$	25,383,068			100.0	%	$	27,920,177			100.0	%	$	26,498,585			100.0	%	$	24,654,552			100.0	%	$	21,392,347			100.0	%

*  Loan balance in each category, expressed as a percentage of total loans, net of unearned income.

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Management’s Discussion and Analysis ­ ­ 

The table below shows the maturity of selected loan categories as of December 31, 2009. Also provided are the amounts due after one year, classified according to the sensitivity in interest rates.

Actual repayments of loans may differ from the contractual maturities reflected in the table below because borrowers have the right to prepay obligations with and without prepayment penalties. Additionally, the refinancing of such loans or the potential delinquency of such loans could create differences between the contractual maturities and the actual repayment of such loans.

Table 16  Loan Maturity and Interest Rate Sensitivity Table

	December 31, 2009
			Over One Year		Over
	One Year		Through Five		Five
(In thousands)	Or Less		Years		Years		Total
Selected loan categories:
Commercial, financial, and agricultural	$	3,289,383		2,295,263		533,872		6,118,518
Real estate-construction		3,762,408		1,348,543		97,268		5,208,219
Total		7,051,791		3,643,806		631,140		11,326,737
Loans due after one year:
Having predetermined interest rates								1,815,620
Having floating or adjustable interest rates								2,459,323
Total								4,274,943

Credit Quality

Synovus continuously monitors credit quality and maintains an allowance for loan losses that management believes is sufficient to absorb probable and estimable losses inherent in its loan portfolio. During 2009, Synovus took, and continues to take, an aggressive approach to address problem assets and reduce future exposures through an accelerated asset disposition strategy as well as aggressive recognition of expected losses on problem loans. As of December 31, 2009, total allowance and cumulative write-downs on non-performing loans and non-performing assets (as a percentage of unpaid principal balance) were approximately 42% and 45%, respectively. While asset quality is expected to remain stressed in the near term, Synovus presently believes that it is beginning to see stabilization of certain credit quality metrics/indicators and presently expects further improvement in 2010. The inflow of non-performing loans declined each of the last three quarters of 2009, and management presently expects this downward trend to continue. The charge-off ratio for the fourth quarter of 2009 was 5.58%, a decline of 175 basis points from a peak of 7.33% at September 30, 2009. In addition, past dues greater than ninety days were 0.08% at December 31, 2009, down from 0.14% at December 31, 2008.

The allowance for loan losses at December 31, 2009 was $943.7 million, or 3.72% of total loans, compared to $598.3 million, or 2.14% of total loans as of December 31, 2008. The allowance for loan losses at December 31, 2009 includes estimated losses on problem loans which are planned for disposition during the first and second quarters of 2010. Non-performing assets increased by $661.2 million, or 56.5%, from 2008. Total past due loans still accruing interest as a percentage of outstanding loans decreased from 1.30% to 1.03%, or $262.4 million, as compared to $362.5 million at December 31. 2008.

Total credit costs for the year ended December 31, 2009 were $2.19 billion, including provision for losses on loans of $1.83 billion and expenses related to foreclosed real estate of $354.3 million. The credit costs were largely driven by valuation charges on new non-performing loans and existing non-performing assets, losses from dispositions of non-performing assets, as well as charges for estimated losses on future asset dispositions. For a further discussion of the potential impact of additional credit losses on results of operations and capital, see “Capital Resources” and “Liquidity” and Part I — Item 1A — Risk Factors — of Synovus’ Annual Report onForm 10-K for 2009.

During 2009, Synovus began execution of an aggressive asset disposition strategy whereby Synovus completed sales of problem assets with carrying values of approximately $1.2 billion. Asset sales were comprised of approximately $755.9 million of residential real estate loans and ORE properties, $126.0 million of investment real estate loans and ORE properties, and $266.2 million of loans and ORE properties which are primarily comprised of owner occupied commercial and

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Management’s Discussion and Analysis ­ ­ 

industrial loans and land acquisition loans. Approximately 39% of these asset sales were from the Atlanta market.  While it is very difficult to predict the volume or speed of the migration of performing loans to problem assets, and while market conditions, regulatory directives and a number of other factors may ultimately affect that migration and the attractiveness of selling problem assets, Synovus presently believes that it will sell an additional $600 million in problem assets during the first and second quarters of 2010.

Provision and Allowance for Loan Losses

Despite credit standards, internal controls, and a continuous loan review process, the inherent risk in the lending process results in periodic charge-offs. The provision for losses on loans is the charge to operating earnings necessary to maintain an adequate allowance for loan losses. Through the provision for losses on loans, Synovus maintains an allowance for losses on loans that management believes is adequate to absorb probable losses within the loan portfolio. However, future additions to the allowance may be necessary based on changes in economic conditions, as well as changes in assumptions regarding a borrower’s ability to payand/or collateral values. In addition, various regulatory agencies, as an integral part of their examination procedures, periodically review each bank’s allowance for loan losses. Based on their judgments about information available to them at the time of their examination, such agencies may require the banks to recognize additions to their allowance for loan losses.

Allowance for Loan Losses Methodology

During the second quarter of 2007, Synovus implemented certain refinements to its allowance for loan losses methodology, specifically the way that loss factors are derived. These refinements resulted in a reallocation of the factors used to determine the allocated and unallocated components of the allowance along with a more disaggregated approach to estimate the required allowance by loan portfolio classification. These changes did not have a significant impact on the total allowance for loan losses or provision for losses on loans upon implementation.

The allowance for loan losses is a significant estimate and is regularly evaluated by Synovus for adequacy. To determine the adequacy of the allowance for loan losses, a formal analysis is completed quarterly to assess the probable loss within the loan portfolio. This assessment, conducted by lending officers and each bank’s loan administration department, as well as an independent holding company credit review function, contains significant judgment and includes analyses of historical performance (including the level of charge-offs), past due trends, the level of non-performing loans, reviews of certain impaired loans, loan activity since the previous quarter, consideration of current economic conditions, and other pertinent information. Each loan is assigned a rating, either individually or as part of a homogeneous pool, based on an internally developed risk rating system. The resulting conclusions are reviewed and approved by senior management. The process for determining the appropriate level of the allowance for loan losses and, accordingly, the amount of the provisions that should be made to that allowance during each period, is based upon a number of assumptions, estimates, and judgments that are inherently subjective and subject to change.

The allowance for loan losses consists of two components: the allocated and unallocated allowances. Both components of the allowance are available to cover inherent losses in the portfolio. The allocated component of the allowance is determined by type of loan within the commercial and retail portfolios. The allocated allowance for commercial loans includes an allowance for certain impaired loans which is determined as described below. Additionally, the allowance for commercial loans includes an allowance for non-impaired loans which is based on application of loss reserve factors to the components of the portfolio based on the assigned loan grades. The allocated allowance for retail loans is generally determined on pools of homogeneous loan categories. Loss percentage factors are based on the probable loss including qualitative factors. The probable loss considers the probability of default, the loss given default, and certain qualitative factors as determined by loan category and loan grade. Through December 31, 2007, the probability of default loss factors for commercial and retail loans were based on industry data. Beginning January 1, 2008, the probability of default loss factors for retail loans are based on internal default experience because this was the first reporting period when sufficient internal default data became available. Synovus believes that this data provides a more accurate estimate of probability of default. Beginning April 1, 2009, the probability of default loss factors for commercial loans are based on internal default data experience because this was the first reporting period when sufficient internal default data became available. This change in 2009 resulted in a net increase in the allocated allowance for loan losses for the commercial portfolio of approximately $30 million during the three months ended June 30, 2009. The loss given default factors for both retail and commercial loans continue to be based on industry data because sufficient internal data is not yet available. The qualitative factors consider credit concentrations, recent levels and trends in delinquencies and nonaccrual loans, and growth in the loan portfolio. The occurrence of certain events could result in changes to the loss factors. Accordingly, these loss factors are reviewed periodically and modified as necessary.

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Management’s Discussion and Analysis ­ ­ 

Synovus has a significant amount of non-performing assets. In order to reduce non-performing asset levels, during 2009, Synovus began aggressively selling non-performing loans. During the second quarter of 2009, Synovus was able to significantly accelerate the pace of asset dispositions. This experience provided management a basis to estimate the loan sales (consisting primarily of non-performing loans) that would be completed over the next two quarters. This accelerated sales strategy puts pressure on pricing and has resulted in liquidation type yields rather than pricing that might be realized under a traditional sales life cycle. In addition, some sales have been conducted through auctions and packaged sales to investors. These types of sales yield proceeds lower than traditional sales. Based upon this, beginning in the second quarter of 2009, the allowance for loan losses included management’s estimate of losses associated with these asset dispositions that were both probable and could be reasonably estimated. Such losses are not directly allocated on an asset by asset basis due to the fact that the specific assets to be sold have not yet been individually identified.

The amount of the allowance allocated for losses on asset dispositions is estimated by projecting the book value of assets to be disposed of within a six month period and applying an assumed additional loss factor on those dispositions. Loss factors are determined based upon a combination of historical sales prices and current indicative market pricing. When determining loss factors, consideration is given to anticipated exit mechanisms, expected market activity, as well as the marketability of the non-performing asset portfolio. Asset disposition projections are developed by senior credit officers based upon historical trends, projected available inventory, and anticipated market appetite. Synovus only considers a six month period of projected dispositions for purposes of recording these allowances as that time period is all that management believes is appropriate for determining dispositions that are probable of occurring given the current economic environment and the level of classified assets.

The unallocated component of the allowance is established for losses that specifically exist in the remainder of the portfolio, but have yet to be identified. The unallocated component also compensates for imprecision in assigned loan risk ratings and uncertainty in estimating loan losses. The unallocated component of the allowance is based upon economic factors, changes in the experience, ability, and depth of lending management and staff, and changes in lending policies and procedures, including underwriting standards and results of Parent Company loan reviews. Certain macro-economic factors and changes in business conditions and developments could have a material impact on the collectability of the overall portfolio.

Considering current information and events regarding the borrowers’ ability to repay their obligations, management considers a loan to be impaired when the ultimate collectability of all principal and interest amounts due, according to the contractual terms of the loan agreement, is in doubt. When a loan becomes impaired, management calculates the impairment based on the present value of expected future cash flows discounted at the loan’s effective interest rate. If the loan is collateral dependent, the fair value of the collateral (net of selling costs) is used to measure the amount of impairment. The amount of impairment and any subsequent changes are recorded through a charge to earnings as an adjustment to the allowance for loan losses. When management considers a loan, or a portion thereof, as uncollectible, it is charged against the allowance for loan losses. A majority of Synovus’ impaired loans are collateral dependent. Any deficiency of the collateral coverage is charged against the allowance. The required allowance (or the actual losses) on these impaired loans could differ significantly if the ultimate fair value of the collateral is significantly different from the fair value estimates used by Synovus in estimating such potential losses.

A summary by loan category of loans charged off, recoveries of loans previously charged off, and additions to the allowance through provision expense is presented in Table 20.

Total net charge-offs were $1.46 billion or 5.37% of average loans for 2009, compared to $469.2 million or 1.71% for 2008. The increase in charge offs is related both to credit deterioration within the loan portfolio as well as significantly declining collateral values due to prevailing real estate market conditions. The residential construction and development portfolio (a component of the 1-4 family category) represented $623.4 million or 42.7% of total net charge-offs for 2009. Net charge offs in these categories also increased by $375.9 million from 2008 levels, representing 37.9% of the total increase of $991.0 million in total net charge offs for the year. The South Carolina market and Atlanta market represented $83.9 million and $265.0 million, respectively, of the total residential construction and development net charge-offs for 2009. Retail real estate mortgage net charge-offs, including home equity lines of credit, were $77.2 million in 2009, compared to $18.9 million in 2008.

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Management’s Discussion and Analysis ­ ­ 

The following tables show net charge-offs by geography and type for the years ended December 31, 2009 and December 31, 2008.

