SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
   
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  o  Soliciting Material Pursuant to Section 240.14a-12
Synovus Financial Corp.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
   
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(SYNOVUS full page)

SYNOVUS®
 
NOTICE OF THE 20092010 ANNUAL MEETING OF SHAREHOLDERS
 
   
TIME 10:00 a.m.
Thursday, April 23, 200922, 2010
PLACE RiverCenter for the Performing ArtsColumbus Georgia Convention and Trade Center
900 Broadway801 Front Avenue
Columbus, Georgia 31901
ITEMS OF BUSINESS (1) To elect as directors the 18 nominees named in the attached Proxy Statement.
  (2) To ratifyamend Article 4 of Synovus’ Articles of Incorporation, as amended, to increase the appointmentnumber of KPMG LLP as Synovus’ independent auditor for the year 2009.authorized shares of common stock.
  (3) To approve the compensation of Synovus’ named executive officers as determined by the Compensation Committee.
  (4) To ratify the appointment of KPMG LLP as Synovus’ independent auditor for the year 2010.
(5) To transact such other business as may properly come before the meeting and any adjournment thereof.
WHO MAY VOTE You can vote if you were a shareholder of record on February 13, 2009.12, 2010.
ANNUAL REPORT A copy of the 20082009 Annual Report accompanies this Proxy Statement.
PROXY VOTING Your vote is important. Please vote in one of these ways:
  (1) Use the toll-free telephone number shown on your proxy card;
  (2) Visit the Internet website listed on your proxy card;
  (3) Mark, sign, date and promptly return the enclosed proxy card in the postage-paid envelope provided; or
  (4) Submit a ballot at the Annual Meeting.
 
This Notice of the 20092010 Annual Meeting of Shareholders and the accompanying Proxy Statement are sent by order of the Board of Directors.
 
 
-s- Samuel F. Hatcher
Samuel F. Hatcher
Secretary
 
Columbus, Georgia
March 13, 200912, 2010
 
 
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE VOTE YOUR SHARES PROMPTLY.

 

TABLE OF CONTENTS
 
     
     
Voting Information
  1 
     
Corporate Governance and Board Matters
  56 
     
Director Compensation
  912 
     
Proposals to Be Voted On:
    
     
Proposal 1: Election of 18 Directors
  1215 
     
Proposal 2: RatificationAmendment to Articles of Appointment of the Independent AuditorIncorporation to Increase Authorized Common Stock
  1522 
     
Proposal 3: Advisory Vote on Compensation of Named Executive Officers
  1525
Proposal 4: Ratification of Appointment of the Independent Auditor
26 
     
Executive Officers
  1627 
     
Stock Ownership of Directors and Executive Officers
  1728 
     
Audit Committee Report
  1930 
     
Executive Compensation
  2132 
     
Compensation Committee Report
  3442 
     
Summary Compensation Table
  3543 
     
Certain Relationships and Related Transactions
  4148 
     
Principal Shareholders
  4551 
     
Section 16(a) Beneficial Ownership Reporting Compliance
  4552 
     
Shareholder Proposals and Nominations
  4552 
     
General Information:Information
  4653 
     
Financial Information
  4653 
     
Solicitation of Proxies
  4653 
     
Householding
  4653 
     
Appendix A: Director Independence Standards
  A-1 
     
Financial Appendix
  F-1 

 
PROXY STATEMENT
 
VOTING INFORMATION
 
Purpose
 
You received this Proxy Statement and the accompanying proxy card because the Synovus Board of Directors of Synovus Financial Corp., or Synovus, is soliciting proxies to be used at the 2009Synovus’ 2010 Annual Meeting of Shareholders, or “Annual Meeting”,Annual Meeting, which will be held on April 23, 2009,22, 2010, at 10:00 a.m., at the RiverCenter for the Performing Arts, 900 Broadway,Columbus Georgia Convention and Trade Center, 801 Front Avenue, Columbus, Georgia 31901. Proxies are solicited to give all shareholders of record an opportunity to vote on matters to be presented at the Annual Meeting. In the following pages of this Proxy Statement, you will find information on matters to be voted upon at the Annual Meeting or any adjournment of that meeting.
 
Internet Availability of Proxy Materials
 
As permitted by the federal securities laws, Synovus is making this Proxy Statement and 2008its 2009 Annual Report available to itits shareholders primarily via the Internet instead of mailing printed copies of these materials to each shareholder. On March 13, 2009,12, 2010, we mailed to our shareholders (other than those who previously requested electronic or paper delivery)delivery and other than those holding a certain number of shares) a Notice of Internet Availability, or “Notice”,Notice, containing instructions on how to access our proxy materials, including thethis Proxy Statement and the accompanying 20082009 Annual Report. These proxy materials are being made available to our shareholders on or about March 13, 2009.12, 2010. The Notice also provides instructions regarding how to access your proxy card to vote through the Internet or by telephone. The Proxy Statement and Annual Report are also available on our website at www.synovus.com/2009annualmeeting.2010annualmeeting.
 
If you received a Notice by mail, you will not receive a printed copy of the proxy materials by mail unless you request printed materials. If you wish to receive printed proxy materials, you should follow the instructions for requesting such materials contained on the Notice.
 
If you receive more than one Notice, it means that your shares are registered differently and are held in more than one account. To ensure that all shares are voted, please either vote each account over the Internet or by telephone or sign and return by mail all proxy cards.
 
Who Can Vote
 
You are entitled to vote if you were a shareholder of record of Synovus common stock as of the close of business on February 13, 2009.12, 2010. Your shares can be voted at the meeting only if you are present or represented by a valid proxy.
 
If your shares are held in the name of a bank, broker or other holder of record, you will receive voting instructions from thesuch holder of record. You must follow the voting instructions of the holder of record in order for your shares to be voted. Telephone and Internet voting will also be offered to shareholders owning shares through certain banks, brokers and brokers.other holders of record. If your shares are not registered in your own name and you plan to vote your shares in person at the Annual Meeting, you should contact your broker or agent to obtain a legal proxy or broker’s proxy card and bring it to the Annual Meeting in order to vote.
 
Quorum and Shares Outstanding
 
A majority of the votes entitled to be cast by the holders of the outstanding shares of Synovus common stock must be present, either in person or represented by proxy, in order to conduct the Annual Meeting. On February 13, 2009, 330,369,07212, 2010, 489,832,889 shares of Synovus common stock were outstanding.


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Proxies
 
The Board has designated two individuals to serve as proxies to vote the shares represented by proxies at the Annual Meeting. If you properly submit a proxy but do not specify how you


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want your shares to be voted, your shares will be voted by the designated proxies in accordance with the Board’s recommendations as follows:
 
(1) FORthe election of the 18 director nominees named in this Proxy Statement;
 
(2) FORthe ratificationamendment of Article 4 of the appointmentArticles of KPMG LLP as Synovus’ independent auditor forIncorporation to increase the year 2009; andnumber of authorized shares of common stock;
 
(3) FORthe approval of the compensation of Synovus’ named executive officers as determined by the Compensation Committee.Committee; and
(4) FORthe ratification of the appointment of KPMG LLP as Synovus’ independent auditor for the year 2010.
 
The designated proxies will vote in their discretion on any other matter that may properly come before the Annual Meeting. At this time, we are unaware of any matters, other than as set forth above, that may properly come before the Annual Meeting.
 
Description of Voting of SharesRights
Under our Articles of Incorporation, holders of our common stock are entitled to one vote per share unless the holder can demonstrate that the shares meet the criteria for being entitled to ten votes per share. Holders of Synovus common stock are entitled to ten votes on each matter submitted to a vote of shareholders for each share of Synovus common stock owned on February 13, 200912, 2010 which: (1) has had the same owner since February 13, 2005;April 24, 1986; (2) was acquired by reason of participation in a dividend reinvestment plan offered by Synovus and is heldhas been owned continuously by the same owner who acquired it under such plan;shareholder since February 12, 2006; (3) is held by the same owner to whom it was issued as a result of an acquisition of a company or business by Synovus where the resolutions adopted by Synovus’ Board of Directors approving the acquisition specifically grant ten votes per share; (4) is held by the same owner to whom it was issued by Synovus, or to whom it transferred by Synovus from treasury shares, and the resolutions adopted by Synovus’ Board of Directors approving such issuanceand/or transfer specifically grant ten votes per share; (5) was acquired under any employee, officerand/or director benefit plan maintained for one or more employees, officersand/or directors of Synovusand/or its subsidiaries, and is held by the same owner for whom it was acquired under any such plan; (5)(6) was acquired by reason of participation in a dividend reinvestment plan offered by Synovus and is held by the same owner to whomwho acquired it was issued by Synovus,under such plan; or to whom it was transferred by Synovus from treasury shares, and the resolutions adopted by Synovus’ Board of Directors approving such issuanceand/or transfer specifically grant ten votes per share; (6) was acquired as a direct result of a stock split, stock dividend or other type of share distribution if the share as to which it was distributed was acquired prior to, and has been held by the same owner since, February 13, 2005; (7) has been owned continuously by the same shareholder for a period of 48 consecutive months prior to the record date of any meeting of shareholders at which the share is eligible to be voted; or (8) is owned by a holder who, in addition to shares which are owned under the provisions of (1)-(7)(6) above, is the owner of less than 1,139,063 shares of Synovus common stock (which amount has beenis equal to 100,000 shares, as appropriately adjusted to reflect stock splits and with such amount to be appropriately adjusted to properly reflect any other change in shares of Synovus common stock by means of stock splits, stock dividends, any recapitalization or otherwise occurring after April 24, 1986). For purposes of determining voting power under these provisions, any share of Synovus common stock acquired pursuant to stock options shall be deemed to have been acquired on the date the option was granted, and any shares of common stock acquired as a direct result of a stock split, a stock dividend a recapitalization or otherwise). Holdersother type of share distribution will be deemed to have been acquired and held continuously from the date on which shares of Synovus stock not described above are entitledwith regard to one vote per share for each share.such dividend shares were issued were acquired. The actual voting power of each holder of shares of Synovus common stock will be based on information possessed by Synovus at the time of the Annual Meeting.
Shares of Synovus common stock are presumed to be entitled to only one vote per share unless this presumption is rebutted by providing evidence to the contrary to Synovus. Shareholders seeking to rebut this presumption should complete and execute the certification appearing on their proxy card. Synovus reserves the right to require evidence to support the certification. SHAREHOLDERS WHO DO NOT CERTIFY ON THEIR PROXIES SUBMITTED BY MAIL, INTERNET OR PHONE THAT THEY ARE ENTITLED TO TEN VOTES PER SHARE OR WHO DO NOT PRESENT SUCH A CERTIFICATION IF THEY ARE VOTING IN


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PERSON AT THE ANNUAL MEETING WILL BE ENTITLED TO ONLY ONE VOTE PER SHARE.
 
Synovus common stock is registered with the Securities and Exchange Commission, or “SEC,”SEC, and is traded on the New York Stock Exchange, or “NYSE”.NYSE. Accordingly, SynovusSynovus’ common stock is subject to the provisions of ana NYSE rule which, in general, prohibits a company’s common stock and equity securities from being authorized or remaining authorized for trading on the NYSE if the company issues securities or takes other corporate action that would have the effect of nullifying, restricting or disparately reducing the voting rights of existing shareholders of the company. However, the rule contains a “grandfather” provision, under which Synovus’ ten vote provision falls, which, in general, permits grandfathered disparate voting rights plans to continue to operate as adopted. The number of votes that each shareholder will be entitled to exercise at the Annual Meeting will depend upon whether each share held by the shareholder meets the requirements which entitle one share of Synovus common stock to ten votes on each matter submitted to a vote of shareholders. Shareholders of Synovus stock must complete the Certification on the proxy in order for any of the shares represented by the proxy to be entitled to ten votes per share. All shares entitled to vote and represented in person or by properly completed proxies


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received before the polls are closed at the Annual Meeting, and not revoked or superseded, will be voted in accordance with instructions indicated on those proxies.
SHAREHOLDERS WHO DO NOT CERTIFY ON THEIR PROXIES SUBMITTED BY MAIL, INTERNET OR PHONE THAT THEY ARE ENTITLED TO TEN VOTES PER SHARE WILL BE ENTITLED TO ONLY ONE VOTE PER SHARE.
 
Synovus Stock Plans:Plans.  If you participate in the Synovus Dividend Reinvestment and Direct Stock Purchase Plan, the Synovus Employee Stock Purchase Planand/or the Synovus Director Stock Purchase Plan, your proxy card represents shares held in the respective plan, as well as shares you hold directly in certificate form registered in the same name.
 
Required Votes
The number of affirmative votes required to approve each of the proposals to be considered at the Annual Meeting is described below:
 
Election of 18 Directors.  To be elected, each of the 18 director nomineenominees named in this Proxy Statement must receive more votes cast “for” such nominee’s election than votes cast “against” such nominee’s election. If a nominee who currently is serving as a director does not receive the required vote for re-election, Georgia law provides that such director will continue to serve on the Board of Directors as a “holdover” director. However, pursuant to Synovus’ Corporate Governance Guidelines, each holdover director has tendered an irrevocable resignation that willwould be effective upon the Board’s acceptance of such resignation. In that situation, our NominatingCorporate Governance and Corporate GovernanceNominating Committee would consider the resignation and make a recommendation to the Board of Directors about whether to accept or reject such resignation and publicly disclose its decision within 90 days following certification of the shareholder vote.
 
RatificationAmendment of AppointmentArticles of Independent Auditor.Incorporation.  The affirmative vote of a majorityshares representing at least 662/3% of the votes entitled to be cast by the holders of all of the issued and outstanding Synovus common stock is neededrequired to ratifyapprove the appointmentamendment to Article 4 of KPMG LLP as Synovus’ independent auditor for 2009.the Articles of Incorporation.
 
Approval of Compensation of Named Executive Officers.  The affirmative vote of a majority of the votes cast is needed to approve the advisory proposal on the compensation of Synovus’ named executive officers.
 
Ratification of Appointment of Independent Auditor.  The affirmative vote of a majority of the votes cast is needed to ratify the appointment of KPMG LLP as Synovus’ independent auditor for 2010.
Abstentions and Broker Non-Votes
 
Under certain circumstances, including the election of directors, banks and brokers are prohibited from exercising discretionary authority for beneficial owners who have not provided voting instructions to the broker (a “broker non-vote”). In these cases, and in cases where the shareholder abstains from voting on a matter, those shares will be counted for the purpose of determining if a quorum is present, but will not be included as votes cast with respect to those matters. Abstentions andWhether a bank or broker non-voteshas authority to vote its shares on uninstructed matters is determined by stock exchange rules. We expect brokers will be allowed to exercise discretionary


3

authority for beneficial owners who have no effect on the outcome of the vote for anynot provided voting instructions with respect to all of the proposals to be voted on at the Annual Meeting.Meeting other than Proposal 1 — Election of 18 Directors.
For each of the proposals to be considered at the Annual Meeting, abstentions and broker non-votes will have the following effect:
Election of 18 Directors.  Broker non-votes and abstentions will have no effect on this proposal.
Amendment of Articles of Incorporation.  Broker non-votes will have no effect on this proposal, but abstentions will have the effect of a vote “against” this proposal.
Approval of Compensation of Named Executive Officers.  Broker non-votes and abstentions will have no effect on this proposal.
Ratification of Independent Auditor.  Broker non-votes and abstentions will have no effect on this proposal.
 
How You Can Vote
 
If you hold shares in your own name, you may vote by proxy or in person at the meeting. To vote by proxy, you may select one of the following options:
 
Vote By Telephone:
 
You can vote your shares by telephone by calling the toll-free telephone number (at no cost to you) shown on your proxy card. Telephone voting is available 24 hours a day, seven days a week.Easy-to-follow voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded. Our telephone voting procedures are designed to authenticate the shareholder by using individual control numbers. If you vote by telephone, you do NOT need to return your proxy card.
 
Vote By Internet:
 
You can also choose to vote on the Internet. The website for Internet voting is shown on your proxy card. Internet voting is available 24 hours a day, seven days a week. You will


3

be given the opportunity to confirm that your instructions have been properly recorded, and you can consent to view future proxy statements and annual reports on the Internet instead of receiving them in the mail. If you vote on the Internet, you do NOT need to return your proxy card.
 
Vote By Mail:
 
If you choose to vote by mail, simply mark your proxy card, date and sign it, sign the Certificationcertification and return bothit in the postage-paid envelope provided.
 
If your shares are held in the name of a bank, broker or other nomineeholder of record, you will receive instructions from thesuch holder of record that you must follow for your shares to be voted. Please follow their instructions carefully. Also, please note that if the holder of record of your shares is a broker, bank or other nominee and you wish to vote in person at the Annual Meeting, you must request a legal proxy or broker’s proxy from your bank, broker or other nominee that holds your shares and present that proxy and proof of identification at the Annual Meeting.
 
Revocation of Proxy
 
If you are a shareholder of record and vote by proxy, you may revoke that proxy at any time before it is voted at the Annual Meeting. You may do this by (1) signing another proxy card with a later date and returning it to us prior to the Annual Meeting, (2) voting again by telephone or on the Internet prior to the Annual Meeting, or (3) attending the Annual Meeting in person and casting a ballot.


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If your Synovus shares are held by a bank, broker or other nominee, you must follow the instructions provided by the bank, broker or other nominee if you wish to change or revoke your vote.
 
Attending the Annual Meeting
 
The Annual Meeting will be held on Thursday, April 23, 200922, 2010 at 10:00 a.m. at the RiverCenter for the Performing Arts, 900 Broadway,Columbus Georgia Convention and Trade Center, 801 Front Avenue, Columbus, Georgia. Directions to the RiverCenterTrade Center can be obtained from the Investor Relations page of Synovus’ website at www.synovus.com. If you are unable to attend the meeting, you can listen to it live and view the slide presentation over the Internet at www.synovus.com/2009annualmeeting. 2010annualmeeting.
Additionally, we will maintain copies of the slides and audio of the presentation for the Annual Meeting on our website for reference after the meeting. Information included on Synovus’ website, other than the Proxy Statement and form of proxy, is not a part of the proxy soliciting material.
 
Voting Results
 
You can find the officialpreliminary voting results of the voting at the Annual Meeting in Synovus’ Current Report onForm 10-Q8-K, for the second quarter of 2009, which Synovus will file with the SEC no later than August 10, 2009.
April 28, 2010.


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CORPORATE GOVERNANCE AND BOARD MATTERS
 
Corporate Governance Philosophy
 
The business affairs of Synovus are managed under the direction of the Board of Directors in accordance with the Georgia Business Corporation Code, as implemented by Synovus’ Articles of Incorporation and bylaws. The role of the Board of Directors is to effectively govern the affairs of Synovus for the benefit of its shareholders and other constituencies. The Board strives to ensure the success and continuity of business through the election of qualified management. It is also responsible for ensuring that Synovus’ activities are conducted in a responsible and ethical manner. Synovus is committed to having sound corporate governance principles.
 
Independence
 
The NYSE listing standards provide that a director does not qualify as independent unless the Board of Directors affirmatively determines that the director has no material relationship with Synovus. The Board has established categorical standards of independence to assist it in determining director independence which conform to the independence requirements in the NYSE listing standards. The categorical standards of independence are incorporated within our Corporate Governance Guidelines, are attached to this Proxy Statement as Appendix A and are also available in the Corporate Governance Section of our website at www.synovus.com/governance.
 
The Board has affirmatively determined that a majority of its members are independent as defined by the listing standards of the NYSE and meet the categorical standards of independence set by the Board. Synovus’ Board has determined that the following directors are independent: Daniel P. Amos, Richard Y. Bradley, Frank W. Brumley, Elizabeth W. Camp, T. Michael Goodrich, V. Nathaniel Hansford, Mason H. Lampton, Elizabeth C. Ogie, H. Lynn Page, J. Neal Purcell, Melvin T. Stith, William B. Turner, Jr. and James D. Yancey. Please see “Certain Relationships and Related Transactions” on page 41 which includes information with respect to48 of this Proxy Statement for a discussion of certain relationships between Synovus and its independent directors. These relationships have been considered by the Board in determining a director’s independence from Synovus under Synovus’ Corporate Governance Guidelines and the NYSE listing standards and were determined to be immaterial.
 
Attendance at Meetings
 
The Board of Directors held sixseven meetings in 2008.2009. All directors attended at least 75% of Board and committee meetings held during their tenure during 2008 except Mr. Amos, who attended at least 66% of Board and committee meetings.2009. The average attendance by directors at the aggregate number of Board and committee meetings they were scheduled to attend was 95%97%. Although Synovus has no formal policy with respect to Board members’ attendance at its annual meetings, it is customary for all Board members to attend the annual meetings. All but one of Synovus’ directors who were serving at the time attended Synovus’ 20082009 Annual Meeting of Shareholders.
 
Committees of the Board
 
Synovus’ Board of Directors has four principal standing committees — an Executive Committee, an Audit Committee, a Corporate Governance and Nominating Committee and a Compensation Committee. Each committee has a written charter adopted by the Board of Directors that complies with the listing standards of the NYSE pertaining to corporate governance. Copies of the committee charters are available in the Corporate Governance section of our website at www.synovus.com/governance. The Board has determined that each member of the Audit, Corporate Governance and Nominating and Compensation Committees is an independent director as defined by the listing standards of the NYSE and our Corporate


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Governance Guidelines. The following table shows the membership of the various committees as of the date of this Proxy Statement.
 
       
    Corporate Governance
  
Executive Audit and Nominating Compensation
 
V. Nathaniel Hansford, ChairJames. H. Blanchard, Chair* J. Neal Purcell, Chair Richard Y. Bradley, Chair T. Michael Goodrich, Chair*Chair
Richard E. Anthony Elizabeth W. Camp Daniel P. Amos V. Nathaniel Hansford
James H. BlanchardRichard Y. Bradley H. Lynn Page Frank W. Brumley Mason H. Lampton
Richard Y. BradleyFrank W. Brumley**  Melvin T. Stith Elizabeth C. Ogie  
Gardiner W. Garrard, Jr.      
T. Michael Goodrich
V. Nathaniel Hansford      
Mason H. Lampton      
J. Neal Purcell      
William B. Turner, Jr.      
James D. Yancey      
 
*Mr. GoodrichBlanchard was elected as Chairman of the CompensationExecutive Committee on January 22,in June 2009. Prior to that date, Mr. Hansford served as Chairman of the CompensationExecutive Committee.
**Mr. Brumley was elected to the Executive Committee in February 2010.
 
Executive Committee.  Synovus’ Executive Committee held fournine meetings in 2008.2009. During the intervals between meetings of Synovus’ Board of Directors, Synovus’the Executive Committee possesses and may exercise any and all of the powers of Synovus’ Board of Directors in the management and direction of the business and affairs of Synovus with respect to which specific direction has not been previously given by Synovus’the Board of Directors unless Board action is required by Synovus’ governing documents, law or rule.
 
Audit Committee.  Synovus’ Audit Committee held 10ten meetings in 2008.2009. Its report is on page 19.30 of this Proxy Statement. The Board has determined that all four members of the Committee are independent and financially literate under the rules of the NYSE and that at least one member, J. Neal Purcell, is an “audit committee financial expert” as defined by the rules of the SEC. The primary functions of Synovus’the Audit Committee include:
 
 • Monitoring the integrity of Synovus’ financial statements, Synovus’ systems of internal controls and Synovus’ compliance with regulatory and legal requirements;
 
 • MonitoringOverseeing Synovus’ enterprise risk management framework;
 
 • Monitoring the independence, qualifications and performance of Synovus’ independent auditor and internal auditing activities; and
 
 • Providing an avenue of communication among the independent auditor, management, internal audit and the Board of Directors.
 
Corporate Governance and Nominating Committee.  Synovus’ Corporate Governance and Nominating Committee held threefour meetings in 2008.2009. The primary functions of Synovus’ Corporate Governance and Nominating Committee include:
 
 • Identifying qualified individuals to become Board members;
 
 • Recommending to the Board the director nominees for each annual meeting of shareholders and director nominees to be elected by the Board to fill interim director vacancies;
 
 • Overseeing the annual review and evaluation of the performance of the Board and its committees;
 
 • Developing and recommending to the Board corporate governance guidelines; and
 
 • Developing and recommending to the Board compensation for non-employee directors.


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Compensation Committee.  Synovus’ Compensation Committee held six meetings in 2008.2009. Its report is on page 34.42 of this Proxy Statement . The primary functions of Synovus’the Compensation Committee include:
 
 • Designing and overseeing Synovus’ executive compensation program;
 
 • Designing and overseeing all compensation and benefit programs in which employees and officers of Synovus are eligible to participate;
• Reviewing Synovus’ incentive compensation arrangements to confirm that incentive pay does not encourage unnecessary risk taking and to review and discuss, at leastsemi-annually, the relationship between risk management and incentive compensation; and
 
 • Performing an annual evaluation of the Chief Executive Officer.
 
The Compensation Committee’s charter reflects these responsibilities and allows the Committee to delegate any matters within its authority to individuals or subcommittees it deems appropriate. In addition, the Committee has the authority under its charter to retain outside advisors to assist the Committee in the performance of its duties. In January 2008,2009, the Committee retained the services of Hewitt Associates, (“Hewitt”)or Hewitt, for 20082009 to:
 
 • Provide ongoing recommendations regarding executive compensation consistent with Synovus’ business needs, pay philosophy, market trends and latest legal and regulatory considerations;
 
 • Provide market data for base salary, short-term incentive and long-term incentive decisions; and
 
 • Advise the Committee as to best practices.
 
Hewitt was engaged directly by the Committee, although the Committee also directed that Hewitt continue to work with Synovus’ management. Synovus’ Director of Human Resources and his staff develop executive compensation recommendations for the Committee’s consideration in conjunction with Synovus’ Chief Executive Officer and Chief People Officer and with the advice of Hewitt.
 
During 2009, Synovus paid Hewitt $108,000 for executive compensation services and $166,000 for other services. The decision to engage Hewitt for the other services was made by management and was not approved by the Committee or the Board, although the Committee was aware Hewitt was providing these other services. The relationships for both the executive compensation and the other services provided by Hewitt have each been in existence for more than a decade. In addition, the Hewitt executive compensation consultant had no involvement or input into the other services, and was paid solely on the basis of executive compensation revenues. Effective January 29, 2010, Hewitt spun off part of its North American executive compensation business into a new and independent consulting firm, Meridian Compensation Partners LLC. As a result, the Committee’s executive compensation consultant was completely independent of Hewitt as of January 29, 2010.
Synovus’ Director of Human Resources works with the Chairman of the Committee to establish the agenda for Committee meetings. Management also prepares background information for each Committee meeting. Synovus’ Chief People Officer and Director of Human Resources attend all Committee meetings by invitation of the Committee, while Synovus’ Chief Executive Officer attends some Committeecommittee meetings by invitation of the Committee, such as the Committeecommittee meeting in which his performance is reviewed with the Committee or other meetings upon the request of the Committee. The Chief Executive Officer, Chief People Officer and the Director of Human Resources do not have authority to vote on Committeecommittee matters. A compensation consultant with Hewitt attended fiveall of the Committeecommittee meetings held during 20082009 upon the request of the Committee.


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Compensation Committee Interlocks and Insider Participation.  Messrs. Goodrich, Hansford Goodrich and Lampton served on the Compensation Committee during 2008.2009. None of these individuals is or has been an officer or employee of Synovus. There are no Compensation Committee interlocks.
 
Risk Oversight
Under Synovus’ Corporate Governance Guidelines, the Board is charged with providing oversight of Synovus’ risk management processes. In accordance with NYSE requirements, the Audit Committee is primarily responsible for overseeing the risk management function at Synovus on behalf of the Board. In carrying out its responsibilities, the Audit Committee works closely with Synovus’ Chief Risk Officer and other members of Synovus’ enterprise risk management team. The Audit Committee meets at least quarterly with the Chief Risk Officer and other members of management and receives a comprehensive report on enterprise risk management, including management’s assessment of risk exposures (including risks related to liquidity, credit, operations and regulatory compliance, among others), and the processes in place to monitor and control such exposures. The Audit Committee also receives updates between meetings from the Chief Risk Officer, the Chief Executive Officer, the Chief Financial Officer and other members of management relating to risk oversight matters. The Audit Committee provides a report on risk management to the full Board on at least a quarterly basis. In addition, at least annually, the Chief Risk Officer and members of the risk staff make a presentation on enterprise risk management to the full Board.
In addition to the Audit Committee, the other committees of the Board consider the risks within their areas of responsibility. For example, the Compensation Committee considers the risks that may be implicated by our executive compensation programs. For a discussion of the Compensation Committee’s review of Synovus’ senior executive officer compensation plans and employee incentive compensation plans and the risks associated with these plans, see “Executive Compensation — Compensation Discussion and Analysis — TARP Related Actions — Incentive Compensation Plan Risk Assessment” on page 40 of this Proxy Statement.
Consideration of Director Candidates
Shareholder Candidates.  The Corporate Governance and Nominating Committee will consider candidates for nomination as a director submitted by shareholders. Although the Committee does not have a separate policy that addresses the consideration of director candidates recommended by shareholders, the Board does not believe that such a separate policy is necessary as Synovus’ bylaws permit shareholders to nominate candidates and as one of the duties set forth in the Corporate Governance and Nominating Committee charter is to review and consider director candidates submitted by shareholders. The Committee will evaluate individuals recommended by shareholders for nomination as directors according to the criteria discussed below and in accordance with Synovus’ bylaws and the procedures described under “Shareholder Proposals and Nominations” on page 45.


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Director Qualifications.  Synovus’ Corporate Governance Guidelines contain Board membership criteria considered by the Corporate Governance and Nominating Committee in recommending nominees for a position on Synovus’ Board. The Committee believes that, at a minimum, a director candidate must possess personal and professional integrity, sound judgment and forthrightness. A director candidate must also have sufficient time and energy to devote to the affairs of Synovus, be free from conflicts of interest with Synovus, must not have reached the retirement age for Synovus directors and be willing to make, and financially capable of making, the required investment in Synovus’ stock pursuant to Synovus’ Director Stock Ownership Guidelines. The Committee also considers the following criteria when reviewing a director candidate:
 
 • The extent of the director’s/potential director’s educational, business, non-profit or professional acumen and experience;
 
 • Whether the director/potential director assists in achieving a mix of Board members that represents a diversity of background, perspective and experience, including with respect to age, gender, race, place of residence and specialized experience;
 
 • Whether the director/potential director meets the independence requirements of the listing standards of the NYSE;
 
 • Whether the director/potential director has the financial acumen or other professional, educational or business experience relevant to an understanding of Synovus’ business;
• Whether the director/potential director would be considered a “financial expert” or “financially literate” as defined in the listing standards of the NYSE;NYSE or applicable law;


9

 • Whether the director/potential director, by virtue of particular technical expertise, experience or specialized skill relevant to Synovus’ current or future business, will add specific value as a Board member; and
 
 • Whether the director/potential director possesses a willingness to challenge and stimulate management and the ability to work as part of a team in an environment of trust.
The Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. In addition to the criteria set forth above, the Committee considers how the skills and attributes of each individual candidate or incumbent director work together to create a board that is collegial, engaged and effective in performing its duties. Moreover, the Committee believes that the background and qualifications of the directors, considered as a group, should provide a significant mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities. For a discussion of the specific backgrounds and qualifications of our current directors, each of whom is one of the nominees for re-election named in this Proxy Statement, see “Proposals to be Voted on: Proposal 1 — Election of 18 Directors — Nominees for Election as Director” on page 15 of this Proxy Statement.
 
Identifying and Evaluating NomineesNominees.
The Corporate Governance and Nominating Committee has two primary methods for identifying director candidates (other than those proposed by Synovus’ shareholders, as discussed above)below). First, on a periodic basis, the Committee solicits ideas for possible candidates from a number of sources including members of the Board, Synovus executives and individuals personally known to the members of the Board. Second, the Committee is authorized to use its authority under its charter to retain at Synovus’ expense one or more search firms to identify candidates (and to approve such firms’ fees and other retention terms).
 
The Committee will consider all director candidates identified through the processes described above, and will evaluate each of them, including incumbents, based on the same criteria. The director candidates are evaluated at regular or special meetings of the Committee and may be considered at any point during the year. If based on the Committee’s initial evaluation a director candidate continues to be of interest to the Committee, the Chair of the Committee will interview the candidate and communicate his evaluation to the other Committee members and executive management. Additional interviews are conducted, if necessary, and ultimately the Committee will meet to finalize its list of recommended candidates for the Board’s consideration.
Shareholder Candidates.  The Corporate Governance and Nominating Committee will consider candidates for nomination as a director submitted by shareholders. Although the Committee does not have a separate policy that addresses the consideration of director candidates recommended by shareholders, the Board does not believe that such a separate policy is necessary as Synovus’ bylaws permit shareholders to nominate candidates and as one of the duties set forth in the Corporate Governance and Nominating Committee charter is to review and consider director candidates submitted by shareholders. The Committee will evaluate individuals recommended by shareholders for nomination as directors according to the criteria discussed above and in accordance with Synovus’ bylaws and the procedures described under “Shareholder Proposals and Nominations” on page 52 of this Proxy Statement.
Leadership Structure of the Board
In accordance with Synovus’ bylaws, our Board of Directors elects our Chief Executive Officer and our Chairman, and each of these positions may be held by the same person or may be held by two persons. Under our Corporate Governance Guidelines, the Board does not have a policy, one way or the other, on whether the role of the Chairman and Chief Executive Officer should be separate and, if it is to be separate, whether the Chairman should be selected from the non-employee directors or be an employee. However, our Corporate Governance Guidelines require that, if the Chairman of the Board is not an independent director, the Corporate


10

Governance and Nominating Committee shall nominate, and a majority of the independent directors shall elect, a Lead Director. Under its charter, the Corporate Governance and Nominating Committee periodically reviews and recommends to the Board the leadership structure of the Board and, if necessary, nominates the Lead Director candidate. Because our Chief Executive Officer also serves as Chairman of the Board, Synovus has a Lead Director.
The Chairman of the Board is responsible for chairing Board meetings and meetings of shareholders, setting the agendas for Board meetings and providing information to the Board members in advance of meetings and between meetings. Pursuant to Synovus’ Corporate Governance Guidelines, the duties of the Lead Director include the following:
• Working with the Chairman of the Board, Board and Corporate Secretary to set the agenda for Board meetings;
• Having the authority to call meetings of the independent and non-management directors, as needed;
• Ensuring Board leadership in times of crisis;
• Developing the agenda for and chairing executive sessions of the independent directors and executive sessions of the non-management directors;
• Acting as liaison between the independent directors and the Chairman of the Board on matters raised in such sessions;
• Chairing Board meetings when the Chairman of the Board is not in attendance;
• Attending meetings of the committees of the Board, as necessary or athis/her discretion, and communicating regularly with the Chairs of the principal standing committees of the Board;
• Working with the Chairman of the Board to ensure the conduct of the Board meeting provides adequate time for serious discussion of appropriate issues and that appropriate information is made available to Board members on a timely basis;
• Performing such other duties as may be requested fromtime-to-time by the Board, the independent directors or the Chairman of the Board; and
• Availability, upon request, for consultation and direct communication with major shareholders.
After careful consideration, the Corporate Governance and Nominating Committee has determined that Synovus’ current Board structure combining the principal executive officer and board chairman positions and utilizing a Lead Director is the most appropriate leadership structure for Synovus and its shareholders.
 
Meetings of Non-Management and Independent Directors
 
The non-management directors of Synovus meet separately at least four times a year after each regularly scheduled meetingmeetings of the Board of Directors.Directors and at such other times as may be requested by the Chairman of the Board or any director. Synovus’ independent directors meet at least once a year. V. NathanielMr. Hansford Synovus’as the Lead Director presides at the meetings ofnon-management and independent directors.
 
Communicating with the Board
 
Synovus’ Board provides a process for shareholders and other interested parties to communicate with one or more members of the Board, including the Lead Director, or the non-


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managementnon-management or independent directors as a group. Shareholders and other interested parties may communicate with the Board by writing the Board of Directors, Synovus Financial Corp.,c/o General Counsel’s Office, 1111 Bay Avenue, Suite 500, Columbus, Georgia 31901 or by calling(800) 240-1242. These procedures are also available in the Corporate Governance section of our


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website at www.synovus.com/governance. Synovus’ process for handling shareholder and other communications to the Board has been approved by Synovus’ independent directors.
 
Additional Information about Corporate Governance
 
Synovus has adopted Corporate Governance Guidelines which are regularly reviewed by the Corporate Governance and Nominating Committee. We have also adopted a Code of Business Conduct and Ethics which is applicable to all directors, officers and employees. In addition, we maintain procedures for the confidential, anonymous submission of any complaints or concerns about Synovus, including complaints regarding accounting, internal accounting controls or auditing matters. Shareholders may access Synovus’ Corporate Governance Guidelines, Code of Business Conduct and Ethics, each committee’s current charter, procedures for shareholders and other interested parties to communicate with the Lead Director or with the non-management or independent directors individually or as a group and procedures for reporting complaints and concerns about Synovus, including complaints concerning accounting, internal accounting controls and auditing matters, in the Corporate Governance section of our website at www.synovus.com/governance. Copies of these documents are also available in print upon written request to the Corporate Secretary, Synovus Financial Corp., 1111 Bay Avenue, Suite 500, Columbus, Georgia 31901.
 
DIRECTOR COMPENSATION
 
Director Compensation Table
 
The following table summarizes the compensation paid by Synovus to directors for the year ended December 31, 2008.2009.
 
                                
  
 Fees Earned
        Fees Earned
       
 or Paid in
 Stock
 All Other
    or Paid in
 Stock
 All Other
   
Name
 Cash ($) Awards ($)(1) Compensation ($) Total ($)  Cash ($) Awards ($)(1) Compensation ($) Total ($) 
Daniel P. Amos $47,500  $14,012  $10,000(2) $71,512  $47,500   —  $10,000(2) $57,500 
James H. Blanchard  50,000   9,013   130,579(3)(4)  189,592   57,500   —   122,039(3)(4)  179,539 
Richard Y. Bradley  65,000   15,145   9,800(3)  89,945   65,000   —   13,300(3)(6)  78,300 
Frank W. Brumley  47,500   14,012   31,850(2)(3)(5)  93,362   47,500   —   44,700(2)(3)(5)(6)  92,200 
Elizabeth W. Camp  55,000   14,012   15,500(2)(3)  84,512   55,000   —   15,400(2)(3)  70,400 
Gardiner W. Garrard, Jr.   50,000   14,012   9,800(3)(5)  73,812   50,000   —   21,600(3)(5)(6)  71,600 
T. Michael Goodrich  60,000   14,012   19,750(2)(3)  93,762   70,000   —   27,750(2)(3)(6)  97,750 
V. Nathaniel Hansford  75,000   14,012   16,550(2)(3)  105,562   65,000   —   11,515(3)(6)  76,515 
Mason H. Lampton  60,000   14,012   10,000(2)  84,012   60,000   —   10,000(2)  70,000 
Elizabeth C. Ogie  47,500   14,012   5,900(3)  67,412   47,500   —   6,200(3)  53,700 
H. Lynn Page  55,000   14,012   9,900(3)  78,912   55,000   —   9,900(3)  64,900 
J. Neal Purcell  80,000   14,012   10,000(2)  104,012   80,000   —   10,000(2)  90,000 
Melvin T. Stith  55,000   14,012   10,000(2)  79,012   55,000   —   10,000(2)  65,000 
Philip W. Tomlinson  40,000   3,658   5,000(2)  48,658   40,000   —   3,750(2)  43,750 
William B. Turner, Jr.   50,000   14,012   6,600(3)  70,612   50,000   —   11,800(3)(6)  61,800 
James D. Yancey  50,000   14,012   39,000(2)(3)(5)(6)  103,012   50,000   —   43,150(2)(3)(5)  93,150 
 
 
**Compensation for Messrs.Mr. Anthony and Green for service on the Synovus Board is described under the Summary Compensation Table found on page 35.43.


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(1)The grant date fair value of the 1,000 restricted shares of Synovus stock awarded to each director in 2008 was $12,400. The amounts in this column reflects the dollar amount recognized as accounting expense for financial statement reporting purposes for the year ended December 31, 2008 in accordance with FAS 123(R) and includes amounts from awards granted in 2008 and prior to 2008. For a discussion of the restrictedDirectors did not receive any stock awards reported in this column, see Note 20 of Notes to Consolidated Financial Statements in the Financial Appendix.during 2009. At December 31, 2008, Mr. Tomlinson held 1,000 shares2009, each of Synovus restricted stock, none of which are vested, and the other directors each held 1,500 shares of Synovus restricted stock, none500 of which are vested.vested on February 11, 2010 with the remaining shares unvested. Dividends are paid on the restricted stock award shares.shares, whether vested or unvested.
 
(2)Includes $10,000 in contributions made by Synovus under Synovus’ Director Stock Purchase Plan for this director, except that $7,500 is included for Mr. Hansford and $5,000$3,750 is included for Mr. Tomlinson. As described more fully below, qualifying directors can elect to contribute up to $5,000 per calendar quarter to make purchases of Synovus stock, and Synovus contributes an additional amount equal to 50% of the directors’ cash contributions under the plan.


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(3)Includes compensation of $5,400$4,400 for Mr. Blanchard, $9,800$5,300 for Mr. Bradley, $15,850$16,700 for Mr. Brumley, $5,500$5,400 for Ms. Camp, $3,800$3,600 for Mr. Garrard, $9,750$10,750 for Mr. Goodrich, $9,050$3,515 for Mr. Hansford, $5,900$6,200 for Ms. Ogie, $9,900 for Mr. Page, $6,600$4,800 for Mr. Turner and $23,000$13,150 for Mr. Yancey for service as a director of certain of Synovus’ subsidiaries.
(4)Includes perquisite of $106,974$109,067 for Mr. Blanchard for providing him with administrative assistance and includes the incremental cost to Synovus of $9,633 for providing him with personal use of corporate aircraft.assistance. Also includes the incremental costs incurred by Synovus if any, for providing Mr. Blanchard with office space and security alarm monitoring.space. In calculating the incremental cost to Synovus of providing Mr. Blanchard with administrative assistance, Synovus aggregated the cost of providing salary, benefits and office space (based on lease payments per square foot) to Mr. Blanchard’s administrative assistant. In calculating the incremental cost to Synovus of providing Mr. Blanchard with personal use of corporate aircraft, Synovus aggregated the cost of fuel, maintenance, crew travel expenses, on-board catering, landing fees, trip-related hangar and parking costs and smaller variable costs. Since the company owned aircraft are used primarily for business travel, the calculation does not include fixed costs that do not change based on usage, such as pilots’ salaries and the purchase costs of the aircraft. Amounts for office space and security alarm monitoring are not quantified because they do not exceed the greater of $25,000 or 10% of the total amount of perquisite.
(5)Includes $6,000$10,000 for service on the Real Estate Committee, an advisory committee to the Board of Directors. TheDirectors, and as to Mr. Yancey, an additional $10,000 for his service as Chairperson of the Real Estate Committee held six meetings in 2008, with each member receiving $1,000 per meeting.Committee.
(6)Includes compensation of $8,000 for each of Messrs. Bradley, Brumley, Garrard and Hansford and $7,000 for each of Messrs. Goodrich and Turner for service on the incremental costs incurred by Synovus, if any, for providing Mr. Yancey with security alarm monitoring.Succession Planning Committee, an advisory committee to the Board of Directors.
 
Director Compensation Program
 
The Corporate Governance and Nominating Committee is responsible for the oversight and administration of the Synovus director compensation program. The Committee’s charter reflects these responsibilities and does not allow the Committee to delegate its authority to any person other than the members of the Corporate Governance and Nominating Committee. Under its charter, the Committee has authority to retain outside advisors to assist the Committee in performance of its duties. In November 2006, the Committee retained Mercer Human Resource Consulting, (“Mercer”)or Mercer, to review the competitiveness of the Synovus director compensation program. Mercer was directed to evaluate existing peer groups of companies against which to benchmarkSynovus’ director compensation at Synovus andwould be compared. Mercer was also directed to review and compare director pay practices at Synovus both to these industry peer companies and to those of general industry companies, analyzing annual compensation, long-term incentive compensation and total compensation. The Committee, with the assistance of Mercer, studied compensation at a peer group of 26 companies in the banking industry and at 350 large industrial, financial and service organizations. The Committee also asked Mercer to review recent director pay trends, including shifts in pay mix, equity compensation trends and changes related to increased responsibilities and liability. Mercer’s recommendations for director compensation were then presented to the Committee. The Committee, who discussed and considered these recommendations and recommended to the Board that it approve the current compensation structure for non-management directors.directors be approved. The decisions made by the Committee and the Board are the responsibility of the Committee and the Board and may reflect factors and considerations other than the information and recommendations provided by Mercer.


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Cash Compensation of Directors.  As reflected in the “Fees Earned or Paid in Cash” column of the Director Compensation Table above, for the fiscal year ended December 31, 2008,2009, directors of Synovus received an annual cash retainer of $40,000, with Compensation Committee and Executive Committee members receiving an additional cash retainer of $10,000, Corporate Governance and Nominating Committee members receiving an additional cash retainer of $7,500 and Audit Committee members receiving an additional cash retainer of $15,000. In addition, the Chairperson of the Corporate Governance and Nominating Committee received a $7,500 cash retainer, the Chairperson of the Compensation Committee received a $10,000 cash retainer, the Chairperson of the Audit Committee received a $15,000 cash retainer, the Chairperson of the Executive Committee received a $15,000 cash retainer (pro-rated for 2009) and the Lead Director received a $5,000 cash retainer. Directors who are employees of Synovus do not receive any additional compensation for their service on the Board.
 
By paying directors an annual retainer, Synovus compensates each director for his or her role and judgment as an advisor to Synovus, rather than for his or her attendance or effort at individual meetings. In so doing, directors with added responsibility are recognized with higher cash compensation. For example, members of the Audit Committee receive a higher cash retainer


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based upon the enhanced duties, time commitment and responsibilities of service on that committee. The Corporate Governance and Nominating Committee believes that this additional cash compensation is appropriate. In addition, directors may from time to time receive compensation for serving on specialadvisory committees of the Synovus Board.
 
Directors may elect to defer all or a portion of their cash compensation under the Synovus Directors’ Deferred Compensation Plan. The Directors’ Deferred Compensation Plan does not provide directors with an “above market” rate of return. Instead, the deferred amounts are deposited into one or more investment funds at the election of the director. In so doing, the plan is designed to allow directors to defer the income taxation of a portion of their compensation and to receive an investment return on those deferred amounts. All deferred fees are payable only in cash. EachNone of Messrs. Hansford and Purcell and Ms. Campthe directors deferred all of their cash compensation under this plan during 2008.2009.
 
Equity Compensation of Directors.  During 2008,In the past, non-management directors alsohave received an annual award of 1,000 restricted shares of Synovus stock under the Synovus 2007 Omnibus Plan, 100% of which vests after three years. The Board granted these restricted stock awards to directors on February 11, 2008. These restricted stock awards arewere intended to provide equity ownership and to focus directors on the long-term performance of Synovus. In January 2009, based upon a recommendation from the Corporate Governance and Nominating Committee, in light of currentthe prevailing economic conditions, the Board determined not to postponegrant any 2009 restricted stock awards to non-management directors.directors for 2009 or 2010.
 
Synovus’ Director Stock Purchase Plan is a non-qualified, contributory stock purchase plan pursuant to which qualifying Synovus directors can purchase, with the assistance of contributions from Synovus, presently issued and outstanding shares of Synovus stock. Under the terms of the Director Stock Purchase Plan, qualifying directors can elect to contribute up to $5,000 per calendar quarter to make purchases of Synovus stock, and Synovus contributes an additional amount equal to 50% of the directors’ cash contributions. Participants in the Director Stock Purchase Plan are fully vested in, and may request the issuance to them of, all shares of Synovus stock purchased for their benefit under the Plan. Synovus’ contributions under this Plan are included in the “All Other Compensation” column of the Director Compensation Table above. Synovus’ contributions under the Director Stock Purchase Plan further provide directors the opportunity to buy and maintain an equity interest in Synovus and to share in the capital appreciation of Synovus.
 
The restricted stock awards to directors and Synovus’ contributions under the Director Stock Purchase Plan also assist and facilitate directors’ fulfillment of their stock ownership requirements. Synovus’ Corporate Governance Guidelines require all directors to accumulate over time shares of Synovus stock equal in value to at least three times the value of their annual


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retainer. Directors have five years to attain this level of total stock ownership but must attain a share ownership threshold of one times the amount of the director’s annual retainer within three years. These stock ownership guidelines are designed to align the interests of Synovus’ directors to that of Synovus’ shareholders and the long-term performance of Synovus. All of Synovus’ non-management directors were in complianceDue to market conditions during 2009, the Compensation Committee agreed that each director that complied with thethese stock ownership guidelines as of December 31, 2008.January 1, 2009 would be considered to be in compliance for the year.
 
Consulting AgreementCertain Other Arrangements
 
Synovus entered into a one-year Consulting AgreementIn connection with the appointment of Mr. Blanchard effective October 18, 2006, the date of his retirement as ChairmanChairperson of the Executive Committee in June 2009, the Board which agreement expired in October 2007. Under the Consulting Agreement,of Directors agreed to provide Mr. Blanchard provided consulting serviceswith office space and administrative assistance during his tenure as requested by the Synovus’ Chief Executive Officer or Board of Directors.Chairperson. In 2009, Mr. Blanchard’s specific duties included serving on various boards of directors of financial services and civic and charitable organizations and providing Synovus with advice and counsel regarding these matters, developing major prospective customers and existing customer relationships and entertaining prospects and customers, and providing leadership training. In exchange for these services, Mr. Blanchard received monthly payments of $26,667 and was provided with 25 hours of personal use of Synovus aircraft in 2007. Mr. Blanchard also received office space and administrative assistance, during the term of the Agreement and will continue to do so for two years thereafter. In 2008, Mr. Blanchard received office space, administrative assistance and 6.3 hours of personal use of Synovus’ aircraft, resulting in aggregate benefits of $125,179,$117,639 as set forth under “All Other Compensation” in the Director Compensation Table on page 9.12 of this Proxy Statement.


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PROPOSALS TO BE VOTED ON
 
PROPOSAL 1: ELECTION OF 18 DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” ALL 18 NOMINEES.
 
Number
 
Pursuant to Synovus’ bylaws, the Board shall consist of not less than 8 nor more than 25 directors with such number to be set either by the Board of Directors or shareholders representing at least 662/3% of the votes entitled to be cast by the holders of all of Synovus’ issued and outstanding shares. In January 2009,February 2010, the Board set the size of the Board at 18. Proxies cannot be voted at the 20092010 Annual Meeting for a greater number of persons than the 18 nominees named in this Proxy Statement.
 