Table 17  Net Charge-Offs by Geography

	December 31,
(In thousands)	2009		2008
Georgia	$	798,161		277,002
Atlanta		453,233		164,003
Florida		270,792		93,914
South Carolina		276,188		48,595
Tennessee		55,476		26,755
Alabama		59,558		22,929
Consolidated	$	1,460,175		469,195

Table 18  Net Charge-Offs by Loan Type

	December 31,
(In thousands)	2009		2008
Investment properties	$	165,666		17,742
1 — 4 Family properties		685,033		264,165
Land for future development		202,302		54,742
Total commercial real estate		1,053,001		336,649
Commercial and industrial		296,052		97,373
Retail		111,122		35,173
Total	$	1,460,175		469,195

Allocation of the Allowance for Loan Losses

Table 21 shows a five year comparison of the allocation of the allowance for loan losses. The allocation of the allowance for loan losses is based on several essential loss factors which could differ from the specific amounts or loan categories in which charge-offs may ultimately occur.

The allowance for loan losses to non-performing loans coverage was 60.66% at December 31, 2009, compared to 65.00% at December 31, 2008. This ratio is impacted by collateral-dependent impaired loans, which have no allowance for loan losses as the estimated losses on these credits have been charged-off. Therefore, a more meaningful allowance for loan losses coverage ratio is the allowance to non-performing loans excluding collateral-dependent impaired loans for which there is no related allowance for loan losses, which was 124.7% at December 31, 2009, compared to 192.8% at December 31, 2008. During times when non-performing loans are not significant, this coverage ratio — which measures the allowance for loan losses (which is there for the entire loan portfolio) against a small non-performing loans total — appears very large. As non-performing loans increase, this ratio will decline even with significant incremental additions to the allowance.

The allowance for loan losses allocated to non-performing loans (exclusive of collateral-dependent impaired loans which have no allowance, as the estimated losses on these loans have already been recognized) is as follows:

Table 19  Allowance for Loan Losses Allocated to Non-performing Loans

	December 31,
(Dollars in thousands)	2009			2008
Non-performing loans, excluding collateral-dependent impaired loans which have no allowance	$	771.2			303.6
Total allocated allowance for loan losses on above loans		161.9			68.5
Allocated allowance as a% of loans		21.0	%		22.6

Collateral-dependent impaired loans which have no allowance at December 31, 2009 (because they are carried at fair value net of selling costs) totaled $784.6 million, or 50.4% of non-performing loans. Synovus has recognized net charge-offs amounting to approximately 39% of the principal balance on these loans since they were placed on impaired status.

Commercial loans had an allocated allowance of $805.5 million, an increase of $312.2 million or 63.3% increase from the prior year. Approximately 46% of the increase is related to the reserve for asset dispositions that was established during 2009.

Commercial, financial, and agricultural loans had an allocated allowance of $114.3 million or 1.9% of loans in the respective category at December 31, 2009, compared to $126.7 million or 1.9% at December 31, 2008. The decrease in the allocated allowance is primarily due to a decline in loan balances of $629.4 million from the previous year-end.

The allocated allowance for owner occupied loans was $72.0 million at December 31, 2009, an increase of $32.7 million or 83.3% from December 31, 2008. The increase was driven by negative credit migration in this loan category.

At December 31, 2009, the allocated component of the allowance for loan losses related to commercial real estate construction loans was $306.4 million, up 24.0% from $247.2 million in 2008. As a percentage of commercial real

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Management’s Discussion and Analysis ­ ­ 

estate construction loans, the allocated allowance in this category was 5.9% at December 31, 2009, compared to 3.4% the previous year-end. The increase is primarily due to negative credit migration in the land acquisition category. As a percentage of total loans, the allowance for loan losses in this category was 6.3%, compared to approximately 2.0% of total loans in the prior year.

Commercial real estate mortgage loans had an allocated allowance of $168.8 million at December 31, 2009, up $88.6 million from $80.2 million at December 31, 2008. The increase in this category was related to negative loan migration, with approximately half of the increase attributed to the investment real estate category.

The unallocated allowance is 0.32% of total loans at December 31, 2009. This compares to 0.22% of total loans at December 31, 2008. The increase in the unallocated allowance during 2009 is primarily due to the macroeconomic downturn and imprecision in loan risk ratings. Management believes that this level of unallocated allowance is adequate to provide for probable losses that are inherent in the loan portfolio and that have not been fully provided through the allocated allowance. Factors considered in determining the adequacy of the unallocated allowance include economic factors, changes in the experience, ability, and depth of lending management and staff, and changes in lending policies and procedures, including underwriting standards and results of Parent Company loan reviews.

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Management’s Discussion and Analysis ­ ­ 

Table 20  Allowance for Loan Losses – Summary of Activity by Loan Type

	December 31,
(Dollars in thousands)	2009			2008		2007		2006		2005
Allowance for loan losses at beginning of year	$	598,301			367,613		314,459		289,612		265,745
Allowance for loan losses of acquired subsidiaries, net		—			—		—		9,915		—
Loans charged off:
Commercial:
Commercial, financial, and agricultural		242,843			95,186		35,443		44,676		38,087
Owner occupied		67,347			11,803		1,347		2,695		2,603
Real estate — construction		913,032			311,716		61,055		3,899		1,367
Real estate — mortgage		153,741			28,640		13,318		4,795		3,972
Total commercial		1,376,963			447,345		111,163		56,065		46,029
Retail:
Real estate — mortgage		79,016			20,014		6,964		3,604		4,393
Retail loans — credit card		20,854			13,213		8,172		8,270		11,383
Retail loans — other		15,773			5,699		4,910		4,867		5,421
Total retail		115,643			38,926		20,046		16,741		21,197
Total loans charged off		1,492,606			486,271		131,209		72,806		67,226
Recoveries on loans previously charged off:
Commercial:
Commercial, financial, and agricultural		12,321			9,219		7,735		7,304		3,890
Owner occupied		1,817			397		119		185		331
Real estate — construction		10,140			2,673		1,713		132		50
Real estate — mortgage		3,632			1,035		471		729		152
Total commercial		27,910			13,324		10,038		8,350		4,423
Retail:
Real estate — mortgage		1,846			1,138		894		527		511
Retail loans — credit card		1,161			1,557		1,669		2,130		1,828
Retail loans — other		1,514			1,057		1,554		1,583		1,799
Total retail		4,521			3,752		4,117		4,240		4,138
Recoveries of loans previously charged off		32,431			17,076		14,155		12,590		8,561
Net loans charged off		1,460,175			469,195		117,054		60,216		58,665
Provision for losses on loans		1,805,599			699,883		170,208		75,148		82,532
Allowance for loan losses at end of year	$	943,725			598,301		367,613		314,459		289,612
Allowance for loan losses to loans, net of unearned income		3.72	%		2.14		1.39		1.28		1.35
Ratio of net loans charged off to average loans outstanding, net of unearned income		5.37	%		1.71		0.46		0.26		0.29

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Management’s Discussion and Analysis ­ ­ 

Table 21  Allocation of Allowance for Loan Losses

	December 31,
	2009					2008					2007					2006					2005
(Dollars in thousands)	Amount		% *			Amount		% *			Amount		% *			Amount		% *			Amount		% *
Commercial:
Commercial, financial, and agricultural	$	137,031		24.1		$	126,695		24.2		$	94,741		24.2		$	74,649		23.8		$	83,995		24.6
Owner occupied		72,002		18.1			39,276		16.1			29,852		16.0			38,712		16.4			34,000		17.2
Real estate — construction		379,618		20.5			247,151		26.1			116,791		30.3			73,799		30.5			55,095		26.8
Real estate — mortgage		216,840		20.8			80,172		18.0			41,737		14.6			40,283		14.6			40,108		15.9
Total commercial		805,491		83.5			493,294		84.4			283,121		85.1			227,443		85.3			213,198		84.5
Retail:
Real estate — mortgage		34,860		13.2			27,656		12.5			27,817		12.1			6,625		11.8			6,445		12.0
Retail loans — credit card		15,751		1.2			11,430		1.0			10,900		1.1			8,252		1.1			8,733		1.3
Retail loans — other		6,701		2.2			5,766		2.2			8,017		1.9			9,237		2.0			8,403		2.4
Total retail		57,312		16.6			44,852		15.7			46,734		15.1			24,114		14.9			23,581		15.7
Unearned income				(0.1	)				(0.1	)				(0.2	)				(0.2	)				(0.2	)
Unallocated		80,922					60,155					37,758					62,902					52,833
Total allowance for loan losses	$	943,725		100.0		$	598,301		100.0		$	367,613		100.0		$	314,459		100.0		$	289,612		100.0

* Loan balance in each category expressed as a percentage of total loans, net of unearned income.

Non-performing Assets and Past Due Loans

Non-performing assets consist of loans classified as non-accrual, impaired or held for sale and real estate acquired through foreclosure. Accrual of interest on loans is discontinued when reasonable doubt exists as to the full collection of interest or principal, or when they become contractually in default for 90 days or more as to either interest or principal, unless they are both well-secured and in the process of collection. Non-accrual loans consist of those loans on which recognition of interest income has been discontinued. Demand and time loans, whether secured or unsecured, are generally placed on non-accrual status when principaland/or interest is 90 days or more past due, or earlier if it is known or expected that the collection of all principaland/or interest is unlikely. Loans past due 90 days or more, which based on a determination of collectability are accruing interest, are classified as past due loans. Non-accrual loans are reduced by the direct application of interest and principal payments to loan principal, for accounting purposes only.

During the third quarter of 2009, Synovus revised its definition of non-performing loans to exclude accruing TDRs. Such loans are not considered to be non-performing because they are performing in accordance with the restructured terms. Management believes that this change better aligns our definition of non-performing loans and non-performing assets with the definition used by our peers and therefore improves the comparability of this measure across the industry. All prior periods presented have been reclassified to conform to the new presentation. Accruing TDRs were approximately $213.6 million at December 31, 2009, compared to $1.2 million at December 31, 2008. At December 31, 2009, the allowance for loan losses allocated to these accruing restructured loans was approximately $20.6 million. The increase in accruing restructured loans since the prior year is directly related to the challenges our commercial customers continue to face in the current economic environment and Synovus’ efforts to work with creditworthy customers to find solutions that are in the best interest of both the customer and Synovus. Restructurings are primarily in the form of extension of terms or reduction in interest rate.

Non-performing assets increased $661.2 million to $1.83 billion at December 31, 2009 compared to year-end 2008. The non-performing assets as a percentage of loans, other loans held for sale, and other real estate increased to 7.14% as of December 31, 2009 compared to 4.15% as of year-end 2008. The increase in non-performing assets was driven primarily by investment properties, mainly hotels and residential real estate. Total non-performing loans increased

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Management’s Discussion and Analysis ­ ­ 

$635.27 million or 69.0% over year-end 2008. As shown on Table 27, 1-4 family property loans represent $622.0 million or 40.0% of total non-performing loans at December 31, 2009. Additionally, investment properties represent 26.1% and land acquisition loans represent 12.7%, respectively, of total non-performing loans at December 31, 2009. At December 31, 2009, non-performing loans in the Atlanta market totaled $454.1 million while non-performing loans in the South Carolina market totaled $266.7 million, which together represents 46.3% of total non-performing loans. Atlanta and South Carolina represent $309.2 million or 49.7% of 1-4 family property non-performing loans at December 31, 2009. While total non-performing assets at December 31, 2009 showed a significant increase from the prior year, total new non-performing assets have declined for each of the last three quarters in 2009. Synovus presently anticipates stabilization of non-performing asset balances in the near term and improvement in on-boarding of non-performing assets in 2010. In addition, Synovus continues to aggressively manage its non-performing asset portfolio through its asset disposition strategy.

Provision expense for the year ended December 31, 2009 was $1.81 billion, an increase of $1.11 billion compared to the prior year. The Atlanta market accounted for $410.4 million of the total provision expense, while the South Carolina market accounted for $347.3 million of the total provision expense.

Other real estate totaled $238.8 million at December 31, 2009, which represented a $7.3 million decrease from year-end 2008. While Synovus transferred a significant amount of properties into other real estate during 2009, asset dispositions, including sales of $477.0 million of other real estate properties, contributed to the decline from the prior year. Residential real estate represented 72.1% of the other real estate total at December 31, 2009. The Atlanta and South Carolina markets represented 54.4% of other real estate at December 31, 2009.

As a percentage of total loans outstanding, loans 90 days past due and still accruing interest were 0.08% at December 31, 2009. This compares to 0.14% at year-end 2008. These loans are in the process of collection, and management believes that sufficient collateral value securing these loans exists to cover contractual interest and principal payments.

Management continuously monitors non-performing and past due loans, to prevent further deterioration regarding the condition of these loans. Potential problem loans are defined by management as certain performing loans with a well defined weakness and where there is information about possible credit problems of borrowers which causes management to have doubts as to the ability of such borrowers to comply with the present repayment terms. Management’s decision to include performing loans in the category of potential problem loans means that management has recognized a higher degree of risk associated with these loans. In addition to accruing loans 90 days past due, Synovus had approximately $1.43 billion of potential problem commercial and commercial real estate loans at December 31, 2009, as compared to $1.25 billion at September 30, 2009 and $830 million at December 31, 2008. Management’s current expectation of probable losses from potential problem loans is included in the allowance for loan losses at December 31, 2009. At December 31, 2009, the allowance for loan losses allocated to these potential problem loans was approximately $196 million. The increase in potential problem loans from the prior year is primarily related to credits within the residential and commercial development categories. Synovus cannot predict at this time whether these potential problem loans ultimately will become problem loans or result in losses.

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Management’s Discussion and Analysis ­ ­ 

Table 22 Selected Credit Quality Metrics

	December 31,
(Dollars in thousands)	2009			2008		2007		2006		2005
Non-performing loans(1)(4)	$	1,555,776			920,506		340,656		96,242		80,026
Impaired loans held for sale(2)		36,816			3,527		—		—		—
Other real estate		238,807			246,121		101,487		25,923		16,500
Non-performing assets(3)(4)	$	1,831,399			1,170,154		442,143		122,165		96,526
Net charge-offs	$	1,460,175			469,195		117,054		60,216		58,665
Net charge-offs/average loans		5.37	%		1.71		0.44		0.24		0.27
Loans 90 days past due and still accruing	$	19,938			38,794		33,663		34,495		16,023
As a% of loans		0.08	%		0.14		0.13		0.14		0.07
Total past due loans and still accruing	$	262,446			362,538		270,496		155,058		93,291
As a% of loans		1.03	%		1.30		1.02		0.63		0.44
Restructured loans (accruing)(4)	$	213,552			1,202		1,427		380		2,149
Allowance for loan losses	$	943,725			598,301		367,613		314,459		289,612
Allowance for loan losses as a% of loans		3.72	%		2.14		1.39		1.28		1.35
Non-performing loans as a% of total loans		6.13			3.30		1.29		0.39		0.37
Non-performing assets as a% of total loans, other loans held for sale, and ORE		7.14			4.15		1.66		0.49		0.45
Allowance to non-performing loans		60.66			65.00		107.91		326.74		361.89
Collateral-dependent impaired loans(5)	$	1,021,038			421,034		264,902		42,164		95,303

(1)	Allowance and cumulative write-downs on non-performing loans as a percentage of unpaid principal balance at December 31, 2009 was approximately 42%, compared to 36% at December 31, 2008.
(2)	Represent only the impaired loans that have been specifically identified to be sold. Impaired loans held for sale are carried at the lower of cost or fair value.
(3)	Allowance and cumulative write-downs on non-performing assets as a percentage of unpaid principal balance at December 31, 2009 was approximately 45%.
(4)	During the third quarter of 2009, Synovus revised its definition of non-performing assets to exclude TDRs that remain on accruing status. These loans are not considered to be non-performing because they are performing in accordance with the restructured terms. Management believes that this change better aligns Synovus’ definition of non-performing loans and non-performing assets with the definition used by peers and therefore improves the comparability of this measure across the industry. All prior periods presented have been reclassified to conform to the new presentation.
(5)	Collateral-dependent impaired loans for which there was no associated reserve were: $784.6 million at December 31, 2009 and $610.1 million as of December 31, 2008.

Interest income on non-performing loans outstanding on December 31, 2009, that would have been recorded if the loans had been current and performed in accordance with their original terms was $145.0 million for the year ended December 31, 2009. Interest income recorded on these loans for the year ended December 31, 2009 was $67.3 million.

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Management’s Discussion and Analysis ­ ­ 

Table 23  Non-performing Assets Ratio by State

	December 31,
	2009			2008
Georgia		8.45	%		5.27
Atlanta		14.51			8.61
Florida		7.11			5.51
South Carolina		9.04			1.68
Tennessee		4.28			2.62
Alabama		3.69			1.86
Consolidated		7.14	%		4.15

The investment properties portfolio represents the largest category of loans within the commercial real estate portfolio, comprising 54.3% of such loans as of December 31, 2009. Synovus has provided below further detail regardingnon-performing loans by loan type within the investment properties portfolio as of December 31, 2009.

Table 24  Selected Credit Quality Metrics by Category – Investment Property Portfolio

	Outstanding					30+ Past
(Dollars in thousands)	Balance		NPL Ratio			Due Ratio
Multi-family	$	925,017		1.5	%		0.1
Hotels		1,018,460		21.8	*		0.2
Office buildings		1,010,212		3.0			0.8
Shopping centers		1,087,181		1.9			1.7
Commercial development		608,333		7.6			1.1
Warehouses		493,454		7.8			—
Other investment property		547,407		6.4			0.8
Total investment property loans	$	5,690,064		7.1	%*		0.7

* Excluding one large credit, NPL ratio would be 0.09% for hotels and 3.25% for total investment properties as of December 31, 2009.

Commercial and Industrial loans represent 50.5% of the total commercial loan portfolio as of December 31, 2009. Synovus has provided below further detail of the non-performing loan balances related to commercial and industrial loan portfolio as of December 31, 2009.

Table 25  Selected Credit Quality Metrics by Type – Commercial and Industrial Loan Portfolio

	Outstanding					30+ Past
(Dollars in thousands)	Balance		NPL Ratio			Due Ratio
Commercial, financial, and agricultural	$	6,118,516		2.75	%		0.89
Owner occupied real estate		4,584,278		2.04			0.47
Total commercial and industrial loans	$	10,702,794		2.44	%		0.71

Retail loans represent 16.6% of the total Synovus loan portfolio as of December 31, 2009. Synovus has provided below further detail of the non-performing loan balances related to the retail loan portfolio as of December 31, 2009.

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Management’s Discussion and Analysis ­ ­ 

Table 26  Selected Credit Quality Metrics by Type – Retail Loan Portfolio

	Outstanding					30+ Past
(Dollars in thousands)	Balance		NPL Ratio			Due Ratio
Home equity lines	$	1,714,994		0.91	%		0.75
Consumer mortgage		1,637,978		2.94			2.08
Small business		186,837		1.14			1.74
Credit card		294,126		—			3.85
Other consumer loans		378,295		0.84			1.32
Total retail loans	$	4,212,230		1.64	%		1.58

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Management’s Discussion and Analysis ­ ­ 

The following table shows the composition of the loan portfolio and non-performing loans classified by loan type as of December 31, 2009 and 2008. The commercial real estate category is further segmented into the various property types determined in accordance with the purpose of the loan. Commercial real estate represents 41.3% of total loans and is diversified among many property types. These include commercial investment properties, 1-4 family properties, and land acquisition. As shown in the table below, commercial investment properties represent 22.4% of total loans and 54.3% of total commercial real estate loans at December 31, 2009. No category of commercial investment properties exceeds 5% of the total loan portfolio. 1-4 family properties include 1-4 family construction, commercial 1-4 family mortgages, and residential development loans. These properties are further diversified geographically; approximately 17% of 1-4 family property loans are secured by properties in the Atlanta market and approximately 9% are secured by properties in coastal markets. Land acquisition represents less than 6% of total loans.

Table 27  Composition of Loan Portfolio and Non-performing Loans

	December 31, 2009					December 31, 2008
				Non-performing					Non-performing
	Loans as a			Loans as a		Loans as a			Loans as a
	Percentage			Percentage		Percentage			Percentage
	of Total			of Total		of Total			of Total
	Loans			Non-performing		Loans			Non-performing
Loan Type	Outstanding			Loans		Outstanding			Loans
Multi-family		3.6	%		0.9		2.1			0.4
Hotels		4.0			14.3		3.5			1.1
Office buildings		4.0			1.9		3.7			0.8
Shopping centers		4.3			1.3		3.9			0.4
Commercial development		2.4			3.0		2.7			2.8
Warehouses		1.9			2.5		1.7			0.3
Other investment property		2.2			2.2		2.2			0.8
Total Investment Properties		22.4			26.1		19.8			6.6
1-4 family construction		2.8			12.4		5.8			27.8
1-4 family perm/mini-perm		5.2			5.0		5.1			5.7
Residential development		5.3			22.6		7.6			25.1
Total 1-4 Family Properties		13.3			40.0		18.5			58.6
Land Acquisition		5.6			12.7		5.8			11.6
Total Commercial Real Estate		41.3			78.8		44.1			76.8
Commercial, Financial, Agricultural		24.1			10.8		24.2			11.2
Owner-Occupied		18.1			6.0		16.1			7.9
Total Commercial and Industrial Loans		42.2			16.8		40.3			19.1
Home Equity		6.8			1.0		6.2			0.9
Consumer Mortgages		6.5			3.1		6.3			2.9
Credit Card		1.2			—		1.0			—
Other Retail Loans		2.1			0.3		2.2			0.3
Total Retail		16.6			4.4		15.7			4.1
Unearned Income		(0.1	)		—		(0.1	)		—
Total		100.0	%		100.0		100.0			100.0

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Management’s Discussion and Analysis ­ ­ 

Deposits

Deposits provide the most significant funding source for interest earning assets. The following table shows the relative composition of deposits for 2009 and 2008. See Table 6 for information on average deposits, including average rates paid in 2009, 2008, and 2007.

Table 28  Composition of Deposits

(Dollars in thousands)	2009		%(1)		2008		%(1)
Non-interest bearing demand deposits	$	4,172,697		15.2	$	3,563,619		12.6
Interest bearing demand deposits		3,894,243		14.2		3,359,410		11.7
Money market accounts		7,363,677		26.8		8,094,452		28.3
National market brokered money market accounts		1,098,117		4.0		1,985,465		6.9
Savings deposits		463,967		1.7		437,656		1.5
Time deposits under $100,000		2,791,060		10.2		3,274,327		11.4
Time deposits $100,000 and over		8,747,889		31.9		9,887,715		34.5
National market brokered time deposits		3,941,211		14.4		4,352,614		15.2
Total deposits		27,433,533		100.0		28,617,179		100.0
Core deposits(2)	$	22,394,205		81.6	$	22,279,100		77.9

(1)	Deposits balance in each category expressed as percentage of total deposits.
(2)	Core deposits include total deposits less national market brokered deposits.

Core deposits (total deposits excluding national market brokered money market and time deposits) grew 0.5% from December 31, 2008 to December 31, 2009. During 2009, the overall mix of core deposits improved with non-interest bearing demand deposits and interest bearing demand deposits replacing higher priced time deposits. The year over year increase was driven by growth within non-interest bearing demand deposits, which increased $609.1 million, or 17.1%, and interest bearing demand deposits, which increased $534.8 million, or 15.9%.

Synovus continues to maintain a strong base of large denomination time deposits from customers within the local market areas of subsidiary banks. Synovus also utilizes national market brokered time deposits as a funding source while continuing to maintain and grow its local market large denomination time deposit base. Time deposits of $100,000 and greater at December 31, 2009 and 2008 were $8.75 billion and $9.89 billion, respectively. Refer to Table 29 for the maturity distribution of time deposits of $100,000 or more. These larger deposits represented 31.9% and 34.5% of total deposits at December 31, 2009 and 2008, respectively.