Nominees for Election as Director
 
The Board has nominated each of the following 18 individuals to be elected as directors at the Annual Meeting upon the recommendation ofnominees for director named in this Proxy Statement were selected by the Corporate Governance and Nominating Committee. All nominees are currently directors of Synovus. Each director elected will serve until the next Annual Meeting and until his or her successor is duly elected and qualified or until his or her earlier retirement, resignation or removal. The Board believes that each director nominee will be able to stand for election. If any nominee becomes unable to stand for election, proxies in favor of that nominee will be voted in favorCommittee based upon a review of the remaining nominees and in favorconsideration of any substitute nominee named by the director qualifications described under “Corporate Governance and Board uponMatters — Consideration of Director Candidates — Director Qualifications” on page 9 of this Proxy Statement. In addition to the recommendation ofspecific criteria for director election, the Corporate Governance and Nominating Committee.Committee assesses whether a candidate possesses the integrity, judgment, knowledge, experience, skills and expertise that are likely to enhance the Board’s ability to manage and direct the affairs and business of Synovus. With respect to the nomination of continuing directors for re-election, the Corporate Governance and Nominating Committee also considers the individual’s contributions to the Board and its committees. Each of the 18 nominees currently serves as a director. The nominees for director include 9 current and former chief executive officers, at least 12 persons who could be recognized as “audit committee experts,” two current or former deans of national universities, and a past vice-chairman of a global auditing firm. The nominees collectively have over 225 years of experience in banking and financial services as well as significant experience in insurance, investment management, commercial real estate and accounting. The nominees also bring extensive board and committee experience.
In addition to the overall composition of the Board, the Corporate Governance and Nominating Committee also considered the nominees’ individual roles in (1) oversight of our enterprise risk management initiatives, (2) relationships with the numerous regulatory agencies that monitor Synovus’ operations, (3) oversight and support of our asset disposition and expense reduction initiatives, (4) assistance with the strategic plan of the Company, including the recently announced initiative to consolidate our subsidiary bank charters, and (5) managing succession planning. In addition to fulfilling the above criteria, 13 of the 18 nominees forre-election named above are considered independent under the NYSE rules and Synovus’ Director Independence Standards. Each nominee also brings a strong and unique background and set of skills to the Board, giving the Board as a whole competence and experience in a wide variety of areas, including corporate governance and board service, executive management, risk management and oversight, commercial real estate, troubled asset work-out and disposition situations, and ancillary financial services businesses. Each member of the Board has demonstrated leadership through his or her work on the boards of a variety of public, private and non-profit organizations and is familiar with board processes and corporate governance. We believe the atmosphere of our Board is collegial and that all Board members are engaged in their responsibilities. For additional information about our director independence requirements, consideration of director candidates, leadership structure of our Board and other corporate governance matters, see “Corporate Governance and Board Matters” beginning on page 6 of this Proxy Statement.


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Following is the principal occupation, age and certain otherThe following table sets forth information for each director nominee. Unless otherwise noted, each ofregarding the nominees has held, or is retired after holding,for election to the same position for at least the past five years.Board.
 
           
        Principal
        Occupation
     Year First
  and Other
Name
 
Age
  
Elected Director
  Information
 
Daniel P. Amos(1)  57   2001  Chairman of the Board and Chief Executive Officer, Aflac Incorporated (Insurance Holding Company)
Richard E. Anthony(2)  62   1993  Chairman of the Board and Chief Executive Officer, Synovus Financial Corp.; Director, Total System Services, Inc.
James H. Blanchard(3)  67   1972  Chairman of the Board and Chief Executive Officer, Retired, Synovus Financial Corp.; Director, Total System Services, Inc. and AT&T Corp.
Richard Y. Bradley  70   1991  Partner, Bradley & Hatcher (Law Firm); Director, Total System Services, Inc.
Frank W. Brumley(4)  68   2004  Chairman of the Board and Chief Executive Officer, Daniel Island Company (Planned Community Development)
Elizabeth W. Camp  57   2003  President and Chief Executive Officer, DF Management, Inc. (Investment and Management of Commercial Real Estate)
Gardiner W. Garrard, Jr.   68   1972  President, The Jordan Company (Real Estate Development and Private Equity Investments); Director, Total System Services, Inc.
T. Michael Goodrich  63   2004  Chairman and Chief Executive Officer, Retired, BE&K, Inc. (Engineering and Construction Company); Director, Energen Corporation
Frederick L. Green, III(5)  50   2006  President and Chief Operating Officer, Synovus Financial Corp.
V. Nathaniel Hansford(6)  65   1985  President, Retired, North Georgia College and State University
Mason H. Lampton(7)  61   1993  Chairman of the Board, Standard Concrete Products (Construction Materials Company); Director, Total System Services, Inc.
Elizabeth C. Ogie(8)  58   1993  Private Investor
H. Lynn Page  68   1978  Vice Chairman of the Board, Retired, Synovus Financial Corp.; Director, Total System Services, Inc.


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    Year First
 Principal
Name
 
Age
 
Elected Director
 Occupation
 
Daniel P. Amos  58   2001  Chairman of the Board and Chief Executive Officer, Aflac Incorporated
Richard E. Anthony  63   1993  Chairman of the Board and Chief Executive Officer, Synovus Financial Corp.
James H. Blanchard  68   1972  Chairman of the Board and Chief Executive Officer, Retired, Synovus Financial Corp.
Richard Y. Bradley  71   1991  Partner, Bradley & Hatcher
Frank W. Brumley  69   2004  Chairman of the Board and Chief Executive Officer, Daniel Island Company
Elizabeth W. Camp  58   2003  President and Chief Executive Officer, DF Management, Inc.
Gardiner W. Garrard, Jr.   69   1972  Chairman of the Board, The Jordan Company
T. Michael Goodrich  64   2004  Chairman and Chief Executive Officer, Retired, BE&K, Inc.
V. Nathaniel Hansford  66   1985  President, Retired, North Georgia College and State University
Mason H. Lampton  62   1993  Chairman of the Board, Standard Concrete Products
Elizabeth C. Ogie(1)  59   1993  Private Investor
H. Lynn Page  69   1978  Vice Chairman of the Board, Retired, Synovus Financial Corp.
J. Neal Purcell  68   2003  Vice Chairman, Retired, KPMG LLP
Kessel D. Stelling, Jr.   53   2010  President and Chief Operating Officer, Synovus Financial Corp.
Melvin T. Stith  63   1998  Dean, Martin J. Whitman School of Management, Syracuse University
Philip W. Tomlinson  63   2008  Chairman of the Board and Chief Executive Officer, Total System Services, Inc.
William B. Turner, Jr.(1)  58   2003  Vice Chairman of the Board and President, Retired, W.C. Bradley Co.
James D. Yancey  68   1978  Chairman of the Board, Columbus Bank and Trust Company; Chairman of the Board, Retired, Synovus Financial Corp.

           
        Principal
        Occupation
     Year First
  and Other
Name
 
Age
  
Elected Director
  Information
 
J. Neal Purcell  67   2003  Vice Chairman, Retired, KPMG LLP (Professional Services Provider); Director, Southern Company and Kaiser Permanente
Melvin T. Stith(9)  62   1998  Dean, Martin J. Whitman School of Management, Syracuse University; Director, Flowers Foods, Inc.
Philip W. Tomlinson(10)  62   2008  Chairman of the Board and Chief Executive Officer, Total System Services, Inc. (Payments Processing)
William B. Turner, Jr.(8)  57   2003  Vice Chairman of the Board and President, Retired, W.C. Bradley Co. (Consumer Products and Real Estate)
James D. Yancey(11)  67   1978  Chairman of the Board, Columbus Bank and Trust Company; Chairman of the Board, Retired, Synovus Financial Corp.; Director, Total System Services, Inc.
 
(1)Daniel P. Amos previously served as a director of Synovus from 1991 until 1998, when he resigned as a director as required by federal banking regulations to join the board of a company affiliated with a Japanese bank.
(2)Richard E. Anthony was elected Chairman of the Board and Chief Executive Officer of Synovus in October 2006. From 1995 until 2006, Mr. Anthony served in various capacities with Synovus, including Chief Executive Officer and President and Chief Operating Officer of Synovus.
(3)James H. Blanchard was elected Chairman of the Board of Synovus in July 2005 and retired from that position in October 2006. Prior to 2005, Mr. Blanchard served in various capacities with Synovus and Columbus Bank and Trust Company, a banking subsidiary of Synovus, including Chairman of the Board and Chief Executive Officer of Synovus and Chief Executive Officer of Columbus Bank and Trust Company. Mr. Blanchard also retired as an executive officer of Total System Services, Inc. (“TSYS”) in October 2006. Prior to 2006, Mr. Blanchard served as Chairman of the Executive Committee of TSYS in an executive officer capacity.
(4)Frank W. Brumley was elected Chairman of the Board and Chief Executive Officer of Daniel Island Company in January 2006. Prior to 2006, Mr. Brumley served as President of Daniel Island Company.
(5)Frederick L. Green, III was elected President and Chief Operating Officer of Synovus in October 2006. Mr. Green served as Vice Chairman of Synovus from 2003 until 2006. From 1991 until 2003, Mr. Green served in various capacities with The National Bank of South Carolina, a banking subsidiary of Synovus, including President of The National Bank of South Carolina.
(6)V. Nathaniel Hansford serves as Lead Director of the Synovus Board.
(7)Mason H. Lampton was elected Chairman of the Board of Standard Concrete Products in June 2004. Prior to 2004, Mr. Lampton served as President and Chief Executive Officer of Standard Concrete Products.
(8)Elizabeth C. Ogie and William B. Turner, Jr. are first cousins.
(9)Melvin T. Stith was appointed Dean of Syracuse University’s Martin J. Whitman School of Management in January 2005. Prior to 2005, Mr. Stith served as Dean of the College of Business at Florida State University.
(10)Philip W. Tomlinson was elected Chairman of the Board and Chief Executive Officer of TSYS in January 2006. Prior to 2006, Mr. Tomlinson served as Chief Executive Officer of TSYS.
(11)James D. Yancey retired as an executive employee of Synovus in December 2004 and served as a non-executive Chairman of the Board until July 2005. Mr. Yancey was elected as an executive Chairman of the Board of Synovus in October 2003. Prior to 2003, Mr. Yancey served in various capacities with Synovus and/or Columbus Bank and Trust Company, including Vice Chairman of the Board and President of both Synovus and Columbus Bank and Trust Company.
The business experience and other specific skills, attributes and qualifications of each of the nominees is as follows:
Daniel P. Amosis Chairman of the Board and Chief Executive Officer of Aflac Incorporated, a publicly held global insurance holding company. He has been Chairman of the Board since 2001 and Chief Executive Officer of Aflac since 1990 and has held various other senior management

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positions at Aflac since 1973. Mr. Amos holds a bachelor’s degree in risk management from the University of Georgia. Previously, Mr. Amos served as a director of Synovus from 1991 until 1998, and as director of the Southern Company, a publicly held public utility holding company, from 2000 until 2006. Mr. Amos has been recognized three times as one of the top chief executive officers in the United States byInstitutional Investor Magazine and as CEO of the Week by CNN. Mr. Amos is a past member of the Consumer Affairs Advisory Committee of the Securities and Exchange Commission. He is recognized as a leader in corporate governance initiatives. Under Mr. Amos’ guidance, Aflac became the first public company to submit voluntarily a “say on pay” advisory vote to its shareholders. Mr. Amos has also been on panels on corporate governance sponsored by Risk Metrics Group and other corporate advisory firms. As chief executive officer of a public insurance company, Mr. Amos brings extensive experience in executive management, corporate governance and risk management to our Board. In addition, his extensive knowledge of the capital markets is a valuable resource as Synovus regularly assesses its capital and liquidity needs.
 
Richard E. Anthonyis Chairman of the Board and Chief Executive Officer of Synovus, positions he has held since 2006 and 2005, respectively. From 1992 until 2006, Mr. Anthony served in various capacities with Synovus, including Vice Chairman, Chief Executive Officer and President and Chief Operating Officer. Prior to that time, Mr. Anthony served as president of First Commercial Bancshares of Birmingham, Alabama and as Executive Vice President of AmSouth Bank, N.A. in Birmingham, Alabama, having started his career in banking in 1971. Mr. Anthony holds a bachelor’s degree in finance from the University of Alabama and a master’s degree in business administration from the University of Virginia. Mr. Anthony has served as a director of Total System Services, Inc., or TSYS, a publicly held global payment processing company and former subsidiary of Synovus, since 2006. Mr. Anthony is a member of numerous civic and professional organizations, including the State of Georgia Economic Development Commission and The Commission for a New Georgia, chairs the Columbus Chamber of Commerce, and holds board seats in such organizations as the American Bankers Association, the Financial Services Roundtable and the Georgia Chamber of Commerce. Mr. Anthony brings extensive experience in banking and executive management to our Board. Mr. Anthony’s experience as a leader in the Southeastern markets where our company operates and as a board member of the American Bankers Association and Financial Services Roundtable provide insight to our Board on the factors that impact both our company and our communities. Moreover, Mr. Anthony’s day to day leadership and intimate knowledge of our business and operations provide the Board with company-specific experience and expertise.
James H. Blanchardwas elected Chairman of the Board of Synovus in July 2005 and retired from that position in October 2006. Prior to 2005, Mr. Blanchard served in various capacities with Synovus and Columbus Bank and Trust Company, a banking subsidiary of Synovus (“CB&T”), including Chairman of the Board and Chief Executive Officer of Synovus and Chief Executive Officer of CB&T. Mr. Blanchard served as Chief Executive Officer of Synovus and our predecessor company for over 34 years, during which time he played a key role in rallying support for the multibank holding company legislation passed in Georgia and in forming Synovus as the first bank holding company in Georgia to acquire other banks under the new law. Mr. Blanchard also served as an executive officer of TSYS until 2006, playing an instrumental role in establishing the payment processing company. Mr. Blanchard holds a bachelor’s degree and a law degree from the University of Georgia. Mr. Blanchard currently serves as a director of TSYS, chairing its Executive Committee, and as a director of AT&T Inc., a publicly held global telecommunications company. Mr. Blanchard previously served as a director of BellSouth Corporation from 1998 until 2006. During Mr. Blanchard’s forty year career in banking and financial services, he has served in numerous leadership roles in the financial services industry, including service as Chairman of the Financial Services Roundtable and recognition byUS Banker Magazineas one of the “25 Most Influential People in Financial Services” in 2005. Mr. Blanchard brings to our Board an extraordinary understanding of our company’s business,


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history and organization as well as extensive leadership, community banking expertise and management experience.
Richard Y. Bradleyis a partner at Bradley & Hatcher, a law firm, a position he has held since 1995, specializing in business transactions and corporate litigation. Mr. Bradley previously served as President of Bickerstaff Clay Products Company, Inc., a structural clay products manufacturing company. Mr. Bradley is the Chairman of our Corporate Governance and Nominating Committee. Mr. Bradley received a bachelor’s degree and law degree from the University of Georgia. He is a past president of the State Bar of Georgia and a fellow of the American College of Trial Lawyers. Mr. Bradley currently serves as the Lead Director of TSYS and as Chair of its Corporate Governance and Nominating Committee. Mr. Bradley’s extensive legal career and his experience as president of a manufacturing company give him the leadership and consensus-building skills to guide our Board on a variety of matters, including corporate governance, succession planning and litigation oversight.
Frank W. Brumleyis the Chairman of the Board and Chief Executive Officer of Daniel Island Company, a private planned community development company, a position he has held since 2006. Prior to 2006, Mr. Brumley served as President of Daniel Island Company. Prior to forming the Daniel Island Company in 1997, Mr. Brumley served in various executive positions with the Sea Pines Company and the Kiawah Island Company, playing a pivotal role in the development of these coastal areas. He also started and managed a commercial real estate company, which managed, brokered and developed numerous commercial real estate projects in the Charleston, South Carolina area for more than 20 years. Mr. Brumley has over forty years of experience in commercial real estate. In addition, Mr. Brumley has seven years in banking, having spent time as a commercial banker prior to the start of his real estate development career. Mr. Brumley holds a bachelor’s degree in business administration from the University of Georgia and graduated from the University of North Carolina Executive Program at Chapel Hill. Mr. Brumley serves as a director of The National Bank of South Carolina, a banking subsidiary of Synovus, and the Terry College of Business, University of Georgia, as well as several other non-profit boards. Mr. Brumley’s extensive experience in banking and commercial real estate, as well as related financing and work-out situations, provide significant insight and expertise to our Board, particularly as we continue to refine and execute our asset disposition and expense reduction strategies in the current environment.
Elizabeth W. Campis President and Chief Executive Officer of DF Management, Inc., a private investment and commercial real estate management company, a position she has held since 2000. Previously, Ms. Camp served in various capacities, including President and Chief Executive Officer, of Camp Oil Company for 16 years. Before it was sold in 2000, Camp Oil developed and operated convenience stores, truck stops and restaurants and grew to realize annual revenue of $300 million, employing 650 employees and operating 62 units in nine states throughout the United States. Ms. Camp’s background also includes experience as a tax accountant with a major accounting firm and an attorney in law firms in Atlanta and Washington, D.C. Ms. Camp holds a bachelor’s degree in accounting and a law degree from the University of Georgia and a master’s degree in taxation from Georgetown University. Ms. Camp currently serves as a director of Citizens Bank & Trust, a banking subsidiary of Synovus, and is a current or past trustee or director of several non-profit organizations, including the Georgia Department of Industry, Trade & Tourism. Previously, Ms. Camp served as a director of Blue Cross Blue Shield of Georgia from 1992 to 2001. Ms. Camp’s background as an executive officer and her expertise in accounting, tax and legal matters, provides expertise in management and auditing, as well as leadership skills to our Board.
Gardiner W. Garrard, Jr. is the Chairman of the Board of The Jordan Company, a privately held real estate development and private equity investment company. From 1975 until October 2009, Mr. Garrard served as an executive of The Jordan Company, including as President. During that time, The Jordan Company was involved in a wide variety of activities, including real estate development, investment and financing as well as lumber manufacturing,


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building materials, general contracting and insurance brokerage. As President, he managed the various lines of business and negotiated the sales of several of such businesses with third parties. Mr. Garrard holds a bachelor’s degree from the University of North Carolina and a law degree from the University of Georgia. After graduating from law school, Mr. Garrard served as a law clerk to Judge Griffin B. Bell on the U.S. Court of Appeals for the Fifth Circuit. He is currently a director of TSYS and has served on the boards of a wide array of non-profit and civic organizations. In addition to his management expertise, Mr. Garrard brings to our board extensive knowledge of commercial real estate and related investment and financing activities, having nearly 40 years of experience in such fields.
T. Michael Goodrichis the former Chairman of the Board and Chief Executive Officer of BE&K, Inc., a privately held international engineering and construction company specializing in complex projects. Mr. Goodrich joined BE&K in 1972 as Assistant Secretary and General Counsel, was named President in 1989 and served as Chairman and Chief Executive Officer from 1995 until his retirement in May 2008. Mr. Goodrich received a bachelor’s degree in civil engineering from Tulane University and a law degree from the University of Alabama. Mr. Goodrich serves as a director of Energen Corporation, a publicly held diversified energy company, and First Commercial Bank, a banking subsidiary of Synovus. Mr. Goodrich is the Chairman of Synovus’ Compensation Committee and serves on the governance committee and the officers review committee at Energen. In addition, he serves on the board of Altec, Inc., a privately owned manufacturer of mobile equipment for the utility industry, and is a member of the Alabama Academy of Honor, the National Academy of Construction and the Alabama Engineering Hall of Fame. Through his experience as chief executive officer as well as his service on the board and committees of another NYSE-listed public company, Mr. Goodrich brings extensive leadership, risk assessment skills and public company expertise to our board.
V. Nathanial Hansfordis the former President of North Georgia College and State University, a position he held from 1999 through 2005. Prior to his retirement in 2005, Mr. Hansford was a professor and Dean of Law at the University of Alabama and was a visiting professor at the United States Military Academy, the University of Georgia and the University of Fribourg in Switzerland. Mr. Hansford also served for 20 years in the U.S. Army Reserves, CPT, Judge Advocate General’s Corp., retiring as a Colonel. Mr. Hansford holds a bachelor’s degree and a law degree from the University of Georgia and a master’s degree in taxation from the University of Michigan. Mr. Hansford is Synovus’ Lead Director. In addition to chairing the board of our banking subsidiary, Cohutta Banking Company, Mr. Hansford serves on the boards of various civic organizations, including the Georgia Trust for Historic Preservation and the Georgia Non-Public Postsecondary Education Commission. Mr. Hansford’s extensive background in education and administration provide our Board with leadership and consensus-building skills on a variety of matters, including corporate governance and succession planning.
Mason H. Lamptonis the Chairman of the Board of Standard Concrete Products, Inc., a privately-held construction materials company, a position he has held since he founded the company in 1996. From 1996 until 2004, Mr. Lampton also served as President and Chief Executive Officer of Standard Concrete. Prior to founding Standard Concrete, Mr. Lampton served as President and Chairman of the Board of The Hardaway Company, having negotiated a leveraged buy-out of that company in 1977. Mr. Lampton spent two years in the United States Army and achieved the rank of First Lieutenant. Mr. Lampton holds a bachelor’s degree from Vanderbilt University. Mr. Lampton also serves as a director of TSYS and chairs its compensation committee. Mr. Lampton’s extensive experience in the various aspects of the construction industry throughout the Southeast, including dispute resolution, employee relations matters and contract negotiations, his focus on the capital needs of a growing company and his extensive skills at managing risk and directing corporate strategy provide our Board with a valuable resource as it manages Synovus through the current environment and looks to its future.


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Elizabeth C. Ogieis a private investor. Ms. Ogie holds bachelors’ degrees from Columbus College and Georgia State University, as well having completed graduate studies at Schiller College. She is a director of CB&T and is a current or past trustee or director of severalPROPOSAL 2: RATIFICATION OFnon-profit organizations, including the Bradley-Turner Foundation, the Georgia Health Sciences Foundation, the Pitts Foundation, Wesleyan College, the Historic Columbus Foundation, the Medical College of Georgia Foundation, St. Luke United Methodist Church, Children’s Healthcare of Atlanta Community Board, The Columbus Museum, Andrew College, Girl’s Inc., W.C. Bradley Co., Scottish Rite Children’s Hospital and the United Methodist Higher Education Foundation. Ms. Ogie’s extensive experience and leadership in for-profit and non-profit organizations and integral involvement in some of the communities in which we serve provides the Board with a unique perspective on corporate governance related matters and corporate strategy.
H. Lynn Pageis the former Vice Chairman of the Board of Synovus, having retired from that position in 1991 after working for the company for over 25 years. Prior to his retirement, Mr. Page served in various executive management positions with Synovus, including President and Executive Vice President. In addition to his substantial commercial banking experience, Mr. Page is credited with envisioning, creating and developing Synovus’ payment processing line of business, which was eventually formed as TSYS. From 1978 to 1991, he also served as the Vice Chairman of the Board at TSYS and CB&T. Mr. Page has a bachelor’s degree in industrial management from Georgia Institute of Technology. He currently serves as a director of TSYS and as the Chair of its audit committee. Mr. Page’s long-standing history with Synovus and his extensive understanding of the financial services industry provide the Board with a valuable resource for assessing and managing risks and planning for corporate strategy.
J. Neal Purcellis the former Vice Chairman of KPMG LLP. Prior to his retirement in 2002, Mr. Purcell managed the national audit practice operations for three years. Prior to that time, he held various management positions at KPMG, having been elected as a partner in 1972. He holds an accounting degree from Emory University and served in the U.S. Army for six years. In addition, Mr. Purcell currently serves on the board of the Southern Company, a publicly held public utility holding company, where he also chairs its compensation committee. He also serves on the board of Kaiser Permanente, a national health care company, where he chairs its audit committee and serves on its compensation, finance and executive committees. From 2003 to 2007, Mr. Purcell served on the board of Dollar General Corporation, a public company. Mr. Purcell also serves on the board of trustees at Emory University, chairing its compensation committee and serving on its executive and investment committees. In addition, Mr. Purcell currently serves, or has recently served, on the boards at Emory HealthCare, the Georgia Chamber of Commerce, the Salvation Army and the United Way of Atlanta. Mr. Purcell’s nearly forty years of accounting experience and expertise and his integral involvement in other public companies’ auditing practices and risk management programs and policies provide our Board with valuable expertise in these areas. In addition, Mr. Purcell provides an important perspective as we discuss our capital and liquidity needs.
Kessel D. Stelling, Jr.is the President and Chief Operating Officer of Synovus, positions he has held since February 2010. From June 2008 until February 2010, Mr. Stelling served as the Regional Chief Executive Officer of Synovus’ Atlanta area market. Prior to that time, he served as President and Chief Executive Officer of Bank of North Georgia, a banking subsidiary of Synovus (“BNG”), having been appointed to that position in December 2006. Mr. Stelling founded Riverside Bancshares, Inc. and Riverside Bank in 1996 and served as its Chairman of the Board and Chief Executive Officer until 2006 when Riverside Bancshares, Inc. merged with and into Synovus and Riverside Bank merged with and into BNG. Prior to that time, Mr. Stelling worked in various management capacities in banking in the Atlanta region, having begun his career in the industry in 1974. Mr. Stelling holds a bachelor’s degree from the University of Georgia and is a graduate of Louisiana State University School of Banking of the South. He serves as a trustee or director on several civic and non-profit organizations, including Well Star Health Systems, the


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University System of Georgia, Kennesaw State University and the Metro Atlanta Chamber of Commerce. Mr. Stelling’s extensive experience in the Georgia markets where our company operates and his knowledge of our day-to-day operations and asset disposition strategy provide our Board with an important resource in understanding our markets and industry.
Melvin T. Stithis the Dean of the Martin J. Whitman School of Management at Syracuse University. Prior to taking this position in 2005, Dr. Stith was the Dean and Jim Moran Professor of Business Administration at Florida State University for thirteen years. He has been a professor of marketing and business since 1977 after having served in the U.S. Army Military Intelligence Command and achieving the rank of Captain. He holds a bachelor’s degree from Norfolk State College and a master’s degree in business administration and a Ph.D. in marketing from Syracuse University. Dr. Stith currently serves on the board of Flower Foods, Inc., a publicly held baked foods company, as well as its audit and compensation committees. He has also served on the boards of Correctional Services Corporation, JM Family Enterprises Youth Automotive Training Center, PHT Services and Tallahassee State Bank, and is a current or past director of Beta Gamma Sigma, the national honorary society for business schools, the Jim Moran Foundation and the Graduate Management Admissions Council. Dr. Stith’s leadership skills in consensus-building, risk management and executive management and his financial acumen add an important dimension to our Board’s composition.
Philip W. Tomlinsonis the Chairman of the Board and Chief Executive Officer of TSYS, a publicly held global payments processing company. Mr. Tomlinson was elected to his current position with TSYS in January 2006. From 1982 until 2006, Mr. Tomlinson served in various capacities with TSYS, including Chief Executive Officer and President. Since TSYS’ incorporation in December 1982, Mr. Tomlinson has played a key role in almost every major relationship that has shaped TSYS’ development. Mr. Tomlinson is a member of the Financial Services Roundtable and a graduate of Louisiana State University School of Banking of the South. Mr. Tomlinson is also a member of the Georgia Institute of Technology Advisory Board and the Columbus State University Board of Trustees. As the principal executive officer of a public company, Mr. Tomlinson provides valuable insight and guidance on the issues of corporate strategy and risk management, particularly as to his expertise and understanding of the current trends within the financial services industry and as to his diverse relationships within the financial services community.
William B. Turner, Jr. is the Vice Chairman of the Board and former President of the W.C. Bradley Co., a privately held consumer products and real estate company. After 21 years as President and Chief Operating Officer of the W.C. Bradley Co., Mr. Turner retired from that position in 2008. During his 24 years with the W. C. Bradley Co., Mr. Turner served in various leadership and management positions, overseeing various operating divisions focused on manufacturing and production (including the CharBroil grill) as well as an extensive real estate portfolio which invested in commercial property, industrial property, warehouse space, residential property, investment buildings and development properties. At the time of Mr. Turner’s retirement, the W.C. Bradley Co. had more than $600 million in annual revenues. Mr. Turner’s extensive experience with a diversified business allowed him to provide direction and leadership in corporate strategy; investments, acquisitions and divestitures; talent management and compensation; budgeting; and managing a wide variety of risks. Prior to joining the W.C. Bradley Co., Mr. Turner was a commercial lender for CB&T from 1975 to 1984. Mr. Turner holds a bachelor’s degree from the University of the Georgia. His management skills and extensive experience with corporate strategy and real estate provide valuable insight and guidance to our Board’s oversight function.
James D. Yanceyis the Chairman of the Board of CB&T and former Chairman of the Board of Synovus. He retired as an executive employee of Synovus in December 2004 and served as a non-executive Chairman of the Board until July 2005. Mr. Yancey was elected as an executive Chairman of the Board of Synovus in October 2003. Prior to 2003 and for 45 years, Mr. Yancey served in various capacities with Synovusand/or CB&T, including Vice Chairman of the Board


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and President of both Synovus and CB&T. Mr. Yancey has an associate’s degree from Columbus State University. He serves as a director of TSYS as well as other civic and charitable organizations and brings to our Board a depth of understanding as to our company’s business, history and organization and the various challenges we face in the current economic environment.
Legal Proceedings
As previously disclosed in Synovus’ filings with the SEC, each of the nominees named above, as well as certain of Synovus’ current and former directors and executive officers, is named as a defendant in certain litigation.
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, including Richard E. Anthony, a nominee for director, 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 our Sea Island lending relationship and the impact of real estate values as a threat to our 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 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 the Federal and State Shareholder Derivative Lawsuit allegations.
 
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” RATIFICATIONALL 18 NOMINEES.
PROPOSAL 2: AMENDMENT TO ARTICLE 4 OF THE APPOINTMENTARTICLES OF KPMG LLP ASINCORPORATION TO INCREASE THE INDEPENDENT AUDITOR.NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
Background
Synovus’ Articles of Incorporation, as amended, currently authorize 600,000,000 shares of common stock. As of February 12, 2010, 489,832,889 shares of common stock were issued and outstanding, 25,609,875 shares of common stock were subject to awards under Synovus’ stock compensation plans, 21,088,612 shares of common stock were reserved for future issuance under Synovus’ stock compensation plans and 15,510,737 shares of common stock were reserved for issuance in connection with the conversion of outstanding warrants issued in December 2008 to the United States Department of Treasury as part of its $968 million investment in our preferred


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stock. Accordingly, we only have 47,957,887 shares of common stock available for issuance in other transactions.
Proposed Amendment
On January 28, 2010, the Board of Directors unanimously adopted, subject to shareholder approval, an amendment to Article 4 of Synovus’ Articles of Incorporation, as amended, to increase the number of authorized shares of common stock of the Company from 600,000,000 to 1,200,000,000 (the “Amendment”).
Specifically, we are proposing that the first two sentences of the first paragraph of Article 4 of our Articles of Incorporation be amended as follows (with the deletions marked as strike-throughs and the additions marked by underlining):
“4.
 
The Audit Committeemaximum number of shares of capital stock that the corporation shall be authorized to have outstanding at any time shall be700,000,0001,300,000,000 shares. The corporation shall have the authority to issue (i) 600,000,0001,200,000,000 shares of common stock, par value $1.00 per share, and (ii) 100,000,000 shares of preferred stock, no par value per share.”
If the Amendment is adopted, it will become effective upon the filing of an amendment to Synovus’ Articles of Incorporation with the Secretary of State of the State of Georgia, which Synovus expects to occur following shareholder approval of the proposal described herein. If the proposal is not approved by our shareholders, no amendment with respect to an increase in the number of authorized shares of common stock will be filed with the Secretary of State of the State of Georgia and the proposal will not be implemented.
We are not proposing to increase the number of authorized shares of preferred stock. We have designated 973,350 shares of preferred stock as Fixed Rate Cumulative Perpetual Preferred Stock, Series A, all of which were issued to the United States Department of Treasury. We believe that the over 99 million shares of remaining preferred stock will be adequate for the foreseeable future.
Vote Required
The affirmative vote by the holders of shares representing at least 662/3% of the votes entitled to be cast by the holders of all of the issued and outstanding shares of our common stock is required to approve the Amendment.
Purpose and Effect of the Amendment
The principal purpose of the Amendment is to provide us with additional financial flexibility to issue common stock for purposes which may be identified in the future, including, without limitation, raising equity capital, making acquisitions through the use of common stock, distributing common stock to shareholders pursuant to stock splitsand/or stock dividends, adopting additional equity incentive plans or reserving additional shares for issuance under such plans, and effecting other general corporate purposes. As of the date of the filing of this Proxy Statement, with the exception of shares reserved for issuance under Synovus’ stock compensation plans and conversion of outstanding warrants, Synovus has appointedno existing plans, arrangements or understandings to issue shares of common stock that will be available if shareholders approve this Amendment and it becomes effective. However, we may determine to issue additional shares of common stock to, among other things, improve our capital position, replace or restructure some or all of the firminvestment we have received from the United States Department of KPMG LLPTreasury or in connection with the modification or restructuring of certain of our outstanding debt securities. The availability of additional shares of common stock is particularly important if the Board of Directors needs to undertake any of the foregoing actions on an expedited basis. An increase in the number of authorized shares of common stock would enable the Board of


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Directors to avoid the time (and expense) of seeking shareholder approval in connection with any such contemplated action and would enhance our ability to respond promptly to opportunities for acquisitions, mergers, stock splits or additional financings.
If the Amendment is approved by the shareholders, upon the effective date of the Amendment, Synovus would have approximately 648 million shares of common stock available for future issuance after taking into account the number of shares currently outstanding and reserved for other purposes. If the Amendment is not approved by our shareholders, the number of authorized shares of common stock will remain at 600 million and Synovus would only have approximately 48 million shares of common stock available for future issuance, after taking into account the shares currently outstanding and reserved for other purposes.
If the Amendment is approved by our shareholders, the Board of Directors does not intend to solicit further shareholder approval prior to the issuance of any additional shares of common stock, except as may be required by applicable law or the independent auditor to auditrules of any stock exchange upon which our securities may be listed.
The Board of Directors believes that the consolidated financial statementsAmendment is in the best interests of Synovus and its subsidiariesour shareholders and is consistent with sound corporate governance principles.
Dilution
Adoption of the Amendment and the issuance of any common stock would have no affect on the rights of the holders of currently outstanding common stock. The additional shares of common stock to be authorized by adoption of the Amendment would have rights identical to the currently outstanding common stock.
Under Synovus’ Articles of Incorporation, as amended, our shareholders do not have preemptive rights to subscribe to additional securities which may be issued by Synovus, which means that current shareholders do not have a prior right to purchase any new issue of capital stock of Synovus in order to maintain their proportional ownership of such shares. In addition, to the extent that additional shares are actually issued, any such issuance could have the effect of diluting the earnings per share and book value per share of outstanding shares of common stock.
Anti-Takeover Effects
The proposed Amendment to increase the number of authorized shares of common stock could, under certain circumstances, have an anti-takeover effect, although this is not the intent of our Board of Directors. The increase in the authorized number of shares of common stock and the subsequent issuance of such shares could have the effect of delaying or preventing a change in control of Synovus without further action by the shareholders. This proposal is not being submitted as a result of or in response to any threatened takeover or attempt to obtain control of Synovus by means of a business combination, tender offer, solicitation in opposition to management or otherwise by any person, and the Board of Directors has no knowledge of any current effort to obtain control of Synovus or to accumulate large amounts of common shares. The Board of Directors represents that it will not, without prior shareholder approval, issue common stock for any defensive or anti-takeover purpose or for the fiscal year ending December 31, 2009 and Synovus’ internal control over financial reporting aspurpose of December 31, 2009. Althoughimplementing any shareholder ratification ofrights plan (other than a “tax preservation” shareholder rights plan to protect the appointmentuse of Synovus’ independent auditornet operating losses).
Potential Impact If Amendment is Not Adopted
If the Amendment is not requiredadopted by our bylaws or otherwise,shareholders and we are submittingunable to increase our number of authorized shares of common stock, we will only have 47,957,887 shares of common stock available for future issuance, after taking into account the selectionshares currently outstanding and reserved for other purposes. This limited number of KPMGavailable shares could restrict our ability to raise capital if we are instructed to do so by our shareholders for ratification to permit shareholdersregulators, including taking advantage of financing techniques that receive favorable treatment from regulatory agencies and credit


24

rating agencies, or we otherwise determine that additional capital is in the best interests of Synovus and our shareholders. In addition, our ability to participate in this important corporate decision. If not ratified, the Audit Committeeacquisitions, including FDIC-assisted acquisitions of troubled institutions, could be impaired as we would be restricted in our ability to issue additional shares of common stock or securities convertible into shares of common stock as consideration in these transactions. Without sufficient shares of common stock to issue in financing transactions and acquisitions with little or no delay, we may be unable to take full advantage of changing market conditions that will reconsider the selection, although the Audit Committee will not be requiredbest position Synovus to select a different independent auditor for Synovus.remain strong through these challenging economic conditions.
 
KPMG served as Synovus’ independent auditor for the fiscal year ending December 31, 2008. Representatives of KPMG will be present at the Annual Meeting with the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions from shareholders present at the meeting.THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE PROPOSAL TO AMEND ARTICLE 4 OF THE ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.
 
PROPOSAL 3: ADVISORY VOTE ON COMPENSATION OF
NAMED EXECUTIVE OFFICERS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS DETERMINED BY THE COMPENSATION COMMITTEE, AS DESCRIBED IN THE COMPENSATION DISCUSSION AND ANALYSIS AND THE TABULAR DISCLOSURE REGARDING NAMED EXECUTIVE OFFICER COMPENSATION (TOGETHER WITH THE ACCOMPANYING NARRATIVE DISCLOSURE) IN THIS PROXY STATEMENT.
 
Synovus believes that our compensation policies and procedures for our named executive officers are competitive, are focused on pay for performance principles and are strongly aligned with the long-term interests of our shareholders. Synovus also believes that both we and our shareholders benefit from responsive corporate governance policies and constructive and consistent dialogue. The proposal described below, commonly known as a “Say on Pay” proposal, gives you, as a shareholder, the opportunity to endorse or not endorse the compensation for our named executive officers by voting to approve or not approve such compensation as described in this Proxy Statement.
 
As discussed under “Executive Compensation -— Compensation Discussion and Analysis” beginning on page 21,32 of this Proxy Statement, Synovus’ compensation program for its executive officers is competitive, performance-oriented and designed to support our strategic goals. Compensation of our named executive officers for 20082009 reflected Synovus’ financial performance for 2008.2009. In particular,
 
 • There have been no base salary increases for our executives in more than two years, and the Compensation Committee does not anticipate base salary increases for our executives until Synovus returns to profitability;
• For the secondthird year in a row, we paid no bonuses to named executive officers;
• No long-term incentive awards were granted to our executive officers in 2009;
• Because our long-term incentive program is denominated entirely in equity vehicles, it has reflected the decline in our stock price:
○ Outstanding stock options are “underwater,” meaning that the exercise price exceeds the value of the shares. This will continue until stock prices return to their former levels;
○ Unvested restricted stock has declined in value along with the declines in our stock price; and
 
 • Long-term incentive opportunities that were earned based on2006-2008 performance have been postponed indefinitely;Because of our stock ownership guidelines and
• There were no regular base salary increases for 2008 for named executive officers. “hold until retirement” requirements, executives hold a significant amount of Synovus stock which has declined in value the same as shareholders’ stock.
 
On February 13, 2009, the United States Congress passed the American Recovery and Reinvestment Act of 2009, (the “ARRA”). Theor ARRA. ARRA requires, among other things, all participants in the Troubled Asset Relief Program to permit a non-binding shareholder vote to approve the compensation of the company’s executives. Accordingly, we are asking you to approve the compensation of Synovus’ named executive officers as described under “Executive Compensation -— Compensation Discussion and Analysis” and the tabular disclosure regarding named executive


15

officer compensation (together with the accompanying narrative disclosure) in


25

this Proxy Statement (see pages 2132 to 41)47 of this Proxy Statement). Under the ARRA, your vote is advisory and will not be binding upon the Board. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.
 
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS DETERMINED BY THE COMPENSATION COMMITTEE, AS DESCRIBED IN THE COMPENSATION DISCUSSION AND ANALYSIS AND THE TABULAR DISCLOSURE REGARDING NAMED EXECUTIVE OFFICER COMPENSATION (TOGETHER WITH THE ACCOMPANYING NARRATIVE DISCLOSURE) IN THIS PROXY STATEMENT.
PROPOSAL 4: RATIFICATION OF
APPOINTMENT OF THE INDEPENDENT AUDITOR
The Audit Committee has appointed the firm of KPMG LLP as the independent auditor to audit the consolidated financial statements of Synovus and its subsidiaries for the fiscal year ending December 31, 2010 and Synovus’ internal control over financial reporting as of December 31, 2010. Although shareholder ratification of the appointment of Synovus’ independent auditor is not required by our bylaws or otherwise, we are submitting the selection of KPMG to our shareholders for ratification to permit shareholders to participate in this important corporate decision. If not ratified, the Audit Committee will reconsider the selection, although the Audit Committee will not be required to select a different independent auditor for Synovus.
KPMG served as Synovus’ independent auditor for the fiscal year ending December 31, 2009. Representatives of KPMG will be present at the Annual Meeting with the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions from shareholders present at the meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE INDEPENDENT AUDITOR.


26

EXECUTIVE OFFICERS
 
The following table sets forth the name, age and position with Synovus of each executive officer of Synovus.
 
 
       
    Position with
Name
 
Age
 Synovus
 
Richard E. Anthony(1)  6263  Chairman of the Board and Chief Executive Officer
Frederick L. Green, III(1)Kessel D. Stelling, Jr.(1)  5053  President and Chief Operating Officer
Elizabeth R. James(2)  4748  Vice Chairman, Chief People Officer and Chief Information Officer
Thomas J. Prescott(3)  5455  Executive Vice President and Chief Financial Officer
Mark G. Holladay(4)  5354  Executive Vice President and Chief Risk Officer
Samuel F. Hatcher(5)Leila S. Carr(5)  6348Executive Vice President and Chief Retail Officer
R. Dallis Copeland(6)41Executive Vice President and Chief Commercial Officer
Samuel F. Hatcher(7)64  Executive Vice President, General Counsel and Secretary
Liliana C. McDaniel(6)Kevin J. Howard(8)  4445Executive Vice President and Chief Credit Officer
Liliana C. McDaniel(9)45  Chief Accounting Officer
J. Barton Singleton(10)46Executive Vice President and President, Financial Management Services
 
(1)As Messrs. Anthony and GreenStelling are directors of Synovus, relevant information pertaining to their positions with Synovus isare set forth under the caption “Nominees for Election as Director” beginning on page 12.15.
 
(2)Elizabeth R. James was elected Vice Chairman of Synovus in May 2000. From 1986 until 2000, Ms. James served in various capacities with Synovus and/or its subsidiaries, including Chief Information Officer and Chief People Officer of Synovus.
 
(3)Thomas J. Prescott was elected Executive Vice President and Chief Financial Officer of Synovus in December 1996. From 1987 until 1996, Mr. Prescott served in various capacities with Synovus, including Executive Vice President and Treasurer.
 
(4)Mark G. Holladay was elected Executive Vice President and Chief Risk Officer of Synovus in October 2008. From 2000 to 2008, Mr. Holladay served as Executive Vice President and Chief Credit Officer of Synovus. From 1974 until 2000, Mr. Holladay served in various capacities with Columbus Bank and Trust Company,CB&T, including Executive Vice President.
 
(5)Leila S. Carr was elected Executive Vice President and Chief Retail Officer of Synovus in August 2005. Ms. Carr joined Synovus in June 2000 as Senior Vice President, Director of Sales, Marketing and Product Development and was named Senior Vice President and Synovus’ Retail Banking Executive in 2004. Prior to joining Synovus, Ms. Carr spent 17 years with First Union National Bank.
(6)R. Dallis Copeland was elected as Executive Vice President and Chief Commercial Officer in March 2010 and September 2008, respectively. He previously served as President and Chief Executive Officer of Citizens First Bank, one of our banking subsidiaries, and has led various banking departments in retail and commercial banking at CB&T. He began his career with CB&T in 1992.
(7)Samuel F. Hatcher was elected Executive Vice President, General Counsel and Secretary of Synovus in April 2008. From 2005 until April 2008, Mr. Hatcher was a partner in the law firm of Bradley & Hatcher in Columbus, Georgia and from 2002 until April 2008,2005, he was a partner in the law firm of Hatcher Thomas, LLC in Atlanta, Georgia. Prior to 2002, Mr. Hatcher served as the General Counsel of Equitable Real Estate Investment Management, Inc.
 
(6)(8)Kevin J. Howard was elected as Executive Vice President and Chief Credit Officer in March 2010 and September 2008, respectively. Mr. Howard served as Senior Vice President and Credit Manager of Synovus from 2004 until September 2008 and as Senior Vice President of commercial real estate, correspondent and affiliate lending from 2000 until 2004. Mr. Howard joined CB&T as Vice President in 1993.
(9)Liliana C. McDaniel was elected Chief Accounting Officer in July 2006. From 2001 until 2006, Ms. McDaniel was the Senior Vice President, Director of Financial Reporting at Synovus. From 1998 to 2001, she served as Synovus’ Vice President, Financial Reporting Manager.
(10)J. Barton Singleton was elected as Executive Vice President and President, Synovus Financial Management Services in December 2007. Mr. Singleton joined Synovus in August 2005 and since that time, he has served in various capacities, including Senior Vice President and Manager of the investment banking and institutional brokerage groups and Chief Operating Officer, Chief Financial Officer and Fixed Income Trader for mortgage-backed securities. He was named President of Synovus Securities in February 2006. Prior to joining Synovus, Mr. Singleton spent 16 years at SouthTrust Securities.


1627

STOCK OWNERSHIP OF DIRECTORS
AND EXECUTIVE OFFICERS
 
 
The following table sets forth ownership of shares of Synovus common stock by each director, each executive officer named in the Summary Compensation Table and all directors and executive officers as a group as of December 31, 2008.2009.
 
 
                   
     Shares of
         
  Shares of
  Synovus
  Shares of
      
  Synovus
  Stock
  Synovus
      
  Stock
  Beneficially
  Stock
      
  Beneficially
  Owned
  Beneficially
     Percentage of
  Owned
  with
  Owned
  Total
  Outstanding
  with Sole
  Shared
  with Sole
  Shares of
  Shares of
  Voting
  Voting
  Voting
  Synovus
  Synovus
  And
  And
  and No
  Stock
  Stock
  Investment
  Investment
  Investment
  Beneficially
  Beneficially
  Power
  Power
  Power
  Owned
  Owned
  as of
  as of
  as of
  as of
  as of
Name
 12/31/08  12/31/08  12/31/08  12/31/08(1)  12/31/08
 
Daniel P. Amos  297,753   10,950   1,500   310,203  *
Richard E. Anthony  701,663   70,429   65,027   2,332,857  1
James H. Blanchard  353,014   1,486,057   6,150   6,776,839  2
Richard Y. Bradley  32,336   147,255   1,500   181,091  *
Frank W. Brumley  41,083   45,009   1,500   87,592  *
Elizabeth W. Camp  30,331   2,703   1,500   34,534  *
Gardiner W. Garrard, Jr.   155,147   628,821   1,500   785,468  *
T. Michael Goodrich  165,366   19,730(2)  1,500   186,596  *
Frederick L. Green, III  177,033   622   18,311   512,783  *
V. Nathaniel Hansford  126,934   341,832   1,500   470,266  *
Mark G. Holladay  53,326   —   3,909   885,360  *
Elizabeth R. James  69,188   —   9,136   1,279,600  *
Mason H. Lampton  103,921   1,395   1,500   106,816  *
Elizabeth C. Ogie  472,992   2,215,703   1,500   2,690,195  1
H. Lynn Page  662,712   11,515   1,500   675,727  *
Thomas J. Prescott  76,885   —   9,012   1,279,632  *
J. Neal Purcell  18,689   —   1,500   20,189  *
Melvin T. Stith  13,562   131   1,500   15,193  *
Philip W. Tomlinson  83,788   —   1,000   84,788  *
William B. Turner, Jr.   153,187   232,616   1,500   387,303  *
James D. Yancey  833,142   293,500   1,500   2,892,757  1
Directors and Executive Officers as a Group (23 persons)  4,653,360   5,508,268   135,355   22,105,975  6.5
                   
     Shares of
         
  Shares of
  Synovus
  Shares of
      
  Synovus
  Stock
  Synovus
      
  Stock
  Beneficially
  Stock
      
  Beneficially
  Owned
  Beneficially
     Percentage of
  Owned
  with
  Owned
  Total
  Outstanding
  with Sole
  Shared
  with Sole
  Shares of
  Shares of
  Voting
  Voting
  Voting
  Synovus
  Synovus
  And
  And
  and No
  Stock
  Stock
  Investment
  Investment
  Investment
  Beneficially
  Beneficially
  Power
  Power
  Power
  Owned
  Owned
  as of
  as of
  as of
  as of
  as of
Name
 12/31/09  12/31/09  12/31/09  12/31/09(1)  12/31/09
 
Daniel P. Amos  307,567   12,947   1,000   321,514  *
Richard E. Anthony  780,530   70,429   50,144   2,433,535  *
James H. Blanchard  489,795   1,334,309   1,000   3,875,647  *
Richard Y. Bradley  62,836   177,255   1,000   241,091  *
Frank W. Brumley  75,872   45,009   1,000   121,881  *
Elizabeth W. Camp  29,118   2,703   1,000   32,821  *
Gardiner W. Garrard, Jr.   155,647   614,257   1,000   770,904  *
T. Michael Goodrich  387,644   19,730(2)  1,000   408,374  *
Frederick L. Green, III(3)  11   —   —   11  *
V. Nathaniel Hansford  135,363   197,792   1,000   334,155  *
Mark G. Holladay  64,104   —   1,753   841,767  *
Elizabeth R. James  92,963   —   4,084   1,260,053  *
Mason H. Lampton  104,232   1,395   1,000   106,627  *
Elizabeth C. Ogie  473,675   2,215,703   1,000   2,690,378  *
H. Lynn Page  681,637   11,515   1,000   694,152  *
Thomas J. Prescott  97,667   —   4,046   1,249,962  *
J. Neal Purcell  48,464   —   1,000   49,464  *
Kessel D. Stelling, Jr.(4)  276,354   86,382   1,431   364,167  *
Melvin T. Stith  23,405   133   1,000   24,538  *
Philip W. Tomlinson  94,197   —   1,000   95,197  *
William B. Turner, Jr.   377,169   —   1,000   378,169  *
James D. Yancey  788,654   393,500   1,000   2,596,357  *
Directors and Executive Officers as a Group (24 persons)  5,585,688   5,182,729   78,054   19,015,720  3.82%


1728

 
* Less than one percent of the outstanding shares of Synovus stock.
 
(1)The totals shown in the table above for the directors and executive officers of Synovus listed below include the following shares as of December 31, 2008:2009: (a) under the heading “Stock Options” the number of shares of Synovus stock that each individual had the right to acquire within 60 days through the exercise of stock options, and (b) under the heading “Pledged Shares” the number of shares of Synovus stock that were pledged, including shares held in a margin account.
 