With the multiple charter structure, Synovus has had the unique ability to offer certain shared deposit products (Synovus^® Shared Deposit). At December 31, 2009, Synovus’ Shared CD and Money Market accounts offered customers the unique opportunity to access up to $7.5 million in FDIC insurance by spreading deposits across its 30 separately-chartered banks. Shared deposit products at December 31, 2009 were $1.86 billion, an increase of $120.9 million compared to December 31, 2008. Upon completion of the Charter Consolidation, as discussed in the Executive Summary of Management’s Discussion and Analysis, Synovus’ shared deposit customers will have a six month grace period, per FDIC regulations, during which their total deposit will remain fully insured. Additionally, during that grace period, shared CD customers whose CDs mature during the grace period can elect to renew their shared CD on a fully insured basis for the same term as a one-time rollover. Synovus will work with its shared deposit products customers during and after this grace period to offer additional deposit products to meet their needs.

During the first quarter of 2009, Synovus received notification from the FDIC that deposits obtained through Synovus^® Shared Deposit products should be listed as brokered deposits in bank subsidiary Call Reports. Therefore, beginning with March 31, 2009, Synovus’ bank subsidiary Call Reports, reflect customer deposits held in Synovus^® Shared Deposit products as brokered deposits as requested by the FDIC. The FDIC defines brokered deposits as “funds which the reporting bank obtains, directly or indirectly, by or through any deposit broker for deposit into one or more deposit accounts.” The FDIC further defines the term deposit broker to include: “(1) any person engaged in the business of placing deposits, or

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Management’s Discussion and Analysis ­ ­ 

facilitating the placement of deposits, of third parties with insured depository institutions or the business of placing deposits with insured depository institutions for the purpose of selling interests in those deposits to third parties, and (2) an agent or trustee who establishes a deposit account to facilitate a business arrangement with an insured depository institution to use the proceeds of the account to fund a prearranged loan.” The FDIC also provides the following 9 exclusions for what the term deposit broker does not include: “(1) an insured depository institution, with respect to funds placed with that depository institution; (2) an employee of an insured depository institution, with respect to funds placed with the employing depository institution; (3) a trust department of an insured depository institution, if the trust in question has not been established for the primary purpose of placing funds with insured depository institutions; (4) the trustee of a pension or other employee benefit plan, with respect to funds of the plan; (5) a person acting as a plan administrator or an investment adviser in connection with a pension plan or other employee benefit plan provided that that person is performing managerial functions with respect to the plan; (6) the trustee of a testamentary account; (7) the trustee of an irrevocable trust (other than a trustee who establishes a deposit account to facilitate a business arrangement with an insured depository institution to use the proceeds of the account to fund a prearranged loan), as long as the trust in question has not been established for the primary purpose of placing funds with insured depository institutions; (8) a trustee or custodian of a pension or profit-sharing plan qualified under Section 401(d) or 430(a) of the Internal Revenue Code of 1986; or (9) an agent or nominee whose primary purpose is not the placement of funds with depository institutions. (For purposes of applying this ninth exclusion from the definition of deposit broker, “primary purpose” does not mean “primary activity,” but should be construed as “primary intent.”)” The FDIC requested this reporting change since Synovus facilitates the placement of customer deposits among its separately-chartered bank subsidiaries. At a consolidated level, Synovus includes and reports Synovus^® Shared Deposit product balances held throughout its bank subsidiaries as core deposits (total deposits excluding national market brokered deposits).

Due to the significant turmoil in financial markets during the second half of 2008, national market brokered deposits became more attractive to financial market participants and investors as an FDIC insured alternative to money market and other investment accounts. Synovus grew this funding source as demand for these products increased during the second half of 2008, but has reduced its dependence on funding from these products through normal run off during 2009. National market brokered deposits were $5.04 billion at December 31, 2009 as compared to $6.34 billion at December 31, 2008.

Table 29  Maturity Distribution of Time Deposits of $100,000 or More

(In thousands)	December 31, 2009
3 months or less	$	2,289,011
Over 3 months through 6 months		1,639,099
Over 6 months through 12 months		2,385,732
Over 12 months		2,434,047
Total outstanding	$	8,747,889

Market Risk and Interest Rate Sensitivity

Market risk reflects the risk of economic loss resulting from adverse changes in market prices and interest rates. This risk of loss can be reflected in either diminished current market values or reduced current and potential net income. Synovus’ most significant market risk is interest rate risk. This risk arises primarily from Synovus’ core community banking activities of extending loans and accepting deposits.

Managing interest rate risk is a primary goal of the asset liability management function. Synovus attempts to achieve consistent growth in net interest income while limiting volatility arising from changes in interest rates. Synovus seeks to accomplish this goal by balancing the maturity and repricing characteristics of assets and liabilities along with the selective use of derivative instruments. Synovus manages its exposure to fluctuations in interest rates through policies established by its Asset Liability Management Committee (ALCO) and approved by the Board of Directors. ALCO meets periodically and has responsibility for developing asset liability management policies, reviewing the interest rate sensitivity of Synovus, and developing and implementing strategies to improve balance sheet structure and interest rate risk positioning.

Simulation modeling is the primary tool used by Synovus to measure its interest rate sensitivity. On at least a quarterly basis, the following twenty-four month time period is simulated to determine a baseline net interest income forecast and the sensitivity of this forecast to changes in interest rates. The baseline forecast assumes an unchanged or flat interest rate environment. These simulations include all of Synovus’ earning assets, liabilities, and derivative instruments. Forecasted balance sheet changes, primarily reflecting loan and deposit growth expectations, are included in the periods modeled. Projected rates for new loans and deposits are based on management’s outlook and local market conditions.

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Management’s Discussion and Analysis ­ ­ 

The magnitude and velocity of rate changes among the various asset and liability groups exhibit different characteristics for each possible interest rate scenario; additionally, customer loan and deposit preferences can vary in response to changing interest rates. Simulation modeling enables Synovus to capture the effect of these differences. Synovus is also able to model expected changes in the shape of interest rate yield curves for each rate scenario. Simulation also enables Synovus to capture the effect of expected prepayment level changes on selected assets and liabilities subject to prepayment.

During 2009, the Federal Reserve Bank continued to provide significant liquidity to the markets through various targeted liquidity programs. In conjunction with these programs, the Federal Reserve Bank continued to maintain a targeted federal funds rate of 0.0% to 0.25%. Market expectations are that these rates will eventually increase as the economy becomes more stable and the Federal Reserve Bank seeks to limit any potential inflationary pressure. In this environment, Synovus would seek to position its balance sheet to benefit from an increase in interest rates.

Synovus’ rate sensitivity position is indicated by selected results of net interest income simulations. In these simulations, Synovus has modeled the impact of a gradual increase in short-term interest rates of 100 and 200 basis points to determine the sensitivity of net interest income for the next twelve months. Due to short-term interest rates being at or near 0% at this time, only rising rate scenarios have been modeled. As illustrated in Table 30, the net interest income sensitivity model indicates that, compared with a net interest income forecast assuming stable rates, net interest income is projected to increase by 0.9% and increase by 2.5% if interest rates increased by 100 and 200 basis points, respectively. These changes were within Synovus’ policy limit of a maximum 5% negative change.

The actual realized change in net interest income would depend on several factors. These factors include, but are not limited to, actual realized growth in asset and liability volumes, as well as the mix experienced over these time horizons. Market conditions and their resulting impact on loan, deposit, and wholesale funding pricing would also be a primary determinant in the realized level of net interest income.

Synovus is also subject to market risk in certain of its fee income business lines. Financial management services revenues, which include trust, brokerage, and financial planning fees, can be affected by risk in the securities markets, primarily the equity securities market. A significant portion of the fees in this unit are determined based upon a percentage of asset values. Weaker securities markets and lower equity values have an adverse impact on the fees generated by these operations. Mortgage banking income is also subject to market risk. Mortgage loan originations are sensitive to levels of mortgage interest rates and therefore, mortgage revenue could be negatively impacted during a period of rising interest rates. The extension of commitments to customers to fund mortgage loans also subjects Synovus to market risk. This risk is primarily created by the time period between making the commitment and closing and delivering the loan. Synovus seeks to minimize this exposure by utilizing various risk management tools, the primary of which are forward sales commitments and best efforts commitments.

Table 30  Twelve Month Net Interest Income Sensitivity

Change in	Estimated change in Net Interest Income
Short-Term	As of	As of
Interest Rates	December 31,	December 31,
(In basis points)	2009	2008
+ 200	2.5%	3.9
+ 100	0.9	0.9
Flat	—%	—

Derivative Instruments for Interest Rate Risk Management

As part of its overall interest rate risk management activities, Synovus utilizes derivative instruments to manage its exposure to various types of interest rate risks. These instruments are in the form of interest rate swaps where Synovus receives a fixed rate of interest and pays a floating rate tied to either the prime rate or LIBOR. These swaps are utilized to hedge the variability of cash flows or fair values of on-balance sheet assets and liabilities.

Interest rate derivative contracts utilized by Synovus include end-user hedges, all of which are designated as hedging specific assets or liabilities. These hedges are executed and managed in coordination with the overall interest rate risk management function. Management believes that the utilization of these instruments provides greater financial flexibility and efficiency in managing interest rate risk.

The notional amount of interest rate swap contracts utilized by Synovus as part of its overall interest rate risk management activities as of December 31, 2009 and 2008 was $815 million and $1.84 billion, respectively. The notional amounts represent the amount on which calculations of interest payments to be exchanged are based.

Entering into interest rate derivatives contracts potentially exposes Synovus to the risk of counterparties’ failure to

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Management’s Discussion and Analysis ­ ­ 

fulfill their legal obligations including, but not limited to, potential amounts due or payable under each derivative contract. This credit risk is normally a small percentage of the notional amount and fluctuates based on changes in interest rates. Synovus analyzes and approves credit risk for all potential derivative counterparties prior to execution of any derivative transaction. Synovus seeks to limit credit risk by dealing with highly-rated counterparties and by obtaining collateralization for exposures above certain predetermined limits.

A summary of these interest rate contracts and their terms at December 31, 2009 and 2008 is shown in the table below. The fair value (net unrealized gains and losses) of these contracts has been recorded on the consolidated balance sheets.

During 2009, a total of $843.9 million in notional amounts of interest rate contracts matured, $75.0 million were called, and $350 million were terminated. A total notional amount of $1.3 billion matured in 2008 and $377.5 million were terminated. Interest rate contracts contributed additional net interest income of $47.4 million and a 15 basis point increase in the net interest margin for 2009. For 2008, interest rate contracts contributed an increase in net interest income of $42.3 million and a 14 basis point increase to the net interest margin.

Table 31  Interest Rate Contracts

			Weighted			Weighted		Weighted							Net
			Average			Average		Average							Unrealized
	Notional		Receive			Pay		Maturity		Unrealized		Unrealized			Gains
(Dollars in thousands)	Amount		Rate			Rate *		In Months		Gains		Losses			(Losses)
December 31, 2009
Receive fixed swaps:
Fair value hedges	$	265,000		1.32	%		0.40		6	$	1,020		(29	)		991
Cash flow hedges		550,000		7.97			3.25		16		27,394		—			27,394
Total	$	815,000		5.80	%		2.32		13	$	28,414		(29	)		28,385
December 31, 2008
Receive fixed swaps:
Fair value hedges	$	993,936		3.88	%		1.52		25	$	38,482		(1	)		38,481
Cash flow hedges		850,000		7.86			3.25		25		65,125		—			65,125
Total	$	1,843,936		5.72	%		2.31		25	$	103,607		(1	)		103,606

* Variable pay rate based upon contract rates in effect at December 31, 2009 and 2008.

Liquidity

Liquidity represents the extent to which Synovus has readily available sources of funding needed to meet the needs of depositors, borrowers and creditors, to support asset growth, to maintain reserve requirements, and to otherwise sustain operations of Synovus and its subsidiary banks, at a reasonable cost, on a timely basis, and without adverse consequences. ALCO, operating under liquidity and funding policies approved by the Board of Directors and in coordination with subsidiary banks, actively analyzes contractual and anticipated cash flows in order to properly manage Synovus’ liquidity position.

Synovus generates liquidity through maturities and repayments of loans by customers, deposit growth, and access to sources of funds other than deposits. Management must ensure that adequate liquidity, at a reasonable cost, is available to meet the cash flow needs of depositors, borrowers, and creditors. Management constantly monitors and maintains appropriate levels of liquidity so as to provide adequate funding sources to meet estimated customer deposit withdrawals and future loan requests. Liquidity is also enhanced by the acquisition of new deposits. Each of the 30 subsidiary banks monitors deposit flows and evaluates alternate pricing structures in an effort to retain and grow deposits. In the current market environment, customer confidence is a critical element in growing and retaining deposits. In this regard, Synovus subsidiary banks’ asset quality could play a larger role in the stability of the deposit base. In the event asset quality declines significantly from its current level, the subsidiary banks’ ability to grow and retain deposits could be diminished, which in turn could reduce deposits as a liquidity source.

Synovus has also grown deposits through the offering of shared deposit products which allow customers the opportunity to access up to $7.5 million in FDIC insurance by spreading deposits across our 30 separately chartered banks. As discussed in the Executive Summary of Management’s Discussion and Analysis, Synovus intends to transition from 30 subsidiary

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banks to a single subsidiary bank structure. This charter consolidation, should it be completed, will result in the inability to offer the shared deposit products in the future. Upon completion of the charter consolidation, Synovus’ shared deposit customers will have a six month grace period, per FDIC regulations, during which their total deposit will remain fully insured. Additionally, CD customers whose CDs mature during the grace period can elect to renew their shared CD on a fully insured basis for the same term as a one-time rollover. Synovus intends to work with these customers during and after this grace period to offer additional deposit products to meet their needs. While Synovus intends to aggressively pursue retention of this deposit base, there can be no assurance that a significant portion of these deposits will remain on deposit at Synovus subsidiary banks after their final maturity. The possibility of this deposit outflow is a potential liquidity risk. Due to this and other liquidity risks, Synovus expects to maintain an above average short term liquidity cushion, primarily in the form of interest bearing funds with the Federal Reserve Bank.

Synovus subsidiary banks also generate liquidity through the national deposit markets. These subsidiary banks issue longer-term certificates of deposit across a broad geographic base to increase their liquidity and funding positions. For individual Synovus banks, access to these deposits could become more limited if their asset quality and financial performance were to significantly deteriorate. Selected Synovus subsidiary banks have the capacity to access funding through their membership in the FHLB. At December 31, 2009, most Synovus subsidiary banks had access to incremental funding, subject to available collateral and FHLB credit policies, through utilization of FHLB advances.

In addition to bank level liquidity management, Synovus must manage liquidity at the holding company level for various operating needs including capital infusions into subsidiaries, the servicing of debt, the payment of general corporate expenses, and the payment of dividends to shareholders. The primary source of liquidity for Synovus consists of dividends from the subsidiary banks, which are governed by certain rules and regulations of various state and federal banking regulatory agencies. Dividends from subsidiaries in 2009 were, and Synovus expects that dividends from subsidiaries in 2010 will be, significantly lower than those received in previous years. Should Synovus’ subsidiaries continue to require additional capital resources, either due to asset growth or realized losses, Synovus may be required to provide capital infusions to these subsidiaries. During 2009, Synovus was required to provide capital to certain subsidiary banks and expects to continue to do so during 2010. In addition, during 2009, several of Synovus’ subsidiary state chartered banks were required to hold regulatory capital levels in excess of minimum well-capitalized requirements primarily as a result of increases in non-performing assets. See Note 13, Regulatory Capital, in the notes to the consolidated financial statements. There is an increasing possibility that additional Synovus subsidiary banks may be directed by their regulators to increase their capital levels as a result of weakened financial conditionsand/or formal or informal regulatory pressures. This may require that Synovus contribute additional capital to these banks at a time when Synovus is not receiving a meaningful amount of dividend payments from its other banks to offset those capital infusions. In addition, current conditions in the public markets for bank holding companies, together with the dividend payments on Series A Preferred Stock and other obligations and expenses of Synovus’ holding company, will likely continue to put further pressure on liquidity.

Synovus’ holding company has historically enjoyed a solid reputation and credit standing in the capital markets and historically has been able to raise funds in the form of either short or long-term borrowings or equity issuances, including the public offering executed in September 2009 as part of the Capital Plan. However, given the weakened economy, current market conditions, Synovus’ recent financial performance, and related credit ratings, there can be no assurance that Synovus would be able to obtain new borrowings or issue additional equity on favorable terms, if at all. See Part I — Item 1A — Risk Factors — of Synovus’ Annual Report onForm 10-K for 2009. Additionally, Synovus may be unable to receive dividends from its subsidiary banks, and may be required to contribute capital to those banks, which could adversely affect liquidity and cause it to raise capital on terms that are unfavorable. Due to these factors, Synovus is currently maintaining a cash position in excess of what it considers to be historically normal levels. In order to enhance this cash position, Synovus sold its ownership in Visa stock and certain private equity investments during the fourth quarter of 2009. For further discussion of these transactions, see Note 18, Visa Shares and Litigation Expense, and the section “Private Equity Investments”, under Note 16, Fair Value Accounting, in the notes to the consolidated financial statements. Synovus also continues to identify, consider, and pursue additional cash management and capital strategies. See “Capital Resources.”

While liquidity is an ongoing challenge for all financial institutions, Synovus presently believes that the sources of liquidity discussed above, including existing liquid funds on hand, are sufficient to meet its anticipated funding needs through the near future. However, if economic conditions or other factors worsen to a greater degree than the assumptions underlying Synovus’ internal financial performance projections, if minimum regulatory capital requirements for Synovus or its subsidiary banks increase as the result of regulatory

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directives or otherwise, or if Synovus’ capital projections for any reason fail to adequately address some of the more complex dynamics of our current operating structure, then Synovus may be required to seek additional liquidity from external sources. Given the weakened economy, current market conditions and Synovus’ recent financial performance and related credit ratings, there can be no assurance that the additional liquidity will be available on favorable terms, if at all. See Part I — Item 1A — Risk Factors — of Synovus’ Annual Report onForm 10-K for 2009.

Table 32 Contractual Cash Obligations

	Payments Due After December 31, 2009
	1 Year or Less		Over 1 - 3 Years		4 - 5 Years		After 5 Years		Total
(In thousands)
Long-term debt	$	620,923		416,610		212,013		460,764		1,710,310
Capital lease obligations		366		820		933		4,146		6,265
Operating leases		20,487		39,834		35,587		125,788		221,696
Total contractual cash obligations	$	641,776		457,264		248,533		590,698		1,938,271

Capital Resources

Synovus has always placed great emphasis on maintaining a solid capital base and continues to satisfy applicable regulatory capital requirements. Management is committed to maintaining a capital level sufficient to assure shareholders, customers, and regulators that Synovus is financially sound and to enable Synovus to provide a desirable level of long-term profitability.

The following table presents certain ratios used to measure Synovus’ capitalization:

Table 33 Capitalization

	December 31,			December 31,		December 31,
	2009			2008		2007
(In thousands)
Tier 1 capital	$	2,721,287			3,602,848		2,870,558
Tier 1 common equity		1,782,998			2,673,055		2,860,323
Total risk-based capital		3,637,712			4,674,476		3,988,171
Tier 1 capital ratio		10.16	%		11.22		9.11
Tier 1 common equity ratio		6.66			8.33		9.08
Total risk-based capital to risk-weighted assets ratio		13.58			14.56		12.66
Leverage ratio		8.12			10.28		8.65
Common equity to assets ratio		5.86			8.01		10.41
Tangible common equity to tangible assets ratio(1)		5.74			7.86		8.90
Tangible common equity to risk-weighted assets(1)		7.03	%		8.74		9.19

(1) See reconciliation of non-GAAP Financial Measures.

As a financial holding company, Synovus and its subsidiary banks are required to maintain capital levels required for a well-capitalized institution, as defined by federal banking regulations. The capital measures used by the federal banking regulators are the total risk-based capital ratio, Tier 1 risk-based capital ratio, and the leverage ratio. Under the regulations, a national or state chartered bank will be well-capitalized if it has a total capital ratio of 10% or greater, a Tier 1 capital ratio of 6% or greater, a leverage ratio of 5% or greater, and is not subject to any written agreement, order, capital directive, or prompt corrective action directive by a federal bank regulatory agency to meet and maintain a specific

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capital level for any capital measure. However, even if a bank satisfies all applicable quantitative criteria to be considered well-capitalized, the regulations also establish procedures for “downgrading” an institution to a lower capital category based on supervisory factors other than capital. At December 31, 2009, several of Synovus’ subsidiary state chartered banks were required to hold regulatory capital levels in excess of minimum well-capitalized requirements primarily as a result of increases in non-performing assets. Management believes that as of December 31, 2009, Synovus and its subsidiary banks meet all capital requirements to which they are subject.

Since the third quarter of 2007, the credit markets, and the residential and commercial development real estate markets, have experienced severe difficulties and challenging economic conditions. As a result, Synovus’ capital has been negatively impacted by credit costs since mid-2008. Synovus continually monitors its capital position and has taken a number of steps focused on strengthening Synovus’ capital position, as described below. However, credit deterioration, further regulatory directives (including formal or informal increases in minimum capital requirements), and increases in non-performing assets and the allowance for loan losses exceeding current expectations could adversely impact our liquidity position and capital ratios. Accordingly, Synovus continues to actively monitor its capital position and to identify, consider, and pursue additional strategies designed to bolster its capital position.

In December 2008, Synovus issued 967,870 shares of Series A Preferred Stock to the United States Department of the Treasury as part of the Capital Purchase Program (CPP), generating $967.9 million of Tier 1 Capital. See Note 12 Equity in Notes to Consolidated Financial Statements.

During 2009, as Synovus continued to carefully monitor the dramatically evolving financial services landscape in general and its position in that landscape compared to its peers in particular, Synovus considered a number of factors, including, but not limited to: the regulators’ urging for Synovus to bolster its capital position; strategies pursued by Synovus’ peers to improve their capital position; market conditions and the ability to raise available capital; and available strategic opportunities resulting from the distressed banking environment.

In light of these factors, on September 14, 2009, Synovus announced a Capital Plan, (2009 Capital Plan) pursuant to which Synovus implemented certain initiatives that it expected would increase Synovus’ Tier 1 capital and improve its tangible common equity to tangible assets ratio. Synovus has substantially completed the execution of the 2009 Capital Plan as described below:

•  On September 22, 2009, Synovus completed a public offering of 150,000,000 shares of common stock at a price of $4.00 per share, generating net proceeds of $570.9 million.

•  On November 5, 2009, Synovus completed the exchange offer (Exchange Offer) of $29,820,000 in aggregate principal amount of its outstanding 4.875% Subordinated Notes Due 2013 (Notes) for 9.44 million shares of Synovus common stock. The Notes exchanged in the Exchange Offer represent 12.6% of the $236,570,000 aggregate principal amount of Notes outstanding prior to the Exchange Offer. The Exchange Offer resulted in an increase to tangible common equity of approximately $28 million.

•  On November 6, 2009, Synovus completed the sale of its remaining shares of Visa Class B common stock. Synovus recognized a pre-tax gain of $51.9 million on the sale of the Visa Class B common stock during the three months ended December 31, 2009.

As of December 31, 2009, implementation of the 2009 Capital Plan generated an aggregate of approximately $644 million of tangible common equity.

Synovus’ current internal capital projections and assessment of its capital position are based upon a consolidated review of asset quality and operating performance and resulting capital position over an extended period ending December 31, 2011. Synovus continually monitors its capital position, particularly as capital is impacted by current credit conditions, economic conditions and regulatory requirements, and engages in regular discussions with its regulators regarding capital at both the Parent Company and Synovus subsidiary banks. During 2009, Synovus experienced significant declines in the value of collateral for real estate loans and heightened credit losses, which resulted in record levels of non-performing assets, charge-offs, foreclosures, and losses on disposition of the underlying assets. Although Synovus presently expects that certain of these levels will begin to flatten out over the near term, it is difficult to predict the effects of further negative developments in the credit, economic and regulatory environments, which could cause these levels to worsen.