                
Name
 Stock Options Pledged Shares Stock Options Pledged Shares
Richard E. Anthony  1,495,738   67,823   1,532,432   67,823 
James H. Blanchard  4,931,618   872,812   2,050,543   1,446,938 
Gardiner W. Garrard, Jr.   —   290,427   —   290,427 
Frederick L. Green, III  316,817   102,595 
Mark G. Holladay  828,125   30,927   775,910   30,927 
Elizabeth R. James  1,201,276   —   1,163,006   — 
Mason H. Lampton  —   58,275   —   58,275 
Elizabeth C. Ogie  —   221,699 
H. Lynn Page  —   66,468   —   66,468 
Thomas J. Prescott  1,193,735   —   1,148,249   — 
William B. Turner, Jr.   —   50,000   —   50,000 
James D. Yancey  1,764,615   241,228   1,413,203   241,228 
 
In addition, the other executive officers of Synovus had rights to acquire an aggregate of 77,06885,576 shares of Synovus stock within 60 days through the exercise of stock options.
 
(2)Includes 15,280 shares of Synovus stock held in a trust for which Mr. Goodrich is not the trustee. Mr. Goodrich disclaims beneficial ownership of these shares.
(3)Mr. Green resigned as President and Chief Operating Officer effective May 28, 2009.
(4)Mr. Stelling was elected as President and Chief Operating Officer effective February 22, 2010.


1829

 
AUDIT COMMITTEE REPORT
 
 
The Audit Committee of the Board of Directors is comprised of four directors, each of whom the Board has determined to be an independent director as defined by the listing standards of the New York Stock Exchange. The duties of the Audit Committee are summarized in this Proxy Statement under “Committees of the Board” beginning on page 56 and are more fully described in the Audit Committee charter adopted by the Board of Directors.
 
One of the Audit Committee’s primary responsibilities is to assist the Board in its oversight responsibility regarding the integrity of Synovus’ financial statements and systems of internal controls. Management is responsible for Synovus’ accounting and financial reporting processes, the establishment and effectiveness of internal controls and the preparation and integrity of Synovus’ consolidated financial statements. KPMG LLP, Synovus’ independent auditor, is responsible for performing an independent audit of Synovus’ consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and issuing opinions on whether those financial statements are presented fairly in conformity with accounting principles generally accepted in the United States and on the effectiveness of Synovus’ internal control over financial reporting. The Audit Committee is directly responsible for the compensation, appointment and oversight of KPMG LLP. The function of the Audit Committee is not to duplicate the activities of management or the independent auditor, but to monitor and oversee Synovus’ financial reporting process.
 
In discharging its responsibilities regarding the financial reporting process, the Audit Committee:
 
 • Reviewed and discussed with management and KPMG LLP Synovus’ audited consolidated financial statements as of and for the year ended December 31, 2008;2009;
 
 • Discussed with KPMG LLP the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees);, as amended and adopted by the Public Company Accounting Oversight Board; and
 
 • Received from KPMG LLP the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’sKPMG LLP’s communications with the Audit Committee concerning independence and has discussed with KPMG LLP their independence.
 
Based upon the review and discussions referred to in the preceding paragraph, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements referred to above be included in Synovus’ Annual Report onForm 10-K for the year ended December 31, 20082009 filed with the Securities and Exchange Commission.
 
The Audit Committee
J. Neal Purcell, Chair
Elizabeth W. Camp
H. Lynn Page
Melvin T. Stith


1930

KPMG LLP Fees and Services
 
The following table presents fees for professional audit services rendered by KPMG LLP for the audit of Synovus’ annual consolidated financial statements for the years ended December 31, 20082009 and December 31, 20072008 and fees billed for other services rendered by KPMG during those periods.
 
                
 2008 2007(1)  2009 2008 
Audit Fees(2)(1) $2,018,000  $3,837,000  $2,739,260  $2,018,000 
Audit Related Fees(3)(2)  136,000   1,747,000   121,000   136,000 
Tax Fees(4)(3)  —   490,000   24,474   — 
All Other Fees(5)(4)  226,000   -0-   40,565   226,000 
          
Total $2,380,000  $6,074,000  $2,925,299  $2,380,000 
          
 
 
(1)Fees in 2007 include amounts billed to Total System Services, Inc. which, prior to December 31, 2007, was a majority-owned subsidiary of Synovus.
(2)Audit fees consisted of fees for professional services provided in connection with the audits of Synovus’ consolidated financial statements and internal control over financial reporting, reviews of quarterly financial statements, issuance of comfort letters and other SEC filing matters, and audit or attestation services provided in connection with other statutory or regulatory filings.
 
(3)(2)Audit related fees consisted principally of fees for assurance and related services that are reasonably related to the performance of the audit or review of Synovus’ financial statements and are not reported above under the caption “Audit Fees.”
 
(4)(3)Tax fees consisted of fees for tax consulting and compliance, tax advice and tax planning services.
 
(5)(4)All other fees for 2009 consisted principally of fees for professional services related to Synovus’ regulatory compliance and for enterprise risk management consulting services. For 2008, all other fees consisted principally of fees for enterprise risk management consulting services.
 
Policy on Audit Committee Pre-Approval
 
The Audit Committee has the responsibility for appointing, setting the compensation for and overseeing the work of Synovus’ independent auditor. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent auditor in order to assure that the provision of these services does not impair the independent auditor’s independence. Synovus’ Audit CommitteePre-Approval Policy addresses services included within the four categories of audit and permissible non-audit services, which include Audit Services, Audit Related Services, Tax Services and All Other Services.
 
The annual audit services engagement terms and fees are subject to the specific pre-approval of the Audit Committee. In addition, the Audit Committee must specifically approve permissible non-audit services classified as All Other Services.
 
Prior to engagement, management submits to the Committee for approval a detailed list of the Audit Services, Audit Related Services and Tax Services that it recommends the Committee engage the independent auditor to provide for the fiscal year. Each specified service is allocated to the appropriate category and accompanied by a budget estimating the cost of that service. The Committee will, if appropriate, approve both the list of Audit Services, Audit Related Services and Tax Services and the budget for such services.
 
The Committee is informed at each Committee meeting as to the services actually provided by the independent auditor pursuant to the Pre-Approval Policy. Any proposed service that is not separately listed in the Pre-Approval Policy or any service exceeding the pre-approved fee levels must be specifically pre-approved by the Committee. The Audit Committee has delegatedpre-approval authority to the Chairman of the Audit Committee. The Chairman must report any pre-approval decisions made by him to the Committee at its next scheduled meeting.
 
All of the services described in the table above under the captions “Audit Fees,” “Audit Related Fees” and “Tax Fees” were approved by the Committee pursuant to legal requirements and the Committee’s Charter and Pre-Approval Policy.


2031

 
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
 
Executive Summary
2008 Performance. 20082009 was one of the most challenging yearsyear Synovus has ever faced. Due to the continued decline in economic crisisconditions in the U.S., earnings declined from the prior year,we experienced significant credit-related losses and our stock price fell precipitously.
continued to decline.
 
Synovus’ financialThis performance for 2008 is reflected in our total compensation for executives. For example:
 
 • There have been no base salary increases for our executives in more than two years, and the Compensation Committee does not anticipate base salary increases for our executives until Synovus returns to profitability.
• For the secondthird year in a row, we paid no bonuses to named executive officers.
 • Long-termNo long-term incentive opportunities thatawards were earned during 2008 based on2005-2007 performance were at one-half of market levels.
• Long-term incentive opportunities that were earned based on2006-2008 performance have been postponed indefinitely.granted to our executive officers in 2009.
 
 • Because our long-term incentive program is denominated entirely in equity vehicles, it has reflected the decline in our stock price.price:
 
 ○ Outstanding stock options have a currentare “underwater,” meaning that the exercise price exceeds the value of zero andthe shares. This will have no valuecontinue until stock prices return to their former levels.
 ○ Unvested restricted stock has declined in value along with the declines in our stock price.
 
 • Because of our stock ownership guidelines and “hold until retirement” requirements, executives hold a significant amount of Synovus stock, which has declined in value the same as all other shareholders’ stock.
 
TARP-Related Actions.Actions:  In addition to the above, on December 19, 2008, Synovus issued approximately $968 million of preferred stock and warrants to the United States Treasury Department underpursuant to the Capital Purchase Program enacted under the Troubled Asset Relief Program, (“TARP”). This had implications foror TARP. In 2009, Congress enacted ARRA, which contained several executive pay:
compensation and corporate governance requirements that apply to TARP recipients, including Synovus. The Compensation Committee has taken a number of actions in order to comply with the provisions of TARP and ARRA:
 
 • As required byMet with Synovus’ senior risk officer to review senior executive officer compensation plans and employee incentive compensation plans and the terms of the Capital Purchase Program, our named executive officers entered into agreementsrisks associated with Synovus that amended several of Synovus’ executive compensation programs. These amendments arethese plans. The risk assessment is described in more detail beginning on page 30.40 of this Proxy Statement.
 
 • The Committee met withEliminated bonus and other incentive payments to senior executive officers and the next twenty most highly compensated employees during the TARP period. Synovus’ senior risk officer in January 2009 to review Synovus’short-term and long-term incentive compensation arrangementsplans and risks. The risk assessment and new incentive award processesthe Committee’s actions are described in more detail beginning on page 31.37 of this Proxy Statement.
• Suspended Synovus’ change of control agreements previously applicable to Synovus’ senior executive officers and the next five most highly compensated employees during the TARP period.
• Added a recovery or “clawback” provision to Synovus’ incentive compensation plans requiring that any senior executive officer or next twenty most highly compensated employees return any bonus payment or award made during the TARP period based upon materially inaccurate financial statements or performance metrics. As noted above, however, there were no bonus payments to any such officers or employees during 2009.
• Prohibited all forms ofgross-ups to senior executive officers and the next twenty most highly compensated employees. Synovus rarely used “gross ups” for its officers, so the impact of this prohibition was minimal.
• Adopted a policy regarding luxury or excessive expenditures.


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A high point during the year was the completed spin-off of Total System Services, Inc. (the “Spin-Off”), discussed further below under “Certain Relationships and Related Transactions.” In recognition of that event, on January 22, 2008, our named executive officers received a one-time stock option grant as described on page 27. Those options have no current value and will have value only when our stock price returns to $13.18, the options’ grant prices.
 
Program Overview
 
What the CD&A Addresses.  The following Compensation Discussion and Analysis, (“or CD&A”)&A, describes our compensation program for the executive officers named in the Summary Compensation Table on page 3543 of this Proxy Statement (“named executive officers”). Specifically, the CD&A addresses:
 
 • the objectives of our compensation program (found in the section entitled “Compensation Philosophy and Overview”);
 
 • what our compensation program is designed to reward (also described in the section entitled “Compensation Philosophy and Overview”);
 
 • each element of compensation (set forth in the section entitled “Primary Elements of Compensation”);


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 • why each element was chosen (described with each element of compensation, including base pay, short-term incentives and long-term incentives);
 
 • how amounts and formulas for pay are determined (also described with each element of compensation, including base pay, short-term incentives and long-term incentives); and
 
 • how each compensation element and our decisions regarding that element fit into Synovus’ overall compensation objectives and affect decisions regarding other elements (described with each element of compensation, as well as in the section entitled “Benchmarking”).
 
For information about the Compensation Committee and its charter, its processes and procedures for administering executive compensation, the role of compensation consultants and other governance information, please see “Compensation“Corporate Governance and Board Matters — Committees of the Board — Compensation Committee” on page 7.8 of this Proxy Statement.


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Elements of Compensation.  Synovus has a performance-oriented executive compensation program that is designed to support our corporate strategic goals, including growth in earnings and growth in shareholder value. The elements of our regular total compensation program (not all elements of which are currently active because of the TARP requirements) and the objectives of each element are identified in the following table:
 
     
Compensation Element
 Objective Key Features
 
Base Pay To compensate an executive for performing his or her job on a daily basis. Fixed cash salary targeted at median (50th percentile) of identified list of Peer Companies (companies with similar size and scope of banking operations) for similar positions.
Short-Term Incentives To provide an incentive for executives to meet our short-term earnings goals and ensure a competitive program given the marketplace prevalence of short-term incentive compensation. Cash bonuses typically awarded based upon achievement of earnings per share goals for year of performance usingperformance.This plan is suspended during the grid on page 25.TARP period, however, and no bonus will be earned or paid to our senior executive officers and the next twenty most highly compensated employees during that period.
Long-Term Incentives To (1) provide an incentive for our executives to provide exceptional shareholder return to Synovus’ shareholders by tying a significant portion of their compensation opportunity to growth in shareholder value, (2) align the interests of executives with shareholders by awarding executives equity in Synovus, and (3) ensure a competitive compensation program given the market prevalence of long-term incentive compensation. 
Equity typically is awarded based upon a performance matrix that measures Synovus’ absolute and relative total shareholder return performance over the preceding three-year period. The equity awards made in 2008 were based uponperiod, as well as its total shareholder return for the 2005-2007 performance period as described on page 26. relative to other banks.

Awards are generally made 50% in stock options and 50% in restricted stock.The long-term incentive plan has been suspended during the TARP period.
Perquisites To align our compensation plan with competitive practices. Small component of pay intended to provide an economic benefit to Synovus in retaining executive talent.executives to promote their retention.
Retirement Plans Defined contribution plans designed to provide income following an executive’s retirement, combined with a deferred compensation plan to replace benefits lost under Synovus’ qualified plans. Plans offered include a money purchase pension plan, a profit sharing plan, a 401(k) savings plan and a deferred compensation plan.
Change in Control Agreements To provide orderly transition and continuity of management following a change in control of Synovus. Dual-triggered change inChange of control agreements described on page 40.for the Company’s senior executive officers and the next five most highly compensated employees have been suspended during the TARP period.
Stock Ownership/Retention Guidelines To align the interests of our executives with shareholders. Executive officers must maintain minimum ownership levels of Synovus common stock and must “hold until retirement” 50% of all stock acquired in connection with equity compensation programs, all as described on pages 29-30.page 39.


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Compensation Philosophy and Overview
 
Synovus has established a compensation program for our executives that is competitive, performance-oriented and designed to support our strategic goals. The goals and objectives of our the


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compensation program that would apply to our senior executives absent the TARP restrictions are described below.
 
Synovus’ executive compensation program is designed to compete in the markets in which we seek executive talent. We believe that we must maintain a competitive compensation program that allows us to recruit top level executive talent and that will prevent our executives from being recruited from us. Our compensation program is also designed to be performance-oriented. A guiding principle in developing our compensation program has been “average pay for average performance — above-average pay for above-average performance.” As a result, a significant portion of the total compensation of each executive is at risk based on short and long-term performance.performance of Synovus. This “pay for performance” principle also results in executive compensation that is below average when performance is below average. Because of our emphasis on performance, we also believe that compensation generally should be earned by executives while they are actively employed and can contribute to Synovus’ performance.
 
Synovus’ compensation program is also designed to support corporate strategic goals, including growth in earnings and growth in shareholder value. As described in more detail below, earnings arehas been the primary driver of our short-term incentive program and shareholder value ishas been the primary driver of our long-term incentive program. Synovus believes that the high degree of performance orientation and the use of goals based upon earnings and shareholder value in our incentive plans aligns the interests of our executives with the interests of our shareholders. In addition, Synovus has adopted stock ownership guidelines, which require executives to own a certain amount of Synovus stock based on a multiple of base salary, and a “hold until retirement” provision, which requires executives to retain ownership of 50% of all stock acquired through our equity compensation plans until their retirement or other termination of employment. These requirements are intended to focus executives on long-term shareholder value creation. During the TARP period, Synovus will be required to manage our executive compensation programs within the boundaries dictated by the regulations. We continue to believe in our guiding principles and will strive to meet our stated objectives of competitive pay, executive motivation and retention, and pay for performance while working within the constraints dictated by TARP.
 
Primary Elements of Compensation
 
There areHistorically, there have been three primary elements of compensation in Synovus’ executive compensation program:
 
 • base pay;
 • short-term incentive compensation; and
 
 • long-term incentive compensation.
 
AsIn early 2009, the decision was made to suspend these programs in light of business performance and economic conditions. Accordingly, as more fully described below, there were no base salary increases, short-term incentive awards or long-term incentive awards for 2009.As we exit TARP in the future, we anticipate a completere-evaluation of base salary and short and long-term incentive programs to ensure they align strategically with the needs of the business and the competitive market at that time.
In past years, short-term and long-term incentive compensation arehas been tied directly to performance. Short-term incentive compensation iswas based upon Synovus’ fundamental operating performance measured over a one-year period, while long-term incentive compensation iswas based upon Synovus’ total shareholder return measured over a three-year period. Synovus has not established a specific targeted “mix” of compensation between base pay and short-term and long-term incentives. However, both short-term and long-term incentives arewere based upon percentages or multiples of base pay. If both short-term and long-term incentives arewere paid at target, long-term incentives arewould constitute the largest portion of an executive’s total compensation package. For example, if short-term and long-term incentives arewere paid at target,


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long-term incentives would constitute almost fifty percent of an executive’s total compensation package, thereby illustrating our emphasis on performance and growth in shareholder value.
 
Benchmarking
 
As described below,In the past, Synovus benchmarkshas benchmarked base salaries and “market” short-term and long-term incentive target awards. The market used by Synovus for benchmarking is banks with similar asset size as Synovus. From a listawards to assess the competitive executive compensation practices of competitor banks rankedcompanies. We continued the practice in 2009 although the competitive landscape had been completely disrupted by asset size, Synovus selects the 10 banks immediately aboveeconomic and immediately below Synovus’ asset size as the


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appropriate companies against whichregulatory changes. Findings from this benchmarking exercise in 2009 will not be used to benchmark base pay (the “Peer Companies”). For 2008, the Peer Companies were:
Associated Banc-Corp. Fulton Financial Corp.
Bok Financial GroupHuntington Bancshares, Inc.
City National Corp. Marshall & Ilsley Corp.
Colonial Bancgroup, Inc. M&T Bank Corp.
Comerica Inc. Northern Trust Corporation
Commerce BancorpPopular, Inc.
Commerce Bancshares, Inc. The South Financial Group, Inc.
First Bancorp Citizens BancShares, Inc. TCF Financial Corp.
First Citizens BancShares, Inc. Unionbancal Corp.
First Horizon National Corp. Zions Bancorporation
determine any current compensation actions, but will serve to provide historical trending information to support future compensation evaluation.
 
Synovus also benchmarks total compensation (base salary, short-term incentives and long-term incentives) of its executives. Synovus usesused current year proxy data for the Peer Companies for benchmarking total compensation,companies listed below as well as external market surveys. Synovus uses a three-year look back of thesurveys to benchmark total compensation benchmark data to reduce the impact of short-term fluctuations in the data which may occur from year to year.compensation. When reviewing the total compensation benchmarking data, Synovus focusesfocused on total compensation opportunities, not necessarily the amount of compensation actually paid, which varies depending upon Synovus’ performance results due to the program’s performance orientation.
From a list of competitor banks, Synovus selects the banks immediately above and immediately below Synovus’ assets size as the appropriate companies against which to benchmark base pay (the “Peer Companies”). For example, over2009, the past five years, Synovus’ long-term incentive awards have been below target for four of the five years and above-target for one year. Although these awards result in compensation amounts for Synovus’ executives that could be considered below market in total, the Committee believes the amount of compensation paid to its executives is appropriate given Synovus’ shareholder return during this five-year period.Peer Companies were:
Associated Banc-Corp. Huntington Bancshares, Inc.
Bok Financial GroupKeyCorp
City National Corp. Marshall & Ilsley Corp.
Comerica Inc. M&T Bank Corp.
Commerce Bancshares, Inc. Northern Trust Corporation
Fifth Third Bancorp.People’s United Financial, Inc.
First Bancorp Citizens BancShares, Inc. Popular, Inc.
First Citizens BancShares, Inc. TCF Financial Corp.
First Horizon National Corp. Zions Bancorporation
Fulton Financial Corp.
 
Base Pay.  Base pay is seen as the amount paid to an executive for consistently performing his or her job on a daily basis. To ensure that base salaries are competitive, Synovus targets base pay at the median (e.g., the 50th50th percentile) of the marketPeer Companies for similarly situated positions, based upon each executive’s position and job responsibilities. When establishing base salaries, the Committee compares each executive’s current base pay to the market median for that position using proxy information from the Peer Companies. For certain positions for which there is no clear market match in the benchmarking data, Synovus uses a blend of two or more positions from the benchmarking data. The Committee also reviews changes in the benchmarking data from the previous year. The Committee then uses this data to establish a competitive base salary for each executive. For example, an executive whose base salary is below the benchmarking target for his or her position may receive a larger percentage increase than an executive whose base salary exceeds the benchmarking target for his or her position.
 
In addition to market comparisons of similar positions at the Peer Companies, subjective evaluation of individual performance may affect base pay. For example, an executive whose performance is not meeting expectations, in the committee’s judgment, may receive no increase in base pay or a smaller base pay increase in a given year. On the other hand, an executive with outstanding performance may receive a larger base pay increase or more frequent base pay increases.
 
Base pay is not directly related to Synovus’ performance. Comparison of an executive’s base salary to the base salaries of other Synovus executives may also be a factor in establishing base salaries, especially with respect to positions for which there is no clear market match in the base pay benchmarking data. Because of the process we use to initially establish base pay, large increases in base pay generally occur only when an executive is promoted into a new position.


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ThereDue to economic conditions, there were no base salary increases for 2008 based upon market comparisons and the other factors typically used by the2009. The Committee fordoes not anticipate any future base salary adjustments, such as internal pay equity,increases for our executives until the merit pay budget, individual performance, experience, time in position and retention needs. However, effective January 1, 2008, the Committee increased the base salaries of Mr. Anthony,


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Mr. Green and Ms. James by $59,200, $62,100 and $40,000 respectively. The amount of this one-time increase was equalCompany returns to the amount of Board of Director fees foregone by each executive as a result of the decision to eliminate the payment of cash director fees to named executives as described under “Board Fees” below. Thus, the increase in total compensation as a result of base salary changes was zero.profitability.
 
Short-Term Incentives.  In addition to base salary, our executive compensation program includeshistorically included short-term incentive compensation. We paypreviously paid short-term incentive compensation in order to (1) provide an incentive for executives to meet our short-term earnings growth goals, and (2) ensure a competitive compensation program given the marketplace prevalence of short-term incentive compensation.
 
Our short-term incentive program is tied directlyAs required under ARRA, no bonuses can be paid to our fundamental operating performance measured over a one-year period. Each year,Synovus’ senior executive officers and the Committee establishes a target for percentage change in earnings per share (“EPS”). A target goal of 100% equates to a “market” award, which is set at the median target short-term incentive award for similar positions at the Peer Companies, expressed as a percentage of base salary earnednext twenty most highly compensated employees during the year (“base earnings”). Actual short-term incentive targets for 2008 were set taking into account median market data atTARP period. As a result, the Peer Companies, as well as existing incentive targets, internal pay equity, individual performance and retention needs. The target short-term incentive percentages for our named executive officers are set forth in the table below:
Target Short-Term Incentive
Named Executive Officer
Percentage of Base Salary
Richard E. Anthony (CEO)100%
Frederick L. Green, III (President and COO)85%
All other executive officers70%
The amount of a short-term incentive award can range from zero to 200% of a target grant in accordance with a schedule approved by the Committee each year. For 2008, the Committee approved the following schedule:
       
EPS Percentage Change
  
Percent of Target Bonus Paid
 
 
 15.4%  200%
 10.6%  175%
 5.8%  150%
 1.0%  125%
 −3.8%  100%
 −8.6%  90%
 −13.2%  75%
 −18.2%  50%
 −27.9%  20%
 Below −27.9%  0%
Although the target EPS percentage change goal set by the Committee is generally based upon initial EPS projections calculated in accordance with generally accepted accounting principles (“GAAP”), from time to time the target percentages are based on non-GAAP EPS growth percentages for purposes of determiningprior short-term incentive compensation because of unusual events that could occur during the year. These events include, but are not limited to, changes in accounting and regulatory standards, changes in tax rates and laws, chargesplan was suspended for corporate or workforce restructurings, acquisitions and divestitures2009 and for 2008, reductions in net income or charges resulting from the Spin-Off. The Committee made no such adjustments in 2008.


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Because Synovus did not attainremainder of the minimum EPS percentage change level required under the above schedule, noTARP period. For more information regarding our short-term incentive awards were paidplan as in effect prior to TARP, please refer to the named executive officers for 2008.discussion beginning on page 25 under “Executive Compensation — Compensation Discussion and Analysis” of Synovus’ 2009 Proxy Statement.
 
Long-Term Incentives.  Our executive compensation program also includeshistorically included long-term incentive compensation, which iswas awarded in the form of restricted stock units and stock options that arewere earned through performance. We have elected to provide long-term incentive compensation opportunities in order to: (1) provide an incentive for our executives to provide exceptional shareholder return to Synovus’ shareholders by tying a significant portion of their compensation opportunity to both past and future growth in shareholder value, (2) align the interests of executives with shareholders by awarding executives equity in Synovus, and (3) ensure a competitive compensation program given the market prevalence of long-term incentive compensation.
 
As required under ARRA, Synovus’ prior long-term incentive plan awards equity incentive opportunities to executives based upon Synovus’ performance as measured by total shareholder return (“TSR”), over a three-year period. TSRwas suspended for each measurement period is calculated by dividing Synovus’ stock price appreciationour senior executive officers and dividends paid by the stock price atnext twenty most highly compensated employees for 2009 and the beginningremainder of the measurementTARP period. We use a three-year period to measure performance for purposes ofFor more information regarding our long-term incentive awardsplan as in ordereffect prior to link TSR performance over timeTARP, please refer to the discussion beginning on page 26 under “Executive Compensation — Compensation Discussion and to reduce the impact, positive or negative, of unusual events that may occur in a given year.
Under Synovus’ long-term incentive program, TSR is compared to two benchmarks: (1) a range of absolute levels of TSR, and (2) TSRsAnalysis” of Synovus’ competitors. We do this because we believe shareholders are interested both in how Synovus’ shareholder return compares to its competitors, as well as shareholders’ actual return on their investment. Competitors for this purposes, are the banks in the Keefe, Bruyette and Woods 50 Index (“KBW 50”). Synovus selected the KBW 50 for awarding long-term incentives to ensure that the companies are chosen by an independent third party and to provide consistency from year to year in the assessment of long-term performance for incentive purposes.
The amount of long-term incentives awarded to executives each year is based upon a performance grid approved by the Committee. The performance grid has been in place in substantially its current form for over a decade. This grid is reproduced below showing the absolute TSR over the three preceding calendar years as the horizontal measurement and the percentile performance of Synovus against the KBW 50 over the three preceding calendar years as the vertical measurement.
                          
Percentile of3-year
                    
SNV TSR
                    
vs. KBW 50                    
 90th   50%   100%    150%    200%    250% 
                          
 70th   50%   100%    125%    150%    200% 
                          
 50th   50%   75%    100%    125%    150% 
                          
 30th   50%   50%    75%    100%    100% 
                          
 <30th   50%*   50%    50%    75%    75% 
                          
     <4%   4%    8%    10%    16% 
                          
                          
     3-Year Annualized Synovus TSR     
*At this performance level, long-term incentives are awarded at 50% of target and solely in the form of stock options.
The award percentages in the performance grid are multiplied by target long-term incentive opportunities, which are expressed as percentages of base salary earned during the year (“base earnings”). Such targets are established taking into account market median data at the Peer Companies as well as existing incentive targets, internal pay equity, individual performance and


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retention needs. The target long-term incentive percentages for our named executive officers are set forth in the table below:
Target Long-Term Incentive
Named Executive Officer
Percentage of Salary
Richard E. Anthony (CEO)200%
Frederick L. Green, III (President and COO)175%
All other executive officers150%
Because there are advantages and disadvantages to every form of equity award, long-term incentive opportunities generated by the performance grid are provided 50% as restricted stock and 50% as stock options. While the Committee has the discretion to vary the form of the award as needed for accounting, tax or other reasons, it has not done so to date. The 50%/50% split in equity awarded is calculated based upon the estimated overall value of the award as of the date of grant (a stock option is determined to be equal to one-fourth the value of a restricted stock award).
Because the Committee may take action to approve equity awards on or near the date that Synovus’ annual earnings are released, the Committee has established the last business day of the month in which earnings are released as the grant date for equity awards to executives to ensure that the annual earnings release has time to be absorbed by the market before equity awards are granted and stock option exercise prices are established.
2005-2007 Performance Period (Awarded in 2008)
In 2008, long-term incentive equity awards were made to Synovus’ named executive officers pursuant to the above grid based upon the2005-2007 performance period. For this performance period, Synovus’ annualized TSR was -2.93% and Synovus’ TSR was in the 59th percentile of the KBW 50. Under the grid, this resulted in a long-term incentive award equal to 50% of target, one-half as stock options and one-half as restricted stock units. The equity awards made to Synovus’ named executive officers in 2008 are set forth in the “All Other Stock Awards” and “All Other Option Awards” columns in the Grant of Plan-Based Awards Table.
Synovus released its annual earnings on January 24, 2008. The Committee met on January 22, 2008 to approve stock option and restricted stock awards to the named executive officers effective January 31, 2008. As a result, the grant date for long-term incentive awards (stock options and restricted stock awards) for the2005-2007 performance period was January 31, 2008. The closing price of Synovus stock on January 31, 2008 was used as the exercise price for stock options and to determine the FAS 123(R) accounting expense and was also used for disclosure in the compensation tables in this2009 Proxy Statement.
 
2006-2008 Performance Period (Not Awarded)
Under the long-term incentive payment process described above, our named executives would have been eligible to receive a 50% of target award in 2009 based upon Synovus’ total shareholder return (−.46%) and Synovus’ performance against the KBW 50 (68th percentile) under the grid for the2006-2008 performance period. However, in light of current economic conditions, the Committee exercised its discretion to postpone a long-term incentive grant for executive officers for the2006-2008 performance period.
Spin-Off Stock Option Grant
In January 2008, the Committee also awarded a one-time special stock option grant in connection with the Spin-Off to (1) reward the executive officers for their efforts relating to the successful Spin-Off, (2) mobilize the executive team around performance following the Spin-Off as a financial services company, (3) retain key employees due to the impact of the Spin-Off; and (4) align the new executive team as a group. In making the grant, the Committee reviewed existing equity grants to determine the need for and size of the special grant. The awards were


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made in stock options so that the awards were entirely performance-based, requiring that the Company’s stock price increase from the date of grant in order for executives to receive value from the grant. The awards vested over a five-year period, with one-third of each award vesting on January 31, 2011, January 31, 2012 and January 31, 2013. This longer vesting schedule was selected to reflect the retention component of the award.
Other Long-Term Incentive Awards
 
In addition to the annual long-term incentive awards awarded pursuant to the performance gridprogram described above, the Committee has from time to time granted other long-term incentive awards. For example, the Committee made a restricted stock awards grantsaward grant to Messrs.Mr. Anthony and Green in 2005 to reflect their promotionshis promotion and to serve as a vehicle for retaining theirhis services in theirhis new roles. The award to Mr. Green vests 20% a year for five years based upon continued service. As a result, 20% of Mr. Green’s 2005 award vested in 2008.role. Although Mr. Anthony’s 2005 award was primarily for retention, the grant was a performance-based grant to link his award to a threshold level of performance. Mr. Anthony’s 2005 award vests over a five to seven year period. The Committee establishes performance measures each year during the seven year vesting period and, if the performance measure is attained for a particular year, 20% of the award vests. The performance measuremeasures established for 2008 was 75%2009 were: (1) Synovus’ earnings per share results in light of the EPS percentage change target established undereconomic and financial conditions facing Synovus, (2) Synovus’ short-term incentive plan. Because Synovus did not attainearnings per share results compared to the EPS percentage change measure establishedearnings per share results of Synovus’ competitors for 2008, none2009, (3) Synovus’ progress during 2009 in reducing problem assets, (4) Synovus’ management of Mr. Anthony’s 2005 performance-based restricted stock vestedcredit issues during 2008.2009, and (5) Synovus’ progress toward implementing a strategic plan during 2009. Based upon Synovus’ progress toward these performance measures in 2009, the Committee approved the vesting of 20% of the award. The Committee expects to establish similar performance measures for 2010.
 
Perquisites
 
Perquisites are a small part of our executive compensation program. Perquisites are not tied to performance of Synovus.Synovus’ performance. Perquisites are offered to align our compensation program with competitive practices because similar positions at Synovus’ competitors offer similar perquisites. The perquisites offered by Synovus are set forth in footnotes 5, 6, 7 and 87 of the Summary


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Compensation Table. No named executive officers received perquisites in excess of $25,000 in 2009. Considered both individually and in the aggregate, we believe that the perquisites we offer to our named executive officers are reasonable and appropriate. However, in light of current economic conditions, the Committee suspended the personal use of aircraft by the Company’s executives for 2009 following the January 2009 Committee meeting, although the Committee can approve exceptions to that policy.
 
Employment Agreements
 
Synovus does not generally enter into employment agreements with its executives, except in unusual circumstances such as acquisitions. None of the named executive officers have employment agreements.
 
Retirement Plans
 
Our compensation program also includes retirement plans designed to provide income following an executive’s retirement. Synovus’ compensation program is designed to reflect Synovus’ philosophy that compensation generally should be earned while actively employed. Although retirement benefits are paid following an executive’s retirement, the benefits are earned while employed and are substantially related to performance. We have chosen to use defined contribution retirement plans because we believe that defined benefit plans are difficult to understand, difficult to communicate, and contributions to defined benefit plans often depend upon factors that are beyond Synovus’ control, such as the earnings performance of the assets in such plans compared to actuarial assumptions inherent in such plans. Synovus offers three qualified defined contribution retirement plans to its employees: a money purchase pension plan, a profit sharing plan and a 401(k) savings plan.
 
The money purchase pension plan has ahad an historical fixed 7% of compensation employer contribution every year (effectiveyear. Effective March 15, 2009, this percentage was amendedreduced to 3%). The profit sharing plan and any employer contribution to the 401(k) savings plan are tied directly to Synovus’ performance. There are opportunities under both the profit sharing plan and the 401(k) savings


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plan for employer contributions of up to 7% of compensation based upon the achievement of EPS percentage change goals. Based upon Synovus’ performance for 2008,2009, Synovus’ named executive officers did not receive a contribution under the profit sharing plan or 401(k) savings plan. The retirement plan contributions for 20082009 are included in the “All Other Compensation” column in the Summary Compensation Table.
 
In addition to these plans, the Synovus/TSYS Deferred Compensation Plan (“Deferred Plan”) replaces benefits foregone under the qualified plans due to legal limits imposed by the IRS. The Deferred Plan does not provide “above market” interest. Instead, participants in the Deferred Plan can choose to invest their accounts among mutual funds that are generally the same as the mutual funds that are offered in the 401(k) savings plan. The executives’ Deferred Plan accounts are held in a rabbi trust, which is subject to claims by Synovus’ creditors. The employer contribution to the Deferred Plan for 20082009 for named executive officers is set forth in the “All Other Compensation” column in the Summary Compensation Table and the earnings (losses) on the Deferred Plan accounts during 20082009 for named executive officers is set forth in the “Aggregate Earnings in Last FY” column in the Nonqualified Deferred Compensation Table and in a footnote to the “All Other Compensation” column in the Summary Compensation Table.
 
Post-Termination Compensation
 
Synovus’ compensation program is designed to reflect Synovus’ philosophy that compensation generally should be earned while actively employed. Although retirement benefits are paid following an executive’s retirement, the benefits are earned while employed and are substantially related to performance as described above. Historically, Synovus hashad entered into limited post-termination arrangements when appropriate, such as the change of control agreements which are describedwith each of the named executive officers. As required under ARRA, the change of control


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agreements have been suspended for senior executive officers and the next five most highly compensated employees for the remainder of the TARP period. For more information regarding the change in control agreements as in effect prior to TARP, please refer to the discussion beginning on page 25 under “Executive Compensation — Compensation Discussion and Analysis” of Synovus’ 2009 Proxy Statement and the “Potential Payouts Upon ChangeChange-In-Control” section appearing on page 40 of Control” section. Synovus chose to enter into change of control arrangements with its executives to ensure: (1) the retention of executives and an orderly transition during a change of control, (2) that executives would be financially protected in the event of a change of control so they continue to act in the best interests of Synovus while continuing to manage Synovus during a change of control, and (3) a competitive compensation package because such arrangements are common in the market and it was determined that such agreements were important in recruiting executive talent.
2009 Proxy Statement.
 
Stock Ownership/Retention Guidelines
 
To align the interests of its executives with shareholders, Synovus has implemented stock ownership guidelines for its executives. Under the guidelines, executives arewere initially required to maintain ownership of Synovus common stock equal to at least a specified multiple of base salary, as set forth in the table below:
 
     
  Ownership Level
Named Executive Officer
 (as multiple of base salary)
 
Richard E. Anthony (CEO)Chief Executive Officer  55xx
Frederick L. Green, III (President and COO)Chief Operating Officer  44xx
All other executive officers  33xx
 
The guidelines arewere recalculated at the beginning of each calendar year. The guideline was initially adopted January 1, 2004, and executives had a five-year grace period to fully achieve the guideline with an interim three-year goal. Until the guideline iswas achieved, executives arewere required to retain all net shares received upon the exercise of stock options, excluding shares used to pay the option’s exercise price and any taxes due upon exercise. In the event of a severe financial hardship, the guidelines permit the development of an alternative ownership plan by the Chairman of the Board of Directors and Chairman of the Compensation Committee.
Like a number of other public companies, especially financial institutions, the market value of Synovus’ common stock decreased significantly during 2008.2008 and 2009. As a result of the decline in Synovus’ stock price, in 2008, Mr. Anthony is the only named executive currently in compliance withCommittee recalculated the


29

guidelines as of December 31, 2008. guidelines. As a result, the Committee is evaluating administrative rules for applicationagreed to accept the number of shares owned by each executive as of January 1, 2009 as being in compliance with the guidelines. Executives are required to maintain that number of shares as a minimum going forward. The Committee agreed to review the guidelines and each executive’s ownership level on an annual basis beginning in various stock price scenarios.2010.
 
Synovus has also adopted a “hold until retirement” provision that applies to all unexercised stock options and unvested restricted stock awards. Under this provision, executives that have attained the stock ownership guidelines described above are also required to retain ownership of 50% of all stock acquired through Synovus’ equity compensation plans (after taxes and transaction costs) until their retirement or other termination of employment. Synovus believes that the “hold until retirement” requirement further aligns the interests of its executives with shareholders.
 
Tally Sheets
 
The Committee reviewed ahistorically uses tally sheet for Mr. Anthony in July 2008 as part of an annual practice, and for other executives on a less frequent basis. The tally sheets to add up all components of compensation for each named executive officer, including base salary, bonus, long-term incentives, accumulative realized and unrealized stock options and restricted stock gains, the dollar value of perquisites and the total cost to the company, and earnings and accumulated payment obligations under Synovus’ nonqualified deferred compensation program. The tally sheets also provide estimates of the amounts payable to each executive upon the occurrence of potential future events, such as a change of control, retirement, voluntary or involuntary termination, death and disability. The tally sheets are used to provide the Committee with total compensation amounts for each executive so that the Committee can determine whether the amounts are reasonable or excessive. Although the tally sheets are not used to benchmark total compensation with specific companies, the Committee considers total compensation paid to executives at other companies in considering the reasonableness of our executives’ total compensation. After reviewingBecause there were no base


39

salary increases, short-term incentive awards or long-term incentive awards during 2009, the Committee did not review tally sheetsheets for Mr. Anthony or any other named executive officers. The Committee anticipates using tally sheets in 2008, the Committee determined that his total compensation is fair, reasonable and competitive.future as business conditions normalize.
 
TARP Related Actions
 
Amendments to Executive Compensation Plans.Program.  On December 19, 2008, Synovus issued approximately $968 million of preferred stock and warrants to the Unites States Treasury Department under the Capital Purchase Program established under TARP.  As required by the termsARRA, a number of the Capital Purchase Program,amendments were made to our senior executive officers entered into agreements with Synovus that amended the following Synovus’ executive compensation programs:
program. The amendments include:
 
 • the change of control agreements with our namedBonuses and other incentive payments to senior executive officers (see page 40);
and the next twenty most highly compensated employees have been prohibited during the TARP period.
 • the Synovus Financial Corp. Executive Cash Bonus Plan, pursuant to which short-term incentive awards are made to our executive officers (see page 25); and
 • The Synovus Financial Corp. 1996, 2000 and 2002 Long-Term Incentive Planschange of control agreements previously applicable to senior executive officers and the Synovus Financial Corp. 2007 Omnibus Plan, pursuantnext five most highly compensated employees have been suspended during the TARP period.
• A recovery or “clawback” provision has been added to which certain long-termSynovus’ incentive awardscompensation plans requiring that any senior executive officer or next twenty most highly compensated employees return any bonus payment or award made during the TARP period based upon materially inaccurate financial statements or performance metrics. There were madeno bonus payments to our namedany such officers or employees during 2009.
• All forms ofgross-ups to senior executive officers (see page 26).and the next twenty most highly compensated employees have been prohibited during the TARP period. Historically, the onlygross-ups we used were for: (1) spouse travel to business events when the spouse’s attendance is expected and (2) any excise taxes imposed in connection with the change of control agreements. Both of thesegross-ups have been eliminated as required under TARP.
The specific amendments were: (1) adding a recovery or “clawback” provision to the Company’s incentive compensation programs requiring that senior executive officers return any bonus or incentive compensation award based upon materially inaccurate financial statements or performance metrics; (2) amending the Company’s change of control agreements for the senior executive officers so that any future severance payments under such agreements will be limited so that no “golden parachute payments” will be made (the limit is basically three times the executive’s five-year average compensation); and (3) agreeing to the limit on tax-deductible compensation for the senior executive officers of $500,000. These amendments were effective December 19, 2008 and continue to remain in effect for so long as the Treasury Department holds debt or equity securities issued by Synovus under the Capital Purchase Program.


30

Incentive Compensation Plan Risk Assessment.  As required under the provisions of the TARP Capital Purchase Program, theThe Committee met with Synovus’ Chief Risk Officer in January 2009 to review the Company’sSynovus’ incentive compensation plans. The purposeBecause the incentive compensation plans covering senior executive officers (SEOs) have been suspended by the Committee for the TARP period, no incentive compensation plans were part of the assessment was to identify any featuresreview. As a result, the review focused on Synovus’ employee incentive plans.
Synovus’ employee incentive plans are broadly classified by business unit: incentive plans for Synovus’ banks and incentive plans for Synovus’ Financial Management Services division, or FMS. All of the Company’splans were assessed for risk factors in four different categories: financial payouts, type of performance measured, design features, and administrative risks. Each plan was assigned a level of risk ranking from 1 (highest risk) to 5 (lowest risk) for each risk category. Any plan which received a “1” in any category was modified through the implementation of additional controls to ensure appropriate mitigation of risks.
The Synovus subsidiary banks maintain incentive compensation plans that could encouragepay production incentives to bank personnel, including commercial and business bankers, private bankers, branch managers and assistant branch managers, personal bankers and cash management personnel. Incentives are paid for various measures of production consistent with Synovus’ strategic business goals for the Company’s senior executive officers to take “unnecessaryyear. For 2009, these measures included core deposit growth, growth in deposit accounts, and excessive” risks that threaten the value of Synovus.
The Committee reviewed a number of incentive compensation plan design features asfee income, including both referral fees and fees paid on retail accounts. As part of its assessment. The featuresthe risk assessment, it was determined that the risks of these plans was acceptable requiring normal monitoring. With respect to financial payout risks, it was noted that incentives were reviewed includedpaid only upon realized revenue, and that the “mix”payouts represented an extremely small portion (less than 1%) of salarythe banks’ total compensation expense. With respect to risks related to design and incentive compensation, the incentive compensationtype of performance, measures themselves, the relationship betweenit was noted that the performance measures were based on Synovus’ strategic business goals for the year, and that a return on investment analysis was performed on a quarterly basis to ensure that the correspondingincentives being encouraged were consistent with the company’s business and strategic goals for the year. It was also noted that participants must achieve threshold performance goals before becoming eligible to receive incentive payouts, the use of equity in incentive awards, and the equity retention requirements for executives who receive awards.
payouts. With respect to the Company’s annual short-term incentive bonus program, the Committee noted that percentage change earnings per share had been used as the quantitative measure. The Committee believed that bonus goals had been set at achievable and realistic, yet challenging, levels. The Committee also concluded that the payment of short-term incentives in cashadministrative risks, it was appropriate and consistent with market practice. Although the Committee noted that the quantitative measure of earnings per share did not necessarily reflect the “quality” of earnings, the Committee also noted that it had exercised downward discretion for bonus payments on an informal basis on a number of prior occasions as the Committee deemed appropriate based on the circumstances.
With respect to the Company’s long-term incentive plan, the Committee concluded that the “mix” of 50% restricted stock unit awards and 50% stock options was appropriate since there are advantages and disadvantages to every form of equity award. The Committee also concluded that the total shareholder return measures (both absolute and as compared to peers) were in the best long-term interests of shareholders, and that the3-year measurement period did not encourage senior executive officers to take unnecessary or excessive risks through short-term actions that could influence stock price. The Committee also noted that it had not made any “mega-option” grants or any highly-leveraged performance-based restricted stock grants that could encourage the senior executive officers to take such risks.
Although the Committee noted that the “mix” of long-term incentive compensation was more performance-leveraged than the Company’s peers, the Committee did not believe that the “mix” was unreasonable or encouraged senior executive officers to take unnecessary or excessive risks. The Committee noted that it established base pay and all incentive awards at the median of the Company’s peers. The Committee also noted that it had adopted stock ownership guidelines and “hold until retirement” provisions for the Company’s executives as described on pages 29 to 30.
Although the Committee did not conclude any features of its compensation plan necessarily encouraged senior executive officers to take “unnecessary and excessive” risks that could threaten the Company’s value, the Committee concluded that it was appropriate to implement a formal process tying future incentive compensation awards to the risks and associated measurements of the risks that are reviewed with the Company’s Audit Committee on a periodic basis. Under the new process, the Committee will formally select several areas of risks (and their associated measurements) that are reviewed with the Audit Committee, and use the Company’s progress (or lack of progress) during the year toward mitigating these risks as a basis for exercising downward discretion for future incentive compensation awards. Examples of the areas of risks that may be selected by the Committee include concentrations in certain categories of loans, capital adequacy measures and liquidity measures. Under the new process, at the time incentive compensation goals are established, the Committee will also select the appropriate risks and associated measurements to be used in making incentive compensation awards after consulting with the Company’s Chief Risk Officer.design, goal setting,


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and performance measurement for the plans were performed by team members who do not participate in the plans, and that the plans were administered and managed by a central corporate office. As a result, there were no additional mitigating controls required to be implemented.
FMS maintains incentive compensation plans for its subsidiaries, including Synovus Mortgage Corp., Synovus Securities, Inc., Synovus Trust Company, N.A., Creative Financial Group, Ltd., and Globalt, Inc. As part of the risk assessment, it was noted that the plans for Synovus Mortgage, Synovus Securities and Creative Financial presented somewhat more risk than other Synovus plans because commissions were based on production volume and constituted a higher portion of each company’s total compensation expense than the other plans. However, as part of the risk assessment, additional controls were implemented for each plan to ensure appropriate monitoring of risks. It was also noted that the commission expense at Synovus Trust and Globalt was lower, although additional controls were also implemented for the plans maintained at these companies to ensure appropriate risk mitigation. The implemented controls include centralized plan administration, periodic return on investment analysis to ensure the effectiveness of the incentive plans, and periodic audits of plan payouts to ensure the plans are being administered in accordance with their terms.
Role of the Compensation Consultant
 
The Committee has retained Hewitt Associates as its independent executive compensation consultant. The role of the outside compensation consultant is to assist the Committee in analyzing executive pay packages and contracts and understanding Synovus’ financial measures. The Committee has the sole authority to hire and fire outside compensation consultants. The Committee’s relationship with Hewitt Associates is described on page 78 of this Proxy Statement under “Compensation Committee.”
 
Role of the Executive Officers in the Compensation Process
 
Synovus’ Chief People Officer attends all Committee meetings.and Synovus’ Chief Executive Officer attends somegenerally attend all Committee meetings by invitation of the Committee, such asCommittee. These executives provide management perspective on issues under consideration by the Committee meeting in which his performance is reviewed with the Committee or other meetings upon the request of the Committee. The CEO provides the Committee with his assessment of the performance of the other named executive officers and makes recommendations regarding any changes to their compensation. Neither the Chief Executive Officer nor the Chief People Officer have authority to vote on Committee matters. The Committee regularly meets in executive session with no Synovus executive officers present. For more information regarding Committee meetings, please refer to page 78 of this Proxy Statement under “Compensation Committee.”
 
Other Policies
“Clawback” Policy.  As described above under TARP-related actions, Synovus added a recovery or “clawback” provision to all of our incentive plans for senior executive officers.
 
Tax Considerations.  We have structured most forms of compensation paid to our executives to be tax deductible. Internal Revenue Code Section 162(m) limits the deductibility of compensation paid by a publicly-traded corporation to its Chief Executive Officer and four other highest paid executives for amounts in excess of $1 million, unless certain conditions are met. As described above underUnder TARP, related actions, however, we agreed to lower the tax deductionthis limit is reduced to $500,000. The short-term and long-term incentive plans have been approved by shareholders and awards under these plans are designed to qualify as “performance-based” compensation to ensure deductibility under Code Section 162(m). We reserve the right to provide compensation which is not tax-deductible, however, if we believe the benefits of doing so outweigh the loss of a tax deduction.
 
In general, Synovus does not“gross-up” its officers for taxes that are due with respect to their compensation. An example of an exception to this rule is for excise taxes that may be due with respect to the change of control agreements, as described above.
Accounting Considerations.  We account for all compensation paid in accordance with GAAP. The accounting treatment has generally not affected the form of compensation paid to named executive officers.
 