Management currently believes, based on internal capital analysis and projections, that Synovus’ capital position is adequate under current regulatory standards. Synovus continues to monitor economic conditions, actual performance against forecasted credit losses, peer capital levels, and regulatory capital standards and pressures. In light of these factors, as well as continuing discussions with regulators,

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Synovus is identifying, considering, and pursuing additional strategic initiatives to bolster its capital position. Given current economic and market conditions and Synovus’ recent financial performance and related credit ratings, there can be no assurance that additional capital will be available on favorable terms, if at all. See Part I — Item 1A — Risk Factors — “If economic conditions worsen or regulatory capital rules are modified, we may be required to undertake one or more strategic initiatives to improve our capital position” in Synovus’ Annual Report onForm 10-K for 2009.

Market and Stock Price Information

The table below presents stock price information for the years ended December 31, 2009 and 2008 based on the closing stock price as reported on the New York Stock Exchange.

Table 34 Stock Price Information

	High		Low
2009
Quarter ended December 31, 2009	$	3.85		1.49
Quarter ended September 30, 2009		4.43		2.55
Quarter ended June 30, 2009		5.16		2.95
Quarter ended March 31, 2009		8.20		2.47
2008
Quarter ended December 31, 2008	$	11.50		6.68
Quarter ended September 30, 2008		11.60		7.56
Quarter ended June 30, 2008		12.84		8.73
Quarter ended March 31, 2008		13.49		10.80

As of February 5, 2010, there were approximately 22,338 shareholders of record of Synovus common stock, some of which are holders in nominee name for the benefit of a number of different shareholders. Table 34 displays high and low stock price quotations of Synovus common stock which are based on actual transactions.

Dividends

Synovus has historically paid a quarterly cash dividend to the holders of its common stock. Management closely monitors trends and developments in credit quality, liquidity, financial markets and other economic trends, as well as regulatory requirements regarding the payment of dividends, all of which impact our capital position, and will continue to periodically review dividend levels to determine if they are appropriate in light of these factors. In the current environment, regulatory restrictions may limit Synovus’ ability to continue to pay dividends. Synovus must inform and consult with the Federal Reserve Board prior to declaring and paying any future dividends, and the Federal Reserve Board could decide at any time that paying any common stock dividends could be an unsafe or unsound banking practice. See “Part I — Business — Supervision, Regulation and Other Factors — Dividends” and “Part I — Item 1A — Risk Factors — “We presently are subject to, and in the future may become subject to additional, supervisory actionsand/or enhanced regulation that could have a material negative effect on our business, operating flexibility, financial condition and the value of our common stock” in Synovus’ Annual Report onForm 10-K for 2009.

Synovus’ ability to pay dividends is partially dependent upon dividends and distributions that it receives from its banking and non-banking subsidiaries, which are restricted by various regulations administered by federal and state bank regulatory authorities. Dividends from subsidiaries in 2009 were, and Synovus expects that dividends from subsidiaries in 2010 will be, significantly lower than those received in previous years.

In addition to dividends paid on Synovus’ common stock, Synovus paid dividends of $43.8 million to the Treasury on its Series A Preferred Stock during 2009. There were no dividends paid during 2008 on the Series A Preferred Stock, which was issued on December 19, 2008.

Synovus’ participation in the Capital Purchase Program limits its ability to increase the dividend on Synovus’ common stock (without the consent of the Treasury) until the earlier of December 19, 2011 or until the Series A Preferred Stock has been redeemed in whole or until the Treasury has transferred all of the Series A Preferred Stock to a third party. In addition, Synovus must seek the Federal Reserve’s permission to increase the quarterly dividend on its common stock above $0.01 per common share. Synovus is presently subject to, and in the future may become subject to, additional supervisory actionsand/or enhanced regulation that could have a material negative effect on business, operating flexibility, financial condition, and the value of Synovus common stock. See “Part I — Business — Supervision, Regulation and Other Factors — Dividends” and “Part I — Item 1A — Risk factors — “We presently are subject to, and in the future may become subject to, additional supervisory actionsand/or enhanced regulation that could have a material negative effect on our business, operating flexibility, financial condition and the value of our common stock” in Synovus’ Annual Report onForm 10-K for 2009.

On September 10, 2008, Synovus announced that its board of directors voted to reduce the quarterly dividend on Synovus’ common stock by 65%, from $0.17 per share to $0.06 per share, to further strengthen Synovus’ financial position by preserving

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its capital base. On March 10, 2009, Synovus announced that its board of directors voted to further reduce the quarterly dividend by 83%, from $.06 per share to $0.01 per share, to further enable Synovus to preserve its capital base.

The table below presents information regarding dividends on Synovus common stock declared during the years ended December 31, 2009 and 2008.

Table 35 Dividends

			Per Share
Date Declared	Date Paid		Amount
2009
December 15, 2009		January 4, 2010	$	.0100
September 14, 2009		October 1, 2009		.0100
June 10, 2009		July 1, 2009		.0100
March 10, 2009		April 1, 2009		.0100
2008
December 9, 2008		January 2, 2009	$	.0600
September 10, 2008		October 1, 2008		.0600
June 9, 2008		July 1, 2008		.1700
March 10, 2008		April 1, 2008		.1700

Issuer Purchases of Equity Securities

Synovus’ participation in the Capital Purchase Program restricts its ability to repurchase its common stock. Prior to December 19, 2011, unless Synovus has redeemed the Series A preferred stock or the Treasury has transferred the Series A preferred stock to a third party, the consent of the Treasury will be required for Synovus to redeem, repurchase or acquire its common stock or other equity or capital securities, other than in connection with benefit plans consistent with past practice and certain other limited circumstances.

In prior periods, Synovus received previously owned shares of its common stock in payment of the exercise price of stock options and shares withheld to cover taxes on vesting for non-vested shares granted. No shares of Synovus’ common stock were delivered during the three months ended December 31, 2009. Synovus does not have a publicly announced share repurchase plan in place.

Commitments and Contingencies

Table 36 and Note 11 to the consolidated financial statements provide additional information on short-term and long-term borrowings.

Legal Proceedings

Synovus and its subsidiaries are subject to various legal proceedings and claims that arise in the ordinary course of its business. In the ordinary course of business, Synovus and its subsidiaries are also subject to regulatory examinations, information gathering requests, inquiries, and investigations. Synovus establishes accruals for litigation and regulatory matters when those matters present loss contingencies that Synovus determines to be both probable and reasonably estimable. Based on current knowledge, advice of counsel and available insurance coverage, management does not believe that the eventual outcome of pending litigationand/or regulatory matters, including those described below, will have a material adverse effect on Synovus’ consolidated financial condition, results of operations or cash flows. However, in the event of unexpected future developments, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to Synovus’ results of operations for any particular period.

Synovus is a member of the Visa USA network. Under Visa USA bylaws, Visa members are obligated to indemnify Visa USAand/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. See Note 18 for further discussion of the Visa litigation.

As previously disclosed, the FDIC conducted an investigation of the policies, practices and procedures used by Columbus Bank and Trust Company (CB&T), a wholly owned banking subsidiary of Synovus Financial Corp. (Synovus), in connection with the credit card programs offered pursuant to its Affinity Agreement with CompuCredit Corporation (CompuCredit). CB&T issues credit cards that are marketed and serviced by CompuCredit pursuant to the Affinity Agreement. A provision of the Affinity Agreement generally requires CompuCredit to indemnify CB&T for losses incurred as a result of the failure of credit card programs offered pursuant to the Affinity Agreement to comply with applicable law. Synovus is subject to a per event 10% share of any such loss, but Synovus’ 10% payment obligation is limited to a cumulative total of $2 million for all losses incurred.

On June 9, 2008, the FDIC and CB&T entered into a settlement related to this investigation. CB&T did not admit or deny any alleged violations of law or regulations or any unsafe and unsound banking practices in connection with the settlement. As a part of the settlement, CB&T and the FDIC entered into a Cease and Desist Order and Order to Pay whereby CB&T agreed to: (1) pay a civil money penalty in the amount of

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$2.4 million; (2) institute certain changes to CB&T’s policies, practices and procedures in connection with credit card programs; (3) continue to implement its compliance plan to maintain a sound risk-based compliance management system and to modify them, if necessary, to comply with the Order; and (4) maintain its previously established Director Compliance Committee to oversee compliance with the Order. CB&T has paid the civil money penalty, and that payment is not subject to the indemnification provisions of the Affinity Agreement described above.

CB&T and the FDIC also entered into an Order for Restitution pursuant to which CB&T agreed to establish and maintain an account in the amount of $7.5 million to ensure the availability of restitution with respect to categories of consumers, specified by the FDIC, who activated Aspire credit card accounts issued pursuant to the Affinity Agreement on or before May 31, 2005. The FDIC may require the account to be applied if, and to the extent that, CompuCredit defaults, in whole or in part, on its obligation to pay restitution to any consumers required under the settlement agreements CompuCredit entered into with the FDIC and the Federal Trade Commission (FTC) on December 19, 2008. Those settlement agreements require CompuCredit to credit approximately $114 million to certain customer accounts that were opened between 2001 and 2005 and subsequently charged off or were closed with no purchase activity. CompuCredit has stated that this restitution involves mostly non-cash credits — in effect, reversals of amounts for which payments were never received. In addition, CompuCredit has stated that cash refunds to consumers are estimated to be approximately $3.7 million. This $7.5 million account represents a contingent liability of CB&T. At December 31, 2009, CB&T has not recorded a liability for this contingency. Any amounts paid from the restitution account are expected to be subject to the indemnification provisions of the Affinity Agreement described above. Synovus does not currently expect that the settlement will have a material adverse effect on its consolidated financial condition, results of operations or cash flows.

On May 23, 2008, CompuCredit and its wholly owned subsidiary, CompuCredit Acquisition Corporation, sued CB&T and Synovus in the State Court of Fulton County, Georgia, alleging breach of contract with respect to the Affinity Agreement. This case has subsequently been transferred to Georgia Superior Court, CompuCredit Corp,. v. Columbus Bank and Trust Co., CaseNo. 08-CV-157010 (Ga. Super Ct.) (the “Superior Court Litigation”). CompuCredit seeks compensatory and general damages in an unspecified amount, a full accounting of the shares received by CB&T and Synovus in connection with the MasterCard and Visa initial public offerings and remittance of certain of those shares to CompuCredit, and the transfer of accounts under the Affinity Agreement to a third-party. The parties are actively engaged in settlement discussions to resolve the Superior Court Litigation. Although no assurances can be given as to whether the litigation will settle, Synovus recorded a contingent liability in the amount of $10.5 million in the third quarter of 2009 relating to this potential settlement. CB&T and Synovus intend to continue to vigorously defend themselves against these allegations. Based on current knowledge and advice of counsel, management does not believe that the eventual outcome of this case will have a material adverse effect on Synovus’ consolidated financial condition, results of operations or cash flows. It is possible, however, that in the event of unexpected future developments the ultimate resolution of this matter, if unfavorable, may be material to Synovus’ results of operations for any particular period.

On October 24, 2008, a putative class action lawsuit was filed against CompuCredit and CB&T in the United States District Court for the Northern District of California, Greenwood v. CompuCredit, et. al., CaseNo. 4:08-cv-04878 (CW) (“Greenwood”), alleging that the solicitations used in connection with the credit card programs offered pursuant to the Affinity Agreement violated the Credit Repair Organization Act, 15 U.S.C. § 1679 (“CROA”), and the California Unfair Competition Law, Cal. Bus. & Prof. Code § 17200. CB&T intends to vigorously defend itself against these allegations. On January 22, 2009, the court in the Superior Court Litigation ruled that CompuCredit must pay the reasonable attorneys’ fees incurred by CB&T in connection with the Greenwood case pursuant to the indemnification provision of the Affinity Agreement described above. Any losses that CB&T incurs in connection with Greenwood are also expected to be subject to the indemnification provisions of the Affinity Agreement described above. Based on current knowledge and advice of counsel, management does not believe that the eventual outcome of this case will have a material adverse effect on Synovus’ consolidated financial condition, results of operations or cash flows.

On July 7, 2009, the City of Pompano Beach General Employees’ Retirement System filed suit against Synovus, and certain of Synovus’ current and former officers, in the United States District Court, Northern District of Georgia (Civil Action File No. 1 09-CV-1811) (the “Securities Class Action”) alleging, among other things, that Synovus and the named individual defendants misrepresented or failed to disclose material facts that artificially inflated Synovus’ stock price in violation of the federal securities laws, including purported exposure to Synovus’ Sea Island lending relationship and the impact of real estate values as a threat to Synovus’ credit, capital position, and business, and failed to adequately and timely record losses

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for impaired loans. The plaintiffs in the Securities Class Action seek damages in an unspecified amount.

On November 4, 2009, a shareholder filed a putative derivative action purportedly on behalf of Synovus in the United States District Court, Northern District of Georgia (Civil Action File No. 1 09-CV-3069) (the “Federal Shareholder Derivative Lawsuit”), against certain currentand/or former directors and executive officers of Synovus. The Federal Shareholder Derivative Lawsuit asserts that the individual defendants violated their fiduciary duties based upon substantially the same facts as alleged in the Securities Class Action described above. The plaintiff is seeking to recover damages in an unspecified amount and equitableand/or injunctive relief.

On December 1, 2009, the Court consolidated the Securities Class Action and Federal Shareholder Derivative Lawsuit for discovery purposes, captionedIn re Synovus Financial Corp., 09-CV-1811-JOF, holding that the two cases involve “common issues of law and fact.”

On December 21, 2009, a shareholder filed a putative derivative action purportedly on behalf of Synovus in the Superior Court of Fulton County, Georgia (the “State Shareholder Derivative Lawsuit”), against certain currentand/or former directors and executive officers of Synovus. The State Shareholder Derivative Lawsuit asserts that the individual defendants violated their fiduciary duties based upon substantially the same facts as alleged in the Federal Shareholder Derivative Lawsuit described above. The plaintiff is seeking to recover damages in an unspecified amount and equitableand/or injunctive relief.

Synovus and the individual named defendants collectively intend to vigorously defend themselves against the Securities Class Action and Shareholder Derivative Lawsuit allegations. There are significant uncertainties involved in any potential class action and derivative litigation. Based upon information that presently is available to it, Synovus’ management is unable to predict the outcome of the purported Securities Class Action and Shareholder Derivative Lawsuits and cannot currently reasonably determine the probability of a material adverse result or reasonably estimate a range of potential exposure, if any. Although the ultimate outcome of these lawsuits cannot be ascertained at this time, based upon information that presently is available to it, Synovus’ management presently does not believe that the Securities Class Action or the Shareholder Derivative Lawsuits, when resolved, will have a material adverse effect on Synovus’ consolidated financial condition, results of operations, or cash flows.

Synovus has received a letter from the SEC Atlanta regional office, dated December 15, 2009, informing Synovus that it is conducting an informal inquiry “to determine whether any person or entity has violated the federal securities laws”. The SEC has not asserted, nor does management believe, that Synovus or any person or entity has committed any securities violations. Synovus intends to cooperate fully with the SEC’s informal inquiry. Based upon information that presently is available to it, Synovus’ management is unable to predict the outcome of the informal SEC inquiry and cannot currently reasonably determine the probability of a material adverse result or reasonably estimate a range of potential exposure, if any. Although the ultimate outcome of this informal inquiry cannot be ascertained at this time, based upon information that presently is available to it, Synovus’ management presently does not believe that informal inquiry, when resolved, will have a material adverse effect on Synovus’ consolidated financial condition, results of operations, or cash flows.

Short-Term Borrowings

The following table sets forth certain information regarding federal funds purchased and securities sold under repurchase agreements, the principal components of short-term borrowings.

Table 36  Short-Term Borrowings

(Dollars in thousands)	2009			2008		2007
Balance at December 31	$	475,062			725,869		2,319,412
Weighted average interest rate at December 31		0.53	%		0.68		3.81
Maximum month end balance during the year	$	1,580,259			2,544,913		2,767,055
Average amount outstanding during the year		918,736			1,719,978		1,957,990
Weighted average interest rate during the year		0.42	%		2.24		4.75

Income Tax Expense

Income tax benefits from continuing operations amounted to $172.0 million for the year-ended December 31, 2009, up from a benefit of $80.4 million in 2008 and an expense of $182.1 million in 2007. The 2009 effective income tax rate was 10.7%, compared to 12.2% and 35.1% in 2008 and 2007, respectively. During 2009, Synovus increased the valuation allowance on deferred income tax assets by $438.2 million,

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resulting in a total valuation allowance of $443.3 million at December 31, 2009. The income tax expense of discontinued operations is reflected as a component of “income from discontinued operations, net of taxes and non-controlling interest” in the consolidated statement of income. The deferred tax assets and valuation allowance pertains to continuing operations. See Note 23 to the consolidated financial statements for a detailed analysis of income taxes.

Synovus’ participation in the Troubled Asset Relief Program (TARP) made Synovus ineligible to claim the extended net operating loss carryback period (five year carryback provision) enacted in 2009. If Synovus had been able to carry back net operating losses to all of these years, it would have substantially reduced the valuation allowance for deferred tax assets. Synovus expects to receive federal and state income tax refunds of approximately $339.1 million from filing claims carrying back the 2009 operating loss to prior years. These claims will substantially exhaust Synovus ability to obtain additional income tax refunds from prior years from most taxing jurisdictions.

Synovus reached a three-year cumulative pre-tax loss position during the second quarter of 2009. Cumulative losses in recent years are considered significant negative evidence which was difficult to overcome in assessing the realizability of deferred tax assets. Synovus evaluated all available evidence in considering whether a valuation allowance was needed pursuant to the requirements under ASC740-30-25. After considering this evidence, Synovus concluded it was necessary to increase its valuation allowance for deferred tax assets by $438.2 million during 2009. Synovus has estimated its realization of deferred tax assets solely based on future reversals of existing taxable temporary differences, taxable income in prior carryback years, and state tax planning strategies. Significant existing taxable temporary differences include depreciation of fixed assets and unrealized gains on investment securities. Changes in market conditions and other factors could periodically impact values assigned to tax planning strategies which would require increases or decreases in the valuation allowance, as well. Management will continuously reassess the need for a valuation allowance for its deferred tax assets each reporting period based on the criteria of ASC740-30-25.

If additional losses are incurred or if income tax credits are generated in 2010, Synovus will expect to record a deferred tax asset with a corresponding valuation allowance with no impact to current earnings. To the extent that the financial results of the operations improve, Synovus will not recognize an income tax expense, except in certain state jurisdictions, but will rather begin to reduce the valuation allowance. Reversal of the remaining valuation allowance through earnings will occur when the positive evidence considered outweighs the negative evidence and the total of all sources of future taxable earnings are adequate to support its reversal of the remaining deferred tax valuation allowance. Changes in the valuation allowance are subject to considerable judgment. Additionally, regulatory limits could disallow a portion of deferred tax assets for the purpose of determining regulatory capital ratios, even with the reversal of the valuation allowance.

Synovus files income tax returns in the U.S. federal jurisdiction and various state jurisdictions, and is subject to examinations by these taxing authorities until 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 by the IRS for years before 2005 and, with few exceptions, is no longer subject to income tax examinations from state and local income tax authorities for years before 2006. Currently, there are no years for which a federal income tax return is under examination by the IRS. However, certain state income tax examinations are currently in progress. Although Synovus is unable to determine the ultimate outcome of these examinations, Synovus believes that current income tax accruals are adequate for any uncertain income tax positions relating to these jurisdictions. These income tax accruals reference issues outside the scope of any net operating loss carryback potential that currently exists at December 31, 2009 and, therefore, the establishment of the valuation allowance had no bearing on these income tax accruals.

During the twelve months ended December 31, 2009, Synovus incurred a decrease in the amount of unrecognized income tax benefits of $0.7 million. This decrease was primarily due to state statute expirations and state income tax audits and notices being settled. The total liability for uncertain income tax positions at December 31, 2009 is $5.8 million. Synovus is not able to reasonably estimate the amount by which the liability will increase or decrease over time; however, at this time, Synovus does not expect a significant payment related to these income tax obligations within the next year. Synovus expects that approximately $1.3 million of uncertain income tax positions will be either settled or resolved during the next twelve months.

Inflation

A financial institution’s assets and liabilities are primarily monetary in nature; therefore, inflation can have an important impact on the growth of total assets in the banking industry and may create a need to increase equity capital at higher than normal rates in order to maintain an appropriate equity to assets ratio. Interest rate levels are also significantly influenced by changes in the rate of inflation although they do not

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Management’s Discussion and Analysis ­ ­ 

necessarily change at the same time or magnitude as the inflation rate. Said changes could adversely impact Synovus’ financial position and profitability. Synovus attempts to mitigate the effects of inflation and changing interest rates by managing its interest rate sensitivity position through its asset/liability management program and by periodically adjusting its pricing of services and banking products in an effort to take into consideration such costs. See “Market Risk and Interest Rate Sensitivity” herein.

Deflation

An extended period of deflation could negatively impact the banking industry and may be associated with lower growth and a general deterioration of the economy. Such a scenario could impair bank earnings and profitability in a variety of ways, including, but not limited to, through decreases in the value of collateral for loans and leases, a diminished ability of borrowers to service their debts, increases in the value of certain bank liabilities, and lessened demand for loans and leases. While these effects cannot be fully accounted for, Synovus attempts to mitigate such risks through prudent underwriting of loans and leases and through the interest rate sensitivity position of its asset/liability management program.

Parent Company

The Parent Company’s assets, primarily its investment in subsidiaries, are funded, for the most part, by shareholders’ equity. It also utilizes short-term and long-term debt. The Parent Company is responsible for providing the necessary funds to strengthen the capital of its subsidiaries, acquire new businesses, fund internal growth, pay corporate operating expenses, and pay dividends to its shareholders. These operations have historically been funded by dividends and fees received from subsidiaries, and borrowings from outside sources. However, as a result of the challenging economic conditions, dividends from subsidiaries were significantly lower in 2009 than in previous years. Additionally, the Parent Company was required to provide higher levels of capital infusions to subsidiaries during 2009, and may be required to do so in 2010. Thus, Synovus has taken a number of steps to strengthen its capital and liquidity positions as described below.

On December 19, 2008, the Parent Company received proceeds of $967.9 million from the sale of preferred stock and warrants to the U.S. Treasury as part of the government’s Capital Purchase Program. On September 22, 2009, the Parent Company received proceeds of $570.9 million, net of issuance costs, from the public offering of 150,000,000 shares of Synovus common stock at a price of $4.00 per share. On November 6, 2009, the Parent Company recognized a gain of $51.9 million from the sale of its remaining shares of Visa Class B common stock. Additionally, during 2009, the Parent Company received proceeds of $65.8 million from the sale of certain private equity investments.

Recently Issued Accounting Standards

In June 2009, the FASB issued SFAS 166, Accounting for Transfers of Financial Assets — an amendment of FASB Statement 140. SFAS 166 removes the concept of a qualifying special-purpose entity from SFAS 140, Accounting for Transfers of Financial Assets, and removes the exception from applying FASB Interpretation 46 (revised December 2003), Consolidation of Variable Interest Entities, to qualifying special-purpose entities. SFAS 166 clarifies that the objective of paragraph 9 of SFAS 140 is to determine whether a transferor and all of the entities included in the transferor’s financial statements being presented have surrendered control over transferred financial assets. This determination must consider the transferor’s continuing involvement in the transferred financial asset, including all arrangements or agreements made contemporaneously with, or in contemplation of, the transfer, even if they were not entered into at the time of the transfer. SFAS 166 modifies the financial-components approach used in SFAS 140 and limits the circumstances in which a financial asset, or portion of a financial asset, should be derecognized when the transferor has not transferred the entire financial asset to an entity that is not consolidated with the transferor in the financial statements being presentedand/or when the transferor has continuing involvement. The special provisions of SFAS 140 and SFAS 65, Accounting for Certain Mortgage Banking Activities, for guaranteed mortgage securitizations are removed to require those securitizations to be treated the same as any other transfer of financial assets within the scope of SFAS 140, as amended by SFAS 166. If the transfer does not meet the requirements for sale accounting, the securitized mortgage loans should continue to be classified as loans in the transferor’s statement of financial position. SFAS 166 requires that a transferor recognize and initially measure at fair value all assets obtained (including a transferor’s beneficial interest) and liabilities incurred as a result of a transfer of financial assets accounted for as a sale. Enhanced disclosures are required to provide financial statement users with greater transparency about transfers of financial assets and a transferor’s continuing involvement with transferred financial assets. The provisions of this statement are effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Early application is prohibited. Synovus is currently evaluating the impact of SFAS 166, but does not presently expect that the provisions of SFAS 166

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Management’s Discussion and Analysis ­ ­ 

will have a material impact on its financial position, results of operations and cash flows.