Board Fees.  Effective January 1, 2008, the Compensation Committee eliminated the payment of cash director fees to named executives. The primary reason for this decision is that paying cash director fees was not the prevalent market practice, although it had been the historical practice at Synovus for a number of years. As a result of this decision, the Committee adjusted the base salaries of the affected executives to reflect the amount of director fees foregone by each executive as described under “Base Salary.”
Significant Events After December 31, 20082009
 
Because of current economic conditions, base pay for theThe Committee granted restricted stock unit awards to Synovus’ named executive officers was not increased effective JanuaryFebruary 1, 2009.
We are currently assessing the impact of the executive compensation provisions of the American Recovery2010. Messrs. Anthony and Reimbursement Act of 2009 (“ARRA”). Synovus will comply with the provisions of the ARRAPrescott, Ms. James and its implementing regulations in all respects, which includes theMessrs. Holladay and


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submissionHatcher were each granted restricted stock unit awards of “Proposal 3: Advisory Vote on Compensation71,429, 53,572, 53,572, 53,572, and 53,572 shares, respectively. The restricted stock unit awards have a service component, a performance component and a TARP-related component for vesting. The units vest after each executive has two years of Named Executive Officers” set forth on page 15service and after Synovus has achieved two consecutive quarters of this Proxy Statement.
profitability. In addition, the Compensation Committee has committed that, with respect to future equity awards made to named executive officersas required under TARP, for each 25% of the next three years, at least 50% of such awards will be performance-based equity awards. The performance-based equity awards will be earned or paid out based on the achievement of performance targetsaggregate TARP funds that will be disclosed to shareholders.
Compensation Realized by Named Executive Officers for 2008
The Summary Compensation Table on page 35 provides compensation information for each named executive officer as required by SEC rules. However, the Summary Compensation Table includes amounts that were not realized by the executives in 2008. For example, the Summary Compensation Table reflects the expense recognized for financial statement reporting purposes in connection with equity awards (i.e., stock options and restricted stock awards) for 2008 and prior years in accordance with SFAS 123(R) rather than the financial benefit realized by the executives in 2008 as a resultare repaid, 25% of the exercise of stock options or the vesting of restricted stock units. This information is, however, set forth in the Option Exercises and Stock Vested Table on page 39.units vest.
The following table reflects only compensation realized by each named executive officer for 2008 and is not a substitute for the Summary Compensation Table. In addition, it is not part of the compensation tables that we are required by SEC rules to present in this Proxy Statement. Furthermore, it does not include a number of compensation opportunities that were made available in 2008. For example, the LTIP awards for 2008 are not included in the table because those awards did not vest during 2008. Detailed information on all compensation opportunities that were made available in 2008 and all compensation paid to or earned by the named executive officers during 2008 is included in this CD&A, the Summary Compensation Table and the series of other tables following this CD&A.
Although various compensation opportunities for the named executive officers are not included in the following table, the Compensation Committee considered all amounts paid to or earned by the named executive officers and all compensation opportunities in its determination that the compensation paid to or earned by each named executive officer in 2008 is fair, reasonable, competitive and performance oriented.
Table of Realized Compensation
The following table reflects the components of the compensation realized by the named executive officers for 2008:
                         
           Value Realized on
       
           Vesting of
       
        Value Realized on
  Restricted Stock
       
  Base
  Annual
  Exercise of Options
  Awards During
  All Other
    
Name and Principal Position
 Pay  Bonus  During 2008(1)  2008(2)  Compensation(3)  Total 
Richard E. Anthony (CEO) $928,200  $0  $84,314  $199,748  $86,661  $1,298,923 
Thomas J. Prescott (EVP and CFO)  387,000   0   0   123,968   48,041   558,739 
Frederick L. Green, III (President and COO)  562,100   0   50,588   189,179   59,033   860,900 
Elizabeth R. James (Vice Chairman and CPO)  431,000   0   0   130,249   65,122   626,371 
Mark G. Holladay (EVP and CRO)  315,000   0   0   54,213   33,051   402,264 
(1)Reflects the excess of the fair market value of the shares at the time of exercise over the exercise price of the options.
(2)Reflects the fair market value of the underlying shares as of the vesting date.
(3)The components of All Other Compensation for each named executive officer are set forth in footnotes 4 through 8 to the Summary Compensation Table on page 35.


33

 
Conclusion
 
For the reasons described above, weWe believe that each element of compensation offered in our executive compensation program, and the total compensation delivered to each named executive officer isin 2009 was fair, reasonable and competitive.
 
COMPENSATION COMMITTEE REPORT
 
Synovus’ Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) ofRegulation S-K with management and, based on such review and discussions, has recommended to the Board that the Compensation Discussion and Analysis be included in Synovus’ Annual Report onForm 10-K for the year ended December 31, 20082009 and in this Proxy Statement.
As required under TARP, the Committee met with Synovus’ Chief Risk Officer in 2009 to review the Company’s incentive compensation plans. All incentive compensation plans covering senior executive officers (SEOs) have been suspended by the Committee for the TARP period. The required disclosures under TARP regarding the risks under our employee compensation plans appear under the heading “Compensation Discussion and Analysis — TARP Related Actions — Incentive Compensation Plan Risk Assessment” beginning on page 40 of this Proxy Statement.
 
The Compensation Committee certifies thatthat: (1) it has reviewed with Synovus’ senior risk officerofficers the Senior Executive Officer (“SEO”) incentiveSEO compensation arrangementsplans and has made all reasonable efforts to ensure that such arrangementsthese plans do not encourage SEOs to take unnecessary orand excessive risks that threaten the value of Synovus.Synovus; (2) it has reviewed with senior risk officers the employee compensation plans and has made all reasonable efforts to limit any unnecessary risks these plans pose to Synovus; and (3) it has reviewed the employee compensation plans to eliminate any features of these plans that would encourage the manipulation of reported earnings of Synovus to enhance the compensation of any employee.
 
The Compensation Committee
T. Michael Goodrich, Chair
V. Nathaniel Hansford
Mason H. Lampton


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SUMMARY COMPENSATION TABLE
 
The table below summarizes the compensation for each of the named executive officers for each of the last three fiscal years.
 
The named executive officers were not entitled to receive payments which would be characterized as “Bonus” payments or as “Non-Equity Incentive Plan Compensation” for any of these fiscal years. The short-term incentive amounts paid to the named executives for these three fiscal years, if any, are set forth in the “Non-Equity Incentive Plan Compensation” column. Synovus’ methodology and rationale for short-term incentive compensation are described in the Compensation Discussion and Analysis above.
 
The named executive officers did not receive any compensation that is reportable under the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column because, as described in the Compensation Discussion and Analysis, Synovus has no defined benefit pension plans and does not pay above-market interest on deferred compensation. The retirement plan contributions and earnings (if any) for the named executive officers for these three fiscal years are set forth in the “All Other Compensation” column.
 
                                                                    
             Change in
                 Change in
    
             Pension
                 Pension
    
             Value and
                 Value and
    
             Nonquali-
                 Nonquali-
    
             fied
                 fied
    
           Non-Equity
 Deferred
               Non-Equity
 Deferred
    
           Incentive
 Compen-
 All Other
             Incentive
 Compen-
 All Other
  
       Stock
 Option
 Plan Com-
 sation
 Compen-
         Stock
 Option
 Plan Com-
 sation
 Compen-
  
Name and Principal
   Salary
 Bonus
 Awards
 Awards
 pensation
 Earnings
 sation
 Total
   Salary
 Bonus
 Awards
 Awards
 pensation
 Earnings
 sation
 Total
Position Year ($) ($) ($)(1) ($)(2) ($) ($) ($) ($) Year ($) ($) ($)(1) ($)(2) ($) ($) ($) ($)
Richard E. Anthony  2008  $928,200(3)  —  $871,109  $902,075  $-0-     $86,661(4)(5)(6)(7)(8) $2,788,045   2009  $928,200   —  $-0-  $-0-  $      $268,287(4)(5)(6)(7) $1,196,487 
Chairman of the Board and  2007   869,000   —   453,875   743,449   -0-      369,963   2,436,287   2008   928,200   —   434,518   1,607,808(3)        86,661   3,057,187(3)
Chief Executive Officer  2006   819,000   —   615,086   728,840   1,433,250   —   447,929   4,044,095   2007   869,000   —   409,502   277,790   -0-      369,963   1,926,255 
  
Thomas J. Prescott  2008   387,000   —   210,944   218,223   -0-      48,041(5)(7)(8)  864,208   2009   387,000   —   -0-   -0-   -0-      151,069(5)(6)(7)  538,069 
Executive Vice President and  2007   387,000   —   200,383   334,915   -0-      120,490   1,042,788   2008   387,000   —   145,125   499,200(3)  -0-      48,041   1,079,366(3)
Chief Financial Officer  2006   364,000   —   148,830   496,636   445,900   —   173,368   1,628,734   2007   387,000   —   136,501   92,597   -0-      120,490   736,588 
  
Frederick L. Green, III  2008   562,100(3)  —   387,452   300,002   -0-      59,033(4)(5)(6)(7)  1,308,587 
President and  2007   500,000   —   355,822   157,675   -0-   —   180,801   1,194,298 
Chief Operating Officer  2006   408,333   —   297,054   124,443   522,083   —   235,482   1,587,395 
 
Elizabeth R. James  2008   431,000(3)  —   217,888   223,062   -0-      65,122(4)(5)(7)(8)  937,072   2009   431,000   —   -0-   -0-   -0-      130,739(4)(5)(6)  561,739 
Vice Chairman and  2007   391,000   —   209,348   339,689   -0-      160,080   1,100,117   2008   431,000   —   146,628   499,987(3)  -0-      59,033   1,136,648(3)
Chief People Officer  2006   375,500   —   156,073   502,520   459,988   —   202,954   1,697,035   2007   391,000   —   140,811   95,521   -0-      160,080   787,412 
  
Mark G. Holladay  2008   315,000   —   91,375   121,199   -0-   —   33,051(5)(7)(8)  560,625   2009   315,000   —   -0-   -0-   -0-   —   80,419(5)(6)(7)  395,419 
Executive Vice President and  2007   315,000   —   87,185   203,611   -0-   —   78,372   684,168   2008   315,000   —   63,000   362,079(3)  -0-   —   33,051   773,130(3)
Chief Risk Officer  2006   295,000   —   64,894   335,944   309,750   —   117,222   1,122,810   2007   315,000   —   59,007   40,020   -0-   —   78,372   492,399 
 
Samuel F. Hatcher  2009   325,000   —   -0-   -0-   -0-      10,875(5)(6)  335,875 
Executive Vice President, General  2008   226,675   —   -0-   84,480   -0-      9,375   320,530 
Counsel and Secretary  2007   —   —   —   —   —   —   —   — 
 
Frederick L. Green, III  2009   234,217   —   -0-   -0-   -0-      348,680(5)(6)(7)(8)  582,897 
Former President and  2008   562,100   —   218,762   866,856(3)  -0-      83,123   1,730,841(3)
Chief Operating Officer (Resigned Effective
May 28, 2009)		  2007   500,000   —   158,341   107,405   -0-   —   180,801   946,547 
 
 
(1)The amounts in this column reflect the dollar amount recognized as an expense for financial statement reporting purposes foraggregate grant date fair value of stock awards during the last three fiscal years computed in accordance with FAS 123(R) (disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions), and include amounts from awards granted during these fiscal years and prior to 2006.FASB ASC Topic 718. For a discussion of the assumptions made in the valuation of the restricted stock unit awards reported in this column, please see Note 20note 22 of the Notes to Consolidated Financial Statements in the Financial Appendix to our Annual Report onForm 10-K10K for the year ended December 31, 2008.2009, which is incorporated herein by reference.
(2)The amounts in this column reflect the dollar amount recognized as an expense for financial statement reporting purposes foraggregate grant date fair value of options awards during the last three fiscal years computed in accordance with FAS 123(R) (disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions), and include amounts from awards granted during these fiscal years and prior to 2006.FASB ASC Topic 718. For a discussion of the assumptions made in the valuationcalculation of the stock option awards reflectedreported in this column, please see Note 20note 22 of the Notes to Consolidated Financial Statements in the Financial Appendix to our Annual Report onForm 10-K10K for the year ended December 31, 2008.2009, which is incorporated herein by reference.
(3)AmountOption award amount for 2008 includes a special one-time grant of change from 2008 to 2007 reflects base salary adjustmentsstock options made in connection with the spin-off of TSYS. Fair market value of this award on date of grant was $1,410,000, $423,000, $423,000, $329,000 and $752,000 for director fees forgone by each executive as a resultMessrs. Anthony and Prescott, Ms. James, and Messrs. Holladay and Green, respectively. The exercise price of decision to eliminate payment of cash directors fees to named executives ($59,200 by Mr.this award is $13.18. Without this specialone-time award, total compensation for Messrs. Anthony $62,100 by Mr.and Prescott, Ms. James and Messrs. Holladay and Green would be $1,647,187, $656,366, $713,648, $444,130 and $40,000 by Ms. James).$978,841, respectively.
 
(4)Amount includes matching contributions under the Synovus Director Stock Purchase Plan of $10,000 for each of Messrs. Anthony and Green and Ms. James.


43

(5)Amount includes company contributions by Synovus to qualified defined contribution plans of $16,100$9,310 for each executive except for Messrs. Hatcher and Green, who received contributions of $4,875 and $12,079, respectively, and company contributions by Synovus to nonqualified deferred compensation plans of $48,876, $10,991, $23,248, $14,071$25,963, $5,397, $7,069, $2,660, and $5,951$2,666 for Messrs. Anthony Prescott and Green,Prescott, Ms. James and Mr.Messrs. Holladay and Green, respectively.
 
(6)Amount includes cost of taxgross-up for spousal travel to business events where the spouse’s attendance is expected of $685 for Mr. Anthony and $465 for Mr. Green.
(7)Amount includes the costs incurred by Synovus in connection with providing the perquisite of an automobile allowance. Amount also includes the incremental cost to Synovus for reimbursement of country club dues, if any, and the incremental cost to Synovus for personal use of the corporate aircraft prior to the prohibition on personal air travel. Amount also includes actuarial value of salary continuation life insurance benefit, if any. Amounts for these items are not quantified because they do not exceed the greater of $25,000 or 10% of the total amount of perquisites.
perquisites (perquisites do not exceed $25,000 for any executive officer). The amount for the personal use of corporate aircraft was calculated by adding all incremental costs of such use, including fuel, maintenance, hanger and tie-down costs, landing fees, airport taxes, catering, crew travel expenses (food, lodging and ground transportation).
(8)
(7)In addition to the items noted in footnote (5)(6), the amount also includes the costs incurred by Synovus in connection with providing the perquisite of reimbursement for financial planning and the incremental cost to Synovus, if any, of security alarm monitoring. These items are not quantified because they do not exceed the greater of $25,000 or 10% of the total amount of perquisites.perquisites (perquisites do not exceed $25,000 for any executive officer).
(8)Amount includes matching contributions under the Synovus Director Stock Purchase Plan of $5,000 and consulting fees of $218,596 for Mr. Green. The payments were made pursuant to a consulting agreement between Mr. Green and Synovus that was effective June 1, 2009. Under this agreement, Mr. Green agreed to perform consulting services as requested by Synovus and not to compete with or solicit customers or employees from Synovus. Synovus agreed to pay Mr. Green $31,288.00 per month for a period of 18 months in exchange for his services and covenants under the agreement.


3544

GRANTS OF PLAN-BASED AWARDS
for the Year Ended December 31, 20082009
 
The table below sets forth theAs described above, there were no short-term incentive compensation (payable in cash) andincentives or long-term incentive compensation (payable in the form of restricted stock awards and stock options)incentives awarded to the named executive officers for 2008.
                                                 
                  All Other
 All Other
    
                  Stock
 Option
    
                  Awards:
 Awards:
    
      Estimated Future Payouts Under
 Estimated Future Payouts Under
 Number
 Number of
 Exercise or
 Grant Date
      Non-Equity Incentive Plan Awards(2) Equity Incentive Plan Awards of Shares
 Securities
 Base Price
 Fair Value
    Action
 Thresh-
     Thresh-
   Maxi-
 of Stock
 Underlying
 of Option
 of Stock and
  Grant
 Date
 old
 Target
 Maximum
 old
 Target
 mum
 or Units
 Options
 Awards
 Option
Name
 Date (1) ($) ($) ($) (#) (#) (#) (#)(3) (#)(4) ($/Sh) Awards
 
Richard E. Anthony         $0  $928,200  $1,856,400   —   —   —                 
   1-31-08   1-22-08                           32,968          $434,518 
   1-31-08   1-22-08                               131,872  $13.18   197,808 
   1-31-08   1-22-08                               750,000(5)  13.18   1,410,000 
Thomas J. Prescott          0   270,900   541,800   —   —   —                 
   1-31-08   1-22-08                           11,011           145,125 
   1-31-08   1-22-08                               44,046   13.18   76,200 
   1-31-08   1-22-08                               225,000(5)  13.18   423,000 
Frederick L. Green, III          0   477,785   955,570   —   —   —                 
   1-31-08   1-22-08                           16,598           218,762 
   1-31-08   1-22-08                               66,391   13.18   114,856 
   1-31-08   1-22-08                               400,000(5)  13.18   752,000 
Elizabeth R. James          0   301,700   603,400   —   —   —                 
   1-31-08   1-22-08                           11,125           146,628 
   1-31-08   1-22-08                               44,501   13.18   76,987 
   1-31-08   1-22-08                               225,000(5)  13.18   423,000 
Mark G. Holladay          0   220,500   441,000                             
   1-31-08   1-22-08                           4,780           63,000 
   1-31-08   1-22-08                               19,121   13.18   33,079 
   1-31-08   1-22-08                               175,000(5)  13.18   329,000 
2009.
 
(1)The Synovus Compensation Committee met on January 22, 2008 and approved the grant of restricted stock unit awards and stock options to the named executive officers effective January 31, 2008.
(2)The amounts shown in this column represent the minimum, target and maximum amounts payable under Synovus’ Executive Cash Bonus Plan for 2008. Awards are paid in cash and are based upon attainment of adjusted earnings per share goals.
(3)The number set forth in this column reflects the number of restricted stock units awarded to each executive during 2008. The restricted stock unit awards vest over a three-year period, with one-third of the shares vesting on each of the first, second and third anniversaries of the date of grant. Vesting is generally based upon continued employment through the vesting date. Dividend equivalents are paid on the restricted stock units.
(4)The number set forth in this column reflects the number of stock options granted to each executive during 2008. The first stock option award listed vests over a three-year period, with one-third of the shares vesting on each of the first, second and third anniversaries of the date of grant. The second stock option award listed vests over a five-year period, with one-third of the shares vesting on each of the third, fourth and fifth anniversaries of the date of grant. Vesting is generally based upon continued employment through the vesting date.
(5)One-time special stock option grant awarded in connection with the Spin-Off as described on page 27.


36

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
December 31, 20082009
 
                                    
                                    
 Option Awards Stock Awards
               Equity
   Option Awards Stock Awards
               Incentive
                 Equity
  
               Plan
 Equity
               Incentive
 Equity
     Equity
         Awards:
 Incentive
     Equity
         Plan Awards:
 Incentive
     Incentive
     Number
   Number of
 Plan
     Incentive
     Number
   Number of
 Plan
     Plan
     of
   Unearned
 Awards:
     Plan
     of
   Unearned
 Awards:
     Awards:
     Shares
 Market
 Shares,
 Market or
     Awards:
     Shares
 Market
 Shares,
 Market or
 Number of
 Number of
 Number of
     or Units
 Value of
 Units or
 Payout Value
 Number of
 Number of
 Number of
     or Units
 Value of
 Units or
 Payout Value
 Securities
 Securities
 Securities
     of Stock
 Shares or
 Other
 of Unearned
 Securities
 Securities
 Securities
     of Stock
 Shares or
 Other
 of Unearned
 Underlying
 Underlying
 Underlying
     That
 Units of
 Rights
 Shares, Units or
 Underlying
 Underlying
 Underlying
     That
 Units of
 Rights
 Shares, Units or
 Unexercised
 Unexercised
 Unexercised
 Option
   Have
 Stock That
 That
 Other Rights
 Unexercised
 Unexercised
 Unexercised
 Option
   Have
 Stock That
 That
 Other Rights
 Options
 Options
 Unearned
 Exercise
 Option
 Not
 Have Not
 Have Not
 That Have Not
 Options
 Options
 Unearned
 Exercise
 Option
 Not
 Have Not
 Have Not
 That Have Not
 (#)
 (#)
 Options
 Price
 Expiration
 Vested
 Vested
 Vested
 Vested
 (#)
 (#)
 Options
 Price
 Expiration
 Vested
 Vested
 Vested
 Vested
Name
 Exercisable(1) Unexercisable(1) (#) ($) Date (#)(1) ($)(2) (#)(1) ($)(2) Exercisable(1) Unexercisable(1) (#) ($) Date (#)(1) ($)(2) (#)(1) ($)(2)
Richard E. Anthony(3)                 —   —   38,032  $315,666   —   —   —         —   —   38,032  $77,966 
  34,718   —   —  $8.44   01/19/2010   10,845  $90,014   —   —   34,718   —   —  $8.44   01/19/2010   4,275  $8,764   —   — 
  856,347   —   —   8.27   06/28/2010   8,549   70,957   —   —   856,347   —   —   8.27   06/28/2010   23,287   47,738   —   — 
  27,356   —   —   12.35   01/16/2011   32,968   461,552   —   —   27,356   —   —   12.35   01/16/2011   —   —   —   — 
  49,685   —   —   12.38   04/28/2012   —   —   —   —   49,685   —   —   12.38   04/28/2012   —   —   —   — 
  97,666   —   —   12.01   01/20/2014   —   —   —   —   97,666   —   —   12.01   01/20/2014   —   —   —   — 
  122,130   —   —   12.53   01/20/2015   —   —   —   —   122,130   —   —   12.53   01/20/2015   —   —   —   — 
  139,308   69,657   —   12.93   01/30/2016   —   —   —   —   208,965   —   —   12.93   01/30/2016   —   —   —   — 
  27,454   54,915   —   14.92   01/31/2017   —   —   —   —   54,913   27,456   —   14.92   01/31/2017   —   —   —   — 
     750,000      13.18   01/31/2018               —   750,000   —   13.18   01/31/2018   —   —   —   — 
     131,872      13.18   01/31/2018               43,958   87,914   —   13.18   01/31/2018   —   —   —   — 
 
Thomas J. Prescott(4)  44,894   —   —   10.69   02/08/2009   4,301   35,698   —   —   —   —   —   10.69   02/08/2009   1,425   2,921   —   — 
  24,425   —   —   8.44   01/19/2010   2,849   23,647   —   —   24,425   —   —   8.44   01/19/2010   7,340   15,047   —   — 
  856,347   —   —   8.27   06/28/2010   11,011   91,391   —   —   856,347   —   —   8.27   06/28/2010   —   —   —   — 
  34,108   —   —   12.35   01/16/2011   —   —   —   —   34,108   —   —   12.35   01/16/2011   —   —   —   — 
  33,324   —   —   12.38   04/28/2012   —   —   —   —   33,324   —   —   12.38   04/28/2012   —   —   —   — 
  56,229   —   —   12.01   01/20/2014   —   —   —   —   56,229   —   —   12.01   01/20/2014   —   —   —   — 
  28,557   —   —   12.53   01/20/2015   —   —   —   —   28,557   —   —   12.53   01/20/2015   —   —   —   — 
  55,240   27,621   —   12.93   01/30/2016   —   —   —   —   82,864   —   —   12.93   01/30/2016   —   —   —   — 
  9,152   18,304   —   14.92   01/31/2017   —   —   —   —   18,304   9,152   —   14.92   01/31/2017   —   —   —   — 
     225,000      13.18   01/31/2018               —   225,000   —   13.18   01/31/2018   —   —   —   — 
     44,046      13.18   01/31/2018               14,683   29,363   —   13.18   01/31/2018   —   —   —   — 
Frederick L. Green, III(5)  76,649   —   —   10.69   02/08/2009   4,541   37,690   —   — 
 
Elizabeth R. James(5)  40,515   —   —   10.69   02/08/2009   1,470   3,014   —   — 
  42,802   —   —   8.44   01/19/2010   10,440   86,652   —   —   22,029   —   —   8.44   01/19/2010   7,854   16,101   —   — 
  34,108   —   —   12.35   01/16/2011   3,205   26,602   —   —   856,347   —   —   8.27   06/28/2010   —   —   —   — 
  21,631   —   —   12.38   04/28/2012   16,598   137,763   —   —   35,527   —   —   12.35   01/16/2011   —   —   —   — 
  35,928   —   —   12.01   01/20/2014   —   —   —   —   36,354   —   —   12.38   04/28/2012   —   —   —   — 
  21,408   —   —   11.65   02/02/2014   —   —   —   —   59,978   —   —   12.01   01/20/2014   —   —   —   — 
  30,083   —   —   12.53   01/20/2015   —   —   —   —   30,533   —   —   26.82   01/20/2015   —   —   —   — 
  58,327   29,168   —   12.93   01/30/2016   —   —   —   —   57,516   —   —   12.93   01/30/2016   —   —   —   — 
  10,616   21,231   —   14.92   01/31/2017   —   —   —   —   18,882   9,441   —   14.92   01/31/2017   —   —   —   — 
     400,000      13.18   01/31/2018               —   225,000   —   13.18   01/31/2018   —   —   —   — 
     66,391      13.18   01/31/2018               14,834   29,667   —   13.18   01/31/2018   —   —   —   — 
Elizabeth R. James(6)  40,515   —   —   10.69   02/08/2009   4,478   37,167   —   — 
 
Mark G. Holladay(6)  40,515   —   —   10.69   02/08/2009   616   1,263   —   — 
  22,029   —   —   8.44   01/19/2010   2,939   24,394   —   —   22,029   —   —   8.44   01/19/2010   3,372   6,913   —   — 
  856,347   —   —   8.27   06/28/2010   11,125   92,338   —   —   642,260   —   —   8.27   06/28/2010   —   —   —   — 
  35,527   —   —   12.35   01/16/2011   —   —   —   —   15,632   —   —   12.35   01/16/2011   —   —   —   — 
  36,354   —   —   12.38   04/28/2012   —   —   —   —   19,850   —   —   12.38   04/28/2012   —   —   —   — 
  59,978   —   —   12.01   01/20/2014   —   —   —   —   24,990   —   —   12.01   01/20/2014   —   —   —   — 
  30,533   —   —   26.82   01/20/2015   —   —   —   —   12,961   —   —   12.53   01/21/2015   —   —   —   — 
  57,516   28,761   —   12.93   01/30/2016   —   —   —   —   35,874   —   —   12.93   10/30/2016   —   —   —   — 
  9,441   18,882   —   14.92   01/31/2017   —   —   —   —   7,910   3,956   —   14.92   01/31/2017   —   —   —   — 
     225,000      13.18   01/31/2018               —   175,000   —   13.18   01/31/2018   —   —   —   — 
     44,501      13.18   01/31/2018               6,374   12,747   —   13.18   01/31/2018   —   —   —   — 
Mark G. Holladay(7)  40,515         10.69   02/08/2009   1,862   15,455       
 
Samuel F. Hatcher(7)  16,001   31,999   —   12.50   05/01/2018   —   —   —   — 
 
Frederick L. Green, III(8)  76,649   —   —   10.69   02/08/2009   —   —   —   — 
  22,029         8.44   01/19/2010   1,232   10,226         42,802   —   —   8.44   01/19/2010   —   —   —   — 
  642,260         8.27   06/28/2010   4,780   39,674         34,108   —   —   12.35   01/16/2011   —   —   —   — 
  15,632         12.35   01/16/2011               21,631   —   —   12.38   04/28/2012   —   —   —   — 
  19,850         12.38   04/28/2012               35,928   —   —   12.01   01/20/2014   —   —   —   — 
  24,990         12.01   01/20/2014               21,408   —   —   11.65   02/02/2014   —   —   —   — 
  12,961         12.53   01/21/2015               30,083   —   —   12.53   01/20/2015   —   —   —   — 
  23,916   11,958      12.93   10/30/2016               87,495   —   —   12.93   01/30/2016   —   —   —   — 
  3,955   7,911      14.92   01/31/2017               31,847   —   —   14.92   01/31/2017   —   —   —   — 
     175,000      13.18   01/31/2018               —   —   —   13.18   01/31/2018   —   —   —   — 
     19,121      13.18   01/31/2018               66,391   —   —   13.18   01/31/2018   —   —   —   — 


3745

 
(1)In connection with the Spin-Off,spin-off of TSYS, each named executive officer received approximately .4839210.483921 of a share of TSYS stock for each share of Synovus restricted stock held by the executive. The TSYS stock received by each executive in connection with the Spin-Offspin-off is subject to the same restrictions and conditions as the Synovus restricted stock. As a result of this distribution of TSYS stock, as of December 31, 2008,2009, Mr. Anthony held 28,28820,472 restricted shares of TSYS with a market value of $396,032,$353,551, Mr. Prescott held 3,459689 restricted shares of TSYS with a market value of $48,426, Mr. Green$11,899, Ms. James held 8,847711 restricted shares of TSYS with a market value of $123,858, Ms. James$12,279, and Mr. Holladay held 3,588298 restricted shares of TSYS with a market value of $50,232, and Mr. Holladay held 1,496 restricted shares of TSYS with a market value of $20,944.$5,146. The TSYS restricted shares are not reflected in the table.
(2)Market value is calculated based on the closing price of Synovus’ common stock on December 31, 2008 of $8.30.2009 ($2.05).
 
(3)With respect to Mr. Anthony’s unexercisable stock options, the 69,65727,456 options vest on January 31, 2009,2010, the 54,91587,914 options vest in equal installments on January 31, 2009 and January 31, 2010, the 131,872 options vest in equal installments on January 31, 2009, January 31, 2010 and January 31, 2011; and the 750,000 options vest in equal installments on January 31, 2011, January 31, 2012 and January 31, 2013. With respect to Mr. Anthony’s restricted stock awards that have not vested, the 10,8454,275 restricted share grant will vestvests on January 31, 2009;2010, and the 8,54923,287 restricted sharestock unit grant vests in equal installments on January 31, 2009 and January 31, 2010, and the 32,968 restricted stock unit grant vests in three equal installments on January 31, 2009, January 31, 2010 and January 31, 2011. Because Mr. Anthony meets the criteria for retirement eligibility (age 62 with 15 years of service), he will vest in the 32,96823,287 restricted stock unit grant upon his retirement. In addition, the performance-based restricted stock award of 63,386 shares granted to Mr. Anthony in 2005 vests as follows: the restricted shares have seven one-year performance periods(2005-2011). During each performance period, the Compensation Committee establishes an earnings per share goal and, if such goal is attained during any performance period, 20% of the restricted shares will vest. As of December 31, 2008,2009, 38,032 of the 63,386 restricted shares have not vested.
 
(4)With respect to Mr. Prescott’s unexercisable stock options, the 27,6219,152 options vest on January 21, 2009,31, 2010, the 18,30429,363 options vest in equal installments on January 31, 2009 and January 31, 2010, the 44,046 options vest in equal installments on January 31, 2009, January 31, 2010 and January 31, 2011; and the 225,000 options vest in equal installments on January 31, 2011, January 31, 2012 and January 31, 2013. With respect to Mr. Prescott’s restricted stock awards that have not vested, the 4,3011,425 restricted sharestock unit grant vests on January 21, 2009, the 2,849 restricted share grant vests in equal installments on January 31, 2009 and January 31, 2010 and the 11,0117,340 restricted stock unit grant vests in equal installments of one-third each on January 31, 2009, January 31, 2010 and January 31, 2011.
 
(5)With respect to Mr. Green’sMs. James’ unexercisable stock options, the 29,1689,441 options vest on January 21, 2009,31, 2010, the 21,23129,667 options vest in equal installments on January 31, 2009 and January 31, 2010, the 66,391 options vest in equal installments on January 31, 2009, January 31, 2010 and January 31, 2011; and the 400,000 options vest in equal installments on January 31, 2011, January 31, 2012 and January 31, 2013. With respect to Mr. Green’s restricted stock awards that have not vested, the 4,541 restricted share grant vests on January 31, 2009, the 10,440 restricted share grant vests in equal installments on January 21, 2009 and January 21, 2010, the 3,205 restricted share grant vests in equal installments on January 31, 2009 and January 31, 2010, and the 16,598 restricted stock unit grant vests in equal installments of one-third each on January 31, 2009, January 31, 2010 and January 31, 2011.
(6)With respect to Ms. James’ unexercisable stock options, the 28,761 options vest on January 31, 2009, the 18,882 options vest in equal installments on January 31, 2009 and January 31, 2010, the 44,501 options vest in equal installments on January 31, 2009, January 31, 2010 and January 31, 2011; and the 225,000 options vest in equal installments on January 31, 2011, January 31, 2012 and January 31, 2013. With respect to Ms. James’ restricted stock awards that have not vested, the 4,4781,470 restricted share grant vests on January 31, 2009, the 2,939 restricted share grant vests in equal installments on January 31, 2009 and January 31, 2010, and the 11,1257,854 restricted stock unit grant vests in equal installments of one-third each on January 31, 2009, January 31, 2010 and January 31, 2011.
 
(7)(6)With respect to Mr. Holladay’s unexercisable stock options, the 11,9583,956 options vest on January 31, 2009,2010, the 7,91112,747 options vest in equal installments on January 31, 2009 and January 31, 2010, the 19,121 options vest in equal installments on January 31, 2009, January 31, 2010 and January 31, 2011; and the 175,000 options vest in equal installments on January 31, 2011, January 31, 2012 and January 31, 2013. With respect to Mr. Holladay’s restricted stock awards that have not vested, the 1,862616 share grant vests on January 31, 2009, the 1,232 share grant vests in equal installments on January 31, 2009 and January 31, 2010, and the 4,7803,372 restricted stock unit grant vests in equal installments on January 31, 2009, January 31, 2011 and January 31, 2012.
(7)With respect to Mr. Hatcher’s unexercisable stock options, 15,999 will vest on May 1, 2010 and 16,000 will vest on May 1, 2011.
(8)As a result of his resignation, Mr. Green has no unexercisable stock options or unvested restricted stock units as of December 31, 2009.


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OPTION EXERCISES AND STOCK VESTED
for the Year Ended December 31, 20082009
 
The following table sets forth the number and corresponding value realized during 20082009 with respect to stock options that were exercised and restricted shares that vested for each named executive officer.
 
                                
 Option Awards Stock Awards Option Awards Stock Awards
 Number of
   Number of
   Number of
   Number of
  
 Shares Acquired
 Value Realized
 Shares Acquired
 Value Realized
 Shares Acquired
 Value Realized
 Shares Acquired
 Value Realized
 on Exercise
 on Exercise
 on Vesting
 on Vesting
 on Exercise
 on Exercise
 on Vesting
 on Vesting
Name
 (#) ($)(1) (#) ($)(2) (#) ($) (#) ($)(1)
Richard E. Anthony  127,749  $84,314   10,845  $143,262         26,606  $105,352 
        4,276   56,486 
Thomas J. Prescott        4,300   56,803         9,562   37,866 
        1,426   18,837 
        4,446   48,328 
Elizabeth R. James        9,823   38,899 
Mark G. Holladay        4,143   16,406 
Samuel F. Hatcher        —   — 
Frederick L. Green, III  76,649   50,588   4,541   59,987         17,196   74,517 
        1,653   21,836 
        5,220   56,741 
        4,684   50,915 
Elizabeth R. James        4,478   59,154 
        1,470   19,419 
        4,754   51,676 
Mark G. Holladay        1,861   24,584 
        617   8,150 
        1,976   21,479 
 
 
(1)Reflects the excess of the fair market value of the shares at the time of exercise over the exercise price of the options.
(2)Reflects the fair market value of the underlying shares as of the vesting date.


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NONQUALIFIED DEFERRED COMPENSATION
for the Year Ended December 31, 20082009
 
                                        
 
 Executive
 Registrant
 Aggregate
 Aggregate
 Aggregate
  Executive
 Registrant
 Aggregate
 Aggregate
 Aggregate
 Contributions
 Contributions
 Earnings in
 Withdrawals/
 Balance at
  Contributions
 Contributions
 Earnings in
 Withdrawals/
 Balance at
 in Last FY
 in Last FY
 Last FY
 Distributions
 Last FYE
  in Last FY
 in Last FY
 Last FY
 Distributions
 Last FYE
Name
 ($) ($)(1) ($) ($) ($)(2)(3)  ($) ($)(1) ($) ($) ($)(2)(3)
Richard E. Anthony  —  $48,876  $(400,085)  —  $578,136   —  $25,963  $219,925   —  $824,024 
Thomas J. Prescott  —   10,991   (224,553)  —   344,769   —   5,397   124,690   —   474,855 
Frederick L. Green, III  —   23,248   (189,669)  —   331,210 
Elizabeth R. James  —   14,071   (160,692)  —   306,455   —   7,069   98,087   —   411,610 
Mark G. Holladay  —   5,951   (85,552)  —   235,219   —   2,660   56,836   —   294,715 
Samuel F. Hatcher  —   —   —   —   — 
Frederick L. Green, III  —   2,666   106,621   (437,801)  2,666 
 
 
(1)The amountamounts in this column isthese columns are reported in the Summary Compensation Table for 20082009 as “All Other Compensation.”
 
(2)Of the balances reported in this column, the amounts of $22,692, $213,185, $184,597, $196,061$71,568, $224,176, $210,132 and $123,644$129,595, with respect to Messrs. Anthony Prescott and Green andPrescott, Ms. James and Mr. Holladay, respectively, were reported in the Summary Compensation Table as “All Other Compensation” in previous years. In addition, Mr. Anthony’s balance includes lossesearnings on deferred director fees of ($23,222),$10,802, with a year-end balance of $30,130.$40,932.
 
(3)Each named executive officer with an account balance is 100% vested and will therefore receive his or her account balance in Synovus’ nonqualified deferred compensation plan upon his or her termination of employment for any reason.
 
The Deferred Plan replaces benefits lost by executives under the qualified retirement plans due to IRS limits. Executives are also permitted to defer all or a portion of their base salary or short-term incentive award, although no named executive officers did so for the last fiscal year. Amounts deferred under the Deferred Plan are deposited into a rabbi trust, and executives are permitted to invest their accounts in mutual funds that are generally the same as the mutual funds available in the qualified 401(k) plan. Deferred Plan participants may elect to withdraw their accounts as of a specified date or upon their termination of employment. Distributions can be made in a single lump sum or in annual installments over a 2-10 year period, as elected by


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the executive. The Directors Deferred Compensation Plan permits directors to elect to defer director fees pursuant to similar distribution and investment alternatives as the Deferred Plan.
 
POTENTIAL PAYOUTS UPON TERMINATION ORCHANGE-IN-CONTROL
 
Synovus hashad entered into change of control agreements with its named executive officers. Under these agreements, benefits arewere payable upon the occurrence of two events (also known as a “double trigger”). The first event is a change of control and the second event is the actual or constructive termination of the executive within two years following the date of the change of control. “Change of control” is defined,
As described above, the change in general, ascontrol agreements for the acquisition of 20% of Synovus’ stock by any “person” as defined undernamed executive officers have been suspended during the Securities Exchange Act, turnover of more than one-third ofTARP period. As a result, no amounts would have been payable to the Board of Directors of Synovus, or a merger of Synovus with another company if the former shareholders of Synovus own less than 60% of the surviving company. For purposes of these agreements, a constructive termination is a material adverse reduction in an executive’s position, duties or responsibilities, relocation of thenamed executive more than 35 miles from where the executive is employed, or a material reductionofficers in the executive’s base salary, bonus or other employee benefit plans.
In the event payments are triggered under the agreements, each executive will receive three times his or her base salary as in effect prior to the termination, three timesthat a percentage of his or her base salary equal to the average short-term incentive award percentage earned over the previous three calendar years prior to the termination, as well as a pro-rata short-term incentive award calculated at target for the year of termination. These amounts are paid to the executive in a single lump-sum cash payment. Each executive will also receive health and welfare benefits for a three year period following the second triggering event. The following table quantifies the estimated amounts that would be payable under the change of control agreements, assuming the triggering eventsevent had occurred on December 31, 2008.
                                 
 
     Average
  Pro-Rata
                
     3-Yrs
  Target
                
  3x
  Short-Term
  Short-Term
  Health &
  Stock
  Stock
  Excise Tax
    
  Base
  Incentive
  Incentive
  Welfare
  Award
  Option
  Gross-
    
  Salary  Award  Award  Benefits  Vesting(1)  Vesting(2)  up(3)  Total 
 
Richard E. Anthony $2,784,600  $1,624,350  $928,200  $52,740  $1,146,303  $0  $0  $6,536,193 
Thomas J. Prescott  1,161,000   474,075   270,900   52,740   199,162   0   0   2,157,877 
Frederick L. Green, III  1,686,300   836,124   477,785   52,740   386,233   0   0   3,439,182 
Elizabeth R. James  1,293,000   527,931   301,700   52,740   204,131   0   0   2,379,502 
Mark G. Holladay  945,000   330,750   220,500   52,740   86,290   0   0   1,715,080 
(1)Estimated by multiplying number of stock awards that vest upon change of control by fair market value on December 31, 2008. Stock awards also vest upon death or disability, and the January 31, 2008 restricted stock unit award also vests upon retirement (age 62 with 15 years of service). Mr. Anthony is the only named executive officer who is currently eligible for retirement.
(2)Estimated by multiplying number of options that vest upon change of control by difference in fair market value on December 31, 2008 and exercise price. Because the fair market value of Synovus stock on December 31, 2008 is less than the exercise price of all unexercised options held by each named executive officer, amount is estimated at zero for each named executive officer. Excluding the Spin-Off stock option grant made on January 31, 2008, stock options also vest upon retirement (age 62 with 15 years of service), death, disability or involuntary termination not for cause.
(3)As described under “TARP Related Actions” on page 30, the change of control agreements for named executives were amended on December 19, 2008 to limit benefits so that no excise tax will apply. Under the above table, however, no excise tax would have been imposed on any of the named executives, regardless of the amendments.
Executives who receive these benefits are subject to a confidentiality obligation with respect to secret and confidential information about Synovus they know. There are no provisions regarding a waiver of this confidentiality obligation. No perquisites or other personal benefits are payable under the change of control agreements.2009.
 
POTENTIAL PAYOUTSPAYMENTS UNDER VARIOUS TERMINATION SCENARIOS
 
The following table compares the amounts payable to the CEO under various termination scenarios within 12 months. As described above, neither the CEO (nor anynone of the other named executive officers)officers has an employment agreement, so thatand the change in control agreements have been suspended during the TARP period. Accordingly, as of December 31, 2009, the only amountsamount payable upon termination of employment would have been the distribution of each executives’ deferred compensation account balance shown above in the Nonqualified Deferred Compensation Table. In addition, Mr. Anthony’s restricted stock units vest upon his retirement. The value of such restricted stock units as of December 31, 2009 was $47,738, determined by multiplying number of units (23,287) by the closing price of Synovus’ common stock on December 31, 2009 ($2.05). This value is shown above in the Outstanding Equity Awards At Fiscal Year-End Table.


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termination (other than the amounts set forth in the change of control agreement) are long-term incentives that vest upon retirement and the deferred compensation account balance.
             
     “Not For Cause”
  Change of Control
 
  Termination  Termination  Termination 
 
Base Salary $0  $0  $2,784,600 
Bonus  0   0   2,552,550 
Stock Options(1)  0   0   0 
Restricted Stock  273,634(2)  273,634(2)  1,146,303 
Health/Welfare  0   0   52,740 
Perks  0   0   0 
Deferred Compensation(3)  578,136   578,136   578,136 
SERP  N/A   N/A   N/A 
             
Total $851,770  $851,770  $7,114.329 
(1)Estimated by multiplying the number of options that vest by difference in fair market value and exercise price on December 31, 2008. As of December 31, 2008, exercise price exceeds fair market value of all outstanding shares.
(2)Estimated by multiplying number of restricted units that vest upon retirement (32,698) by closing price on December 31, 2008 ($8.30).
(3)Estimated based upon deferred compensation account balance as of December 31, 2008.
 
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
 
Related Party Transaction Policy
 
Synovus’ Board of Directors has adopted a written policy for the review, approval or ratification of certain transactions with related parties of Synovus, which policy is administered by the Corporate Governance and Nominating Committee. Transactions that are covered under the policy include any transaction, arrangement or relationship, or series of similar transactions, arrangements or relationships, in which:which (1) the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year,year; (2) Synovus is a participant,participant; and (3) any related party of Synovus (such as an executive officer, director, nominee for election as a director or greater than 5% beneficial owner of Synovus stock, or their immediate family members) has or will have a direct or indirect interest.
 
Among other factors considered by the Committee when reviewing the material facts of related party transactions, the Committee must take into account whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party’s interest in the transaction. Certain categories of transactions have standing pre-approval under the policy, including the following:
 
 • the employment of non-executive officers who are immediate family members of a related party of Synovus so long as the annual compensation received by this person does not exceed $250,000, which employment is reviewed by the Committee at its next regularly scheduled meeting; and
 
 • certain limited charitable contributions by Synovus, which transactions are reviewed by the Committee at its next regularly scheduled meeting.
 
The policy does not apply to certain categories of transactions, including the following:
 
 • certain lending transactions between related parties and Synovus and any of its banking and brokerage subsidiaries;


41

 • certain other financial services provided by Synovus or any of its subsidiaries to related parties, including retail brokerage, deposit relationships, investment banking and other financial advisory services; and
 
 • transactions which occurred, or in the case of ongoing transactions, transactions which began, prior to the date of the adoption of the policy by the Synovus Board.
 
Related Party Transactions in the Ordinary Course
 
During 2008,2009, Synovus’ executive officers and directors (including their immediate family members and organizations with which they are affiliated) were also customers of Synovusand/or its subsidiaries. In management’s opinion, the lending relationships with these directors and officers were made in the ordinary course of business and on substantially the same terms, including interest rates, collateral and repayment terms, as those prevailing at the time for comparable transactions with other customers and do not involve more than normal collection risk or present other unfavorable features. In addition to these lending relationships, some directors and their affiliated organizations provide services or otherwise do business with Synovus and its subsidiaries, and we in turn provide services, including retail brokerage and other financial services, or otherwise do business with the directors and their organizations, in each case in the ordinary course of business and on substantially the same terms as those prevailing at the time for comparable transactions with other nonaffiliated persons.


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Total Technology Ventures and Related Funds
 
As of December 31, 2008,January 1, 2009, Synovus owned a 60%49% membership interest in Total Technology Ventures, LLC, (“TTV”) andor TTV. Gardiner W. Garrard, III, the son of Gardiner W. Garrard, Jr., a director of Synovus, owned a 20% membership interest in TTV. Gardiner W. Garrard, IIITTV and also serves as a managing partner of TTV andTTV. During 2009, Mr. Garrard received $250,000 in compensation during 2008 for this role. In addition to their ownership in TTV, during 2009 each of Synovus and Gardiner W. Garrard, III ownsowned interests in TTP Fund, L.P. (“, or Fund I”)I, and TTP Fund II, L.P. (“, or Fund II”),II, two private investment funds engaged in private equity investment transactions. As of January 1, 2009, Synovus holdsheld approximately 79.8% of the limited partnershipmembership interests in Fund I and hasalso held a 5% profit allocation from Fund I. As of January 1, 2009, Synovus holdsheld approximately 74.9% of the limited partnershipmembership interests in Fund II and, through its ownership interest in the general partner of Fund II, is entitled to receive approximately 15%3% of any profit allocation distributions made by Fund II. In the fourth quarter of 2009, Synovus sold all of its voting membership interests in Fund I and 33.3% of its voting interest in Fund II to unrelated third parties in a series of negotiated transactions. As of December 31, 2009, Synovus owned no voting membership interests in Fund I and a 49.9% voting membership interest in Fund II, and held directly or indirectly, a 5% profit allocation interest in Fund I and a 3% profit allocation interest in Fund II. Gardiner W. Garrard, III owns an interest in the general partners of Fund I and Fund II. ThroughAs of December 31, 2009, through these ownership interests, heMr. Garrard is entitled to receive 47.4%9.4% and 42.5%8.5%, respectively, of any profit allocations made by Fund I and Fund II to their general partners.
 
The general partners of Fund I and Fund II have entered into agreements with TTV pursuant to which TTV provides investment management administrative services to each general partner. The management fee payable quarterly to TTV for investment advisory services is equal to the management fee received quarterly by each general partner from Fund I and Fund II, respectively, subject to certain adjustments and reductions. The aggregate management fees paid to TTV by the general partners of Fund I and Fund II during 20082009 were $626,827$512,522 and $1,802,272, respectively.
 
Effective as of January 1, 2009, Synovus sold 11% of its interests in TTV to Gardiner W. Garrard, III and an unrelated third party for a total purchase price of $242,782 in cash (the “TTV“January TTV Sale”), reducing Synovus’ percentage interest in TTV to 49% and increasing Mr. Garrard’s interest in TTV to 25.5%. On December 23, 2009, Synovus sold its remaining 49% interest in TTV to Mr. Garrard and an unrelated third party for a total purchase price of $1,081,484 in cash (the “December TTV Sale”). The Corporate Governance and Nominating Committee reviewed the material terms of the January TTV Sale and the December TTV Sale in accordance with Synovus’ related party transactions policy and determined that each of the January TTV Sale and the December TTV Sale was on terms no less favorable to Synovus than terms generally available to an unaffiliated party under the same or similar circumstances.


42

Total System Services, Inc.
 
On December 31, 2007, pursuant to an Agreement and Plan of Distribution, Columbus Bank and Trust Company (“CB&T”),&T, a wholly owned banking subsidiary of Synovus, distributed its approximately 80.8% ownership interest in Total System Services, Inc. (“TSYS”)TSYS to Synovus and Synovus distributed all of those shares to Synovus shareholders in the Spin-Off.spin-off. After this time, TSYS became a fully independent, publicly owned company. PhilPhilip Tomlinson, a director of Synovus, is the Chairman of the Board and Chief Executive Officer of TSYS. Richard E. Anthony, Chairman of the Board and Chief Executive Officer of Synovus, is a director of TSYS.
 
During 2008, Synovus and TSYS were parties to a Transition Services Agreement which was entered into in connection with the Spin-Off pursuant to which each party provided certain services to the other for a specified period during 2008. The services provided by Synovus to TSYS included human resource services, payroll services, corporate education services, investor relations services, legal services and tax services for which TSYS paid Synovus a fee of $3,211,987. The services provided by TSYS to Synovus included telecommunications services and legal services for which Synovus paid TSYS a fee of $1,005,218.
During 2008,2009, TSYS provided electronic payment processing services and other card-related services to certain banking subsidiaries of Synovus totaling $4,083,204 for electronic payment processing services and $9,068,303 for other data processing, software and business process management services.payments of $14,133,675. Synovus and its subsidiaries also paid TSYS an aggregate of $2,173,071$1,998,972 in miscellaneous reimbursable items such as data links, network services and postage, primarily related to processing services, in 2008.2009.


49

In addition, Synovus and CB&T leased office space from TSYS in 2008 under various lease agreements, resulting in aggregate payments of $1,255,552$872,445 to TSYS during 2008.2009. CB&T and other Synovus subsidiaries also paid subsidiaries of TSYS $455,125$65,634 for debt collection services and $554,361$342,278 for printing services in 2008.2009.
 
All of the transactions set forth above between TSYS and Synovus and its subsidiaries are comparable to those provided by between similarly situated unrelated third parties in similar transactions. The payments to Synovus by TSYS and the payments to TSYS by Synovus represent less than 2% of TSYS’ 20082009 gross revenues.
 
W.C. Bradley Co.
 
Synovus leased various properties in Columbus, Georgia from W.C. Bradley Co. for office space and storage during 2008.2009. The rent paid for the space was $2,124,252.$2,538,737. The terms of the lease agreements are comparable to those provided for between similarly situated unrelated third parties in similar transactions.
 
Synovus is a party to a Joint Ownership Agreement with TSYS and W.C.B. Air L.L.C. pursuant to which they jointly own or lease aircraft. W.C. Bradley Co. owns all of the limited liability interests of W.C.B. Air. The parties have each agreed to pay fixed fees for each hour they fly the aircraft ownedand/or leased pursuant to the Joint Ownership Agreement. Synovus paid $1,768,411$1,150,174 for use of the aircraft during 2008.2009. The charges payable by Synovus in connection with its use of this aircraft approximate charges available to unrelated third parties in the State of Georgia for use of comparable aircraft for commercial purposes.
 