In June 2009, the FASB issued SFAS 167, Amendments to FASB Interpretation 46(R). The FASB expects SFAS 167 to improve financial reporting by enterprises involved with variable interest entities. The FASB undertook this project to address (1) the effects on certain provisions of FASB Interpretation 46 (revised December 2003), Consolidation of Variable Interest Entities (FIN 46), as a result of the elimination of the qualifying special-purpose entity concept in FASB 166, and (2) constituent concerns about the application of certain key provisions of Interpretation 46(R), including those in which the accounting and disclosures under FIN 46 do not always provide timely and useful information about an enterprise’s involvement in a variable interest entity. SFAS 167 is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited. Synovus does not expect that the provisions of SFAS 167 will have a material impact on its financial position, results of operations and cash flows.

In December 2009, the FASB issued ASU2009-15, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets. This ASU incorporates SFAS 166 into the Codification. Synovus does not expect that the provisions of ASU2009-15, which are effective as of the beginning of the first annual reporting period that begins after November 15, 2009, will have an impact on its financial position, results of operations or cash flows.

In December 2009, the FASB issued ASU2009-16, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. This ASU incorporates SFAS 167 into the Codification. Synovus does not expect that the provisions of ASU2009-16, which are effective as of the beginning of the first annual reporting period that begins after November 15, 2009, will have an impact on its financial position, results of operations or cash flows.

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Non-GAAP Financial Measures ­ ­ 

Non-GAAP Financial Measures

The measures entitled pre-tax, pre-credit costs income; fundamental non-interest expense; net interest margin excluding the negative impact of non-performing assets; average core deposits; the tangible common equity to tangible assets ratio; and the tangible common equity to risk-weighted assets are not measures recognized under GAAP, and therefore are considered non-GAAP financial measures. The most comparable GAAP measures are income (loss) before income taxes, total non-interest expense, net interest margin, average total deposits, and the ratio of total common shareholders’ equity to total assets, respectively.

Management uses these non-GAAP financial measures to assess the performance of Synovus’ core business and the strength of its capital position. Synovus believes that these non-GAAP financial measures provide meaningful additional information about Synovus to assist investors in evaluating Synovus’ operating results, financial strength, and capitalization. These non-GAAP financial measures should not be considered as a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled measures at other companies. Pre-tax, pre-credit costs income is a measure used by management to evaluate core operating results exclusive of credit costs as well as certain non-core expenses such as goodwill impairment charges, restructuring charges, and Visa litigation expense (recovery). Fundamental non-interest expense is a measure used by management to evaluate core non-interest expense exclusive of other credit costs, FDIC insurance expense, restructuring charges, Visa litigation expense (recovery), and goodwill impairment charges. Net interest margin excluding the impact of non-performing assets is a measure used by management to measure the net interest margin exclusive of the impact of non-performing assets and associated net interest charge-offs on the net interest margin. Average core deposits is a measure used by management to evaluate organic growth of deposits and the quality of deposits as a funding source. Total risk-weighted assets is a required measure used by banks and financial institutions in reporting regulatory capital and regulatory capital ratios to federal and state regulatory agencies. The tangible common equity to tangible assets ratio and the tangible common equity to risk-weighted assets ratio are used by management and investment analysts to assess the strength of Synovus’ capital position.

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Non-GAAP Financial Measures ­ ­ 

The computations of pre-tax, pre-credit costs income; fundamental non-interest expense; net interest margin excluding the impact of non-performing assets; core deposits; the tangible common equity to tangible assets ratio; and the tangible common equity to risk-weighted assets, and the reconciliation of these measures to income (loss) before income taxes, total non-interest expense, net interest margin, total deposits, and the ratio of total common shareholders’ equity to total assets are set forth in the tables below:

Reconciliation of Non-GAAP Financial Measures
	December 31,
(Dollars in thousands)	2009			2008			2007			2006			2005
Tangible Common Equity Ratios:
Total risk-weighted assets	$	26,781,973			32,106,501			31,505,022			29,930,284			26,008,797
Total assets	$	32,831,418			35,786,269			33,064,481			30,496,950			26,401,125
Goodwill		(24,431	)		(39,521	)		(519,138	)		(515,719	)		(338,649	)
Other intangible assets, net		(16,649	)		(21,266	)		(28,007	)		(35,693	)		(29,263	)
Tangible assets	$	32,790,338			35,725,482			32,517,336			29,945,538			26,033,213
Total shareholders’ equity	$	2,851,041			3,787,158			3,441,590			3,708,650			2,949,329
Goodwill		(24,431	)		(39,521	)		(519,138	)		(515,719	)		(338,649	)
Other intangible assets, net		(16,649	)		(21,266	)		(28,007	)		(35,693	)		(29,263	)
Cumulative perpetual preferred stock		(928,207	)		(919,635	)		—			—			—
Tangible common equity	$	1,881,754			2,806,736			2,894,445			3,157,238			2,581,417
Total common shareholders’ equity to total assets(1)		5.86	%		8.01			10.41			12.16			11.17
Tangible common equity to tangible assets		5.74	%		7.86			8.90			10.54			9.92
Tangible common equity to risk-weighted assets		7.03	%		8.74			9.19			10.55			9.93
Average Core Deposits:
Average total deposits	$	27,966,863			26,499,070			24,821,390			22,780,062			19,625,819
Average national market brokered deposits		(5,352,963	)		(5,130,413	)		(3,516,746	)		(3,140,840	)		(2,257,660	)
Average core deposits	$	22,613,900			21,368,657			21,304,644			19,639,222			17,368,159
Net Interest Margin Excluding the Negative Impact of Non-performing Assets:
Average earning assets	$	31,873,119			31,232,188
Net interest income (taxable equivalent)	$	1,015,156			1,082,802
Add: Negative impact of non-performing assets on net interest income(2)		119,149			74,531
Net interest income excluding the negative impact of non-performing assets	$	1,134,305			1,157,333
Net interest margin		3.19	%		3.47
Add: Negative impact of non-performing assets on net interest margin		0.37			0.24
Net interest margin excluding the negative impact of non-performing assets		3.56	%		3.71

(1)	Total shareholders’ equity less preferred stock divided by total assets.
(2)	Represents pro forma interest income on non-performing loans at current commercial loan portfolio yield, carrying cost of ORE, and net interest charge-offs on loans recognized during the quarter.

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Non-GAAP Financial Measures ­ ­ 

Reconciliation of Non-GAAP Financial Measures

	Years Ended December 31,
(Dollars in thousands)	2009			2008			2007			2006			2005
Pre-Tax Pre-Credit Costs Income:
Income (loss) from continuing operations before income taxes	$	(1,605,908	)		(660,805	)		520,035			638,335			559,425
Add: Provision for losses on loans		1,805,599			699,883			170,208			75,148			82,532
Add: Other credit costs(3)		380,984			162,786			22,355			7,724			7,102
Add: Goodwill impairment		15,090			479,617			—			—			—
Add: Restructuring costs		5,995			16,125			—			—			—
Add: (Subtract) Net litigation contingency expense (recovery)		4,059			(17,473	)		36,800			—			—
Less: Gain on sale/redemption of Visa shares		(51,900	)		(38,542	)		—			—			—
Pre-tax pre-credit costs income	$	553,919			641,591			749,398			721,207			649,059
Fundamental Non-Interest Expense:
Total non-interest expense	$	1,221,289			1,456,056			830,343			756,747			642,521
Less: Other credit costs(3)		(380,984	)		(162,786	)		(22,355	)		(7,724	)		(7,102	)
Less: FDIC insurance expense		(71,452	)		(20,068	)		(4,322	)		(2,709	)		(2,519	)
Less: Restructuring charges		(5,995	)		(16,125	)		—			—			—
Less: Net litigation contingency (expense) recovery		(4,059	)		17,473			(36,800	)		—			—
Less: Goodwill impairment expense		(15,090	)		(479,617	)		—			—			—
Fundamental non-interest expense	$	743,709			794,933			766,866			746,314			632,900

(3) Other credit costs consist primarily of losses on ORE, reserve for unfunded commitments, and charges related to impaired loans held for sale.

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Summary of Quarterly Financial Data (Unaudited) ­ ­ 

Presented below is a summary of the unaudited consolidated quarterly financial data for the years ended December 31, 2009 and 2008.

	Fourth			Third			Second			First
(In thousands, except per share data)	Quarter			Quarter			Quarter			Quarter
2009
Interest income	$	361,685			376,620			384,491			386,393
Net interest income		255,832			254,631			256,608			243,239
Provision for losses on loans		387,114			496,522			631,526	(1)		290,437
Loss from continuing operations before income taxes		(243,929	)		(472,476	)		(665,651	)		(223,852	)
Net loss(2)		(268,558	)		(439,802	)		(584,252	)		(136,729	)
Net loss available to common shareholders(2)	$	(282,848	)		(453,805	)		(601,154	)		(150,864	)
Basic earnings per common share:
Net loss from continuing operations available to common shareholders	$	(0.58	)		(1.32	)		(1.83	)		(0.46	)
Net loss available to common shareholders		(0.58	)		(1.32	)		(1.82	)		(0.46	)
Diluted earnings per common share:
Net loss from continuing operations available to common shareholders	$	(0.58	)		(1.32	)		(1.83	)		(0.46	)
Net loss available to common shareholders		(0.58	)		(1.32	)		(1.82	)		(0.46	)
2008
Interest income	$	440,337			455,223			458,140			503,881
Net interest income		258,025			267,798			273,421			278,649
Provision for losses on loans		363,867			151,351			93,616			91,049
Income (loss) from continuing operations before income taxes		(742,445	)(3)		(61,611	)		19,131			124,119
Net income (loss)		(635,410	)		(40,121	)		12,099			80,994
Net income (loss) available to common shareholders	$	(637,467	)		(40,121	)		12,099			80,994
Basic earnings per common share:
Net income (loss) from continuing operations available to common shareholders	$	(1.94	)		(0.13	)		0.03			0.24
Net income (loss) available to common shareholders		(1.93	)		(0.12	)		0.04			0.25
Diluted earnings per common share:
Net income (loss) from continuing operations available to common shareholders	$	(1.94	)		(0.13	)		0.03			0.24
Net income (loss) available to common shareholders		(1.93	)		(0.12	)		0.04			0.24

(1)	Synovus recognized provision expense for future asset dispositions of $200.0 million during the second quarter of 2009. For further discussion of the provision for loan losses and the associated reserve for future asset dispositions, see the sections within Management’s Discussion and Analysis titled “Critical Accounting Policies” and “Provision and Allowance for Loan Losses”.
(2)	Synovus recognized a valuation allowance recorded against deferred tax assets of $443.3 million during 2009. For a full discussion of the valuation allowance for the deferred tax assets, see Note 23 to the consolidated financial statements and the section within Management’s Discussion and Analysis titled “Income Tax Expense”.
(3)	Synovus recognized a $442.7 million charge for impairment of goodwill during the fourth quarter of 2008. For a full discussion of goodwill impairment, see Note 8 to the consolidated financial statements and the section titled “Goodwill Impairment” in Management’s Discussion and Analysis.

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