James H. Blanchard, a director of Synovus, is a director of W.C. Bradley Co. James D. Yancey, Chairman of the Board of CB&T and a director of Synovus, is a director of W.C. Bradley Co. William B. Turner, Jr., Vice Chairman of the Board and Retired President of W.C. Bradley Co., is a director of Synovus and CB&T. John T. Turner, William B. Turner, Jr.’s brother, is a director of W.C. Bradley Co. and a director of CB&T. The payments to W.C. Bradley Co. by Synovus and its subsidiaries and the payments to Synovus and its subsidiaries by W.C. Bradley Co. represent less than 2% of W.C. Bradley Co.’s 20082009 gross revenues.


43

Other Related Party Transactions
 
During 2008,2009, a banking subsidiary of Synovus leased office space in Daniel Island, South Carolina from DIBS Holdings, LLC for $202,331.$174,489. Frank W. Brumley, a director of Synovus, is managing member of and holds a 30% equity interest in DIBS Holdings, LLC. The terms of the lease agreement are comparable to those provided for between similarly situated unrelated third parties in similar transactions.
 
During 2008,2009, Synovus and its wholly owned subsidiaries paid to Communicorp, Inc. $414,889,$120,806, for printing, marketing and promotional services, which payments are comparable to payments between similarly situated unrelated third parties for similar services. Communicorp is a wholly owned subsidiary of Aflac Incorporated. Daniel P. Amos, a director of Synovus, is Chairman of the Board and Chief Executive Officer and a director of Aflac. The payments to Aflac by Synovus and its subsidiaries represent less than 2% of Aflac’s 20082009 gross revenues.
 
William Russell Blanchard, a son of director James H. Blanchard, was employed by a subsidiary of Synovus as a retail banking executivebank president during 2008.2009. William Russell Blanchard received $218,440$179,235 in compensation during 2008.2009. William Fray McCormick, theson-in-law of director Richard Y. Bradley, was employed by a subsidiary of Synovus as a trust officer during 2008.2009. Mr. McCormick received $123,620$116,568 in compensation for his services during the year. The compensation received by the employees listed above is determined under the standard compensation practices of Synovus.
 
The Transition Services Agreement between Synovus and TSYSJanuary TTV Sale, the December TTV Sale and the TTV Salelease with DIBS Holdings, LLC, as amended, were each approved pursuant to Synovus’ related party transaction policy. None of the other transactions described above required review, approval or ratification under Synovus’


50

related party transaction policy as they occurred or began prior to the adoption of the policy by the Synovus Board.
 
Other Information About Board Independence
 
In addition to the information set forth under the caption “Related Party Transactions”Transactions in the Ordinary Course” above, the Board also considered the following relationships in evaluating the independence of Synovus’ independent directors and determined that none of the relationships constitute a material relationship with Synovus:
 
 • Synovus provided lendingand/or other financial services to each of Messrs. Amos, Bradley, Brumley, Goodrich, Hansford, Lampton, Page, Purcell, Stith, Turner and Yancey and Ms. Camp and Ms. Ogie, their immediate family membersand/or their affiliated organizations during 20082009 in the ordinary course of business and on substantially the same terms as those available to unrelated parties. These relationships meet the Board’s categorical standards for independence;
 
 • Two immediate family members of Mr. Turner were compensated as non-executive employees of Synovus during 2008,2009, which employment was in accordance with the Board’s categorical standards for independence; and
 
 • Entities affiliated with Mr. Amos made minimal payments to or received payments from Synovus for services in the ordinary course of business during 2008,2009, which payments did not approach the 2% of consolidated gross revenues threshold set forth in the Board’s categorical standards for independence.


44

 
PRINCIPAL SHAREHOLDERS
 
The following table sets forth the number of shares of Synovus common stock held by the only known holders of more than 5% of the outstanding shares of Synovus common stock as of December 31, 2008.2009.
 
                
   Percentage of
   Percentage of
 Shares of
 Outstanding Shares
 Shares of
 Outstanding Shares
 Synovus Stock
 of Synovus
 Synovus Stock
 of Synovus
Name and Address
 Beneficially Owned
 Stock Beneficially
 Beneficially Owned
 Stock Beneficially
of Beneficial
 as of
 Owned as
 as of
 Owned as
Owner 12/31/08 of 12/31/08 12/31/09 of 12/31/09
Synovus Trust Company, N.A.(1)  47,501,473(2)  14.38%  47,968,681(2)  9.79%
1148 Broadway            
Columbus, Georgia 31901            
Wells Fargo & Company  23,087,514(3)  6.99%
420 Montgomery Street      
San Francisco, California 94163      
 
 
(1)The shares of Synovus stock held by Synovus Trust Company are voted by the President of Synovus Trust Company.
 
(2)As of December 31, 2008,2009, the banking, brokerage, investment advisory and trust company subsidiaries of Synovus, including CB&T through its wholly owned subsidiary, Synovus Trust Company, held in various fiduciary or advisory capacities a total of 47,522,35547,999,256 shares of Synovus stock as to which they possessed sole or shared voting or investment power. Of this total, Synovus Trust Company held 42,232,29642,242,150 shares as to which it possessed sole voting power, 44,266,24944,572,488 shares as to which it possessed sole investment power, 157,735155,362 shares as to which it possessed shared voting power and 2,492,4562,594,664 shares as to which it possessed shared investment power. The other banking, brokerage, investment advisory and trust subsidiaries of Synovus held 20,88230,575 shares as to which they possessed sole or shared investment power. Synovus and its subsidiaries disclaim beneficial ownership of all shares of Synovus stock which are held by them in various fiduciary, advisory, non-advisory or agency capacities.
(3)As of December 31, 2008, Wells Fargo & Company and its subsidiaries held 14,371,138 shares of Synovus stock as to which they possessed sole voting power, 1,000 shares as to which they possessed shared voting power, 22,809,994 shares as to which they possessed sole investment power and 103,226 shares as to which they possessed shared investment power. Of this total, Metropolitan West Capital Management, LLC, an investment advisory subsidiary of Wells Fargo & Company, beneficially owned a total of 19,875,805 shares of Synovus stock, 11,591,239 shares of which it possessed sole voting power and all of which it possessed sole investment power.


51

 
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
 
Section 16(a) of the Securities Exchange Act of 1934 requires Synovus’ officers and directors, and persons who own more than ten percent of Synovus stock, to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC and the NYSE. Officers, directors and greater than ten percent shareholders are required by SEC regulations to furnish Synovus with copies of all Section 16(a) forms they file.
 
To Synovus’ knowledge, based solely on its review of the copies of such forms received by it, and written representations from certain reporting persons that no Forms 5 were required for those persons, Synovus believes that during the fiscal year ended December 31, 20082009 all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with, except that each of Messrs. Anthony, GreenMr. Blanchard reported two transactions late and TurnerMr. Bradley reported one transaction late.
 
SHAREHOLDER PROPOSALS AND NOMINATIONS
 
In order for a shareholder proposal to be considered for inclusion in Synovus’ Proxy Statement for the 20102011 Annual Meeting of Shareholders, the written proposal must be received by the Corporate Secretary of Synovus at the address below. The Corporate Secretary must receive the proposal no later than November 13, 2009.12, 2010. The proposal will also need to comply with


45

the SEC’s regulations underRule 14a-8 regarding the inclusion of shareholder proposals in company sponsored proxy materials. Proposals should be addressed to:
 
Corporate Secretary

Synovus Financial Corp.

1111 Bay Avenue, Suite 500

Columbus, Georgia 31901
 
For a shareholder proposal that is not intended to be included in Synovus’ Proxy Statement for the 2010 Annual Meeting of Shareholders, or if you want to nominate a person for election as a director, you must provide written notice to the Corporate Secretary at the address above. The Secretary must receive this notice not earlier than NovemberDecember 23, 20092010 and not later than December 23, 2009.January 22, 2011. The notice of a proposed item of business must provide information as required in the bylaws of Synovus which, in general, require that the notice include for each matter a brief description of the matter to be brought before the meeting; the reason for bringing the matter before the meeting; your name, address, and number of shares you own beneficially or of record; and any material interest you have in the proposal.
 
The notice of a proposed director nomination must provide information as required in the bylaws of Synovus which, in general, require that the notice of a director nomination include your name, address and the number of shares you own beneficially or of record; the name, age, business address, residence address and principal occupation of the nominee; and the number of shares owned beneficially or of record by the nominee, as well as information on any hedging activities or derivative positions held by the nominee with respect to Synovus shares. It must also include the information that would be required to be disclosed in the solicitation of proxies for the election of a director under federal securities laws. You must submit the nominee’s consent to be elected and to serve as well as a statement whether each nominee, if elected, intends to tender promptly following such person’s failure to receive the required vote for election or re-election, an irrevocable resignation effective upon acceptance by the Board of Directors, in accordance with Synovus’ Corporate Governance Guidelines. A copy of the bylaw requirements will be provided upon request to the Corporate Secretary at the address above.


52

 
GENERAL INFORMATION
 
Financial Information
 
A copy of Synovus’ 20082009 Annual Report onForm 10-K, or 2009Form 10-K, will be furnished, without charge, by writing to the Corporate Secretary, Synovus Financial Corp., 1111 Bay Avenue, Suite 500, Columbus, Georgia 31901. The 2009Form 10-K is also available on Synovus’ home page on the Internet at www.synovus.com. Seewww.synovus.com under the “Financial Reports — SEC Filings” underlink on the “Investor Relations” page.
 
Solicitation of Proxies
 
Synovus will pay the cost of soliciting proxies. Proxies may be solicited on behalf of Synovus by directors, officers or employees by mail, in person or by telephone, facsimile or other electronic means. Synovus will reimburse brokerage firms, nominees, custodians, and fiduciaries for theirout-of-pocket expenses for forwarding proxy materials to beneficial owners. In addition, we have retained Laurel Hill Advisory Group LLC to assist in the solicitation of proxies with respect to shares of our common stock held of record by brokers, nominees and institutions and, in certain cases, by other holders. Such solicitation may be made through the use of mails, by telephone or by personal calls. The anticipated cost of the services of Laurel Hill is $12,500 plus expenses.
 
Householding
 
The Securities and Exchange Commission’s proxy rules permit companies and intermediaries, such as brokers and banks, to satisfy delivery requirements for proxy statements with respect to two or more shareholders sharing the same address by delivering a single proxy statement to those shareholders. This method of delivery, often referred to as householding, should reduce the amount of duplicate information that shareholders receive and lower printing


46

and mailing costs for companies. Synovus and certain intermediaries are householding proxy materials for shareholders of record in connection with the Annual Meeting. This means that:
 
 • Only one Notice of Internet Availability of Proxy Materials or Proxy Statement and Annual Report and Proxy Statement will be delivered to multiple shareholders sharing an address unless you notify your broker or bank to the contrary;
 
 • You can contact Synovus by calling(706) 649-5220 or by writing Director of Investor Relations, Synovus Financial Corp., P.O. Box 120, Columbus, Georgia 31902 to request a separate copy of the Notice of Internet Availability of Proxy Materials or Annual Report and Proxy Statement for the 20092010 Annual Meeting and for future meetings or, if you are currently receiving multiple copies, to receive only a single copy in the future or you can contact your bank or broker to make a similar request; and
 
 • You can request delivery of a single copy of the Notice of Internet Availability of Proxy Materials, Annual ReportsReport or Proxy Statements from your bank or broker if you share the same address as another Synovus shareholder and your bank or broker has determined to household proxy materials.


4753

 
APPENDIX A
 
SYNOVUS FINANCIAL CORP.
DIRECTOR INDEPENDENCE STANDARDS
 
The following independence standards have been approved by the Board of Directors and are included within Synovus’ Corporate Governance Guidelines.
 
A majority of the Board of Directors will be independent directors who meet the criteria for independence required by the NYSE. The Corporate Governance and Nominating Committee will make recommendations to the Board annually as to the independence of directors as defined by the NYSE. To be considered independent under the NYSE Listing Standards, the Board must determine that a director does not have any direct or indirect material relationship with the Company. The Board has established the following standards to assist it in determining director independence. A director is not independent if:
 
 • The director is, or has been within the last three years, an employee of the Company or an immediate family member is, or has been within the last three years, an executive officer of the Company.
 
 • The director has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $100,000$120,000 in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service). (Compensation received by an immediate family member for service as an employee of the Company (other than an executive officer) is not taken into consideration under this independence standard).
 
 • (A) The director is a current partner or employee of a firm that is the Company’s internal or external auditor; (B) the director has an immediate family member who is a current partner of such a firm; (C) the director has an immediate family member who is a current employee of such a firm and personally works on the Company’s audit; or (D) the director or an immediate family member was within the last three years a partner or employee of such a firm and personally worked on the Company’s audit within that time.
 
 • The director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of the Company’s present executive officers at the same time serves or served on that company’s compensation committee.
 
 • The director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues. (The principal amount of loans made by the Company to any director or immediate family member shall not be taken into consideration under this independence standard; however, interest payments or other fees paid in association with such loans would be considered payments.)
 
The following relationships will not be considered to be material relationships that would impair a director’s independence:
 
 • The director is a current employee, or an immediate family member of the director is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services (including financial services) in an amount which, in the prior fiscal year, is less than the greater of $1 million, or 2% of such other company’s consolidated gross revenues. (In the event this threshold is exceeded, and where applicable in the standards set forth below, the three year “look back” period referenced above will apply to future independence determinations).


A-1

 
 • The director or an immediate family member of the director is a partner of a law firm that provides legal services to the Company and the fees paid to such law firm by the Company in the prior fiscal year were less than the greater of $1 million, or 2% of the law firm’s total revenues.
 
 • The director or an immediate family member of the director is an executive officer of a tax exempt organization and the Company’s contributions to the organization in the prior fiscal year were less than the greater of $1 million, or 2% of the organization’s consolidated gross revenues.
 
 • The director received less than $120,000 in direct compensation from the Company during the prior twelve month period, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service).
 
 • The director’s immediate family member received in his or her capacity as an employee of the Company (other than as an executive officer of the Company), less than $250,000 in direct compensation from the Company in the prior fiscal year, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service).
 
 • The director or an immediate family member of the director has, directly, in his or her individual capacities, or, indirectly, in his or her capacity as the owner of an equity interest in a company of which he or she is not an employee, lending relationships, deposit relationships or other banking relationships (such as depository, trusts and estates, private banking, investment banking, investment management, custodial, securities brokerage, insurance, cash management and similar services) with the Company provided that:
 
1) Such relationships are in the ordinary course of business of the Company and are on substantially the same terms as those prevailing at the time for comparable transactions with non-affiliated persons; and
 
2) With respect to extensions of credit by the Company’s subsidiaries:
 
(a) such extensions of credit have been made in compliance with applicable law, including Regulation O of the Board of Governors of the Federal Reserve, Sections 23A and 23B of the Federal Reserve Act and Section 13(k) of the Securities Exchange Act of 1934; and
 
(b) no event of default has occurred under the extension of credit.
 
For relationships not described above or otherwise not covered in the above examples, a majority of the Company’s independent directors, after considering all of the relevant circumstances, may make a determination whether or not such relationship is material and whether the director may therefore be considered independent under the NYSE Listing Standards. The Company will explain the basis of any such determinations of independence in the next proxy statement.
 
For purposes of these independence standards an “immediate family member” includes a person’s spouse, parents, children, siblings, mothers andfathers-in-law, sons anddaughters-in-law, brothers andsisters-in-law, and anyone (other than domestic employees) who shares such person’s home.
 
For purposes of these independence standards “Company” includes any parent or subsidiary in a consolidated group with the Company.


A-2

Financial Appendix ­ ­ (SYNOVUS LOGO)

 
   
  
Consolidated Balance Sheets as of December 31, 20082009 and 20072008
  F-2 
    
Consolidated Statements of Income for the Years ended December 31, 2009, 2008, 2007, and 20062007
  F-3 
    
Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income (Loss) for the Years ended December 31, 2009, 2008, 2007, and 20062007
  F-4 
    
Consolidated Statements of Cash Flows for the Years ended December 31, 2009, 2008, 2007, and 20062007
  F-5 
    
Notes to Consolidated Financial Statements
  F-6 
    
Report of Independent Registered Public Accounting Firm (Financial Statements)
  F-51F-57 
    
Management’s Report on Internal Control Over Financial Reporting
  F-52F-58 
    
Report of Independent Registered Public Accounting Firm (Internal Control)
  F-53F-59 
    
Selected Financial Data
  F-54F-60 
    
Management’s Discussion and Analysis of Financial Condition and Results of Operation
  F-55F-61
Non-GAAP Financial Measures
F-114 
    
Summary of Quarterly Financial Data (Unaudited)
  F-101F-117 


F-1

Consolidated Balance Sheets ­ ­ (SYNOVUS LOGO)

 
        
          
  December 31, 
(In thousands, except share data)      2009 2008 
 December 31, 
 2008 2007 
ASSETS
        
ASSETS
Cash and due from banks, including $24,965 and $18,946 in 2008 and 2007, respectively, on deposit to meet Federal Reserve requirements $524,327   682,583 
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  1,206,168   —   1,901,847   1,206,168 
Interest earning deposits with banks  10,805   10,950   12,534   10,805 
Federal funds sold and securities purchased under resale agreements  388,197   76,086   203,959   388,197 
Trading account assets  24,513   17,803 
Trading account assets, at fair value  14,370   24,513 
Mortgage loans held for sale, at fair value  133,637   153,437   138,056   133,637 
Impaired loans held for sale  3,527   — 
Investment securities available for sale  3,892,148   3,666,974 
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  27,920,177   26,498,585   25,383,068   27,920,177 
Allowance for loan losses  (598,301)  (367,613)  (943,725)  (598,301)
          
Loans, net  27,321,876   26,130,972   24,439,343   27,321,876 
          
Premises and equipment, net  605,019   547,437   580,375   605,019 
Goodwill  39,521   519,138   24,431   39,521 
Other intangible assets, net  21,266   28,007   16,649   21,266 
Other assets  1,615,265   1,231,094   1,709,821   1,737,391 
          
Total assets $35,786,269   33,064,481  $32,831,418   35,786,269 
          
 
LIABILITIES AND SHAREHOLDERS’ EQUITY        
LIABILITIES AND EQUITYLIABILITIES AND EQUITY
Liabilities:                
Deposits:                
Non-interest bearing deposits $3,563,619   3,472,423  $4,172,697   3,563,619 
Interest bearing deposits ($75,875 and $293,842 at fair value as of December 31, 2008 and 2007)  25,053,560   21,487,393 
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  28,617,179   24,959,816   27,433,533   28,617,179 
Federal funds purchased and securities sold under repurchase agreements  725,869   2,319,412 
Federal funds purchased and other short-term borrowings  475,062   725,869 
Long-term debt  2,107,173   1,890,235   1,751,592   2,107,173 
Other liabilities  516,541   453,428   299,730   516,541 
          
Total liabilities  31,966,762   29,622,891   29,959,917   31,966,762 
          
Minority interest in consolidated subsidiaries  32,349   — 
Equity:        
Shareholders’ equity:                
Cumulative perpetual preferred stock — no par value. Authorized 100,000,000 shares; 967,870 shares outstanding at December 31, 2008  919,635   — 
Common stock — $1.00 par value. Authorized 600,000,000 shares; issued 336,010,941 in 2008 and 335,529,482 in 2007; outstanding 330,334,111 in 2008 and 329,867,944 in 2007  336,011   335,529 
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  1,165,875   1,101,209   1,605,097   1,165,875 
Treasury stock, at cost — 5,676,830 shares in 2008 and 5,661,538 shares in 2007  (114,117)  (113,944)
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  129,253   31,439   84,806   129,253 
Retained earnings  1,350,501   2,087,357 
Accumulated (deficit) retained earnings  (148,428)  1,350,501 
          
Total shareholders’ equity  3,787,158   3,441,590   2,851,041   3,787,158 
Non-controlling interest in subsidiaries  20,460   32,349 
          
Total liabilities and shareholders’ equity $35,786,269   33,064,481 
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 ­ ­ (SYNOVUS LOGO)

            
              
  Years Ended December 31, 
(In thousands, except per share data)        2009 2008 2007 
 Years Ended December 31, 
 2008 2007 2006 
Interest income:                        
Loans, including fees $1,661,012   2,046,239   1,859,914  $1,323,942   1,661,012   2,046,239 
Investment securities available for sale:                        
U.S. Treasury and U.S. Government agency securities  82,856   89,597   69,834   65,447   82,856   89,597 
Mortgage-backed securities  88,609   67,744   52,469   96,441   88,609   67,744 
State and municipal securities  6,368   8,095   9,208   4,786   6,368   8,095 
Other investments  5,415   7,290   6,915   2,270   5,415   7,290 
Trading account assets  1,924   3,418   2,691   1,091   1,924   3,418 
Mortgage loans held for sale  7,342   9,659   8,638   10,837   7,342   9,659 
Impaired loans held for sale  93   —   — 
Other loans held for sale  45   93   — 
Federal funds sold and securities purchased under resale agreements  3,382   5,258   6,422   356   3,382   5,258 
Interest on Federal Reserve balances  391   —   — 
Interest on Federal Reserve Bank balances  3,650   391   — 
Interest earning deposits with banks  188   1,104   375   324   188   1,104 
              
Total interest income  1,857,580   2,238,404   2,016,466   1,509,189   1,857,580   2,238,404 
              
Interest expense:                        
Deposits  667,453   912,472   746,669   456,247   667,453   912,472 
Federal funds purchased and securities sold under repurchase agreements  38,577   92,970   72,958 
Federal funds purchased and other short-term borrowings  3,841   38,577   92,970 
Long-term debt  73,657   84,014   71,050   38,791   73,657   84,014 
              
Total interest expense  779,687   1,089,456   890,677   498,879   779,687   1,089,456 
              
Net interest income  1,077,893   1,148,948   1,125,789   1,010,310   1,077,893   1,148,948 
Provision for losses on loans  699,883   170,208   75,148   1,805,599   699,883   170,208 
              
Net interest income after provision for losses on loans  378,010   978,740   1,050,641 
Net interest (expense) income after provision for losses on loans  (795,289)  378,010   978,740 
              
Non-interest income:                        
Service charges on deposit accounts  111,837   112,142   112,417   117,751   111,837   112,142 
Fiduciary and asset management fees  48,779   50,761   48,627   44,168   48,779   50,761 
Brokerage and investment banking revenue  33,119   31,980   26,729   28,475   33,119   31,980 
Mortgage banking income  23,493   27,006   29,255   38,521   23,493   27,006 
Bankcard fees  53,153   47,770   44,303   36,139   35,283   30,393 
Net gains (losses) on sales of investment securities available for sale  45   980   (2,118)
Net gains on sales of investment securities available for sale  14,067   45   980 
Other fee income  37,246   39,307   38,743   31,200   37,246   39,307 
Increase in fair value of private equity investments, net  24,995   16,497   6,552   1,379   24,995   16,497 
Proceeds from sale of MasterCard shares  16,186   6,304   2,481 
Proceeds from redemption of Visa shares  38,542   —   — 
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  47,795   56,281   52,441   38,719   47,716   56,268 
              
Total non-interest income  435,190   389,028   359,430   410,670   417,241   371,638 
              
Non-interest expense:                        
Salaries and other personnel expense  458,927   455,158   450,373   425,170   455,395   451,742 
Net occupancy and equipment expense  124,444   112,888   100,270   123,105   123,529   112,026 
FDIC insurance and other regulatory fees  25,161   10,347   8,796   76,314   25,161   10,347 
Foreclosed real estate  136,678   15,736   3,294 
Losses on impaired loans held for sale  9,909   —   — 
Foreclosed real estate expense  354,269   136,678   15,736 
Losses on other loans held for sale  1,703   9,909   — 
Goodwill impairment  479,617   —   —   15,090   479,617   — 
Professional fees  30,276   21,255   20,001   38,802   30,210   20,961 
Data processing expense  45,131   46,914   45,435 
Visa litigation (recovery) expense  (17,473)  36,800   —   (6,441)  (17,473)  36,800 
Restructuring charges  16,125   —   —   5,995   16,125   — 
Other operating expenses  201,957   187,910   181,799   142,151   149,992   137,296 
              
Total non-interest expense  1,465,621   840,094   764,533   1,221,289   1,456,057   830,343 
              
Minority interest in consolidated subsidiaries  7,712   —   — 
Income (loss) from continuing operations before income taxes  (660,133)  527,674   645,538   (1,605,908)  (660,806)  520,035 
Income tax expense (benefit)  (77,695)  184,739   230,435   (171,977)  (80,430)  182,066 
              
Income (loss) from continuing operations  (582,438)  342,935   415,103   (1,433,931)  (580,376)  337,969 
Income from discontinued operations, net of income taxes and minority interest  —   183,370   201,814 
Income from discontinued operations, net of income taxes and non-controlling interest  4,590   5,650   188,336 
              
Net income (loss)  (582,438)  526,305   616,917   (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  2,057   —   —   56,966   2,057   — 
              
Net income (loss) available to common shareholders $(584,495)  526,305   616,917  $(1,488,671)  (584,495)  526,305 
              
Basic earnings per share:            
Income (loss) from continuing operations $(1.77)  1.05   1.29 
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)  (1.77)  1.61   1.92 
Net income (loss) available to common shareholders  (3.99)  (1.77)  1.61 
              
Diluted earnings per share:            
Income (loss) from continuing operations $(1.77)  1.04   1.28 
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)  (1.77)  1.60   1.90 
Net income (loss) available to common shareholders  (3.99)  (1.77)  1.60 
              
Weighted average common shares outstanding:                        
Basic  329,319   326,849   321,241   372,943   329,319   326,849 
              
Diluted  329,319   329,863   324,232   372,943   329,319   329,863 
              
 
See accompanying notes to consolidated financial statements.
 


F-3

Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income (Loss) ­ ­ (SYNOVUS LOGO)

 
                                
 
                                             Accumulated
 Accumulated
     
      Additional
   Other
 (Deficit)
 Non-
   
             Accumulated
      Preferred
 Common
 Paid-In
 Treasury
 Comprehensive
 Retained
 Controlling
   
(In thousands, except per share data)
 Preferred Stock Common Stock Additional
   Other
      Stock Stock Capital Stock Income (Loss) Earnings Interest Total 
Years Ended December 31,
 Shares
   Shares
   Paid-In
 Treasury
 Comprehensive
 Retained
   
2008, 2007, and 2006
 Issued Amount Issued Amount Capital Stock Income (Loss) Earnings Total 
Balance at December 31, 2005  —  $—   318,301  $318,301   683,321   (113,944)  (29,536)  2,091,187   2,949,329 
SAB No. 108 adjustment to opening shareholders’ equity  —   —   —   —   —   —   826   3,434   4,260 
Postretirement unfunded health benefit obligation from adoption of SFAS No. 158, net of tax  —   —   —   —   —   —   (3,212)  —   (3,212)
Net Income  —   —   —   —   —   —   —   616,917   616,917 
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  —   —   —   —   —   —   3,650   —   3,650   —   —   —   —   18,334   —   —   18,334 
Change in unrealized gains/losses on investment securities available for sale, net of reclassification adjustment  —   —   —   —   —   —   13,268   —   13,268   —   —   —   —   31,251   —   —   31,251 
Amortization of postretirement unfunded health benefit, net of tax  —   —   —   —   817   —   —   817 
Gain on foreign currency translation  —   —   —   —   —   —   12,875   —   12,875   —   —   —   —   6,151   —   —   6,151 
          
Other comprehensive income  —   —   —   —   —   —   29,793   —   29,793   —   —   —   —   56,553   —   —   56,553 
        
Comprehensive income  —   —   —   —   —   —   —   —   646,710                               582,858 
      
Cash dividends declared — $.78 per share  —   —   —   —   —   —   —   (251,084)  (251,084)
Issuance of non-vested stock  —   —   610   610   (610)  —   —   —   — 
Share-based compensation expense  —   —   —   —   23,373   —   —   —   23,373 
Stock options exercised  —   —   3,459   3,459   62,051   —   —   —   65,510 
Share-based compensation tax benefit  —   —   —   —   11,390   —   —   —   11,390 
Ownership change at majority-owned subsidiary  —   —   —   —   6,031   —   —   —   6,031 
Issuance of common stock for acquisitions  —   —   8,844   8,844   247,499   —   —   —   256,343 
                   
Balance at December 31, 2006  —   —   331,214   331,214   1,033,055   (113,944)  (2,129)  2,460,454   3,708,650 
Cumulative effect of adoption of FIN No. 48          —   —   —   —   —   (230)  (230)
Net income  —   —   —   —   —   —   —   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 — $.82 per share  —   —   —   —   —   —   —   (269,082)  (269,082)
Issuance of non-vested stock  —   —   552   552   (552)  —   —   —   — 
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   —   —   21,540   —   —   —   —   21,540 
Stock options exercised  —   —   3,702   3,702   60,148   —   —   —   63,850   —   3,702   60,148   —   —   —   —   63,850 
Share-based compensation tax benefit  —   —   —   —   15,937   —   —   —   15,937   —   —   15,937   —   —   —   —   15,937 
Issuance of common stock for acquisitions  —   —   61   61   2,054   —   —   —   2,115   —   61   2,054   —   —   —   —   2,115 
Spin-off of TSYS  —   —   —   —   (30,973)  —   (22,985)  (630,090)  (684,048)  —   —   (30,973)  —   (22,985)  (630,090)  —   (684,048)
                                    
Balance at December 31, 2007
  —   —   335,529   335,529   1,101,209   (113,944)  31,439   2,087,357   3,441,590   —   335,529   1,101,209   (113,944)  31,439   2,087,357   —   3,441,590 
Cumulative effect of adoption of EITF IssueNo. 06-4
  —   —   —   —   —   —   —   (2,248)  (2,248)
Cumulative effect of adoption of SFAS No. 159
  —   —   —   —   —   —   —   58   58 
Net loss
  —   —   —   —   —   —   —   (582,438)  (582,438)
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   —   —   —   —   21,589   —   —   21,589 
Change in unrealized gains/losses on investment securities available for sale, net of reclassification adjustment
  —   —   —   —   —   —   76,045   —   76,045   —   —   —   —   76,045   —   —   76,045 
Amortization of postretirement unfunded health benefit, net of tax
          —   —   —   —   180   —   180   —   —   —   —   180   —   —   180 
          
Other comprehensive income
  —   —   —   —   —   —   97,814   —   97,814   —   —   —   —   97,814   —   —   97,814 
        
Comprehensive loss
  —   —   —   —   —   —   —   —   (484,624)                              (476,912)
      
Cash dividends declared — $.46 per share
  —   —   —   —   —   —   —   (151,918)  (151,918)
Cash dividends declared — $0.46 per share  —   —   —   —   —   (151,918)  —   (151,918)
Treasury shares purchased
  —   —   —   —   —   (173)  —   —   (173)  —   —   —   (173)  —   —   —   (173)
Issuance of non-vested stock
  —   —   (39)  (39)  39   —   —   —   — 
Issuance (forfeitures) of non-vested stock, net  —   (39)  39   —   —   —   —   — 
Share-based compensation expense
  —   —   —   —   13,716   —   —   —   13,716   —   —   13,716   —   —   —   —   13,716 
Stock options exercised
  —   —   521   521   2,481   —   —   —   3,002   —   521   2,481   —   —   —   —   3,002 
Share-based compensation tax deficiency
  —   —   —   —   (115)  —   —   —   (115)  —   —   (115)  —   —   —   —   (115)
Issuance of preferred stock and common stock warrants
  967,870   919,325   —   —   48,545   —   —   —   967,870   919,325   —   48,545   —   —   —   —   967,870 
Accretion of discount on preferred stock
      310   —   —   —   —   —   (310)  —   310   —   —   —   —   (310)  —   — 
Change in ownership at majority-owned subsidiary  —   —   —   —   —   —   24,637   24,637 
                                    
Balance at December 31, 2008
  967,870  $919,635   336,011  $336,011   1,165,875   (114,117)  129,253   1,350,501   3,787,158   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 StatementStatements of Cash Flows ­ ­ (SYNOVUS LOGO)

 
            
 
             Years Ended December 31, 
  2009 2008 2007 
(In thousands)              
 Years Ended December 31, 
 2008 2007 2006 
Operating Activities
                        
Net (loss) income $(582,438)  526,305   616,917  $(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  699,883   170,208   75,148   1,805,599   699,883   170,208 
Depreciation, amortization, and accretion, net  70,615   208,270   231,288   37,350   70,615   208,270 
Goodwill impairment  479,617   —   —   15,090   479,617   — 
Equity in income of equity investments  (3,517)  (10,463)  (14,726)  —   (3,517)  (10,463)
Deferred income tax (benefit) expense  (107,601)  (28,057)  (44,970)  175,193   (107,601)  (28,057)
Decrease (increase) in interest receivable  72,611   (11,774)  (84,457)  44,040   72,611   (11,774)
(Decrease) increase in interest payable  (13,783)  830   74,422   (64,465)  (13,783)  830 
Minority interest in consolidated subsidiaries’ net income  7,712   47,521   48,102   —   —   47,521 
Decrease (increase) in trading account assets  (6,710)  (2,537)  12,056   10,143   (6,710)  (2,537)
Originations of mortgage loans held for sale  (1,098,582)  (1,328,905)  (1,550,099)  (1,946,560)  (1,098,582)  (1,328,905)
Proceeds from sales of mortgage loans held for sale  1,129,843   1,378,999   1,547,765   1,955,290   1,129,843   1,378,999 
Gain on sale of mortgage loans held for sale  (9,292)  (27,105)  (29,211)  (16,520)  (9,292)  (27,105)
Decrease (increase) in prepaid and other assets  105,865   (238,950)  (150,668)
(Increase) decrease in prepaid and other assets  (260,273)  (186,048)  (273,899)
(Decrease) increase in accrued salaries and benefits  (11,762)  (33,428)  6,781   (12,084)  (11,762)  (33,428)
Increase (decrease) in other liabilities  184,873   (22,877)  6,719 
(Decrease) increase in other liabilities  (118,885)  184,873   (22,877)
Net (gains) losses on sales of investment securities available for sale  (45)  (980)  2,118   (14,967)  (45)  (980)
Gain on sale of loans  —   —   (1,975)
Loss on sale of impaired loans held for sale  9,909   —   — 
Gain on sale of other assets  —   —   (2,955)
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  (24,995)  (16,497)  (6,346)  (1,379)  (24,995)  (16,497)
Gain from transfer of mutual funds  —   (6,885)  —   —   —   (6,885)
Gain on sale of MasterCard shares  (16,186)  (6,303)  (2,481)  (8,351)  (16,186)  (6,304)
Gain on redemption of Visa shares  (38,542)  —   —   —   (38,542)  — 
Gain on sale of Visa shares  (51,900)  —   — 
(Decrease) increase in accrual for Visa litigation  (17,473)  36,800   —   (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  13,716   36,509   27,163   8,361   13,716   36,509 
Excess tax benefit from share-based payment arrangements  (870)  (14,066)  (10,460)  (12)  (870)  (14,066)
Impairment of developed software  —   1,740   —   —   —   1,740 
Other, net  (8,096)  1,107   39,330   2,157   (8,096)  1,108 
              
Net cash provided by operating activities  834,752   659,462   789,461   433,184   659,338   634,770 
              
Investing Activities
                        
Net cash paid for acquisitions  —   (12,552)  (53,664)  —   —   (12,552)
Net decrease (increase) in interest earning deposits with banks  145   8,365   (16,409)
Net (increase) decrease in Federal funds sold and securities purchased under resale agreements  (312,111)  25,005   (27,387)
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  (1,206,168)  —   —   (695,679)  (1,206,168)  — 
Proceeds from maturities and principal collections of investment securities available for sale  1,036,368   721,679   676,492   1,108,893   1,036,368   721,679 
Proceeds from sales of investment securities available for sale  165,623   25,482   130,457   260,041   165,623   25,482 
Purchases of investment securities available for sale  (1,289,912)  (1,015,303)  (1,051,733)  (805,760)  (1,289,912)  (1,015,303)
Proceeds from sale of commercial loans  —   —   32,813 
Proceeds from sale of impaired loans held for sale  28,813   —   — 
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  (2,374,091)  (2,071,602)  (2,498,467)  (112,659)  (2,374,091)  (2,071,602)
Proceeds from sale of private equity investments  65,786   —   — 
Purchases of premises and equipment  (112,969)  (168,202)  (140,143)  (34,732)  (112,969)  (168,202)
Proceeds from disposals of premises and equipment  2,388   790   1,201   1,991   2,388   790 
Net proceeds from transfer of mutual funds  —   6,885   —   —   —   6,885 
Proceeds from sale of MasterCard shares  16,186   6,303   2,481   8,351   16,186   6,303 
Proceeds from redemption of Visa shares  38,542   —   —   —   38,542   — 
Proceeds from sale of other assets  —   —   3,151 
Additions to other intangible assets  —   —   (6,446)
Proceeds from sale of Visa shares  51,900   —   — 
Contract acquisition costs  —   (22,740)  (42,452)  —   —   (22,740)
Additions to licensed computer software from vendors  —   (33,382)  (11,858)  —   —   (33,382)
Additions to internally developed computer software  —   (17,785)  (13,973)  —   —   (17,785)
Dividend paid by TSYS to minority shareholders  —   (126,717)  (9,765)  —   —   (126,717)
              
Net cash used in investing activities  (4,007,186)  (2,673,774)  (3,025,702)
Net cash provided by (used in) investing activities  848,452   (3,831,772)  (2,649,082)
              
Financing Activities
                        
Net (decrease) increase in demand and savings deposits  (900,032)  549,001   600,371 
Net increase (decrease) in certificates of deposit  1,971,859   (269,638)  1,019,302 
Net increase (decrease) in brokered deposits  2,585,536   390,384   1,067,103 
Net (decrease) increase in Federal funds purchased and securities sold under repurchase agreements  (1,593,543)  736,925   361,401 
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  (250,789)  (294,269)  (760,937)  (1,024,660)  (250,789)  (294,269)
Proceeds from issuance of long-term debt  429,300   1,087,079   127,203   720,000   429,300   1,087,079 
Purchase of treasury shares  (173)  —   —   (38)  (173)  — 
Excess tax benefit from share-based payment arrangements  870   14,066   10,460   12   870   14,066 
Dividends paid to common shareholders  (199,722)  (264,930)  (244,654)  (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   —   —   —   967,870   — 
Proceeds from issuance of common stock  3,002   63,850   65,510   571,226   3,002   63,850 
              
Net cash provided by financing activities  3,014,178   2,012,468   2,245,759 
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   (429)  —   —   4,970 
              
(Decrease) increase in cash and cash equivalents  (158,256)  3,126   9,089 
Increase (decrease) in cash and cash equivalents  40,155   (158,256)  3,126 
Cash retained by Total System Services, Inc.   —   (210,518)  —   —   —   (210,518)
Cash and due from banks at beginning of year  682,583   889,975   880,886   524,327   682,583   889,975 
              
Cash and due from banks at end of year $524,327   682,583   889,975  $564,482   524,327   682,583 
              
 
See accompanying notes to consolidated financial statements.
 


F-5

Notes to Consolidated Financial Statements ­ ­ (SYNOVUS LOGO)

 
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, mortgage, and leasingmortgage services through 3130 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 Codificationtm and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement 162 (ASC105-10). This statement established the FASB Accounting Standards Codificationtm (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 U.S. generally accepted accounting principles (GAAP)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 U.S. generally accepted accounting principles,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 sheetsheets and the reported amounts of revenues and expenses for the period.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 and assets and liabilities of Synovus’ former majority owned subsidiary, TSYS, have been reported as discontinued operations for the yearsyear ended December 31, 2007 and 2006.2007. As a result of the spin-off of TSYS, Synovus has only one business segment as defined by Statement of Financial Accounting Standards (SFAS) No. 131, “Disclosures about Segments of an Enterprise and Related Information.”ASC 280, Segment Reporting. Synovus’ statement of cash flows for the yearsyear ended December 31, 2007 and 2006 include,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.
 
Following isDuring 2009, Synovus committed to a descriptionplan to sell its merchant services business. Accordingly, the revenues and expenses of the moremerchant services business have been reported as discontinued operations for the years ended December 31, 2009, 2008, and 2007. There are no significant of Synovus’ accounting and reporting policies.assets or liabilities associated with the merchant services portfolio.


F-6

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

 
Cash Flow Information
 
Supplemental disclosure of cash flow information is as follows:
 
                        
 Years Ended December 31,  Years Ended December 31, 
(In millions) 2008 2007 2006  2009 2008 2007 
Cash paid during the year for:                        
Income taxes $65.6   440.7   391.4 
Income taxes (refunded) paid $(87.6)  65.6   440.7 
Interest  757.0   1,068.9   806.4   425.7   757.0   1,068.9 
Non-cash investing and financing activities:                        
Loans receivable transferred to other real estate  436.5   111.1   33.0   664.5   436.5   111.1 
Loans charged off to allowance for loan losses  486.3   131.2   72.8   1,492.6   486.3   131.2 
Loans receivable transferred to impaired loans held for sale  50.6   —   — 
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   240.6   —   —   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 include bothprimarily consist of debt and equity 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.


F-6

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

 
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”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.
 
ImpairedOther Loans Held for Sale
 
ImpairedOther loans held for sale are carried at the lower of aggregate cost or fair value. Impaired loansLoans or pools of impaired loans are transferred to the impairedother 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 impaired loans or pools of impaired loans is determined primarily by analyzing the underlying collateral of the loanloans 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 at a specific point in time, 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 shareholders’ 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 earningsnon-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 ­ (SYNOVUS LOGO)

 
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 nonperformingnon-performing loans, loan concentrations, and review of impaired loans, and management’s plan for disposition of non-performing loans.
 
ManagementAs of December 31, 2009, management believes that the allowance for loan losses iswas 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


F-7

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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 ­ (SYNOVUS LOGO)

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, and purchased internal-use software, 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 companies,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. To test for goodwill impairment, Synovus identifies its
Impairment is tested at the reporting units and determinesunit(sub-segment) level involving two steps. Step 1 compares the carryingfair value of eachthe reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units. Synovus then compares the carrying value of each 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 determine whether impairment exists. Synovus performed its annual evaluationbusiness 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 impairment at June 30, 2008, 2007, and 2006. Based on an adverse change in the general business environment, significantly higher loan losses, reduced net interest margin, and a decline indifference. The total of all reporting unit fair values is compared for reasonableness to Synovus’ market capitalization Synovus additionally evaluated goodwill for impairment at December 31, 2008 and 2007. Impairment losses of $479.6 million were recognized for the year ended December 31, 2008 asplus a result of impairment testing during the year ended December 31, 2008. No impairment losses were identified or recorded as a result of Synovus’ goodwill impairment analyses during the years ended December 31, 2007 and 2006.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 and transaction processing 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


F-8

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

the contract during the period. Income or expense from company-owned life insurance programs is included as a component of other non-interest income.
 
Synovus’ investment in company-owned life insurance programs was approximately $376.7 million at December 31, 2008, which included approximately $226.3 million of separate account life insurance policies covered by stable value agreements. At December 31, 2008, the market value of the investments underlying the separate account policies were within the coverage provided by the stable value agreements.
Other Real Estate
 
Other real estate consisting(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 ­ (SYNOVUS LOGO)

balance over the fair value of the real estate held as collateral is treatedrecorded as a charge against the allowance for loan losses. GainsSubsequent 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 salesales and any subsequent adjustments to the value are recorded as foreclosed real estate expense, a component of foreclosed real estatenon-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 the AICPA Audit and Accounting Guide forASC 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 SFAS No. 133, “Accounting for Derivative InstrumentsASC 815, Derivatives and Hedging, Activities,” as amended by SFAS No. 138, “Accounting for Certain Derivative Instruments and Hedging Activities, an Amendment of SFAS No. 133,” 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, 2008,2009, 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 and equity 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


F-9

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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 operatingnon-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 ­ (SYNOVUS LOGO)

consolidated statements of income as other operatingnon-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. Certain forward sales commitments are accounted for as hedges ofearnings in mortgage loans held for sale.banking income.
 
Synovus also enters into derivative financial instrumentsinterest 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 to Synovus.risk. These derivative financial instruments are reported at fair value with any resulting gain or loss recorded in current period earnings.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 minimizesseeks 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 thean 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.


F-10

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

 
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 SFAS No. 140, “Accounting forASC860-10-65, Transfers and Servicing of Financial Assets, and Extinguishments of Liabilities,” (SFAS No. 140) 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 adjusted for recourse obligations, if any, retained by Synovus.sale.


F-11

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

 
Bankcard Fees
 
Bankcard fees consist primarily of interchange and merchant 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 significant majority owned subsidiaries.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. Valuation allowances against the carrying amount of a deferred tax asset are established when necessary to reflect the decreased likelihood of full realization of a deferred tax asset in the future. Changes in the valuation allowance that result from a favorable change in circumstances that causes a change in judgment about the realization of deferred tax assets in future years should reduce income tax expense. The effect on deferred income tax assets and liabilities of a change in income tax rates is recognized in income in the period that includes the enactment date.
 
Synovus adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48, “AccountingASC740-30-25 provides accounting guidance for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (FIN 48) as of January 1, 2007. FIN 48 establishesdetermining when a single model to address accounting for uncertain tax positions. FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax positioncompany is required to meet before being recognizedrecord 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 financial statements. FIN 48 also provides guidanceperiodand/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 derecognition, measurement classification, interestfuture taxable income, exclusive of reversing temporary differences and penalties, accountingcarryforwards, as a reliable source of taxable income to realize a deferred tax asset. Judgment is a critical element in interim periods, disclosure and transition. FIN 48 provides a two-step processmaking this assessment. Changes in the evaluationvaluation allowance that result from favorable changes in circumstances that cause a change in judgment about the realization of adeferred tax position. The first step is recognition. A company determines whether it is more-likely-than-not that aassets in future years are recorded through income tax position will be sustained upon examination, including a resolution of any related appeals or litigation processes, based upon the technical merits of the position. The second step is measurement. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Upon adoption as of January 1, 2007, Synovus recognized a $1.4 million decrease in the liability for uncertain tax positions, with a corresponding increase in retained earnings of $1.4 million as a cumulative effect adjustment.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 adopted SFAS No. 123R, “Share-Based Payment”, effective January 1, 2006 and elected to usehas a long-term incentive plan under which the modified prospective transition method. SFAS No. 123R was effective for all unvested awards at January 1, 2006 and for all awards granted or modified, repurchased, or cancelled after that date. This statement requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair valueCompensation Committee of the award (with limited exceptions)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 recognizeother 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 future service period.
Prior to adoption of SFAS No. 123R, Synovus accounted for its fixed share-based compensation in accordance with the provisions set forth in Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. In accordance with APB Opinion No. 25, compensation expense was recorded on the grant date only to the extent that the current market priceshorter of the underlying stock exceededvesting period or the exercise price on the grant date.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.


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Notes to Consolidated Financial Statements ­ ­ (SYNOVUS LOGO)

 
Fair Value Accounting
 
In September 2006, the FASB issued Statementauthoritative guidance included in the provisions of Financial Accounting Standard (SFAS) No. 157, “FairASC820-10, Fair Value Measurements” (SFAS No. 157). SFAS No. 157Measurements 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 statementguidance 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 SFAS No. 157the provisions of ASC820-10 for financial assets and liabilities. As permitted under FASB Staff Positionthe implementation guidance included in ASCNo. FAS 157-2,820-10-55, Synovus has elected to defer the application of SFAS No. 157ASC820-10 to non-financial assets and liabilities until January 1, 2009.
 
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS No. 159). SFAS No. 159authoritative 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 has elected the fair value option (FVO) for mortgage loans held for sale and certain callable brokered certificates of deposit. Accordingly, a cumulative adjustment of $58 thousand ($91 thousand less $33 thousand of income taxes) was recorded as an increase to retained earnings.
 
In October 2008, the FASB issued FSPprovisions included in ASCFAS 157-3,825-10-65-2 “Determining the Fair Value of aand ASC825-10-35-15A, Financial AssetAssets in a Market that is Not Active.” FSP ASCFAS 157-3825-10-35-15A is intended to provide additional guidance on how an entity should classify the application of SFAS 157ASC820-10-35-15A in an inactive market and illustrates how an entity should determine fair value in an inactive market. The provisions for this statementguidance were effective upon its issuance on October 10, 2008. The impact to Synovus iswas minimal as this FSP providesguidance provided clarification to existing guidance.
Fair Value of Financial Instruments
 
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, computer software, 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 Emerging Issues Task Force (EITF)EITF reached a consensus on EITF IssueASCNo. 06-4,715-60-35, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements”(EITF 06-4).EITF 06-4Arrangements, which requires an employer to recognize a liability for future benefits based on the substantive agreement with the employee. ASCEITF 06-4715-60-35 requires a company to use the guidance prescribed in SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions” and Accounting Principles Board Opinion (APB) No. 12, “Omnibus Opinion,”this ASC when entering into an endorsement split-dollar life insurance agreement and recognizing the liability.EITF 06-4 was effective for fiscal periods beginning after December 15, 2007. Synovus adopted the provisions of ASCEITF 06-4715-60 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 EITF Issuechanges incorporated into ASCNo. 06-10, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Collateral Assignment Split-Dollar Life Insurance Arrangements”(EITF 06-10).715-60-35. Under ASCEITF 06-10,715-60-35, 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 ASCEITF 06-10715-60-35 waswere effective for fiscal periods beginning after December 15, 2007. Synovus adopted the provisions of ASCEITF 06-10715-60-35 effective January 1, 2008. There was no impact to Synovus upon adoption ofEITF 06-10.
In November 2006, the EITF reached a consensus on EITF IssueNo. 06-11, “Accounting for Income Tax Benefits of


F-12

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

Dividends on Share-Based Payment Awards”(EITF 06-11). Employees may receive dividend payments (or the equivalent of) on vested and non-vested share-based payment awards. UnderEITF 06-11, the Task Force concluded that a realized income tax benefit from dividends (or dividend equivalents) that are charged to retained earnings and are paid to employees for equity classified non-vested equity shares, non-vested equity share units, and outstanding equity share options should be recognized as an increase in additional paid-in capital. Once the award is settled, the Company should determine whether the cumulative tax deduction exceeded the cumulative compensation cost recognized on the income statement. If the total tax benefit exceeds the tax effect of the cumulative compensation cost, the excess would be an increase to additional paid-in capital.EITF 06-11 was effective for fiscal periods beginning after September 15, 2007. The impact of adoption ofEITF 06-11 was not material to Synovus’ financial position, results of operations or cash flows. these provisions.
 
In November 2007, the U.S. Securities and Exchange Commission (SEC)SEC issued Staff Accounting Bulletin (SAB) No. 109, “WrittenWritten Loan Commitments Recorded at Fair Value Through Earnings,” (SAB No. 109).Earnings. SAB No. 109 supersedes SAB No. 105, “ApplicationApplication of Accounting Principles to Loan Commitments.” SAB No. 109, which has been incorporated in ASC 815, Derivatives and Hedging, is consistent with SFAS No. 156, “Accounting forASC860-50, Servicing of Financial Assets,” and SFAS No. 159, “The Fair Value Option for Financial Assets and Liabilities, and ASC 825, Financial Liabilities,”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 ­ (SYNOVUS LOGO)

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 this bulletinASC 815 were effective for derivative loan commitments issued or modified in fiscal quarters beginning after December 15, 2007. The impact of adoption of SAB No. 109 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 No. 110, “Share-BasedShare-Based Payment,” (SAB No. 110) SAB No. 110 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 no longer providesdoes not provide a reasonable basis. Under SAB No. 107, “Share-BasedShare-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 all share options granted during 2008.option grants.
 
In February 2006,December 2007, the FASB issued SFAS No. 155, “Accountingrevisions to the authoritative guidance for Certain Hybrid Financial Instruments.” SFAS No. 155 amends SFAS No. 133, “Accounting for Derivative Instrumentsbusiness 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 Hedging Activities,” and SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” SFAS No. 155 resolves issues addressed in Statement No. 133 Implementation Issue No. D1, “Application of Statement No. 133 to Beneficial Interests in Securitized Financial Assets.” SFAS No. 155 eliminates the exemption from applying SFAS No. 133 to interests in securitized financial assets so that similar instruments area business. All business combinations will be accounted for similarly regardlessunder 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 form of the instruments. SFAS No. 155 also permits election of 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 at issuance, or when a previously recognized financial instrument is subjectdate. This period cannot exceed one year, and any subsequent adjustments made to a re-measurement event, on aninstrument-by-instrument basis.provisional amounts are done retrospectively and restate prior period data. The provisions of this statementASC 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 allnon-controlling interests in consolidated financial instruments acquiredstatements 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 issued afterother item outside of equity. Disclosure requirements include net income and comprehensive income to be displayed for both the beginningcontrolling and non-controlling interests and a separate schedule that shows the effects of any transactions with the entity’s first fiscal year that began after September 15, 2006.non-controlling interests on the equity attributable to the controlling interests. Synovus adopted the new provisions of SFAS No. 155ASC 810 effective January 1, 2007.2009. The impact of adoption resulted in a change in the balance sheet classification and presentation of SFAS No. 155non-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 March 2006,April 2009, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets.” SFAS No. 156 amends SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” with respectrevisions to the accounting for separatelyauthoritative 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


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Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

would be recognized servicing assets and servicing liabilities. SFAS No. 156 requires an entityin 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 recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in certain situations and requires that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable.collected. The provisions of this statementthe revised guidance were effective as of the beginning of the first fiscal year that beganfor interim and annual periods ended after SeptemberJune 15, 2006.2009. Synovus adopted the provisions of SFAS No. 156described in ASC320-10-65-1 effective JanuaryApril 1, 2007.2009. The impact of adoption of SFAS No. 156 was not material to Synovus’ financial position, results of operations, or cash flows.
 
In September 2006,April 2009, the EITF reachedFASB 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 consensus on EITF IssueNo. 06-5, “Accounting for Purchasesformerly 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 Life Insurance — Determining the Amount That Could Be Realized in Accordance with FASB TechnicalBulletin No. 85-4”(EITF 06-5).EITF 06-5 requires that a determinationactivity of the amount that could be realized under an insurance contract should (1) consider any additional amounts beyond cash surrender value includedmarket 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 the contractual terms of the policy


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ASCNotes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

and (2) be based on an assumed surrender at the individual policy or certificate level, unless all policies or certificates are required to be surrendered as a group. Synovus adoptedEITF 06-05820-10-65-1 effective JanuaryApril 1, 2007.2009. The impact of adoption ofEITF 06-05 was not material to Synovus’ financial position, results of operations, or cash flows.
 
In September 2006, the SEC issued SAB No. 108, “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements.” In December 2006, Subsequent Events
Synovus adopted the revised provisions of SAB No. 108, which clarifiesASC855-10, Subsequent Events, during the waythree months ended June 30, 2009. ASC855-10, as revised, sets forth general standards for evaluation, recognition, and disclosure of events that a company should evaluate an identified unadjusted error for materiality. SAB No. 108 requires that the effect of misstatements that were not corrected at the end of the prior year be considered in quantifying misstatements in the current year financial statements. Two techniques were identified as being used by companies in practice to accumulate and quantify misstatements — the “rollover” approach and the “iron curtain” approach. The rollover approach, which is the approach that Synovus previously used, quantifies a misstatement based on the amount of the error originating in the current year income statement. Thus, this approach ignores the effects of correcting the portion of the current year balance sheet misstatement that originated in prior years. The iron curtain approach quantifies a misstatement based on the effects of correcting the misstatement existing inoccur after the balance sheet at the enddate. The impact of the current year, irrespective of the misstatement’s year(s) of origination. The primary weakness of the iron curtain approach is that it does not consider the correction of prior year misstatements in the current year to be errors.
Using the rollover approach resulted in an accumulation of misstatements to Synovus’ balance sheets that were deemed immaterial to Synovus’ financial statements because the amounts that originated in each year were quantitatively and qualitatively immaterial. Synovus has elected, as allowed under SAB No. 108, to reflect the effect of initially applying this guidance by adjusting the carrying amount of the impacted accounts as of the beginning of 2006 and recording an offsetting adjustment to the opening balance of retained earnings in 2006. Accordingly, Synovus recorded a cumulative adjustment to increase retained earnings by $3.4 million upon the adoption of SAB No. 108.
The following table presents a description of the individual adjustments included in the cumulative adjustment to retained earnings:
         
     Nature of
  
     Error
  
     Being
 Years
(In millions) Adjustment  Corrected Impacted
 
Brokered time deposits $(10.3) Adjusted to reflect incorrect use of hedges 2003-2005
Deferred income tax liability  3.8  Adjusted to reflect tax effect of incorrect use of hedges 2003-2005
Accumulated other comprehensive loss  (0.8) Adjusted to reflect incorrect use of hedges 2004-2005
Deferred income tax liability  10.7  Adjusted to reflect impact of calculation errors 1993-2005
Total increase in retained earnings $3.4     
         
In the first quarter of 2003, Synovus entered into interest rate swaps to hedge the fair value of certain brokered time deposits. Effectiveness was measured using the short-cut method. Upon further review of these arrangements at September 30, 2005, Synovus determined that these hedges did not qualify for the shortcut method of hedge accounting as the broker placement fee for the related certificates of deposit was factored into the pricing of the swaps. The hedging relationships were redesignated on September 30, 2005, using the cumulative dollar offset method to measure effectiveness. Prior years’ adjustments were evaluated under the rollover approach and the correction of these misstatements was not material to Synovus’ financial position, results of operations, in any ofor cash flows. Synovus has evaluated all transactions, events, and circumstances for consideration or disclosure through March 1, 2010, the years impacted. Brokered time depositsdate these financial statements were increased byissued, and has reflected or disclosed those items within the amount of the cumulative fair value basis adjustmentconsolidated financial statements and the associated deferred tax liability was removed, resulting in a net decrease in shareholders’ equity of $6.5 million, to correct the incorrect use of hedge accounting.
In the fourth quarter of 2004, Synovus entered into certain forward starting interest rate swaps to hedge the future interest payments on debt forecasted to be issued in 2005. Synovus accounted for these arrangementsrelated footnotes as cash flow hedges. Upon further review of these arrangements, during the second quarter of 2005, it was determined that the swaps did not qualify for hedge accounting treatment. The hedging relationships were redesignated during the second quarter of 2005. The prior years’ adjustments were evaluated under the rollover approach and the correction of these misstatements was not material to Synovus’ results of operations in any of the years impacted. Accumulated other comprehensive losses were


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Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

decreased and retained earnings were increased by $0.8 million, respectively, to correct the incorrect use of hedge accounting.
From 1993 through 2005, Synovus had errors in its calculation of deferred taxes for temporary differences related to certain business combinations and premises and equipment. The prior years’ errors were evaluated under the rollover approach and the correction of these misstatements was not material to Synovus results of operations in any of the years impacted. The deferred income tax liability was reduced by $10.7 million to correct the calculation errors.deemed appropriate.
 
Reclassifications
 
Certain prior yearsyear’s amounts have been reclassified to conform to the presentation adopted in 2008.2009.
 
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 and 2006 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 SFAS No. 144, “AccountingASC360-10 regarding accounting for the Impairmentimpairment or Disposaldisposal of Long-Lived Assets,”long-lived assets and SFAS No. 146, “AccountingASC420-10, accounting for Costs Associatedcosts associated with Exitexit or Disposal Activities,” thedisposal activities, historical consolidated results of operations of TSYS, as well as all costs associated with the spin-off of TSYS, are nowwere presented as a component of income from discontinued operations. The balance sheet as
Merchant Services
During 2009, Synovus committed to a plan to sell its merchant services business. As of December 31, 2007 does not include assets2009, the proposed sale transaction met the held for sale criteria under ASC360-10-15-49. Synovus expects the operations and liabilitiescash flows of TSYS.the merchant services business will be eliminated from its ongoing operations as a result of the proposed sale


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Notes to Consolidated Financial Statements ­ ­ (SYNOVUS LOGO)

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 minoritynon-controlling interest, in the consolidated statements of income:income.
 
                    
 Years Ended December 31,  Years Ended December 31, 
(In thousands) 2007 2006  2009 2008 2007 
TSYS revenues $1,835,412   1,806,604  $—   —   1,835,412 
Merchant services revenues  17,605   17,949   17,390 
            
TSYS income, net of minority interest and before income taxes  335,567   327,995 
Total Revenue $17,605   17,949   1,852,802 
       
TSYS income, before income taxes $—   —   335,567 
Income tax expense  143,668   126,181   —   —   143,668 
            
Income from discontinued operations, net of income taxes  191,899   201,814  $—   —   191,899 
            
Spin-off related expenses incurred by Synovus, before income taxes  13,858   —  $—   —   13,858 
Income tax benefit  (1,129)  —   —   —   (1,129)
            
Spin-off related expenses incurred by Synovus, net of income tax benefit  12,729   —  $—   —   12,729 
            
Gain on transfer of mutual funds, before income taxes  6,885   —  $—   —   6,885 
Income tax expense  2,685   —   —   —   2,685 
            
Gain on transfer of mutual funds, net of income taxes  4,200   —  $—   —   4,200 
            
Income from discontinued operations, net of income taxes and minority interest $183,370   201,814 
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 
       
 
Synovus adopted the provisions of FIN 48 as of January 1, 2007. Upon adoption, Synovus recognized a $2.0 million increase in the liability for uncertain tax positions, a corresponding decrease in minority interest of $377 thousand, and a decrease in retained earnings of $1.6 million as a cumulative effect adjustment with respect to discontinued operations.
 
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.
            
 Years Ended December 31,  December 31,
 
(In thousands) 2007 2006  2007 
Cash provided by operating activities $341,728   385,759  $341,728 
Cash used in investing activities  (162,476)  (164,179)  (162,476)
Cash used in financing activities  (376,685)  (69,597)  (376,685)
Effect of exchange rates on cash and cash equivalents  4,970   (429)  4,970 
        
Cash (used in) provided by discontinued operations $(192,463)  151,554 
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 expects to incurincurred restructuring charges of approximately $22.0$22.1 million in conjunction with the project, including $10.9$10.7 million in severance charges and $11.1$11.4 million in other project related costs. During the twelve monthsFor 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.charges, respectively. At December 31, 2008,2009, Synovus had an accrued liability of $2.9 million$532 thousand related to restructuring charges.
Note 4  Business Combinations
Effective on March 25, 2006, Synovus acquired all of the issued and outstanding common shares of Riverside Bancshares, Inc., the parent company of Riverside Bank (Riverside), headquartered in Marietta, Georgia. The aggregate purchase price was $171.4 million, consisting of 5,883,426 shares of Synovus common stock valued at $159.8 million, stock options valued at $11.4 million, and $182 thousand in direct acquisition costs. During the first quarter of 2006, concurrent with the acquisition, Riverside was merged into a subsidiary of Synovus, Bank of North Georgia. The results of operations of Riverside Bancshares have been included in Synovus’ consolidated financial statements beginning March 25, 2006.
Effective on April 1, 2006, Synovus acquired all of the issued and outstanding common shares of Banking Corporation of Florida, the parent company of First Florida Bank (First Florida), headquartered in Naples, Florida. The aggregate purchase price was $84.8 million, consisting of 2,938,791 shares of Synovus common stock valued at $80.1 million, stock options valued at $4.7 million and $24 thousand in direct acquisition


F-16

Notes to Consolidated Financial Statements ­ ­ (SYNOVUS LOGO)

costs. On April 28, 2008, First Florida was merged into a subsidiary of Synovus, Synovus Bank of Tampa Bay, and the merged entity was renamed Synovus Bank. The results of operations of First Florida have been included in Synovus’ consolidated financial statements beginning April 1, 2006.
 
Proforma information relating to the impact of these two acquisitions on Synovus’ consolidated financial statements, assuming such acquisitions had occurred at the beginning of the periods reported, is not presented as such impact is inconsequential.
 
Note 54  Trading Account Assets
 
The following table summarizes trading account assets at December 31, 20082009 and 2007,2008, 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 
         
         
(In thousands) 2008  2007 
 
U.S. Treasury and U.S. Government agency securities $274   162 
Mortgage-backed securities  19,422   16,839 
State and municipal securities  1,753   462 
Other investments  3,064   340 
         
Total $24,513   17,803 
         
 
Note 65  ImpairedOther 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 impairedother 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.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.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, 2008,2009, Synovus transferred loans with a cost basis totaling $72.7$225.8 million to the impairedother loans held for sale portfolio. Synovus recognized charge-offs totaling $22.1$89.2 million on these loans, resulting in a new cost basis for loans transferred to the impairedother loans held for sale portfolio of $50.6$136.6 million. The $22.1$89.2 million in charge-offs were estimated based on the estimatedprojected sales price of the portfolio through bulk sales.loans considering management’s disposition plan. Subsequent to their transfer to the impairedother loans held for sale portfolio, Synovus recognized additional write-downs of $3.2$6.7 million and recognized additional net losses on sales of $9.9$1.7 million. The additional write-downs were based on the estimated sales proceeds from pending sales.
 
The following table provides the classification of impaired loans heldNote 6  Investment Securities Available for sale at December 31, 2008.Sale
     
(In thousands)   
 
Commercial:
    
Real estate — construction $3,527 
     
Total $3,527 
     
Note 7  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, 20082009 and 20072008 are summarized as follows:
 
                                
 December 31, 2008  December 31, 2009 
   Gross
 Gross
 Estimated
    Gross
 Gross
 Estimated
 
 Amortized
 Unrealized
 Unrealized
 Fair
  Amortized
 Unrealized
 Unrealized
 Fair
 
(In thousands) Cost Gains Losses Value  Cost Gains Losses Value 
U.S. Treasury and U.S. Government agency securities $1,478,985   78,229   —   1,557,214 
Mortgage-backed securities  2,002,855   70,288   (730)  2,072,413 
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  120,552   3,046   (317)  123,281   80,931   2,029   (159)  82,801 
Equity securities  131,581   —   (1,288)  130,293   9,456   584   (59)  9,981 
Other investments  9,021   —   (74)  8,947   86,744   —   (889)  85,855 
                  
Total $3,742,994   151,563   (2,409)  3,892,148  $3,078,940   112,046   (2,251)  3,188,735 
                  


F-17

Notes to Consolidated Financial Statements ­ ­ (SYNOVUS LOGO)

                 
  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 
                 
 
 
                 
  December 31, 2007 
     Gross
  Gross
  Estimated
 
  Amortized
  Unrealized
  Unrealized
  Fair
 
(In thousands) Cost  Gains  Losses  Value 
 
U.S. Treasury and U.S. Government agency securities $1,916,005   30,639   (1,263)  1,945,381 
Mortgage-backed securities  1,436,445   6,714   (12,836)  1,430,323 
State and municipal securities  161,697   3,178   (319)  164,556 
Equity securities  114,205   25   —   114,230 
Other investments  12,560   —   (76)  12,484 
                 
Total $3,640,912   40,556   (14,494)  3,666,974 
                 
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, 20082009 and 20072008 were as follows:
 
 
                                                
 December 31, 2008  December 31, 2009 
 Less than 12 Months 12 Months or Longer Total Fair Value  Less than 12 Months 12 Months or Longer Total Fair Value 
 Fair
 Unrealized
 Fair
 Unrealized
 Fair
 Unrealized
  Fair
 Unrealized
 Fair
 Unrealized
 Fair
 Unrealized
 
(In thousands) Value Losses Value Losses Value Losses  Value Losses Value Losses Value Losses 
U.S. Treasury and U.S. Government agency securities $—   —   —   —   —   — 
Mortgage-backed securities  139,838   (535)  27,584   (195)  167,422   (730)
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  4,724   (142)  2,246   (175)  6,970   (317)  5,833   (105)  1,308   (54)  7,141   (159)
Equity securities  4,012   (1,288)  —   —   4,012   (1,288)  2,756   (59)  —   —   2,756   (59)
Other investments  —   —   926   (74)  926   (74)  79,813   (889)  —   —   79,813   (889)
                          
Total $148,574   (1,965)  30,756   (444)  179,330   (2,409) $325,233   (2,197)  1,308   (54)  326,541   (2,251)
                          
 
                                                
 December 31, 2007  December 31, 2008 
 Less than 12 Months 12 Months or Longer Total Fair Value  Less than 12 Months 12 Months or Longer Total Fair Value 
 Fair
 Unrealized
 Fair
 Unrealized
 Fair
 Unrealized
  Fair
 Unrealized
 Fair
 Unrealized
 Fair
 Unrealized
 
(In thousands) Value Losses Value Losses Value Losses  Value Losses Value Losses Value Losses 
U.S. Treasury and U.S. Government agency securities $104,857   (218)  335,372   (1,045)  440,229   (1,263)
Mortgage-backed securities  356,124   (1,314)  527,472   (11,522)  883,596   (12,836)
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  8,459   (55)  12,745   (264)  21,204   (319)  4,724   (142)  2,246   (175)  6,970   (317)
Equity securities  —   —   —   —   —   —   4,012   (1,288)  —   —   4,012   (1,288)
Other investments  —   —   1,674   (76)  1,674   (76)  —   —   926   (74)  926   (74)
                 ��         
Total $469,440   (1,587)  877,263   (12,907)  1,346,703   (14,494) $148,574   (1,965)  30,756   (444)  179,330   (2,409)
                          
 


F-18

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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, 2008, Synovus did not have any unrealized losses in this securities category. As of December 31, 2007,2009, 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, and not credit quality. Because Synovus had the ability and intent to hold these investments until a recovery of fair value, theseincreases. These investments were not considered to beother-than-temporarily impaired at December 31, 2007.2009.
 
Government Agency Issued Mortgage-backed securities.  The unrealized losses on investment in mortgage-backed securities were caused by interest rate increases. At December 31, 2008,2009, 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, and because Synovus has the ability and intent to


F-18

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

hold these investments until a recovery of fair value, which may be at maturity, Synovus does not consider these investments to beother-than-temporarily impaired at December 31, 2008 or December 31, 2007.2009.
 
The amortized cost and estimated fair value by contractual maturity of investment securities available for sale at December 31, 20082009 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
  Amortized
 Estimated
 
(In thousands) Cost Fair Value  Cost Fair Value 
U.S. Treasury and U.S. Government agency securities:        
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 $243,706   249,131  $266,197   272,286 
1 to 5 years  544,728   577,287   324,933   337,472 
5 to 10 years  509,538   534,357   282,597   289,978 
More than 10 years  181,013   196,439   27,257   27,890 
          
 $1,478,985   1,557,214  $900,984   927,626 
          
State and municipal securities:                
Within 1 year $13,811   13,936  $8,452   8,503 
1 to 5 years  50,739   52,029   37,569   38,556 
5 to 10 years  44,599   45,916   25,387   26,090 
More than 10 years  11,403   11,400   9,523   9,652 
          
 $120,552   123,281  $80,931   82,801 
          
Other investments:                
Within 1 year $250   250  $—   — 
1 to 5 years  997   997   81,699   80,810 
5 to 10 years  1,800   1,800   900   900 
More than 10 years  5,974   5,900   4,145   4,145 
          
 $9,021   8,947  $86,744   85,855 
          
 
Equity securities $131,581   130,293  $9,456   9,981 
          
Mortgage-backed securities $2,002,855   2,072,413 
Government agency issued mortgage-backed securities $1,795,688   1,873,980 
          
Total investment securities: $3,742,994   3,892,148 
Government agency issued collateralized mortgage obligations $83,632   86,903 
          
Within 1 year $257,767   263,317 
1 to 5 years  596,464   630,313 
5 to 10 years  555,937   582,073 
More than 10 years  198,390   213,739 
Equity securities  131,581   130,293 
Mortgage-backed securities  2,002,855   2,072,413 
Total investment securities $3,078,940   3,188,735 
          
 $3,742,994   3,892,148 
     


F-19

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

         
  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, 2007, and 20062007 is as follows:
 
                        
   Gross
 Gross
    Gross
 Gross
 
   Realized
 Realized
    Realized
 Realized
 
(In thousands) Proceeds Gains Losses  Proceeds Gains Losses 
2009(1)
 $260,041   14,992   (925)
2008
 $165,623   45   —   165,623   45   — 
2007  25,482   1,056   (76)  25,482   1,056   (76)
2006  130,547   —   (2,118)
 
(1)Gross realized losses include a $900 thousand charge for other-than-temporary impairment.
At December 31, 2008 and 2007, investment securities with a carrying value of $3.1 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.
 
Note 87  Loans and Allowance for Loan Losses
 
Loans outstanding, by classification, are summarized as follows:
 
                
 December 31,  December 31, 
(In thousands) 2008 2007  2009 2008 
Commercial:                
Commercial, financial, and agricultural $6,874,904   6,420,689  $6,118,516   6,747,928 
Owner occupied  4,521,414   4,226,707   4,584,278   4,499,339 
Real estate — construction  7,336,943   8,022,179   5,208,218   7,295,727 
Real estate — mortgage  4,840,423   3,877,808   5,279,174   5,024,640 
          
Total commercial  23,573,684   22,547,383   21,190,186   23,567,634 
          
Retail:                
Real estate — mortgage  3,485,818   3,211,625   3,352,972   3,488,524 
Retail loans — credit card  295,055   291,149   294,126   295,055 
Retail loans — other  603,003   494,591   565,132   606,347 
          
Total retail  4,383,876   3,997,365   4,212,230   4,389,926 
          
Total loans  27,957,560   26,544,748   25,402,416   27,957,560 
          
Unearned income  (37,383)  (46,163)  (19,348)  (37,383)
          
Total loans, net of unearned income $27,920,177   26,498,585  $25,383,068   27,920,177 
          
 


F-19

NotesTotal commercial real estate loans represent 41.3% of the total loan portfolio at December 31, 2009. Due to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)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,  Years Ended December 31, 
(In thousands) 2008 2007 2006  2009 2008 2007 
Balance at beginning of year $367,613   314,459   289,612  $598,301   367,613   314,459 
Allowance for loan losses of acquired subsidiaries  —   —   9,915 
Provision for losses on loans  699,883   170,208   75,148   1,805,599   699,883   170,208 
Recoveries of loans previously charged off  17,076   14,155   12,590   32,431   17,076   14,155 
Loans charged off  (486,271)  (131,209)  (72,806)  (1,492,606)  (486,271)  (131,209)
              
Balance at end of year $598,301   367,613   314,459  $943,725   598,301   367,613 
              
 
 
At December 31, 2008,2009, the recorded investment in loans that were considered to be impaired (including accruing TDRs) was $726.1 million.$1.53 billion. Included in this amount is $618.2$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 SFAS No. 114, “Accountingprovisions 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, 20082009 also include $108.0$733.8 million of impaired loans for which the related allowance for loan losses is $26.2$150.5 million. At December 31, 2008,2009, all impaired loans, other than $213.6 million of accruing TDRs, were on non-accrual status.
 
At December 31, 2007,2008, the recorded investment in loans that were considered to be impaired (including accruing TDRs) was $264.9$727.3 million. Included in this amount was $233.2$618.2 million of impaired loans (which consisted primarily of collateral dependent loans) for which there iswas no related allowance for loan losses.losses determined in accordance with provisions included in sections. The allowance on these loans iswas zero because estimated losses on collateral dependent impaired loans included in this total have been charged-off. Impaired loans at December 31, 20072008 (including accruing TDRs) also include $31.7included $109.2 million of impaired loans for which the related allowance for loan losses is $6.4was $26.2 million. At December 31, 2007,2008, all impaired loans, other than $1.2 million of accruing TDR’s, were on non-accrual status.


F-20

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

 
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 $575.4 million, $148.1$1.37 billion, $576.6 million, and $67.1$149.5 million for the years ended December 31, 2009, 2008, and 2007, and 2006, respectively. ThereExcluding 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 and 2006.respectively.
 
Loans on nonaccrual status amount to $921.7 million, $341.9 million,were $1.56 billion and $96.2$920.5 million at December 31, 2008, 2007,2009 and 2006,2008, respectively.
 
Interest income on non-performingnon-accrual loans outstanding onat 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 yearyears ended December 31, 2008.2009 and 2008, respectively. Interest income recorded on these loans for the yearyears ended December 31, 2009 and 2008, respectively, was $67.3 million and $52.2 million.
 
A substantial portion of the loans areloan 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, 2008.2009.
 
        
(In thousands)      
Balance at December 31, 2007 $313,516 
Balance at December 31, 2008
 $468,808 
Adjustment for executive officer and director changes  (134,429)  (2,277)
      
Adjusted balance at December 31, 2007  179,087 
Adjusted balance at December 31, 2008  466,531 
New loans  568,808   219,375 
Repayments  (402,272)  (198,169)
Loans charged-off
  (49,660)
      
Balance at December 31, 2008 $345,623 
Balance at December 31, 2009
 $438,077 
      
 


F-20

NotesAt December 31, 2009, loans to Consolidated Financial Statementsexecutive 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 affiliates­ ­and/or (SYNOVUS LOGO)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 98  Goodwill and Other Intangible Assets
 
The following table shows the changes in the carrying amount of goodwill for the years ended December 31, 20082009 and 2007.2008.
 
     
(In thousands) Goodwill 
 
Balance as of December 31, 2006 $515,719 
Goodwill acquired(1)(2)
  3,419 
Impairment losses  — 
     
Balance as of December 31, 2007
  519,138 
Goodwill acquired
  — 
Impairment losses
  479,617 
     
Balance as of December 31, 2008
 $39,521 
     
(1)$1.9 million pertains to contingent consideration relating to the GLOBALT acquisition.
(2)During the year ended December 31, 2007, Synovus finalized the purchase price allocation of the Riverside and First Florida acquisitions. This resulted in increases in goodwill of $1.3 million and $259 thousand for Riverside and First Florida, respectively.
         
  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 
         
 
Under SFAS No. 142 (SFAS No. 142), “Goodwill and Other Intangible Assets,” goodwill is required to be tested for impairment annually, or more frequently if events or circumstances indicate that there may be impairment. Synovus used the combination of the income approach utilizing the discounted cash flow (DCF) method, and the guideline company method using a combination of price to tangible book value, price to book value, and price to earnings to estimate the fair value of a reporting unit.
Impairment is tested at the reporting unit (sub-segment) level involving two steps. Step 1 compares the fair value of the reporting unit to its carrying value. If the fair value is greater than carrying value, there is no indication of impairment. Step 2 is performed when the fair value determined in Step 1 is less than the carrying value. Step 2 involves a process similar to business combination accounting where fair values are assigned to all assets, liabilities, and intangibles. The result of Step 2 is the implied fair value of goodwill. If the Step 2 implied 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.
 
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 (pre-tax and after-tax).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 ­ (SYNOVUS LOGO)

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.
 


F-21

NotesDuring 2009, Synovus recognized an additional charge of $15.1 million for impairment of goodwill. The 2009 impairment charge was due to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)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, 20082009 and 20072008 are presented in the following table:table.
 
                                
 2008  2009 
 Gross
        Gross
       
 Carrying
 Accumulated
      Carrying
 Accumulated
     
(In thousands) Amount Amortization Impairment Net  Amount Amortization Impairment Net 
Other intangible assets:                                
Purchased trust revenues $4,210   (2,128)  —   2,082  $4,210   (2,409)  —   1,801 
Acquired customer contracts  5,270   (3,467)  (1,049)  754   5,270   (4,883)  —   387 
Core deposit premiums  46,331   (28,416)  —   17,915   46,331   (32,330)  —   14,001 
Other  666   (151)  —   515   665   (205)  —   460 
                  
Total carrying value $56,477   (34,162)  (1,049)  21,266  $56,476   (39,827)  —   16,649 
                  
 
                                
 2007  2008 
 Gross
        Gross
       
 Carrying
 Accumulated
      Carrying
 Accumulated
     
 Amount Amortization Impairment Net  Amount Amortization Impairment Net 
Other intangible assets:                                
Purchased trust revenues $4,210   (1,848)  —   2,362  $4,210   (2,128)  —   2,082 
Acquired customer contracts  5,270   (2,863)  —   2,407   5,270   (3,467)  (1,049)  754 
Core deposit premiums  46,331   (23,663)  —   22,668   46,331   (28,416)  —   17,915 
Other  666   (96)  —   570   666   (151)  —   515 
                  
Total carrying value $56,477   (28,470)  —   28,007  $56,477   (34,162)  (1,049)  21,266 
                  
 
 
Aggregate other intangible assets amortization expense for the years ended December 31, 2009, 2008, and 2007 and 2006 was $4.6 million, $5.6 million, $5.1 million, and $5.8$5.1 million, respectively. Aggregate estimated amortization expense over the next five years is: $4.5 million in 2009, $4.1 million in 2010, $3.7 million in 2011, $3.2 million in 2012, and $1.6 million in 2013.2013, 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 ­ (SYNOVUS LOGO)

December 31, 2008. The impairment charge was recorded based on management’s estimate that the recorded values would not be recoverable andrecoverable. The charge is presented inrepresented as a component of other operating expenses onin the consolidated statement of income.
 
Note 109  Other Assets
 
Significant balances included in other assets at December 31, 20082009 and 20072008 are as follows:
 
                
(In thousands) 2008 2007  2009 2008 
Accrued interest receivable $171,909   244,521  $127,869   171,909 
Accounts receivable  45,331   52,924   24,471   45,331 
Cash surrender value of bank owned life insurance  376,746   361,737   247,220   384,579 
Other real estate (ORE)  246,121   101,487   238,807   246,121 
FHLB/FRB Stock  142,001   122,126 
Private equity investments  123,475   55,575   48,463   123,475 
Prepaid expenses  31,774   40,505 
FDIC prepaid deposit insurance assessments  188,855   — 
Other prepaid expenses  20,741   23,941 
Net current income tax benefit  95,768   46,029   335,656   82,921 
Net deferred income tax assets  163,270   117,172   11,945   163,270 
Derivative asset positions  307,771   112,021   114,535   307,771 
Miscellaneous other assets  53,100   99,123   209,258   65,947 
          
Total other assets $1,615,265   1,231,094  $1,709,821   1,737,391 
          
 


F-22

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)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 1110  Interest Bearing Deposits
 
A summary of interest bearing deposits at December 31, 20082009 and 20072008 is as follows:
 
                
(In thousands) 2008 2007  2009 2008 
Interest bearing demand deposits $3,359,410   3,362,572  $3,894,243   3,359,410 
Money market accounts  8,094,452   7,557,031   7,363,677   8,094,452 
Savings accounts  437,656   442,824   463,967   437,656 
Time deposits under $100,000  3,274,327   2,773,815 
Time deposits of $100,000 or more  9,887,715   7,351,151 
Time deposits  11,538,949   13,162,042 
          
Total interest bearing deposits $25,053,560   21,487,393  $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. Interest expense for the years ended December 31, 2008, 2007, and 2006 onThe aggregate amount of time deposits of $100,000 or more was $332.4 million, $364.2 million,$8.75 billion at December 31, 2009 and $299.7 million, respectively.$9.89 billion at December 31, 2008.
 
The following table presents scheduled cash maturities of time deposits at December 31, 2008:2009.
 
        
(In thousands)      
Maturing within one year $10,677,461  $8,430,495 
between 1 — 2 years  1,923,149   2,233,808 
2 — 3 years  260,762   676,516 
3 — 4 years  115,981   107,997 
4 — 5 years  104,755   72,508 
Thereafter  76,933   17,625 
      
 $13,159,041  $11,538,949 
      


F-23

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

 
Note 1211  Long-Term Debt and Short-Term Borrowings
 
Long-term debt at December 31, 20082009 and 20072008 consists of the following:
 
                
(In thousands) 2008 2007  2009 2008 
Parent Company:                
4.875% subordinated notes, due February 15, 2013, with semi-annual interest payments and principal to be paid at maturity $272,190   300,000  $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   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 3.80% at December 31, 2008)  10,082   10,150 
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  50,111   11,533   35,017   50,111 
          
Total long-term debt — Parent Company $782,383   771,683   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 .45% to 6.09% at December 31, 2008 (weighted average interest rate of 1.50% at December 31, 2008) $1,317,992   1,111,420 
Other notes payable and capital leases with interest and principal payments due at various maturity dates through 2031 (weighted average interest rate of 4.30% at December 31, 2008)  6,798   7,132 
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  1,324,790   1,118,552   1,049,811   1,324,790 
          
Total long-term debt $2,107,173   1,890,235  $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 SynovusSynovus’ subordinated notes and debentures contain certain restrictions, within specified limits, on mergers, disposition of common stock or assets, and investments in subsidiaries, and limit


F-23

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

Synovus’ ability to pay dividends on its capital stock if there is an event of default under the applicable indenture. As of December 31, 2008,2009, Synovus and its subsidiaries were in compliance with the covenants in these agreements.
 
The Federal Home Loan BankFHLB advances are secured by certain loans receivable of approximately $3.5$4.0 billion, as well as investment securities with a fair market value of approximately $68.5$59.2 million at December 31, 2008.
Synovus had an unsecured line of credit with an unaffiliated bank for $25 million which expired during the year ended December 31, 2008 in accordance with its terms. The line of credit provided for an interest rate of 50 basis points above the short-term index, as defined, and an annual commitment fee of .125% on the average daily available balance. There were no advances outstanding at December 31, 2007.2009.
 
Required annual principal payments on long-term debt for the five years subsequent to December 31, 20082009 are shown on the following table:
 
                        
 Parent
      Parent
     
(In thousands) Company Subsidiaries Total  Company Subsidiaries Total 
2009 $—   588,533   588,533 
2010  —   606,471   606,471  $—   621,289   621,289 
2011  —   78,394   78,394   —   103,949   103,949 
2012  —   42,926   42,926   —   313,481   313,481 
2013  272,190   2,936   275,126   206,750   5,716   212,466 
2014  —   480   480 
 
 
The following table sets forth certain information regarding Federalfederal funds purchased and securities sold under repurchase agreements, the principal components of short-term borrowings.
 
                        
(In thousands) 2008 2007 2006 
(Dollars in thousands) 2009 2008 2007 
Balance at December 31 $725,869   2,319,412   1,582,487  $475,062   725,869   2,319,412 
Weighted average interest rate at December 31  .68%  3.81%  4.97%  .53%  .68%  3.81%
Maximum month end balance during the year $2,544,913   2,767,055   1,986,919  $1,580,259   2,544,913   2,767,055 
Average amount outstanding during the year  1,719,978   1,957,990   1,578,163   918,736   1,719,978   1,957,990 
Weighted average interest rate during the year  2.24%  4.75%  4.62%  0.42%  2.24%  4.75%
 


F-24

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

 
Note 1312  Cumulative Perpetual Preferred StockEquity
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 United States Department of the Treasury (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 our 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. The recently enacted American Recovery and Reinvestment Act and the Treasury’s February 10, 2009, Financial Stability Plan and regulations that may be adopted under these laws may retroactively affect Synovus and modify the terms of the Series A Preferred Stock. In particular, the ARRA provides that the Series A Preferred Stock may now be redeemed at any time with the consent of the Federal Deposit Insurance Corporation.
 
As part of the issuanceits purchase of the Series A Preferred Stock, Synovus issued to the Treasury a warrant to purchase up to 15,510,737 shares of Synovus common stock (the Warrant)(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 ourSynovus common stock, and upon certain issuances of ourSynovus 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


F-24

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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 Synovus 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 ­ (SYNOVUS LOGO)

total proceeds received from the United States Department of the Treasury based on the relative fair values of the preferred sharesSeries A Preferred Stock and the warrants.Warrants. This allocation resulted in the Series A Preferred Stockpreferred 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 will beis 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 ­ (SYNOVUS LOGO)

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 ­ (SYNOVUS LOGO)

Note 14  Other Comprehensive Income (Loss)
 
The components of other comprehensive income (loss) for the years ended December 31, 2009, 2008, 2007, and 20062007 are as follows:
 
                                     
  2008  2007  2006 
  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 on cash flow hedges $34,928   (13,339)  21,589   29,859   (11,525)  18,334   5,909   (2,259)  3,650 
Net unrealized gains on investment securities available for sale:                                    
Unrealized gains arising during the year  123,137   (47,064)  76,073   51,794   (19,940)  31,854   19,456   (7,482)  11,974 
Reclassification adjustment for (gains) losses realized in net income  (45)  17   (28)  (980)  377   (603)  2,118   (824)  1,294 
                                     
Net unrealized gains  123,092   (47,047)  76,045   50,814   (19,563)  31,251   21,574   (8,306)  13,268 
Amortization of postretirement unfunded health benefit, net of tax  290   (110)  180   1,315   (498)  817   —   —   — 
Foreign currency translation gains (losses)  —   —   —   7,621   (1,470)  6,151   16,688   (3,813)  12,875 
                                     
Other comprehensive income $158,310   (60,496)  97,814   89,609   (33,056)  56,553   44,171   (14,378)  29,793 
                                     
                                     
  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 $7.4$33.4 million, $3.1$20.3 million, and $2.5($1.4) million for the years ended December 31, 2009, 2008, 2007, and 20062007, respectively, all of which were included in earnings. During 2009, 2008, 2007, and 2006,2007, Synovus recorded cash (payments) receipts on terminated cash flow hedges of $10.3 million, $2.2 million, and ($1.3) million, and $159 thousand, 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 waswere three terminated cash flow hedges during 2009, one terminated cash flow hedge during 2008, and two terminated cash flow hedges during 2007, and one2007. The amortization on all previously terminated cash flow hedge during 2006. The corresponding net amortization on these settlements was approximately $4.0 million, $17 thousand, and ($816) thousand in 2009, 2008, and ($389) thousand in 2008, 2007, and 2006, 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, and $5.6 million in 2006.2007.


F-25F-28

Notes to Consolidated Financial Statements ­ ­ (SYNOVUS LOGO)

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, 2007, and 2006.2007.
 
                        
 Years Ended December 31,  Years Ended December 31, 
(In thousands, except per share data) 2008 2007 2006  2009 2008 2007 
Income (loss) from continuing operations $(582,438)  342,935   415,103  $(1,433,931)  (580,376)  337,969 
Preferred stock dividends  2,057   —   — 
Income from discontinued operations, net of income taxes and non-controlling interest  4,590   5,650   188,336 
              
Income available, (loss) attributable, to common shareholders  (584,495)  342,935   415,103 
Income from discontinued operations, net of income taxes and minority interest  —   183,370   201,814 
Net income (loss)  (1,429,341)  (574,726)  526,305 
Net income attributable to non-controlling interest  2,364   7,712   — 
              
Net income (loss) available (attributable) to common shareholders $(584,495)  526,305   616,917 
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  329,319   326,849   321,241  $372,943   329,319   326,849 
Potentially dilutive shares from assumed exercise of securities or other contracts to purchase common stock*  —   3,014   2,991   —   —   3,014 
              
Diluted  329,319   329,863   324,232  $372,943   329,319   329,863 
              
Basic earnings per share:            
Income (loss) from continuing operations $(1.77)  1.05   1.29 
Net income (loss)  (1.77)  1.61   1.92 
Diluted earning per share:            
Income (loss) from continuing operations $(1.77)  1.04   1.28 
Net income (loss)  (1.77)  1.60   1.90 
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 yearyears 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 ­ (SYNOVUS LOGO)

 
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
    Weighted Average
 
 Number
 Exercise Price
  Number
 Exercise Price
 
Quarter Ended
 of Shares Per Share  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)  12,577,751  $27.69(2)
September 30, 2007  4,902,564  $29.38   4,902,564   29.38 
June 30, 2007  2,500  $32.57   2,500   32.57 
March 31, 2007  2,500  $32.57   2,500   32.57 
December 31, 2006  11,863  $30.61 
September 30, 2006  4,651,345  $29.21 
June 30, 2006  5,727,935  $28.79 
March 31, 2006  5,710,605  $28.89 
 
(1)Due to the net loss attributable to common shareholders for the yearyears 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 2022 for the adjustment to the exercise price of all options outstanding at December 31, 2007 in connection with the TSYS spin-off.
 
 
Note 16  Derivative Instruments, Commitments and ContingenciesFair 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 ­ (SYNOVUS LOGO)

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 ­ (SYNOVUS LOGO)

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 ­ (SYNOVUS LOGO)

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 ­ (SYNOVUS LOGO)

                 
  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 ­ (SYNOVUS LOGO)

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 ­ (SYNOVUS LOGO)

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 $(1,312)  — 
Assets Measured at Fair Value on a Non-recurring Basis
In February 2008, the FASB issued provisions included in ASC820-10-15-1A which delayed the effective date for application of the provisions included in ASC825-10 regarding fair value measurements and disclosures for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. As of January 1, 2009, Synovus adopted the provisions of ASC820-10-15-1A for all non-financial assets and non-financial liabilities.
Certain assets and liabilities are measured at fair value on a non-recurring basis. These assets and liabilities are measured at fair value on a non-recurring basis and are not included in the tables above. These assets and liabilities primarily include impaired loans, other loans held for sale, other real estate, and goodwill. The amounts below represent only balances measured at fair value during the period and still held as of the reporting date.
December 31, 2009
(In millions)Level 1Level 2Level 3
Goodwill$——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 1Level 2Level 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 ­ (SYNOVUS LOGO)

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.


F-37

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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.
                 
  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 to

F-26

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

fund fixed-rate mortgage loans made to prospective mortgage loan customers. MortgageInterest rate lock commitments represent derivative instruments since it is intended that such loans will be sold.
Synovus originates first lien residential mortgage loans for sale into the secondary market and generally does not hold the originated loans for investment purposes. Mortgage loans are either converted to securities or are sold to a third party servicing aggregator.
At December 31, 2008 Synovus had commitments to fund fixed-rate mortgage loans to customers in the amount of $317.5 million. The fair value of these commitments at December 31, 2008 was an unrealized gain of $2.4 million, which was recorded as a component of mortgage banking income in the consolidated statements of income.
At December 31, 2008, outstanding commitments to sell fixed-rate mortgage loans amounted to approximately $467.2 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, 2008 was an unrealized loss of $3.5 million, which was recorded as a component of mortgage banking income in the consolidated statements of income.
 
Synovus utilizes interest rate swaps to manage interest rate risks, primarily arising from its core banking activities. These interest rate swap transactions generally involve the exchange of fixed and floating rate interest rate payment obligations without the exchange of underlying principal amounts. Entering into interest rate derivatives potentially exposes Synovus to the risk of counterparties’ failure to fulfill their legal obligations including, but not limited to, potential amounts due or payable under each derivative contract. Notional principal amounts often are used to express the volume of these transactions, but the amounts potentially subject to credit risk are much smaller.
 
The receive fixed interest rate swap contracts at December 31, 20082009 are being utilized to hedge $850$550.0 million in floating rate loans and $993.9$265.0 million in fixed-rate liabilities. A summary of interest rate contracts and their terms at December 31, 20082009 and 20072008 is shown below. In accordance with the provisions of SFAS No. 133,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 ­ (SYNOVUS LOGO)

 
                            
   Weighted
   Weighted
     Net
                         
   Average
 Weighted
 Average
     Unrealized
    Weighted-Average     
 Notional
 Receive
 Average Pay
 Maturity
 Unrealized
 Unrealized
 Gains
  Notional
 Receive
 Pay
 Maturity
 Fair Value 
(Dollars in thousands) Amount Rate Rate* In Months Gains Losses (Losses)  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)  38,481  $993,936   3.88%  1.52%  25  $38,482   1 
Cash flow hedges
  850,000   7.86%  3.25%  25   65,125   —   65,125   850,000   7.86   3.25   25   65,125   — 
                  
Total
 $1,843,936   5.72%  2.31%  25  $103,607   (1)  103,606  $1,843,936   5.72%  2.31%  25  $103,607   1 
                
December 31, 2007                            
Receive fixed swaps:                            
Fair value hedges $1,957,500   4.97%  4.87%  25  $20,349   (2,268)  18,081 
Cash flow hedges  800,000   8.06%  7.25%  34   32,340   —   32,340 
         
Total $2,757,500   5.87%  5.56%  28  $52,689   (2,268)  50,421 
         
 
*Variable pay rate based upon contract rates in effect at December 31, 20082009 and 2007.2008.
 
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. AsThe effective portion of December 31, 2008 cumulative ineffectiveness for Synovus’ portfoliothe gain or loss on the derivative instrument is reported as a component of cash flow hedges represented a gain of approximately $242 thousand.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.


F-27

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

 
Synovus expects to reclassify from accumulated other comprehensive income (loss) approximately $21$24.2 million as net-of-taxpre-tax income during the next twelve months, as the related payments for interest rate swaps and amortization of deferred gains (losses) are recorded.
 
During 20082009 and 2007,2008, Synovus terminated certain cash flow hedges which resulted in a net pre-tax gaingains of $2.2$10.3 million and a net pre-tax loss of $1.3$2.2 million, respectively. These gains (losses) have been included as a component of accumulated other comprehensive income (loss) 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 (expense).income. The remaining unamortized deferred gain (loss) balances of all previously terminated cash flow hedges at December 31, 2009 and 2008 and 2007 were ($808) thousand$4.2 million and ($4.4)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 at the end of 2008 which resulted in a net pre-tax gaingains of $24.1 million and $18.9 million.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 waswere $35.0 million and $18.9 million. There were no fair value hedges terminated during 2007.million, respectively.
 
Synovus designates hedges of fixed rate liabilities as fair value hedges. These swaps hedge against the change in fair market value of various fixed rate liabilities due to changes in the benchmark interest rate LIBOR. Synovus calculates effectiveness of the hedging relationships quarterly using regression analysis for all fair value hedges. As of December 31, 2008, cumulative ineffectiveness for Synovus’ portfolio of fair value hedges represented a gain of approximately $983 thousand. Ineffectiveness from fair value hedges is recognized in the consolidated statements of income as other non-interest income.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 risk to Synovus.interest rate risk. These derivative financial instruments are reportedrecorded at fair value with any


F-39

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

resulting gain or loss recorded in current period earnings. As of December 31, 20082009 and 2007,2008, the notional amountamounts of customer related interest rate derivative financial instruments, including both the customer position and the offsetting position, was $3.71were $2.78 billion and $2.96$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, 2008,2009, Synovus had derivative positions for customer interest rate risk management needs with unrealized gainscommitments to fund primarily fixed-rate mortgage loans to customers in the amount of $201.8 million and unrealized losses of $202.9 million for a net unrealized loss of $1.1$107.9 million. The fair value of the customer positions is reflectedthese commitments at December 31, 2009 resulted in an unrealized gain of $199 thousand, which was recorded as a component of other assetsmortgage 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 the offsetting position is reflectedoutstanding 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 other liabilitiesmortgage 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.


F-40

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

The impact of derivatives on the balance sheet at December 31, 2008.2009 and 2008 is presented below:
 
Loan Commitments
                     
  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 Letters2008 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)
                                         


F-41

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

The effect of Creditfair 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 ­ (SYNOVUS LOGO)

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.
 
Synovus provides credit enhancements in the form of standby letters of credit to assist certain commercial customers in obtaining long-term funding through taxable and tax-exempt bond issues. Under these agreements and under certain conditions, if the bondholder requires the issuer to repurchase the bonds, Synovus is obligated to provide funding under the letter of credit to the issuer to finance the repurchase of the bonds by the issuer. Bondholders (investors) may require the issuer to repurchase the bonds for any reason, including general liquidity needs of the investors, general industry/ market considerations, as well as changes in Synovus’ credit ratings. Synovus’ maximum exposure to credit loss in the event of nonperformance by the counterparty is represented by the contract amount of those instruments. Synovus applies the same credit policies in entering into commitments and conditional obligations as it does for loans. The maturities of the funded letters of credit range from one to fifty-nine months, and the yields on these instruments are comparable to average yields for new commercial loans. Synovus has issued approximately $1.6 billion in letters of credit related to these bond issuances. At December 31, 2008, approximately $500 million was funded under these standby letters of credit agreements, all of which is reported as a component of total loans. As of February 26, 2009, approximately $294 million has been funded subsequent to December 31, 2008 related to these bond repurchases, bringing the total amount of funding related to bond repurchases to $794 million.
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


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Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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, 20082009 include the following:
 
        
(In thousands)      
Standby and commercial letters of credit $1,753,754  $503,196 
Commitments to fund commercial real estate, construction, and land development loans  1,362,512   572,253 
Unused credit card lines  1,535,734   1,527,830 
Commitments under home equity lines of credit  970,500   796,196 
Other loan commitments  3,513,092   3,191,528 
      
Total $9,135,592  $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, 2008,2009, minimum rental commitments under all such non-cancelable leases for the next five years and thereafter are as follows:
 
        
(In thousands)      
2009 $20,458 
2010  20,051  $20,487 
2011  19,019   20,099 
2012  18,728   19,735 
2013  17,954   19,145 
2014  16,442 
Thereafter  136,087   125,788 
      
Total $232,297  $221,696 
      
 
 
Rental expense on facilities was $28.5$30.6 million, $24.5$28.4 million, and $19.6$24.4 million for the years ended December 31, 2009, 2008, 2007, and 2006,2007, respectively.
 
Visa Litigation
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 17 for further discussion of the Visa litigation.
Legal Proceedings
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. In the pending regulatory matter described below, loss contingencies are not reasonably estimable in the view of management, and, accordingly, an accrual has not been established for this matter. 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 the pending regulatory matterthose described below, will have a material


F-43

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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 FDICFederal 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


F-29

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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 and expended the civil money penalty, asand 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, 2008,2009, 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


F-44

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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.
 
Note 17  Visa Initial Public Offering and Litigation Expense
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 a memberavailable to it, Synovus’ management is unable to predict the outcome of the Visa USA network. Under Visa USA bylaws, Visa members are obligatedpurported 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 indemnify Visa USAand/it, Synovus presently does not believe that the Securities Class Action or its parent company, Visa, Inc., for potential future settlement the Shareholder Derivative Lawsuits, when resolved, will have a material adverse effect on Synovus’ consolidated financial condition, results of operations, or judgments resultingcash flows.
Synovus has received a letter from certain litigation, which Visa refers to as the “covered litigation.” Synovus’ indemnification obligation is limited to its membership proportion of Visa USA. In November 2007, Visa announced the settlement of its American Express litigation, and disclosed in its annual report to the SEC onForm 10-K forAtlanta 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 year ended September 30, 2007federal securities laws”. The SEC has not asserted, nor does management believe, that Visa had accrued a contingent liability forSynovus or any person or entity has committed any securities violations. Synovus intends to cooperate fully with the estimated settlement of its Discover litigation. During


F-30

NotesSEC’s informal inquiry. Based upon information presently available to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

it, Synovus’ management is unable to predict the second half of 2007, Synovus recognized a contingent liability in the amount of $36.8 million as an estimate for its membership proportionoutcome of the American Express settlementinformal SEC inquiry and cannot currently reasonably determine the probability of a material adverse result or reasonably estimate a range of potential Discover settlement, as well as its membership proportion of the amount that Synovus estimated would be required for Visa to settle the remaining covered litigation.
Visa, Inc. completed an initial public offering (the Visa IPO) in March 2008. Visa used a portion of the proceeds from the Visa IPO to establish a $3.0 billion escrow for settlement of covered litigation and used substantially all of the remaining portion to redeem Class B and Class C shares held by Visa issuing members. In March 2008, Synovus recognized a pre-tax gain of $38.5 million on redemption proceeds received from Visa, Inc. and reduced the $36.8 million litigation accrual recognized in the second half of 2007 by $17.4 million for its pro-rata share of the $3.0 billion escrow established by Visa, Inc. In October 2008, Visa announced that it had reached an agreement in principle to settle its litigation brought against Visa in 2004 by Discover Financial Services (Discover), and also disclosed the specific terms of the settlement. Effective September 2008, Synovus recognized an additional $6.3 million accrued liability in conjunction with Visa’s settlement of the Discover litigation. In December 2008, Visa repurchased a portion of its Class B shares held by Visa members and deposited the $1.1 billion proceeds into the litigation escrow on behalf of Visa members. Accordingly, Synovus reduced its litigation accrual by $6.4 million for its membership proportion of the litigation escrow deposit.
Following the redemption, Synovus continues to hold approximately 1.43 million shares of Visa Class B common stock which are subject to restrictions until the later of March 2011 or settlement of all covered litigation. A portion of the remaining Class B shares held by Visa members may be sold by Visa as needed to provide for settlement of the covered litigation through the litigation escrow. Visa’s retrospective responsibility plan provides for settlementsand/or judgments from covered litigation to be paid from a litigation escrow to be established from proceeds from the sale of Visa Class B shares, which otherwise would be available for conversion to Visa Class A shares and then sold by Visa USA members upon the release from transfer restrictions. Visa Class B shares will convert to Class A shares upon the release from transfer restrictions using a conversion ratio maintained by Visa. 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.
For the year ended December 31, 2008, the redemption of shares and changes to the accrued liability for Visa litigation resulted in a net after-tax gain of $34.2 million, or $0.10 per share. At December 31, 2008, Synovus’ accrual for the aggregate amount of Visa’s covered litigation was $19.3 million. While management believes that this accrual is adequate to cover Synovus’ membership proportion of Visa’s covered litigation based on current information, additional adjustments may be requiredexposure, if the aggregate amount of future settlements differs from Synovus’ estimate.any.
 
Note 18  Regulatory Requirements and Restrictions
The amount of dividends paid to the Parent Company from each of the subsidiary banks is limited by various banking regulatory agencies. In prior years, certain Synovus banks have received permission and have paid cash dividends to the Parent Company in excess of the regulatory limitations. The Federal Reserve Board also has supervisory authority that may limit the Parent Company’s ability to pay dividends in certain circumstances.
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 guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require Synovus on a consolidated basis, and the Parent Company and subsidiary banks individually, to maintain minimum amounts and ratios of total and Tier I capital to risk-weighted assets as defined, and of Tier I capital to average assets, as defined. Management believes that as of December 31, 2008, Synovus meets all capital adequacy requirements to which it is subject.
As of December 31, 2008, the most recent notification from the Federal Reserve Bank of Atlanta categorized all of the subsidiary banks as well-capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, Synovus and its subsidiaries must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table shown below. Management is not currently aware of the existence of any conditions or events occurring subsequent to December 31, 2008 which would affect the well-capitalized classification.


F-31

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

The following table summarizes regulatory capital information at December 31, 2008 and 2007 on a consolidated basis and for each significant subsidiary, defined as any direct subsidiary of Synovus with assets or net income exceeding 10% of the consolidated totals.
                         
        To be Well
 
        Capitalized Under
 
     For Capital Adequacy
  Prompt Corrective
 
  Actual  Purposes  Action Provisions 
(Dollars in thousands) 2008  2007  2008  2007  2008  2007 
 
Synovus Financial Corp.
                        
Tier I capital $3,602,848   2,870,558   1,284,260   1,260,201   n/a   n/a 
Total risk-based capital  4,674,476   3,988,171   2,568,520   2,520,403   n/a   n/a 
Tier I capital ratio  11.22%  9.11   4.00   4.00   n/a   n/a 
Total risk-based capital ratio  14.56   12.66   8.00   8.00   n/a   n/a 
Leverage ratio  10.28   8.65   4.00   4.00   n/a   n/a 
Columbus Bank and Trust Company
                        
Tier I capital $732,725   864,588   210,993   208,864   316,490   313,295 
Total risk-based capital  798,896   912,800   421,987   417,727   527,483   522,159 
Tier I capital ratio  13.89%  16.56   4.00   4.00   6.00   6.00 
Total risk-based capital ratio  15.15   17.48   8.00   8.00   10.00   10.00 
Leverage ratio  12.67   11.97   4.00   4.00   5.00   5.00 
Bank of North Georgia
                        
Tier I capital $557,413   453,127   215,881   202,754   323,822   304,132 
Total risk-based capital  625,767   514,948   431,763   405,509   539,704   506,886 
Tier I capital ratio  10.33%  8.94   4.00   4.00   6.00   6.00 
Total risk-based capital ratio  11.59   10.16   8.00   8.00   10.00   10.00 
Leverage ratio  8.79   9.17   4.00   4.00   5.00   5.00 
The National Bank of South Carolina
                        
Tier I capital $450,512   434,179   191,055   180,598   286,583   270,897 
Total risk-based capital  510,517   477,196   382,111   361,196   477,639   451,495 
Tier I capital ratio  9.43%  9.62   4.00   4.00   6.00   6.00 
Total risk-based capital ratio  10.69   10.57   8.00   8.00   10.00   10.00 
Leverage ratio  9.04   9.39   4.00   4.00   5.00   5.00 
n/a — The prompt corrective action provisions are applicable at the bank level only.
Note 1921  Employment Expenses and Benefit Plans
 
Synovus generally provides noncontributoryhas three separate non-contributory retirement and benefit plans consisting of money purchase andpension, profit sharing, plans, and 401(k) plans which cover all eligible employees.


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Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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 Federalfederal 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 contributionscontribution for eligible employees to thesethe money purchase profit sharing,pension plan of 7.0% for each year ended December 31, 2008 and 401(k) plans,2007. The expense recorded as expense, for the years ended December 31, 2009, 2008, and 2007 and 2006 ofwas approximately $22.7$10.2 million, $19.5$22.5 million, and $43.1$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, $7.3 million, and $6.7$7.3 million for contributions to these plans in 2009, 2008, 2007, and 2006,2007, respectively.
 
Synovus has entered into employmentsalary 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


F-32

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

aggregate cost of these salary continuation plans and employmentassociated 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 2022  Share-Based Compensation
 
General Description of Share-Based Compensation 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 compensationawards to Synovus employees. At December 31, 2008,2009, Synovus had a total of 19,897,14222,723,782 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.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 first quarterexception 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 2,650,000 retention stock options with an exercise price of $13.18 to certain key employees. These stock optionsthat 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. The retentionOther grants of stock options granted in 2008 do not include provisions for accelerated vesting upon retirement. They do, however, allow for continued vesting after retirement at age 65. Excluding the aforementioned retention grant, stock options granted during 2008 2007 and 20062007 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 2007 and 20062007 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. Share-based compensation expense is recognized for plan participants on a straight-line basis over the shorter of the vesting period or the period until reaching retirement eligibility.
 
Non-vested shares and restricted share units granted in 2008 2007 and 20062007 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 and 2006 do not contain accelerated vesting provisions for retirement. Vesting for non-vested shares granted to Synovus directors during 2008 2007 and 20062007 accelerates upon retirement for plan participants who have reached age 72. Share-based compensation expense is recognized for plan participantsDividends are paid on a straight-line basisnon-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 shorter of thesame vesting period oras the period until reaching retirement eligibility.original restricted share unit grant.
 
Impact of TSYS Spin-OffDerivative Assets and Liabilities
 
As describedDerivative 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 Notethe 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 consolidated financial statements, Synovus completed the tax-free spin-off of its shares of TSYS common stockloan closing when there is a lock commitment outstanding to Synovus shareholders on December 31, 2007. Synovus’ share-based plans covering the majority of outstanding stock options on December 31, 2007 contained mandatory antidilution provisions designeda borrower to equalize the fair value of an award in an equity restructuring. Approximately 216 thousand of outstanding Synovus stock options were issued under plans of acquired banks which did not contain mandatory antidilution provisions.close a loan at a specific interest rate. 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 sharesderivatives are valued based on the distribution ratio applicable to all Synovus shares in connection withother 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 spin-off, whichvaluation hierarchy. These amounts, however, are subject to the same vesting period as their non-vested Synovus shares.insignificant.
 
OutstandingIn November 2009, Synovus stock options held by TSYS employees on December 31, 2007 were convertedsold certain Visa Class B shares to TSYS stock options utilizing an adjustment ratio of the post-spin stockanother Visa USA member financial institution. The sales 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-Merton 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’ historicalthe Visa stock price volatility,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 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%.liability.
As a result of this modification, TSYS recognized in 2007 an expense of $5.5 million for outstanding vested options. This


F-33F-32

Notes to Consolidated Financial Statements ­ ­ (SYNOVUS LOGO)

expense
Certain Callable Brokered Certificates of Deposit
The fair value of certain callable brokered certificates of deposit is includedderived 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 component of discontinued operationssimilarly dated interest rate swaption and is also entered in the accompanying consolidated statementmodel. These types of income, netcertificates of minority interest. Outstanding Synovus stock options held by Synovus employees were converted to equalize theirdeposit 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 utilizing an adjustment ratio ofon a recurring basis, including financial instruments for which Synovus has elected 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 optionsfair value option 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 salaries2009 and other personnel expense in the Consolidated Statements of Income. Total share-based compensation expense for continuing operations was $13.7 million, $15.9 million and $18.0 million for 2008 2007 and 2006, respectively. The total income tax benefit recognized in the Consolidated Statements of Income for share-based compensation arrangements was $5.2 million, $5.6 million and $6.4 million for 2008, 2007 and 2006, respectively.
No share-based compensation costs have been capitalized for the years ended December 31, 2008, 2007 and 2006. Aggregate compensation expense recognized in 2007 and 2006 with respect to Synovus stock options included $2.3 million and $5.3 million, respectively, that would have been recognized in previous years had the policy under SFAS No. 123R with respect to retirement eligibility been applied to awards granted prior to January 1, 2006.
As of December 31, 2008, unrecognized compensation cost relatedaccording to the unvested portion of share-based compensation arrangements involving shares of Synovus stock was approximately $15.1 million.
SFAS No. 123R requires that compensation cost be recognized net of estimated forfeitures. The estimate of forfeitures is adjusted as actual forfeitures differ from estimates, resultingvaluation hierarchy included in compensation cost only for those awards that actually vest. The effect of the change in estimated forfeitures is recognized as compensation cost in the period of the change in estimate. In estimating the forfeiture rate, Synovus stratified its grantees and used historical experience to determine separate forfeiture rates for the different award grants. Currently, Synovus estimates forfeiture rates for its grantees in the range of 0% to 10%.
ASCStock Option Awards820-10:
The weighted-average grant-date fair value of stock options granted to key Synovus employees during 2008, 2007 and 2006 was $1.85, $7.22 and $6.40, respectively. The fair value of the option grants was determined using the Black-Scholes-Merton option-pricing model with the following weighted-average assumptions:
 
       
  Years Ended December 31,
  2008 2007 2006
 
Risk-free interest rate 3.4% 4.8 4.5
Expected stock price volatility 23.7 21.7 24.9
Dividend yield 5.2 2.6 2.8
Expected life of options 6.8 years 6.0 years 5.8 years
                 
  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 
The expected volatility for stock option awards in 2008 was based on historical volatility of peer companies. The expected volatility for stock option awards in 2007 and 2006 was determined with equal weighting of Synovus’ implied and historical volatility. The expected life for stock options granted during 2008, 2007 and 2006 was calculated using the “simplified” method, as prescribed by the SEC’s Staff Accounting Bulletins No. 107 and 110. See Note 1 for a summary description of the provisions of SAB No. 110.


F-34F-33

Notes to Consolidated Financial Statements ­ ­ (SYNOVUS LOGO)

 
                 
  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 
A summary of stock option activity (including performance-accelerated stock options as described below) and changes during the years ended December 31, 2008, 2007, and 2006 is presented below:
 
(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.
                         
  2008  2007  2006 
     Weighted-
     Weighted-
     Weighted-
 
     Average
     Average
     Average
 
     Exercise
     Exercise
     Exercise
 
Stock Options
 Shares  Price  Shares  Price  Shares  Price 
 
Outstanding at beginning of year  28,999,602  $10.58   23,639,261  $22.83   25,546,776  $22.66 
Options granted  3,090,911   13.17   246,660   31.93   868,966   27.66 
Options assumed in connection with acquisitions  —   —   —   —   877,915   8.36 
Options exercised  (722,244)  7.18   (4,362,785)  18.74   (3,418,550)  18.89 
Options forfeited  (90,702)  13.54   (471,600)  19.34   (173,050)  27.49 
Options expired  (323,387)  12.36   (68,079)  19.19   (62,796)  21.01 
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  30,954,180  $10.89   28,999,602  $10.58   23,639,261  $22.83 
                         
Options exercisable at end of year  27,259,468  $10.58   25,148,449  $10.10   14,179,889  $21.21 
                         
 
Changes in Fair Value — FVO Items
 
The following table summarizes information about Synovus’ stock options outstandingpresents 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 exercisable at December 31, 2008.other non-interest income, as appropriate, and substantially offset the change in fair value of the financial instruments referenced below.
 
         
  As of December 31, 2008 
  Options
  Options
 
  Outstanding  Exercisable 
 
Weighted-average remaining contractual life  3.84 years   3.17 years 
         
Aggregate intrinsic value $1,620,360  $1,620,360 
         
             
  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 
 
The intrinsic value of stock options exercised during the years ended December 31, 2008, 2007 and 2006 was $2.7 million, $44.6 million and $31.8 million, respectively. The total grant date fair value of stock options vested during 2008, 2007 and 2006 was $13.1 million, $33.5 million and $27.8 million, respectively. At December 31, 2008, total unrecognized compensation cost related to non-vested stock options was approximately $4.5 million. This cost is expected to be recognized over a weighted-average remaining period of 2.14 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 2008, 2007, or 2006.
             
      Options
Year
 Number
 Exercise
 Outstanding at
Options
 of Stock
 Price
 December 31,
Granted
 Options Per Share 2008
 
2000  8,777,563  $8.27-8.44   7,921,210 
Non-Vested Shares and Restricted Share Units
In addition to the stock options described above, non-transferable, non-vested shares of Synovus common stock and restricted share units have been awarded to certain key Synovus employees and non-employee directors of Synovus. During 2008, Synovus granted 125,415 restricted share units at a weighted average grant-date fair value of $12.95. The market value of restricted share units is equal to the market value of


F-35F-34

Notes to Consolidated Financial Statements ­ ­ (SYNOVUS LOGO)

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 ­ (SYNOVUS LOGO)

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 $(1,312)  — 
Assets Measured at Fair Value on a Non-recurring Basis
In February 2008, the FASB issued provisions included in ASC820-10-15-1A which delayed the effective date for application of the provisions included in ASC825-10 regarding fair value measurements and disclosures for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. As of January 1, 2009, Synovus adopted the provisions of ASC820-10-15-1A for all non-financial assets and non-financial liabilities.
Certain assets and liabilities are measured at fair value on a non-recurring basis. These assets and liabilities are measured at fair value on a non-recurring basis and are not included in the tables above. These assets and liabilities primarily include impaired loans, other loans held for sale, other real estate, and goodwill. The amounts below represent only balances measured at fair value during the period and still held as of the reporting date.
December 31, 2009
(In millions)Level 1Level 2Level 3
Goodwill$——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 1Level 2Level 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 ­ (SYNOVUS LOGO)

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.


F-37

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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.
                 
  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.


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Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

                         
     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 ­ (SYNOVUS LOGO)

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 ­ (SYNOVUS LOGO)

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 ­ (SYNOVUS LOGO)

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.


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Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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


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Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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 ­ (SYNOVUS LOGO)

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.


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Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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 is amortized as compensation expense overwho 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 orand the period until reaching retirement eligibility.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.
 
The weighted-average grant-date fair value of non-vested shares granted during 2008, 2007 and 2006 was $12.44, $28.37 and $27.19, respectively. The total fair value of shares vested during 2008, 2007 and 2006 was $11.2 million, $5.9 million and $235 thousand, respectively. Except for the grant of 63,386 performance-vesting shares described below, the market value of the common stock at the date of issuance is amortized as compensation expense using the straight-line method over the vesting period of the awards. Dividends are paid on non-vested shares during the holding period. These non-vested shares are entitled to voting rights.
A summary of non-vested shares outstanding (excluding the 63,386 performance-vesting shares as described below) and changes during the years ended December 31, 2008, 2007, and 2006 is presented below:
         
     Weighted-
 
     Average
 
     Grant-Date
 
Non-Vested Shares
 Shares  Fair Value 
 
Outstanding at January 1, 2006  82,583  $27.28 
Granted  616,495   27.19 
Vested  (8,520)  27.62 
Forfeited  (6,004)  27.13 
         
Outstanding at December 31, 2006  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 
         
Additionally, holders of non-vested Synovus common shares also hold 269,976 non-vested shares of TSYS common stock as of December 31, 2008 as a result of the spin-off of TSYS on December 31, 2007.
Restricted share units were granted for the first time during the year ended December 31, 2008. A summary of restricted share units outstanding as of December 31, 2008 is presented below:
         
     Weighted-
 
     Average
 
     Grant-Date
 
Restricted Share Units
 Shares  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 
         
As of December 31, 2008, total unrecognized compensation cost related to the foregoing non-vested shares and restricted share units was approximately $10.6 million. This cost is expected to be recognized over a weighted-average remaining period of 1.32 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. No performance vesting shares vested in 2008. The total fair value of performance-vesting shares vested during 2007 and 2006 was $351 thousand and $340 thousand, respectively.


F-36

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

The following is a summary of performance-vesting shares outstanding at December 31, 2008, 2007 and 2006:
         
     Weighted-
 
     Average
 
     Grant-Date
 
Performance-Vesting Shares
 Shares  Fair Value 
 
Outstanding at January 1, 2006  12,677  $26.82 
Granted  12,677   27.72 
Vested  (12,677)  26.82 
Forfeited  —   — 
         
Outstanding at December 31, 2006  12,677   27.72 
Granted  —   — 
Vested  (12,677)  27.72 
Forfeited  —   — 
         
Outstanding at December 31, 2007
  —   — 
Granted
  —   — 
Vested
  —   — 
Forfeited
  —   — 
         
Outstanding at December 31, 2008
  —  $— 
         
At December 31, 2008 there remained 38,032 performance-vesting shares to be granted between 2009 and 2011.
Cash received from option exercises under all share-based payment arrangements of Synovus common stock for the years ended December 31, 2008, 2007, and 2006 was $3.0 million, $63.9 million, and $65.5 million, respectively.
As stock options for the purchase of Synovus common stock are exercised and non-vested shares vest, Synovus recognizes a tax benefit or deficiency which is recorded as a component of additional paid-in capital within shareholders’ equity for tax amounts not recognized in the Consolidated Statements of Income. Synovus recognized a net tax deficiency in the amount of $115 thousand during 2008 and a net tax benefit of $15.9 million and $11.4 million for the years 2007, and 2006, respectively.
Synovus elected to adopt the alternative method of calculating the beginning pool of excess tax benefits as permitted by FASB Staff Position (FSP)No. SFAS 123R-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards.” This is a simplified method to determine the pool of excess tax benefits that is used in determining the tax effects of share-based compensation in the Consolidated Statements of Income and cash flow reporting for awards that were outstanding as of the adoption of SFAS No. 123R.
The following table provides aggregate information regarding grants under all Synovus equity compensation plans through December 31, 2008.
             
        (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  30,369,839(2) $11.00   19,897,142(3)
Non-shareholder approved equity compensation plans  —   —   — 
             
Total  30,369,839  $11.00   19,897,142 
             
(1)Does not include information for equity compensation plans assumed by Synovus in mergers. A total of 584,341 shares of common stock were issuable upon exercise of options granted under plans assumed in mergers and outstanding at December 31, 2008. The weighted average exercise price of all options granted under plans assumed in mergers and outstanding at December 31, 2008 was $5.61. Synovus cannot grant additional awards under these assumed plans.
(2)Does not include an aggregate number of 741,941 shares of non-vested stock and restricted share units which will vest over the remaining years through 2011.
(3)Includes 19,897,142 shares available for future grants as share awards under the 2007 Omnibus Plan.


F-37

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

Note 21 —Fair Value Accounting
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS No. 157). SFAS No. 157 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 statement are effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Effective January 1, 2008, Synovus adopted SFAS No. 157 for financial assets and liabilities. As permitted under FASB Staff PositionNo. FAS 157-2, Synovus has elected to defer the application of SFAS No. 157 to non-financial assets and liabilities until January 1, 2009.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS No. 159). SFAS No. 159 permits entities to make an irrevocable election, at specified election dates, to measure eligible financial instruments and certain other instruments at fair value. As of January 1, 2008, Synovus has elected the fair value option (FVO) for mortgage loans held for sale and certain callable brokered certificates of deposit. Accordingly, a cumulative adjustment of $58 thousand ($91 thousand less $33 thousand of income taxes) was recorded as an increase to retained earnings.
In October 2008, the FASB issued FSPFAS 157-3, “Determining the Fair Value of a Financial Asset in a Market that is Not Active.” FSPFAS 157-3 is intended to provide additional guidance on how an entity should classify the application of SFAS 157 in an inactive market, and illustrates how an entity should determine fair value in an inactive market. The provisions for this statement are effective for the period ended September 30, 2008. The impact to Synovus was minimal, as this FSP provides clarification to existing guidance.
The following is a description of the assets and liabilities for which fair value has been elected, including the specific reasons for electing fair value.
Mortgage Loans Held for Sale
Mortgage loans held for sale (MLHFS) have been previously accounted for on a lower of aggregate cost or fair value basis pursuant to SFAS No. 65, “Accounting for Certain Mortgage Banking Activities” (SFAS No. 65). For certain mortgage loan types, fair value hedge accounting was utilized by Synovus to hedge a given mortgage loan pool, and the underlying mortgage loan balances were adjusted for the change in fair value related to the hedged risk (fluctuation in market interest rates) in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended and interpreted (SFAS No. 133). For those certain mortgage loan types, Synovus is still able to achieve an effective economic hedge by being able tomark-to-market the underlying mortgage loan balances through the income statement, but has eliminated the operational time and expense needed to manage a hedge accounting program under SFAS No. 133. Previously under SFAS No. 65, Synovus was exposed, from an accounting perspective, only to the downside risk of market volatilities; however by electing FVO, Synovus may now also recognize the associated gains on the mortgage loan portfolio as favorable changes in the market occur.
Certain Callable Brokered Certificates of Deposit
Synovus has elected FVO for certain callable brokered certificates of deposit (CDs) to ease the operational burdens required to maintain hedge accounting for such instruments under the constructs of SFAS No. 133. Prior to the adoption of SFAS No. 159, Synovus was highly effective in hedging the risk related to changes in fair value, due to fluctuations in market interest rates, by engaging in various interest rate derivatives. However, SFAS No. 133 requires an extensive documentation process for each hedging relationship and an extensive process related to assessing the effectiveness and measuring ineffectiveness related to such hedges. By electing FVO on these previously hedged callable brokered CDs, Synovus is still able to achieve an effective economic hedge by being able tomark-to-market the underlying CDs through the income statement, but has eliminated the operational time and expense needed to manage a hedge accounting program under SFAS No. 133.


F-38

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

The following table summarizes the impact of adopting the fair value option for these financial instruments as of January 1, 2008. Amounts shown represent the carrying value of the affected instruments before and after the changes in accounting resulting from the adoption of SFAS No. 159.
             
  Ending
  Cumulative
  Opening
 
  Balance Sheet
  Effect
  Balance Sheet
 
  December 31,
  Adjustment
  January 1,
 
(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, net of income taxes (increase to retained earnings)     $58     
             
Determination of Fair Value
SFAS No. 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS No. 157 also establishes a fair value hierarchy for disclosure of fair value measurements based on significant inputs used to determine the fair value. The three levels of inputs are as follows:
Level 1Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include corporate debt and equity securities, certain derivative contracts, as well as certain U.S. Treasury and U.S. Government-sponsored enterprise debt securities that are highly liquid and are actively traded inover-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 loansheld-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 Federal Home Loan Bank and Federal Reserve Bank stock, collateral-dependent impaired loans, and certain private equity investments.
Following is a description of the valuation methodologies used for the major categories of financial assets and liabilities measured at fair value.
Trading Account Assets/Liabilities and Investment Securities Available for Sale
Where quoted market prices are available in an active market, securities are valued at the last traded price by obtaining feeds from a number of live data sources including active market makers and inter-dealer brokers. These securities are classified as Level 1 within the valuation hierarchy and include U.S. Treasury securities, obligations of U.S. Government-sponsored enterprises, and corporate debt and equity securities. If quoted market prices are not available, fair values are estimated by using bid prices and quoted prices of pools or tranches of securities with similar characteristics. These types of securities are classified as Level 2 within the valuation hierarchy and consist of collateralized mortgage obligations, mortgage-backed debt securities, debt securities of U.S. Government-sponsored enterprises and agencies, and state and municipal bonds. In both cases, Synovus has evaluated the valuation methodologies of its third party valuation providers to determine whether such valuations are representative of an exit price in Synovus’ principal markets. In certain cases where there is limited activity or less transparency around inputs to valuation, securities are classified as Level 3 within the valuation hierarchy. These Level 3 items are primarily Federal


F-39

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock.
Mortgage Loans Held for Sale
Since quoted market prices are not available, fair value is derived from a hypothetical-securitization model used to project the “exit price” of the loan in securitization. The bid pricing convention is used for loan pricing for similar assets. The valuation model is based upon forward settlement of a pool of loans of identical coupon, maturity, product, and credit attributes. The inputs to the model are continuously updated with available market and historical data. As the loans are sold in the secondary market and predominantly used as collateral for securitizations, the valuation model represents the highest and best use of the loans in Synovus’ principal market. Mortgage loans held for sale are classified within Level 2 of the valuation hierarchy.
Private Equity Investments
Private equity investments consist primarily of investments in venture capital funds. The valuation of these instruments requires significant management judgment due to the absence of quoted market prices, inherent lack of liquidity, and the long-term nature of such assets. Based on these factors, the ultimate realizable value of private equity investments could differ significantly from the values reflected in the accompanying financial statements. Private equity investments are valued initially based upon transaction price. Thereafter, Synovus uses information provided by the fund managers in the determination of estimated fair value. Valuation factors such as recent or proposed purchase or sale of debt or equity of the issuer, pricing by other dealers in similar securities, size of position held, liquidity of the market and changes in economic conditions affecting the issuer are used in the determination of estimated fair value. These private equity investments are classified as Level 3 within the valuation hierarchy.
Private equity investments may also include investments in publicly traded equity securities, which have restrictions on their sale, generally obtained through an initial public offering. Investments in the restricted publicly traded equity securities are recorded at fair value based on the quoted market value less adjustments for regulatory or contractual sales restrictions. Discounts for restrictions are determined based upon the length of the restriction period and the volatility of the equity security. Investments in restricted publicly traded equity securities are classified as Level 2 within the valuation hierarchy.
Derivative Assets and Liabilities
 
Equity derivatives are valued using quoted market prices and are classified as Level 1 within the valuation hierarchy. All other derivativesDerivative instruments are valued using internally developed models. These derivatives include interest rate swaps, floors, caps, and collars. The sale of To-be-announcedto-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 ­ (SYNOVUS LOGO)

Certain Callable Brokered Certificates of Deposit
 
The fair value of certain callable brokered certificates of deposit is derived using several inputs in a valuation model that calculates the discounted cash flows based upon a yield curve. Once the yield curve is constructed, it is applied against the standard certificate of deposit terms that may include the principal balance, payment frequency, term to maturity, and interest accrual to arrive at the discounted cash flow based fair value. When valuing the call option, as applicable, implied volatility is obtained for a similarly dated interest rate swaption and it is also entered in the model. These types of certificates of deposit are classified as Level 2 within the valuation hierarchy. As of December 31, 2009, all of these callable brokered certificates of deposit either had been called or had matured.


F-40

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

 
Assets and Liabilities Measured at Fair Value on a Recurring Basis
 
The following table presentstables 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 SFAS No. 157 valuation hierarchy:hierarchy included in ASC820-10:
                
                 December 31, 2009 
       Total
        Total
 
       Assets/Liabilities
        Assets/Liabilities
 
       at
        at
 
(In thousands) Level 1 Level 2 Level 3 Fair Value  Level 1 Level 2 Level 3 Fair Value 
Assets:
                
Assets
                
Trading account assets $478   24,035   —   24,513  $725   13,645   —   14,370 
Mortgage loans held for sale  —   133,637   —   133,637   —   138,056   —   138,056 
Investment securities available for sale  4,579   3,748,330   139,239(2)  3,892,148 
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  —   —   123,475(3)  123,475   —   —   48,463   48,463 
Derivative assets  —   305,383   2,388   307,771   —   114,336   199   114,535 
Liabilities:
                
Brokered certificates of deposit(1)
 $—   75,875   —   75,875 
Liabilities
                
Trading account liabilities  —   17,287   —   17,287  $—   7,070   —   7,070 
Derivative liabilities  —   206,340   —   206,340   —   86,170   12,862   99,032 


F-33

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

                 
  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 the certain callable brokered certificates of deposit for which Synovus has elected the fair value option under SFAS No. 159.
(2)This amount primarily consists of Federal Home Loan Bank stock and Federal Reserve Bank stock of approximately $117.8 million and $4.3 million, respectively.
(3)Amount represents the recorded value of private equity investments before minority interest. The value net of minority interest at December 31, 2008 was $85.7 million.ASC825-10-10.
 
 
Changes in Fair Value — FVO Items
 
The following table presents the changes in fair value included in the consolidated statementstatements 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 operatingnon-interest income, as appropriate, and substantially offset the change in fair value of the financial instruments referenced below.
             
  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 
             
  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 ­ (SYNOVUS LOGO)

 
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 tabletables below includesinclude 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-41F-35

Notes to Consolidated Financial Statements ­ ­ (SYNOVUS LOGO)

         
  Investment
    
  Securities
  Private
 
  Available
  Equity
 
(In thousands) for Sale  Investments 
 
Balance at January 1, 2008 $126,715   78,693 
Total gains or (losses) (realized/unrealized):        
Included in earnings  —   24,995(1)
Included in other comprehensive income  (1,313)  — 
Purchases, sales, issuances, and settlements, net  13,837   19,787 
Transfers in and/or out of Level 3  —   — 
         
Balance at December 31, 2008 $139,239   123,475 
         
Total gains (losses) for the period included in earnings $(1,313)  24,995(1)
(1)Amount represents net gains from private equity investments before minority interest. The net gains after minority interest for the year ended December 31, 2008 were $16.8 million.
 
The table below summarizes gains and losses due to changes(realized and unrealized) included in fair value, including both realized and unrealized gains and losses, recorded in earnings or changes in net assets for material Level 3 assets and liabilities for the year ended December 31, 2008.
2009 and 2008 in other non-interest income as follows:
 
Year Ended
December 31, 2008
Investment
Securities
Private
Available
Equity
(In thousands)for SaleInvestments
Total change in earnings$—24,995
Change in unrealized losses to assets and liabilities still held at December 31, 2008(1,313)—
         
  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
 
Loans underIn February 2008, the scopeFASB issued provisions included in ASC820-10-15-1A which delayed the effective date for application of SFAS No. 114, “Accounting by Creditorsthe provisions included in ASC825-10 regarding fair value measurements and disclosures for Impairmentnonfinancial 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 Loan” (SFAS No. 114),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 1Level 2Level 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 1Level 2Level 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. The measurement of impaired loans using future cash flows discounted at the loan’s effective interest rate rather than the market rate of interest is not a fair value measurement and is therefore excluded from the requirements of SFAS No. 157. Impaired loans measured by applying the practical expedient in SFAS No. 114ASC310-10-35 are included in the requirements of SFAS No. 157.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.comparables, adjusted for estimated selling costs. Management also considers other factors or recent developments which could result in adjustments to the collateral value estimates indicated in the appraisals such as changes in absorption rates or market conditions from the time of valuation.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 collateral-dependent impaired loans (including impaired loans heldORE is determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources, adjusted for sale) totaled $729.6 millionestimated selling costs. An asset that is acquired through, or in lieu of, loan foreclosures is valued at December 31, 2008 comparedthe fair value of the asset less the estimated cost to $264.9 millionsell. The transfer at December 31, 2007.fair value results in a new cost basis for the asset. Subsequent to


F-36

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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
 
SFAS No. 107, “Disclosure About Fair Value of Financial Instruments” (SFAS 107),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, 20082009 and 2007.2008. 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 SFAS 107,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.


F-42F-37

Notes to Consolidated Financial Statements ­ ­ (SYNOVUS LOGO)

not incorporate the exit-price concept of fair value prescribed by SFAS No. 157.
 
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.
                                
 2008 2007  December 31, 2009 December 31, 2008 
 Carrying
 Estimated
 Carrying
 Estimated
  Carrying
 Estimated
 Carrying
 Estimated
 
(In thousands) Value Fair Value Value Fair Value  Value Fair Value Value Fair Value 
Financial assets:
                
Financial assets
                
Cash and due from banks $524,327   524,327   682,583   682,583  $564,482   564,482   524,327   524,327 
Due from Federal Reserve Bank  1,206,168   1,206,168   —   — 
Interest bearing funds with Federal Reserve Bank  1,901,847   1,901,847   1,206,168   1,206,168 
Interest earning deposits with banks  10,805   10,805   10,950   10,950   12,534   12,534   10,805   10,805 
Federal funds sold and securities purchased under resale agreements  388,197   388,197   76,086   76,086   203,959   203,959   388,197   388,197 
Trading account assets  24,513   24,513   17,803   17,803   14,370   14,370   24,513   24,513 
Mortgage loans held for sale  133,637   133,637   153,437   153,471   138,056   138,056   133,637   133,637 
Impaired loans held for sale  3,527   3,527   —   — 
Other loans held for sale  36,816   36,816   3,527   3,527 
Investment securities available for sale  3,892,148   3,892,148   3,666,974   3,666,974   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  27,321,876   27,227,473   26,130,972   26,143,015   24,439,343   24,082,061   27,321,876   27,227,473 
Derivative asset positions  307,771   307,771   112,160   112,160   114,535   114,535   307,771   307,771 
Financial liabilities:
                
Financial liabilities
                
Non-interest bearing deposits $3,563,619   3,563,619   3,472,423   3,472,423   4,172,697   4,172,697   3,563,619   3,563,619 
Interest bearing deposits  25,053,560   25,209,084   21,487,393   21,502,929   23,260,836   23,349,007   25,053,560   25,209,084 
Federal funds purchased and securities sold under repurchase agreements  725,869   725,869   2,319,412   2,319,412 
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  2,107,173   1,912,679   1,890,235   1,844,505   1,751,592   1,543,015   2,107,173   1,912,679 
Derivative liability positions  206,340   206,340   63,494   63,494  $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-43F-38

Notes to Consolidated Financial Statements ­ ­ (SYNOVUS LOGO)

                         
     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


F-39

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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.


F-40

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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)
                                         


F-41

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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 ­ (SYNOVUS LOGO)

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


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Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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 ­ (SYNOVUS LOGO)

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.


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Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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 22Share-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 ­ (SYNOVUS LOGO)

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 ­ (SYNOVUS LOGO)

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


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Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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


F-49

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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.
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 shareholders’ equity for each of the years in the three-year period ended December 31, 2008,2009, is presented below:
 
                        
(Dollars in thousands) 2008 2007 2006 
(In thousands) 2009 2008 2007 
Consolidated Statements of Income:
                        
Income tax (benefit) expense related to continuing operations $(77,695)  184,739   230,435  $(171,977)  (80,430)  182,066 
Income tax (benefit) expense related to discontinued operations  —   145,224   126,181 
Consolidated Statements of Changes in Shareholders’ Equity:
            
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   —   —   33   230 
Postretirement unfunded health benefit obligation  110   498   (1,966)  14   110   498 
SAB No. 108 adjustment  —   —   14,544 
Unrealized gains on investment securities available for sale  47,047   19,563   8,306 
Unrealized gains on cash flow hedges  13,339   11,525   2,259 
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   3,813   —   —   1,470 
Share-based compensation  115   (15,937)  (11,390)  2,770   115   (15,937)
              
Total $(17,051)  347,312   372,182  $(192,834)  (17,051)  347,312 
              
 


F-50

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

 
For the years ended December 31, 2009, 2008, 2007, and 2006,2007, income tax expense (benefit) consists of:
 
                        
(In thousands) 2008 2007 2006  2009 2008 2007 
Current:                        
Federal $20,235   203,129   234,366  $(337,421)  17,191   200,456 
State  9,671   14,955   22,767   (9,749)  9,980   14,955 
              
  29,906   218,084   257,133   (347,170)  27,171   215,411 
              
Deferred:                        
Federal  (87,810)  (29,272)  (27,294)  161,838   (87,810)  (29,272)
State  (19,791)  (4,073)  596   13,355   (19,791)  (4,073)
              
  (107,601)  (33,345)  (26,698)  175,193   (107,601)  (33,345)
              
Total income tax expense (benefit) $(77,695)  184,739   230,435 
Total income tax (benefit) expense $(171,977)  (80,430)  182,066 
              
 
 
Income tax expense (benefit) as shown in the consolidated statements of income differed from the amounts computed by applying the U.S. Federalfederal income tax rate of 35% to (loss) income from continuing operations before income taxes as a result of the following:
             
(Dollars in thousands) 2008  2007  2006 
 
Taxes at statutory federal income tax rate $(231,046)  184,685   225,938 
Tax-exempt income  (3,043)  (3,249)  (3,964)
State income tax (benefit) expense, net of federal income tax expense (benefit)  (6,578)  7,073   15,186 
Tax credits  (2,474)  (2,643)  (4,020)
Goodwill impairment  167,866   —   — 
Other, net  (2,420)  (1,127)  (2,705)
             
Total income tax (benefit) expense $(77,695)  184,739   230,435 
             
Effective income tax rate  (11.77)%  35.01   35.70 
             
             
(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-44F-51

Notes to Consolidated Financial Statements ­ ­ (SYNOVUS LOGO)

 
The tax effects of temporary differences that gave rise to significant portions of the deferred income tax assets and liabilities at December 31, 20082009 and 20072008 are presented below:
         
(In thousands) 2008  2007 
 
Deferred income tax assets:        
Provision for losses on loans $239,558   140,862 
Finance lease transactions  19,216   18,991 
Non-accrual interest  16,964   4,600 
Share-based compensation  11,987   7,258 
Deferred compensation  11,965   10,953 
Tax credit carryforward and net operating loss  9,067   438 
Visa litigation expense  7,360   14,056 
Deferred revenue  6,664   6,603 
Unrealized loss on derivative instruments  1,194   3,930 
Other  8,154   9,659 
         
Total deferred income tax assets  332,129   217,350 
Less valuation allowance  (5,068)  — 
         
Total deferred income tax assets  327,061   217,350 
         
Deferred income tax liabilities:        
Excess tax over financial statement depreciation  (58,753)  (56,632)
Net unrealized gain on investment securities available for sale  (57,387)  (10,039)
Net unrealized gain on cash flow hedges  (23,758)  (9,827)
Purchase accounting adjustments  (8,944)  (11,285)
Ownership interest in partnership  (7,993)  (6,939)
Other  (6,956)  (5,456)
         
Total gross deferred income tax liabilities  (163,791)  (100,178)
         
Net deferred income tax assets $163,270   117,172 
         
         
(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 if, based on the weight of availableasset. Judgment is a critical element in making this assessment.
During 2009, Synovus reached a three-year cumulative pre-tax loss position. The positive evidence it is more-likely-than-not that some portion or the entire deferred tax asset will not be realized. Synovus evaluated available evidenceconsidered in considering whether a valuation allowance was needed as of December 31, 2008 pursuant to the requirements under FASB Statement No. 109. Based on this evidence, Synovus concluded it is more-likely-than-not that a portionsupport of its Floridause of future earnings as a source of realizing deferred tax assets will not be realized. Accordingly, was insufficient to overcome the negative


F-52

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

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) in 2008. If Synovus continues to experience losses, additional valuation allowances could be necessary.
In connection with the spin-off of TSYS on. At December 31, 2007, Synovus entered into a2009, management also concluded that it is more likely than not that $11.9 million of its deferred tax sharing agreement with TSYS, which requires TSYS to indemnify Synovus from potentialassets will be realized. This amount of deferred tax assets is based on actual separate entity state income tax liabilities that may arise in future examinations as a result of TSYS’ inclusion in Synovus’ consolidatedand tax return filings for calendar years prior to 2008.planning strategies.
 
Synovus is subject to income taxation in the U.S. and by various state jurisdictions. Synovus’ U.S. Federal income tax return is filed on a consolidated basis, while state income tax returns are filed on both a consolidatedsubject to review and a separate entity basis.examination by federal, state, and local taxing jurisdictions. Synovus is no longer subject to U.S. Federalfederal income tax examinations by the IRS for years prior tobefore 2005 and, Synovuswith few exceptions, is no longer subject to income tax examinations from state and local income tax authorities for years prior to 2002. Synovusbefore 2006. Currently, there are no years for which a federal income tax returns are not currentlyreturn 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 its liabilitycurrent income tax accruals are adequate for any uncertain income tax positions relating to these jurisdictionsjurisdictions. The income tax accruals were determined in accordance with sections 25 and 40 of ASC740-10 and ASC835-10-60-14 regarding accounting for such years is adequate.
Synovus adopteduncertainty 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 provisionsprobability outcome. The establishment and calculation of FIN 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” as of January 1, 2007. FIN 48 establishes a single model to address accountingthe deferred tax asset valuation allowance took into consideration the reserve for uncertain income tax positions. FIN 48 clarifies the accounting for income taxes by


F-45

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods and disclosure of such positions. FIN 48 provides a two-step process in the evaluation of an income tax position. The first step is recognition. A company determines whether it is more-likely-than-not that an income tax position will be sustained upon examination, including a resolution of any related appeals or litigation processes, based upon the technical merits of the position. The second step is measurement. An income tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Upon adoption as of January 1, 2007, Synovus recognized a $1.4 million decrease in the liability for uncertain income tax positions of continuing operations, with a corresponding increase in retained earnings of $1.4 million as a cumulative effect adjustment. During the twelve months ended December 31, 2008, Synovus increased its liability for uncertain income tax positions by $0.9 million as shown in the table below.
 
A reconciliation of the beginning and ending amount of unrecognized income tax benefits is as follows(1) (unrecognized state income tax benefits are not adjusted for the federal income tax impact):
     
(In thousands)   
 
Balance at December 31, 2006 $9,057 
Current activity:    
Additions based on tax positions related to current year  2,193 
Additions for tax positions of prior years  — 
Deductions for tax positions of prior years  (4,176)
Deductions for statute of limitations expiring  — 
     
Balance at December 31, 2007
 $7,074 
Current activity:
    
Additions based on tax positions related to current year
  766 
Additions for tax positions of prior years
  2,353 
Deductions for tax positions of prior years
  (1,690)
Deductions for statute of limitations expiring
  (482)
     
Balance at December 31, 2008
 $8,021 
     
 
(1)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 
         
 
 
Synovus recognizes accrued interest and penalties related to unrecognized income tax benefits as a component of income tax expense. Accrued interest and penalties on unrecognized income tax benefits totaled $1.5 million $1.1 million and $1.9 million as of December 31, 2008, December 31, 20072009 and January 1, 2007,2008, respectively. The total amount of unrecognized income tax benefits as of December 31, 2008, December 31, 2007,2009 and January 1, 20072008 that, if recognized, would affect the effective income tax rate is $6.2 million, $5.4$5.8 million and $7.2$6.2 million (net of the Federalfederal benefit on state income tax issues) respectively, which includes interest and penalties of $1.0 million $0.7and $1.1 million, and $1.3 million.respectively.
 
The total liability for uncertain income tax positions under FIN 48 at December 31, 2008 is $6.2 million. Synovus is not able to reasonably estimate the amount by which the liability will increase or decrease over time; however, at this time, Synovus does not expect a significant payment related to these obligations within the next year. Synovus expects that approximately $1.3 million of uncertain income tax positions will be either settled or resolved during the next twelve months.
 


F-46F-53

Notes to Consolidated Financial Statements ­ ­ (SYNOVUS LOGO)

 
Note 2324  Condensed Financial Information of Synovus Financial Corp. (Parent Company only)
 
Condensed Balance Sheets
 
                
 December 31,  December 31, 
(In thousands) 2008 2007  2009 2008 
Assets
                
Cash $2,797   2,157 
Cash and due from banks $30,103   2,797 
Investment in consolidated bank subsidiaries, at equity  3,450,142   3,873,821   2,888,134   3,450,142 
Investment in consolidated nonbank subsidiaries, at equity(1)  149,300   60,447   (32,042)  149,300 
Notes receivable from bank subsidiaries  363,941   140,532   421,317   363,941 
Notes receivable from nonbank subsidiaries  438,134   2,382   397,519   438,134 
Other assets  286,226   287,354   309,729   286,226 
          
Total assets $4,690,540   4,366,693  $4,014,760   4,690,540 
          
Liabilities and Shareholders’ Equity
        
Liabilities and Equity
        
Liabilities:                
Long-term debt $782,383   771,683  $701,781   782,383 
Other liabilities  120,999   153,420   461,938   120,999 
          
Total liabilities  903,382   925,103   1,163,719   903,382 
          
Shareholders’ equity:                
Preferred stock  919,635   —   928,207   919,635 
Common stock  336,011   335,529   495,514   336,011 
Additional paid-in capital  1,165,875   1,101,209   1,605,097   1,165,875 
Treasury stock  (114,117)  (113,944)  (114,155)  (114,117)
Accumulated other comprehensive income  129,253   31,439   84,806   129,253 
Retained earnings  1,350,501   2,087,357 
Accumulated (deficit) retained earnings  (148,428)  1,350,501 
          
Total shareholders’ equity  3,787,158   3,441,590   2,851,041   3,787,158 
          
Total liabilities and shareholders’ equity $4,690,540   4,366,693  $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-47F-54

Notes to Consolidated Financial Statements ­ ­ (SYNOVUS LOGO)

 
 
Condensed Statements of Income
 
                        
 Years Ended December 31,  Years Ended December 31, 
(In thousands) 2008 2007 2006  2009 2008 2007 
Income:                        
Cash dividends received from bank subsidiaries $349,462   365,024   245,687  $64,044   349,462   365,024 
Management and information technology fees from affiliates  115,050   117,934   107,133   162,648   115,050   117,934 
Interest income  26,868   6,693   5,503   50,174   26,868   6,693 
Other income  55,294   42,347   29,996   74,771   55,294   42,347 
              
Total income  546,674   531,998   388,319   351,637   546,674   531,998 
              
Expenses: ��                      
Interest expense  33,041   41,224   41,343   25,081   33,041   41,224 
Other expenses  219,382   250,944   218,803   234,083   219,382   250,944 
              
Total expenses  252,423   292,168   260,146   259,164   252,423   292,168 
              
Income before income taxes and equity in undistributed net income of subsidiaries  294,251   239,830   128,173 
Allocated income tax benefit  (18,390)  (50,854)  (45,260)
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 of subsidiaries  312,641   290,684   173,433 
Income before equity in undistributed net income (loss) of subsidiaries  (137,207)  312,641   290,684 
Equity in undistributed (loss) income of subsidiaries  (895,079)  52,251   241,670   (1,299,088)  (900,729)  47,285 
              
(Loss) income from continuing operations  (582,438)  342,935   415,103 
(Loss) income from discontinued operations, net of income taxes and minority interest  —   183,370   201,814 
(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  (582,438)  526,305   616,917   (1,431,705)  (582,438)  526,305 
Dividends and accretion of discount on preferred stock  2,057   —   —   56,966   2,057   — 
              
Net (loss) income available to common shareholders $(584,495)  526,305   616,917  $(1,488,671)  (584,495)  526,305 
              


F-48F-55

Notes to Consolidated Financial Statements ­ ­ (SYNOVUS LOGO)

 
Condensed Statements of Cash Flows
 
                        
 Years Ended December 31,  Years Ended December 31, 
(In thousands) 2008 2007 2006  2009 2008 2007 
Operating Activities
                        
Net (loss) income $(582,438)  526,305   616,917  $(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  895,079   (244,150)  (443,484)  1,294,497   895,079   (244,150)
Equity in undistributed income of equity method investees  (3,517)  (6,107)  (5,132)  —   (3,517)  (6,107)
Provision for deferred income taxes  286,404   —   — 
Depreciation, amortization, and accretion, net  24,395   20,063   22,235   (68)  24,395   20,063 
Share-based compensation  13,724   21,540   9,889   8,361   13,716   21,540 
Net (decrease) increase in other liabilities  (19,029)  18,034   43,158 
Net increase (decrease) in other liabilities  439,398   (19,029)  18,034 
Gain on redemption of Visa shares  (38,450)  —   —   —   (38,450)  — 
Gain on sale of Visa shares  (51,900)  —   — 
Net increase in other assets  (71,513)  (100,708)  (37,106)  (497,644)  (71,513)  (95,108)
Gain on sale of other assets  —   —   (1,940)
Other, net  109,317   53,797   14,548   83,371   109,325   53,797 
              
Net cash provided by operating activities  327,568   288,774   219,085   130,714   327,568   294,374 
              
Investing Activities
                        
Net investment in subsidiaries  (408,119)  (71,963)  (33,757)  (632,459)  (408,119)  (71,963)
Equity method investments  —   (12,186)  —   —   —   (12,186)
Purchases of investment securities available for sale  (24,974)  —   (5,600)
Purchases of premises and equipment  (41,265)  (22,670)  (26,941)  (14,835)  (41,265)  (22,670)
Proceeds from sale of other assets  —   —   2,135 
Proceeds from sale of private equity investments  65,786   —   — 
Proceeds from redemption of Visa shares  38,450   —   —   —   38,450   — 
Proceeds from sale of Visa shares  51,900   —   — 
Net (increase) decrease in short-term notes receivable from bank subsidiaries  (223,409)  26,907   30,238   (57,376)  (223,409)  26,907 
Net (increase) decrease in short-term notes receivable from non-bank subsidiaries  (435,752)  1,391   241   40,615   (435,752)  1,391 
              
Net cash used in investing activities  (1,070,095)  (78,521)  (28,084)  (571,343)  (1,070,095)  (84,121)
              
Financing Activities
                        
Dividends paid to shareholders  (199,722)  (264,930)  (244,654)
Dividends paid to common and preferred shareholders  (73,568)  (199,722)  (264,930)
Principal repayments on long-term debt  (27,810)  (10,310)  (10,310)  (29,685)  (27,810)  (10,310)
Purchase of treasury shares  (173)  —   —   (38)  (173)  — 
Proceeds from issuance of preferred stock  967,870   —   —   —   967,870   — 
Proceeds from issuance of common stock  3,002   63,850   65,510   571,226   3,002   63,850 
              
Net cash (used in) provided by financing activities  743,167   (211,390)  (189,454)  467,935   743,167   (211,390)
              
Increase (decrease) in cash  640   (1,137)  1,547   27,306   640   (1,137)
Cash at beginning of year  2,157   3,294   1,747   2,797   2,157   3,294 
              
Cash at end of year $2,797   2,157   3,294  $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 2007, and 2006,2007, the Parent Company paid income taxes (net of refunds received) of $57.1 million $429.8 million, and $380.9$429.8 million and interest in the amount of $38.1 million and $41.5 million, and $41.7 million, respectively.


F-49

Notes to Consolidated Financial Statements­ ­ (SYNOVUS LOGO)

Note 24  Supplemental Financial Data
Components of other operating income and other operating expenses in excess of 1% of total revenues for any of the respective years are as follows:
             
  Years Ended December 31,
(In thousands) 2008 2007 2006
 
Third-party processing expenses $48,775   38,639   35,961 


F-50F-56

 ­ ­ (SYNOVUS LOGO)

 
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, 20082009 and 2007,2008, and the related consolidated statements of income, changes in shareholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2008.2009. 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, 20082009 and 2007,2008, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2008,2009, 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, changed its method of accounting for income tax uncertainties during 2007 and changed its method of accounting for pension and other postretirement plans and applied the provisions of Staff Accounting Bulletin No. 108 in 2006.2008.
 
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, 2008,2009, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 2, 20091, 2010 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
 
-s- KPMG LLP
 
Atlanta, Georgia
March 2, 20091, 2010


F-51F-57

 ­ ­ (SYNOVUS LOGO)

 
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, 2008.2009. 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, 2008,2009, 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-59 hereof.
 
   
-s- Richard E. Anthony -s- Thomas J. Prescott
Richard E. Anthony Thomas J. Prescott
Chairman & Executive Vice President &
Chief Executive Officer Chief Financial Officer


F-52F-58

 ­ ­ (SYNOVUS LOGO)

 
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, 2008,2009, 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, 2008,2009, 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, 20082009 and 2007,2008, and the related consolidated statements of income, changes in shareholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2008,2009, and our report dated March 2, 20091, 2010 expressed an unqualified opinion on those consolidated financial statements.
 
-s- KPMG LLP
 
Atlanta, Georgia
March 2, 20091, 2010


F-53F-59

Selected Financial Data ­ ­ (SYNOVUS LOGO)

 
                                        
 Years Ended December 31,  Years Ended December 31, 
(In thousands, except per share data) 2008 2007 2006 2005 2004  2009 2008 2007 2006 2005 
Income Statement:
                                        
Total revenues(a) $1,513,038   1,536,996   1,487,337   1,292,166   1,186,898 
Total revenues(a)
 $1,406,913   1,495,090   1,519,606   1,472,347   1,284,015 
Net interest income  1,077,893   1,148,948   1,125,789   965,216   859,531   1,010,310   1,077,893   1,148,948   1,125,789   965,216 
Provision for losses on loans  699,883   170,208   75,148   82,532   75,319   1,805,599   699,883   170,208   75,148   82,532 
Non-interest income  435,190   389,028   359,430   327,413   327,441   410,670   417,241   371,638   344,440   319,262 
Non-interest expense  1,465,621   840,094   764,533   646,757   621,675   1,221,289   1,456,057   830,343   756,746   642,521 
(Loss) income from continuing operations, net of income taxes  (582,438)  342,935   415,103   359,050   314,941   (1,433,931)  (580,376)  337,969   410,431   365,517 
Income from discontinued operations, net of income taxes and minority interest(b)  —   183,370   201,814   157,396   122,092 
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  (582,438)  526,305   616,917   516,446   437,033   (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  2,057   —   —   —   —   56,966   2,057   —   —   — 
Net (loss) income available to common shareholders  (584,495)  526,305   616,917   516,446   437,033   (1,488,671)  (584,495)  526,305   616,917   516,446 
Per share data:
                                        
Basic earnings per share                    
Basic earnings (loss) per common share:                    
(Loss) income from continuing operations  (1.77)  1.05   1.29   1.15   1.02   (4.00)  (1.79)  1.03   1.28   1.14 
Net (loss) income  (1.77)  1.61   1.92   1.66   1.42   (3.99)  (1.77)  1.61   1.92   1.66 
Diluted earnings per share                    
Diluted earnings (loss) per common share:                    
(Loss) income from continuing operations  (1.77)  1.04   1.28   1.14   1.01   (4.00)  (1.79)  1.02   1.27   1.13 
Net (loss) income  (1.77)  1.60   1.90   1.64   1.41   (3.99)  (1.77)  1.60   1.90   1.64 
Cash dividends declared  0.46   0.82   0.78   0.73   0.69 
Book value per common share  8.68   10.43   11.39   9.43   8.52 
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  3,892,148   3,666,974   3,352,357   2,958,320   2,695,593   3,188,735   3,770,022   3,554,878   3,263,483   2,852,075 
Loans, net of unearned income  27,920,177   26,498,585   24,654,552   21,392,347   19,480,396   25,383,068   27,920,177   26,498,585   24,654,552   21,392,347 
Deposits  28,617,179   24,959,816   24,528,463   20,806,979   18,591,402   27,433,534   28,617,179   24,959,816   24,528,463   20,806,979 
Long-term debt  2,107,173   1,890,235   1,343,358   1,928,005   1,873,247   1,751,592   2,107,173   1,890,235   1,343,358   1,928,005 
Shareholders’ equity  3,787,158   3,441,590   3,708,650   2,949,329   2,641,289   2,851,041   3,787,158   3,441,590   3,708,650   2,949,329 
Average total shareholders’ equity  3,435,432   3,935,910   3,369,954   2,799,496   2,479,404   3,285,014   3,435,574   3,935,910   3,369,954   2,799,496 
Average total assets  34,051,495   32,895,295   29,831,172   26,293,003   23,275,001   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  (1.72)%  1.04   1.39   1.37   1.35   (4.17)%  (1.70)  1.03   1.39   1.37 
Return on average assets  (1.72)  1.60   2.07   1.96   1.88   (4.16)  (1.72)  1.60   2.07   1.96 
Return on average equity from continuing operations  (17.19)  8.71   12.32   12.43   12.70   (43.65)  (16.89)  8.59   12.24   12.83 
Return on average equity  (17.19)  13.37   18.31   18.45   17.63   (43.58)  (16.95)  13.37   18.19   18.45 
Net interest margin, before fees  3.38   3.85   4.12   4.03   3.92 
Net interest margin, after fees  3.47   3.97   4.27   4.18   4.21 
Efficiency ratio  96.53   54.48   51.18   49.79   52.06 
Dividend payout ratio(c)  nm   51.25   40.99   44.51   48.94 
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  10.09   11.96   11.30   10.65   10.65   9.54   10.09   11.96   11.30   10.65 
Tangible common equity to risk-adjusted assets(d)  8.74   9.19   10.55   9.93   9.61 
Tangible common equity to risk-adjusted assets(d)
  7.03   8.74   9.19   10.55   9.93 
Tangible common equity to tangible assets  7.86   8.90   10.54   9.92   9.61   5.74   7.86   8.90   10.54   9.92 
Earnings to fixed charges ratio  0.17x  1.48x  1.72x  2.05x  2.61x  (2.17x)  0.16x  1.47x  1.71x  2.04x
Average shares outstanding, basic  329,319   326,849   321,241   311,495   307,262 
Average shares outstanding, diluted  329,319   329,863   324,232   314,815   310,330 
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 Financial Corp. (“Synovus”) completed the tax-free spin-off of its shares of Total System Services, Inc. (“TSYS”)TSYS common stock to Synovus shareholders. In accordance with the provisions of Statement of FinancialASC360-10-35, Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” and SFAS No. 146, “Accounting for Costs Associated withASC420-10-50, Exit or Disposal Activities,”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 Table 29)“Non-GAAP Financial Measures”).
(e)Total shareholders’ equity less cumulative perpetual preferred stock, divided by common stock outstanding.
 
(nm) Not meaningful.
 


F-54F-60

Management’s Discussion and Analysis ­ ­ (SYNOVUS LOGO)

 
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, (the “Securities Act”), 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 theSynovus’ actual results, performance, or achievements of Synovus or the commercial banking industry or economy generally, to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.
 
All statements other than statements of historical fact are forward-looking statements. You can identify these forward-looking statements through Synovus’ use of words such as “believes,” “anticipates,” “expects,” “may,” “will,” “assumes,” “should,” “predicts,” “could,” “should,” “would,” “intends,” “targets,” “estimates,” “projects,” “plans,” “potential” and other similar words and expressions of the future or otherwise regarding the outlook for Synovus’ future business and financial 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 us;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 ourSynovus’ credit losses and negatively affect ourSynovus’ financial results; (4) inadequacy of ourcontinuing 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 loss reserve, or the risk that the allowancelosses may prove to be inadequate or may be negatively affected by credit risk exposures; (5) our(7) Synovus’ ability to manage fluctuations in the value of our assets and liabilities to maintain sufficient capital and liquidity to support our operations; (6)(8) the concentration of our nonperformingSynovus’ non-performing assets by loan type, in certain geographic regions and with affiliated borrowerborrowing groups; (7)(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 assetsasset yields, thus reducing margins; (8) the impact on our borrowing costs, capital costs and our liquidity if we do not retain our current credit ratings; (9)(11) restrictions or limitations on access to funds from subsidiaries thereby restricting ourand potential obligations to contribute additional capital to subsidiaries, which may restrict Synovus’ ability to make payments on ourits obligations or dividend payments; (10)(12) the availability and cost of capital and liquidity; (11)liquidity on favorable terms, if at all; (13) changes in accounting standards particularly those related to determination of allowance for loan lossesor applications and fair value of assets; (12)determinations made thereunder; (14) slower than anticipated rates of growth in non-interest income and increased non-interest expense; (13)(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 our debt ratings; (14)(16) the impact on our financial results if we do not have sufficient future taxable income to fully realizerisk that the benefitsrecoverability of the deferred tax assets; (15)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; (16)(18) the effects of and changes in trade, monetary and fiscal policies, and laws including interest rate policies of the Federal Reserve Board; (17)(19) inflation, interest rate, market and monetary fluctuations; (18)(20) the impact of the Emergency Economic Stabilization Act of 2008 (EESA), the American Recovery and Reinvestment and Recovery Act (“ARRA”)(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; (19)(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 ourSynovus’ financial results, reputation, and business if we areSynovus is unable to comply with all applicable federal and state regulations; (20)regulations and applicable memoranda of understanding, other supervisory actions, and any necessary capital initiatives;


F-61

Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

(23) the costs and effects of litigation, investigations, inquiries, or similar matters, or adverse facts and developments related thereto, including, without limitation, the pending litigation with CompuCredit Corporation relating to CB&T’s Affinity Agreement with CompuCredit; (21)thereto; (24) the volatility of ourSynovus’ stock price; (22) the actual results achieved by our implementation of Project Optimus, and the risk that we may not achieve the anticipated cost savings and revenue increases from this initiative; (23)(25) the impact on the valuation of our investments due to market volatility or counter partycounterparty payment risk; (26) the risks that Synovus may be required to seek additional capital to satisfy applicable regulatory capital standards and (24)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 Synovus’ Annual Report onForm 10-K for the year ended December 31, 2008 and its other reports and filings that Synovus makes with the SEC under the Exchange Act.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. You should not place undueUndue reliance on any forward-looking statements sinceshould 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.


F-55

Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

 
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.
 
Industry Overview
2008 was marked by severe macro economic conditions, which negatively impacted liquidity and credit quality. Financial and credit markets declined sharply, building on issues that began in thesub-prime mortgage market in the second half of 2007 and which led to significant declines in real estate and home values. Consumer confidence across all sectors of the economy declined as rising costs fueled by unprecedented prices for crude oil in the second and third quarters of 2008 coupled with the downturns in housing and mortgage related financial services. These conditions were accompanied by a further deterioration in the labor market and rising unemployment, all of which contributed to extreme market volatility as economic fears and illiquidity persisted. Concerns regarding increased credit losses from the weakening economy negatively affected capital and earnings of most financial institutions. Financial institutions experienced significant declines in the value of collateral for real estate loans, heightened credit losses, resulting in record levels of non-performing assets, charge-offs and foreclosures. In addition, certain financial institutions failed or merged with other institutions and two of the government sponsored housing enterprises were placed into conservatorship with the U.S. government.
Liquidity in the debt markets remains low in spite of efforts by the U.S. Department of the Treasury (Treasury) and the Federal Reserve Bank (Federal Reserve) to inject capital into financial institutions. During 2008, the Federal Reserve lowered the federal funds rate seven times, including a drop of 75 basis points in December 2008. During 2008, the federal funds rate decreased from 4.25% on January 1, 2008 to 0.25% on December 31, 2008.
Various agencies of the United States government proposed a number of initiatives to stabilize the global economy and financial markets. On October 3, 2008, President Bush signed into law the Emergency Economic Stabilization Act of 2008 (EESA). The legislation was the result of a proposal by the Treasury in response to the financial crises affecting the banking system and financial markets and threats to investment banks and other financial institutions. Pursuant to the EESA, the Treasury has the authority to, among other things, purchase up to $700 billion of troubled assets, including mortgages, mortgage-backed securities and certain other financial instruments from financial institutions for the purpose of stabilizing and providing liquidity to the U.S. financial markets pursuant to the Troubled Asset Relief Plan (TARP). On October 14, 2008, the Treasury announced a program under the EESA pursuant to which it would make senior preferred stock investments in participating financial institutions (TARP Capital Purchase Program), and the Federal Deposit Insurance Corporation announced the development of a guarantee program under the systemic risk exception to the Federal Deposit Insurance Act pursuant to which the FDIC would offer a guarantee of certain financial institution indebtedness in exchange for an insurance premium to be paid to the FDIC by issuing financial institutions. On February 10, 2009, Treasury announced the Financial Stability Plan, which is intended to further stabilize financial institutions and stimulate lending across a broad range of economic sectors. On February 18, 2009, the American Recovery and Reinvestment Act (“ARRA”), a broad economic stimulus package that included restrictions on, and potential additional regulation of, financial institutions, was enacted.
Treasury, the FDIC and other governmental agencies continue to enact rules and regulations to implement the EESA, TARP, the Financial Stability Plan, the ARRA and related economic recovery programs, many of which contain limitations on the ability of financial institutions to take certain actions or to engage in certain activities if the financial institution is a participant in the TARP Capital Purchase Program or related programs. There can be no assurance as to the actual impact of the EESA, the FDIC programs or any other governmental program on the financial markets.
The severe economic conditions are expected to continue in 2009. Financial institutions likely will continue to experience heightened credit losses and higher levels of non-performing assets, charge-offs and foreclosures.
These factors negatively influenced, and likely will continue to negatively influence, earning asset yields at a time when the market for deposits is intensely competitive. As a result, financial institutions experienced, and are expected to continue to experience, pressure on credit costs, loan yields, deposit and other borrowing costs, liquidity, and capital.
About Our Business
 
Synovus Financial Corp. (Parent Company) is a financial services holding company, based in Columbus, Georgia, with approximately $36$32.8 billion in assets. Synovus provides integrated financial services including commercial and retail banking, financial management, insurance, mortgage and leasingmortgage services through 3130 wholly-owned subsidiary banks and other Synovus offices in Georgia, Alabama, South Carolina, Tennessee, and Florida.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 and to provide additional capital as Synovus pursued its aggressive asset disposition strategy. Through a combination of a public equity offering, liability


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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.
our
• 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 rangedwith 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 sizecharter 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 $209.0 million to $6.48 billion in total assets.the Charter Consolidation.
 
Our Key Financial Performance Indicators
 
In terms of how we measureSynovus measures success in our business, the following are our key financial performance indicators:
 
   
•   Loan Growth•   Fee Income Growth
•   Core Deposit GrowthCapital Strength •   Expense Management
•   Liquidity•   Loan Growth
•   Credit Quality•   Core Deposit Growth
•   Net Interest Margin •   Capital Strength
•   Credit Quality•   LiquidityFee Income Growth
 
Overview of 20082009
 
In 2008,On January 28, 2010, Synovus reported results of operations for the financial services industry was significantly affected by turmoil in the financial markets, which negatively impacted liquiditythree and credit quality. The deterioration in the credit markets created market volatility and illiquidity, resulting in significant declines in the market values of a broad range of investment products and loans. Synovus is not immune to the impacts of these market dynamics, as our results clearly indicate through the increased provision for loan losses and total net charge-offs and the decline in our net interest margins and net interest income.
As the economy continued to deteriorate throughout 2008, Synovus continued to refine its non-performing asset disposal strategy. In addition to our individual bank teams aggressively identifying and liquidating non-performing assets, Synovus formed a separate subsidiary to purchase from time to time certain non-performing assets from our subsidiary banks, assess the economics of disposal of these assets, and centrally and effectively manage the liquidation of these assets. This entity, Broadway Asset Management (BAM), had acquired approximately $500 million of these assets as oftwelve months ended December 31, 2008 and has identified approximately $150 million2009. The results included a net loss available to common shareholders of these assets for liquidation in the near term. The $150 million identified for liquidation is comprised of foreclosed assets of approximately $67$264 million and impaired loans$1,470 million for the three and twelve months ended December 31, 2009, respectively. The accompanying statement of approximately $83 million, which will be transferred to other real estate and sold upon foreclosure. In the current environment, Synovus also focused on growing deposits faster than loans. Total core deposits (total deposits less national market brokered deposits) grew 11.1% (annualized) on a sequential quarter basis and 5.1% over the 2007 year end balance.
On December 19, 2008, under the TARP Capital Purchase Program, Synovus issued to the United States Department of the Treasury 967,870 shares of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A without par value,income for a total price of $967,870,000. As part of the issuance of the Preferred Stock, Synovus also issued the United States Department of the Treasury (Treasury) a warrant to purchase up to 15,510,737 shares of Synovus common stock. While participation in TARP Capital Purchase Program may limit Synovus’ ability to take certain actions or to engage in certain activities, management believes that it will enable us to support future loan growth, improve our overall capital position and facilitate the execution of our business strategy.
For the year ended December 31, 2008, Synovus reported a net loss of approximately $584.52009 reflects an $18.7 million or $1.77 per diluted common share,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 from continuing operationstax code. This limitation has resulted in an $18.7 million reduction of $343the previously recorded federal income tax refund receivable (for taxes paid in 2007 and 2008) of $346 million or $1.04 per share for 2007. The net loss in 2008 includedand has yielded a non-cash goodwill impairment charge of $480corresponding $18.7 million (pre-tax and after-tax)federal Alternative Minimum Tax credit carryforward (AMT credit carryforward) which is recorded on the accompanying balance sheet as a deferred tax asset (previously recorded as a current income tax receivable). This charge had no impact on Synovus’ tangible capital levels, regulatory capital ratios, or liquidity. Excluding goodwill impairment charges of $480 million in 2008, Synovus’ net loss would have been $105 million, or $0.32 per share, forWhile the year.


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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.
 
2008 Financial Performance vs. 2007
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.
 
             
  Years Ended December 31, 
(In thousands) 2008  2007  Change 
 
Net (loss) income from continuing operations $(582,438)  342,935   nm 
Net (loss) income  ( 582,438)  526,305   nm 
Net (loss) income excluding the goodwill impairment charge  (104,878)  526,305   nm 
Diluted earnings per share (EPS):            
(Loss) income from continuing operations $(1.77)  1.04   nm 
Net (loss) income  (1.77)  1.60   nm 
Loans, net of unearned income $27,920,177   26,498,585   5.4%
Core deposits  22,279,101   21,207,274   5.1%
Net interest margin  3.47%  3.97%  (50) bp
Nonperforming assets ratio  4.16%  1.67%  249bp
Past dues over 90 days  0.14%  0.13%  1 
Net charge-off ratio  1.71%  0.46%  125 
Non-interest income $435,190   389,028   11.9%
Non-interest expense  1,465,621   840,094   74.5%
Non-interest expense, excluding goodwill impairment  986,004   840,094   17.4%
Return on assets from continuing operations  (1.72)  1.04   (275) bp
Return on assets  (1.72)  1.60   (331) bp
Return on equity from continuing operations  (17.19)  8.71   (2,590)
Return on equity  (17.19)  13.37   (3,056)
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.


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PresentationFinancial Performance Summary
A summary of net income excludingSynovus’ financial performance for the goodwill impairment chargeyears ended December 31, 2009 and 2008, is set forth in the tangible common equity to risk-weighted assets ratio are non-Generally Accepted Accounting Principles (Non-GAAP) financial measures. The following table reconciles (loss) income from continuing operations, comparing non-GAAP financial measures to GAAP financial measures, and illustrates the method of calculating the tangible common equity to risk-adjusted assets ratio:
below.
 
Table 1 Non-GAAP Financial Measures
Performance Summary(In thousands, except per share data)
 
                     
  Years Ended December 31, 
  2008  2007  2006  2005  2004 
 
Net (loss) income from continuing operations excluding goodwill impairment:
                    
(Loss) income from continuing operations, as                    
reported $(582,438)  342,935   415,103   359,050   314,941 
Goodwill impairment charge  479,617   —   —   —   — 
                     
(Loss) income from continuing operations, as adjusted $(102,821)  342,935   415,103   359,050   314,941 
                     
Tangible common equity to risk-adjusted assets:
                    
Total risk-adjusted assets $32,106,501   31,505,022   29,930,284   26,008,796   23,590,520 
                     
Total shareholders’ equity  3,787,158   3,441,590   3,708,650   2,949,329   2,641,289 
Preferred stock  (919,635)  —   —   —   — 
Goodwill  (39,521)  (519,138)  (515,719)  (338,649)  (338,853)
Other intangible assets  (21,266)  (28,007)  (35,693)  (29,263)  (34,565)
                     
Tangible common equity $2,806,736   2,894,445   3,157,238   2,581,417   2,267,871 
                     
Tangible common equity to risk-adjusted assets  8.74%  9.19   10.55   9.93   9.61 
             
  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   299bp
Past dues over 90 days  0.08   0.14   (6)bp
Net charge-off ratio  5.37   1.71   366bp
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)
 
 
Synovus believes that the above non-GAAP financial measures provide meaningful information to assist investors in (a) understanding Synovus’ financial results exclusive of items that management believes are not reflective of its ongoing operating results, and (b) evaluating Synovus’ financial strength and capitalization. The non-GAAP measures should not be considered by themselves or as a substitute for the GAAP measures. The non-GAAP measures should be considered as (a) additional views of the way that Synovus’ financial measures are affected by the significant goodwill impairment charge, and (b) additional views of the strength of Synovus’ tangible capitalization using a non-GAAP financial ratio of tangible common capital and risk-weighted assets. Total risk-adjusted assets is a required measure used by banks and financial institutions in reporting regulatory capital and regulatory capital ratios to Federal regulatory agencies. Tangible common equity to risk-weighted assets is a non-GAAP financial measure utilized by many investors and investment analysts to evaluate the financial strength and capitalization of financial institutions.
Critical Accounting Policies
 
The accounting and financial reporting policies of Synovus conform to U.S. generally accepted accounting principles (GAAP)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 87 to Synovus’ consolidated financial statements contain a discussion of the allowance for loan losses. The allowance for loan losses at December 31, 20082009 was $598.3$943.7 million.


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During the second quarter of 2007, Synovus implemented certain refinements to itsThe 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 haveis a significant impact on the total allowanceestimate and is regularly evaluated by Synovus for loan losses or provision for losses on loans upon implementation.
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, and the qualitative loss factors.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.assessments which are inherently subjective and subject to change. The use of different estimates or assumptions could produce different provisions for loan losses.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. TheThrough March 31, 2009, the probability of default andloss 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. 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. RatingsFor larger credits, ratings are re-evaluated onno less frequently than annually and more frequently when there is an indication of potential deterioration of a quarterly basis.specific credit relationship. Additionally, an independent Parent Company creditloan review function evaluates each bank’s risk rating process at least every twelve to eighteen months.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 ourSynovus’ 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, our policy requires that weSynovus update the fair value of the collateral securing collateral-dependent impaired loans each calendar quarter. Impaired loans not including impaired(excluding accruing restructured loans held for sale,of $213.6 million) had a net carrying value of $726.1 million$1.31 billion at December 31, 2008.2009. 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, including selling costs.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, 2008, $618.22009, $784.6 million, or 85.1%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. At December 31, 2008, Synovus had $108.0 million in collateral-dependent impaired loans with a recorded allocated allowance for loan losses of $26.2 million, or 24.3% of the principal balance. The estimated losses on these loans will be recorded as a charge-off during the firstfollowing quarter of 2009 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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loans and the actual charge-off. Additionally, as partinvestors. These types of our problem asset strategy, management from time to time identifies certain impaired loans for liquidation through auctions or note sales. These liquidations generally result in significantlysales 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 considering the lower inherent risk of the retail portfolio and lower than expected charge-offs.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.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.standards and results of Parent Company loan reviews. Certain macro- economicmacro-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 2008.2008 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. Additionally, as part of our problem asset strategy, management from time to time identifies certain ORE properties for liquidation through auctions or bulk sales. These liquidations generally result in significantly lower proceeds than traditional sales.
 
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 AICPAAmerican 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
 
Notes 1Synovus is a domestic corporation that files a consolidated federal income tax return with its wholly-owned subsidiaries and 22files 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 Synovus’ consolidateddifferences between the financial statements containstatement (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 discussionchange 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 taxes.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 calculation of Synovus’amount allocated to continuing operations is the income tax provision is complexeffect 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 requires(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 useultimate 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 judgmentsassumptions used in the analysis of its determination. As partincome 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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Management’s Discussion and Analysis ­ ­ (SYNOVUS LOGO)

Synovus’ overall business strategy, management must consider tax laws and regulations that apply to the specific facts and circumstances under consideration. This analysis includes the amount and timing of the realization of income tax liabilities or benefits. Management closely monitors tax developments on both the state and federal level in order to evaluate the effect they may have on Synovus’ overall tax position.
Synovus evaluated available evidence in considering whether a valuation allowance was needed as of December 31, 2008 pursuant to the requirements under FASB Statement No. 109. The ability to realize the deferred tax assets depends on the ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction. Synovus considered the following possible sources of taxable income when assessing the realization of the deferred tax assets:
• Future reversals of existing taxable temporary differences;
• Future taxable income exclusive of reversing temporary differences and carryforwards;
• Taxable income in prior carryback years; and
• Tax-planning strategies.
Concluding that a valuation allowance is not required is difficult when there is significant negative evidence which is objective and verifiable, such as cumulative losses in recent years. Synovus considered earnings before tax for the current year, and two prior years to determine whether it had cumulative losses by jurisdiction. In addition, Synovus considered the potential to carry back tax losses to offset taxable income in prior periods and the character of future reversals of existing taxable temporary differences by jurisdiction. The future profitability of Synovus is the most critical factor in determining whether an additional valuation allowance could be required. If Synovus continues to experience losses, additional valuation allowances could become necessary.
 
Asset Impairment
 
Goodwill
Under SFAS No. 142 (SFAS No. 142), “Goodwill and Other Intangible Assets,” goodwill is required to be tested for impairment annually, or more frequently if events or circumstances indicate that there may be impairment. 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 combination of the income approach utilizing the discounted cash flow (DCF) method, and the guideline company method using a combination of price to tangible book value, price to book value, and price to earnings is used to estimate the fair value of a reporting unit. The total of all reporting unit fair values is compared for reasonableness to Synovus’ market capitalization plus a control premium.
Under the DCF method, the fair value of the reporting unit reflects the present value of the projected earnings that will be generated by each reporting unit after taking into account the revenues and expenses associated with the reporting unit, the relative risk that the cash flows will occur, the contribution of other assets, and an appropriate discount rate to reflect the value of invested capital. Cash flows are estimated for future periods based on historical data and projections provided by management. If the actual cash flows are not consistent with Synovus’ estimates, an impairment charge may result.
Under the guideline company method using a combination of price to tangible book value, price to book value, and price to earnings market approach, the fair value of the reporting unit reflects the price at which similar companies are valued.
Synovus recorded a $479.6 million goodwill impairment charge as a result of goodwill impairment testing during 2008. Notes 4 and 9 to Synovus’ consolidated financial statements contain a discussion of goodwill. The net carrying value of goodwill as of December 31, 2008 was $39.5 million.
Should the future earnings and cash flows of the reporting units declineand/or discount rates increase, an impairment charge to goodwill may be required if carrying value exceeds the estimated fair value of the reporting unit.
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


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

consistent with Synovus’ estimates, an impairment charge may result.
Synovus recorded an acquired customer contracts asset impairment charge of $1.0 million during the year ended December 31, 2008. The impairment charge was recorded based on management’s estimate that the recorded values would not be recoverable.
Acquisitions
Table 2 summarizes the acquisitions completed during the past three years.
Table 2  Acquisitions
(Dollars in thousands)
               
    Total
 Shares
  
Company and Location
 Date Closed Assets Issued Cash
 
Banking Corporation of Florida
Naples, Florida		 April 1, 2006 $417,787   2,938,791   — 
Riverside Bancshares, Inc. 
Marietta, Georgia		 March 25, 2006  765,464   5,883,426   — 
This information is presented in further detail in Note 4 to the consolidated financial statements.
 
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 and 2006 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 SFAS No. 144, “AccountingASC360-10 regarding accounting for the Impairmentimpairment or Disposaldisposal of Long-Lived Assets,”long-lived assets and SFAS No. 146, “Accounting for Costs associated with Exit or Disposal Activities,”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. The balance sheet as of the record date
Merchant Services
During 2009, Synovus committed to a plan to sell its merchant services business. As of December 31, 20072009, 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 includeexpect 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 andor liabilities of TSYS.associated with the merchant services business.
 
The following table shows the components of income from discontinued operations for the years ended December 31, 20072009, 2008, and 2006:2007.
Table 32  Discontinued Operations
(In thousands)
                    
 Years Ended December 31,  Years Ended December 31, 
(In thousands) 2009 2008 2007 
 2007 2006 
TSYS net income, net of minority interest (excluding spin-off related expenses) $210,147   201,814 
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, net of minority interest  (18,248)  — 
TSYS  —   —   (18,248)
Synovus  (12,729)  —   —   —   (12,729)
Gain on transfer of mutual funds, net of income taxes  4,200   —   —   —   4,200 
            
Total income from discontinued operations, net of income taxes and minority interest $183,370   201,814 
Total income from discontinued operations, net of income taxes $4,590   5,650   188,336 
            


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

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


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

 
Capital
Cumulative Perpetual Preferred Stock
 
On December 19, 2008, Synovus issued to the United States Department of the Treasury (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 our 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. The recently enacted ARRA and the Treasury’s February 10, 2009 Financial Stability Plan and regulations that may be adopted under these laws may retroactively affect Synovus and modify the terms of the Series A Preferred Stock. In particular, the ARRA provides that the Series A Preferred Stock may now be redeemed at any time with the consent of the Federal Deposit Insurance Corporation.
 
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 ourSynovus common stock, and upon certain issuances of ourSynovus 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 will beis 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
Under SFAS No. 142 (SFAS No. 142), “Goodwill and Other Intangible Assets,” goodwill is required to be tested for impairment annually, or more frequently if events or circumstances indicate that there may be impairment.
The goodwill impairment analysis is a two-step test. The first step (Step 1), used to identify potential impairment, involves comparing each reporting unit’s estimated fair value to its carrying value, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill is considered not to be impaired. If the carrying value exceeds estimated fair value, there is an indication of potential impairment and the second step is performed to measure the amount of impairment.
The second step (Step 2) involves calculating an implied fair value of goodwill for each reporting unit for which the first step indicated impairment. The implied fair value of goodwill is determined in a manner similar to the amount of goodwill calculated in a business combination, by measuring the excess of the estimated fair value of the reporting unit, as determined in the first step, over the aggregate estimated fair values of the


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

individual assets, liabilities and identifiable intangible assets as if the reporting unit was being acquired in a business combination. If the implied fair value of goodwill exceeds the carrying value of goodwill assigned to the reporting unit, there is no impairment. If the carrying value of goodwill assigned to a reporting unit exceeds the implied fair value of goodwill, an impairment charge is recorded for the excess. An impairment loss cannot exceed the carrying value of goodwill assigned to a reporting unit and, and the loss establishes a new basis in the goodwill. Subsequent reversal of goodwill impairment losses is not permitted.
Synovus used the combination of the income approach utilizing the discounted cash flow (DCF) method, and the guideline company method using a combination of price to tangible book value, price to book value, and price to earnings to estimate the fair value of a reporting unit. The total of all reporting unit fair values was compared for reasonableness to Synovus’ market capitalization plus a control premium.
 
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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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

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 31,2008.31, 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 our 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. This initiative includes the elimination of approximately 650 positions across the Synovus footprint. Synovus expects to incurincurred restructuring charges of approximately $22.0$22.1 million in conjunction with the project, including approximately $10.9$10.7 million in severance charges. During the twelve monthsFor 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.charges, respectively.
 
Visa Initial Public OfferingShares 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.” Synovus’ indemnification obligation is limitedVisa’s retrospective responsibility plan provides for settlementsand/or judgments from covered litigation to its membership proportionbe paid from a litigation escrow which was established from proceeds from the sale of Visa USA. In November 2007,Class B shares, which would otherwise have been available for conversion to Visa announcedClass A shares and then sold by Visa USA members upon the settlement of its American Express litigation, and disclosed in


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

its annual reportrelease from transfer restrictions. When proceeds are deposited to the SEC onForm 10-K forescrow, the year ended September 30, 2007 that Visa had accruedconversion ratio is adjusted whereby a contingent liability forgreater amount of Class B shares will be required to convert to one Class A share.
In the estimated settlement of its Discover litigation. During the second halffourth quarter of 2007, Synovus recognized a contingent liability in the amount of $36.8 million as an estimatecontingent liability for its membership proportion of the American Express settlement and the potential Discover settlement, as well as its membership proportion of the amount thatwhich Synovus estimated would be required for Visa to settle the remaining covered litigation.
Visa, Inc. completed an initial public offering (the Visa IPO) in In March 2008.2008, Visa used a portion$3.0 billion of the proceeds from the Visa IPO to establish a $3.0 billionan 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. In March 2008, Synovus recognized a pre-tax gain of $38.5 million on


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

redemption proceeds received from Visa, Inc. and reduced the $36.8 million litigation accrual recognized in the second half of 2007 by $17.4 million for its pro-rata share of the $3.0 billion escrow established by Visa, Inc. In October 2008, Visa announced that it had reached an agreement in principleVisa’s deposit to settle its litigation brought against Visa in 2004 by Discover Financial Services (Discover) and also disclosed specific terms of the settlement. Effective September 2008, Synovus recognized an additional $6.3 million accrued liability in conjunction with Visa’s settlement of the Discover litigation. In December 2008, Visa repurchased a portion of its Class B shares held by Visa members and deposited the $1.1 billion proceeds intoestablish the litigation escrow on behalf of Visa members. Accordingly, Synovus reduced its litigation accrual by $6.4 million for its membership proportion of the litigation escrow deposit.
escrow. Following the redemption, Synovus continues to holdheld approximately 1.43 million shares of Visa Class B common stock which arewere subject to restrictions until the latterlater of March 2011 or settlement of all covered litigation. A portionSynovus 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 held byto another Visa members may be sold byUSA 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 as needed to provide for settlement of the covered litigation through the litigation escrow. The ratio which will be used upon the expiration of restrictions to convert Class B shares intoto Visa Class A unrestricted shares will be adjusted by Visa as additional shares are sold.
Forshares. The fair value of the year ended December 31, 2008, the redemptionconversion rate derivative is measured using a discounted cash flow methodology for estimated future cash flows determined through use of shares and changesprobability weighting for estimates of Visa’s aggregate exposure to the accrued liability for Visa litigation resulted in a net after-tax gain of $34.2 million, or $0.10 per share.covered litigation. At December 31, 2008, Synovus’ accrual for2009, the aggregate amountfair value of the derivative liability was $12.9 million. Management believes that the estimate of Visa’s coveredexposure to litigation was $19.3 million. While management believes that this accrualliability is adequate to cover Synovus’ membership proportion of Visa’s covered litigation based on current information, additional adjustments may be required ifinformation; however, future developments in the aggregate amount of future settlements differs materially from Synovus’litigation could require changes to the estimate.
 
Adoption of SFAS Nos. 157 and 159Fair Value Accounting
 
SFAS No. 157ASC820-10 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. SFAS No. 159ASC820-10 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.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 SFAS No. 159ASC820-10 during the first quarter, effective on January 1, 2008. At December 31, 2008,2009, approximately $5.21$4.8 billion, or 14.6%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 SFAS No. 157ASC820-10 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, SFAS No. 157ASC820-10 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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The following table summarizes the assets accounted for at fair value on a recurring basis by level within the valuation hierarchy at December 31, 2008.2009.
Table 43  Assets Accounted for at Fair Value on a Recurring Basis
(Dollars in millions)
                         
  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%
 
                         
  December 31, 2008 
     Mortgage
  Investment
          
  Trading
  Loans
  Securities
  Private
       
  Account
  Held
  Available
  Equity
  Derivative
    
  Assets  for Sale  for Sale  Investments  Assets  Total 
 
Level 1  3%  —   —   —   —   — 
Level 2  97   100   96   —   99   95 
Level 3  —   —   4   100   1   5 
                         
Total
  100%  100   100   100   100   100 
                         
Total assets held at fair value on the balance sheet
 $24.5   133.6   3,892.1   123.5   307.8   4,481.5 
Level 3 assets as a percentage of total assets measured at fair value                      5.09%
 
The following table summarizes the liabilities accounted for at fair value on a recurring basis by level within the valuation hierarchy at December 31, 2008.2009.
 
Table 54  Liabilities Accounted for at Fair valueValue on a Recurring Basis
(dollars in millions)
             
  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%
 
                 
  December 31, 2008 
  Brokered
  Trading
       
  Certificates
  Account
  Derivative
    
  of Deposit  Liabilities  Liabilities  Total 
 
Level 1  —%  —   —   — 
Level 2  100   100   100   100 
Level 3  —   —   —   — 
                 
Total
  100%  100   100   100 
                 
Total liabilities held at fair value on the balance sheet
 $75.9   17.3   206.5   299.5 
Level 3 liabilities as a percentage of total assets measured at fair value              —%
 
In estimating the fair values for investment securities and most derivative financial instruments, independent, third-party market prices are the best evidence of exit price and, where available, Synovus bases estimates on such prices. If such third-party market prices are not available on the exact securities that Synovus owns, fair values are based on the market prices of similar instruments, third-party broker quotes, or are estimated using industry-standard or proprietary models whose inputs may be unobservable. When market observable data is not available, the valuation of financial instruments becomes more subjective and involves substantial judgment. The need to use unobservable inputs generally results from the lack of market liquidity for certain types of loans and securities, which results in diminished observability of both actual trades and assumptions that would otherwise be available to value these instruments. When fair values are estimated based on internal models, relevant market indices that correlate to the underlying collateral are considered, along with assumptions such as interest rates, prepayment speeds, default rates, and discount rates.
 
The valuation for 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


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

investments requires significant management judgment due to the absence of quoted market prices, inherent lack of liquidity, and the long-term nature of such assets. Private equity


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

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 2116 to the consolidated financial statements as of and for the year ended December 31, 2008.2009.
 
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 $128.3$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 2007, average total assets increased $3.06 billion, or 10.3% from 2006. Average earning assets for 2007 were $29.11 billion, which represented 88.5% of average total assets. For more detailed information on the average balance sheets for the years ended December 31, 2009, 2008, 2007, and 2006,2007, refer to Table 7.6.
 
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. OurSynovus’ 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 6)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 $71.0$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 other borrowed fundslong term debt were the primary funding sources for the increase in earning assets.
 
Net Interest Margin
 
The net interest margin after feeswas 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.
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


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

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. The effective cost of funds includes non-interest bearing funding sources, primarily consisting of demand deposits.
 
Yields on investment securities increased 917 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 nonperformingnon-performing assets in 2008 compared to 2007.
The primary factors driving the 125 basis point decrease in the effective cost of funds were a 200251 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 128108 basis point decrease in the cost of brokered time deposits and a 99 basis point decrease in the cost of non-brokered 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 ourSynovus’ local markets. These pricing pressures limited ourthe ability to lower rates on


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

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.
The net interest margin after fees was 3.97% for 2007, down 30 basis points from 2006. The yield on earning assets increased 9 basis points, which was offset by a 39 basis point increase in the effective cost of funds. The effective cost of funds includes non-interest bearing funding sources, primarily demand deposits.
The yields on earning assets were positively impacted by higher realized yields on investment securities, which increased 45 basis points, primarily due to the maturity of lower yielding investments that were reinvested at higher rates available during 2007. Loan yields, which increased 4 basis points, were favorably impacted by a 10 basis point increase in the average prime rate in 2007 as compared to 2006 and the maturity and replacement of lower yielding fixed rate loans throughout the year. These positive impacts on loan yields were slightly offset by an increase in the cost to fund the elevated levels of nonperforming assets in 2007 compared to 2006. The primary factors driving the 39 basis point increase in the effective cost of funds were a 53 basis point increase in the cost of non-brokered time deposits and a customer driven shift from lower cost deposit types such as NOW and savings accounts to higher cost time deposits and money market accounts.
Table 65  Net Interest Income
(In thousands)
                        
 Years Ended December 31,  Years Ended December 31, 
 2008 2007 2006 
(In thousands) 2009 2008 2007 
Interest income $1,857,580   2,238,404   2,016,466  $1,509,189   1,857,580   2,238,404 
Taxable-equivalent adjustment  4,909   5,059   5,790   4,846   4,909   5,059 
              
Interest income, taxable-equivalent  1,862,489   2,243,463   2,022,256   1,514,035   1,862,489   2,243,463 
Interest expense  779,687   1,089,456   890,677   498,879   779,687   1,089,456 
              
Net interest income, taxable-equivalent $1,082,802   1,154,007   1,131,579  $1,015,156   1,082,802   1,154,007 
              
 


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Management’s Discussion and Analysis ­ ­ (SYNOVUS LOGO)

Table 76  Consolidated Average Balances, Interest, and Yields
(Dollars in thousands)
                                                                  
 2008 2007 2006  2009 2008 2007 
 Average
   Yield/
 Average
   Yield/
 Average
   Yield/
  Average
   Yield/
 Average
   Yield/
 Average
   Yield/
 
 Balance Interest Rate Balance Interest Rate Balance Interest Rate 
(Dollars in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate 
Assets
                                                                        
Interest earning assets:
                                                                        
Taxable loans, net(a)(b) $27,382,247   1,657,647   6.05% $25,467,316   2,043,589   8.02% $23,254,146   1,857,005   7.99%
Tax-exempt loans, net(a)(b)(c)  88,191   5,262   5.97   55,007   3,987   7.25   61,792   4,408   7.13 
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  (418,984)  —   —   (335,032)  —   —   (309,658)  —   —   (777,332)  —   —   (418,984)  —   —   (335,032)  —   — 
                          
Loans, net  27,051,454   1,662,909   6.15   25,187,291   2,047,576   8.13   23,006,280   1,861,413   8.09   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  3,596,336   176,886   4.92   3,429,175   164,631   4.80   3,009,962   129,219   4.29   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)  135,590   9,468   6.98   174,431   11,817   6.77   198,691   13,498   6.79 
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  3,731,926   186,354   4.99   3,603,606   176,448   4.90   3,208,653   142,717   4.45   3,351,805   170,166   5.08   3,612,615   181,803   5.03   3,502,411   170,355   4.86 
                          
Trading account assets  30,870   1,924   6.23   52,274   3,418   6.53   43,201   2,691   6.23   17,556   1,091   6.21   30,870   1,924   6.23   52,274   3,418   6.53 
Interest earning deposits with banks  12,075   188   1.56   21,025   1,104   5.25   8,763   375   4.28   50,267   324   0.64   12,075   188   1.56   21,025   1,104   5.25 
Due from Federal Reserve Bank  90,543   391   0.43   —   —   —   —   —   —   1,461,965   3,650   0.25   90,543   391   0.43   —   —   — 
Federal funds sold and securities purchased under resale agreements  193,895   3,386   1.75   97,462   5,258   5.39   123,804   6,422   5.19   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  121,425   7,342   6.05   152,007   9,659   6.35   132,332   8,638   6.53   206,085   10,837   5.26   121,425   7,342   6.05   152,007   9,659   6.35 
                                
Total interest earning assets  31,232,188   1,862,494   5.96   29,113,665   2,243,463   7.71   26,523,033   2,022,256   7.62   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  505,374           529,306           538,949           522,256           505,374           529,306         
Premises and equipment, net  581,508           514,280           442,753           596,148           581,508           514,280         
Other real estate  180,493           52,735           26,000           262,600           180,493           52,735         
Other assets(d)  1,552,451           1,355,137           1,039,837         
Assets of discontinued operations(e)  —           1,330,172           1,260,600         
Other assets(d)
  1,169,494           1,552,451           1,355,137         
Assets of discontinued operations(e)
  —           —           1,330,172         
              
Total assets $34,052,014          $32,895,295          $29,831,172          $34,423,617          $34,052,014          $32,895,295         
              
Liabilities and Shareholders’ Equity Interest bearing liabilities:
                                    
Liabilities and Equity
                                    
Interest bearing liabilities:                                    
Interest bearing demand deposits $3,158,228   35,792   1.13  $3,125,802   68,779   2.20  $3,006,308   57,603   1.92  $3,586,798   15,916   0.44% $3,158,228   35,792   1.13% $3,125,802   68,779   2.20%
Money market accounts  7,984,231   181,482   2.27   7,714,360   336,286   4.36   6,515,079   269,899   4.14   7,943,855   91,199   1.15   7,984,231   181,482   2.27   7,714,360   336,286   4.36 
Savings deposits  452,661   1,137   0.25   483,368   2,525   0.52   542,793   3,538   0.65   469,419   711   0.15   452,661   1,137   0.25   483,368   2,525   0.52 
Time deposits  11,463,905   449,041   3.92   10,088,353   504,882   5.00   9,196,150   415,629   4.52   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  1,719,978   38,583   2.24   1,957,990   92,970   4.75   1,578,163   72,958   4.62   918,735   3,840   0.42   1,719,978   38,583   2.24   1,957,990   92,970   4.75 
Long-term debt  2,051,521   73,657   3.59   1,619,536   84,014   5.19   1,515,306   71,050   4.69   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  26,830,524   779,692   2.91   24,989,409   1,089,456   4.36   22,353,799   890,677   3.98   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  3,440,047           3,409,506           3,518,312           3,915,925           3,440,047           3,409,506         
Other liabilities  345,493           246,213           234,022           252,254           319,396           246,213         
Liabilities of and minority interest in discontinued operations(e)  —           314,257           355,085         
Shareholders’ equity  3,435,950           3,935,910           3,369,954         
Liabilities of and minority interest in discontinued operations(e)
  —           —           314,257         
Equity  3,321,353           3,462,047           3,935,910         
              
Total liabilities and shareholders’ equity $34,052,014          $32,895,295          $29,831,172         
Total liabilities and equity $34,423,617          $34,052,014          $32,895,295         
              
Net interest income/margin
      1,082,802   3.47%      1,154,007   3.97%      1,131,579   4.27%      1,015,156   3.19%      1,082,802   3.47%      1,154,007   3.97%
              
Taxable-equivalent adjustment      (4,909)          (5,059)          (5,790)          (4,846)          (4,909)          (5,059)    
              
Net interest income, actual      1,077,893           1,148,948           1,125,789           1,010,310           1,077,893           1,148,948     
              
 
 
(a)Average loans are shown net of unearned income. NonperformingNon-performing loans are included.
 
(b)Interest income includes loan fees as follows: 2009 — $22.8 million, 2008 — $29.5 million, 2007 — $36.2 million, 2006 — $40.4 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 $46.7$133.1 million, ($15.1)$46.7 million, and ($54.5)15.1) million for the years ended December 31, 2009, 2008, 2007, and 2006,2007, 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 ­ ­ (SYNOVUS LOGO)

Table 87  Rate/Volume Analysis
(In thousands)
                                                
 2008 Compared to 2007 2007 Compared to 2006  2009 Compared to 2008 2008 Compared to 2007 
 Change Due to(a) Change Due to(a)  Change Due to(a) Change Due to(a) 
   Yield/
 Net
   Yield/
 Net
 
 Volume Rate Change Volume Rate Change 
(In thousands) Volume Yield/Rate Net Change Volume Yield/Rate Net Change 
Interest earned on:                                                
Taxable loans, net $153,577   (539,519)  (385,942)  176,832   9,752   186,584  $(19,896)  (318,347)  (338,243)  153,577   (539,519)  (385,942)
Tax-exempt loans, net(b)  2,406   (1,131)  1,275   (484)  63   (421)
Tax-exempt loans, net(b)
  4,845   (3,104)  1,741   2,406   (1,131)  1,275 
Taxable investment securities  8,024   4,231   12,255   17,984   17,428   35,412   (11,304)  1,925   (9,379)  7,095   6,702   13,797 
Tax-exempt investment securities(b)  (2,630)  281   (2,349)  (1,647)  (34)  (1,681)
Tax-exempt investment securities(b)
  (2,297)  39   (2,258)  (2,630)  281   (2,349)
Trading account assets  (1,398)  (96)  (1,494)  565   162   727   (829)  (4)  (833)  (1,398)  (96)  (1,494)
Interest earning deposits with banks  (470)  (446)  (916)  524   206   730   596   (460)  136   (470)  (446)  (916)
Due from Federal Reserve Bank  391   —   391   —   —   —   5,897   (2,638)  3,259   391   —   391 
Federal funds sold and securities purchased under resale agreements  5,198   (7,070)  (1,872)  (1,367)  202   (1,165)  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  (1,942)  (375)  (2,317)  1,285   (264)  1,021   5,122   (1,627)  3,495   (1,942)  (375)  (2,317)
                          
Total interest income  163,156   (544,125)  (380,969)  193,692   27,515   221,207   (17,127)  (331,332)  (348,459)  163,318   (544,287)  (380,969)
                          
Interest paid on:                                                
Interest bearing demand deposits  713   (33,700)  (32,987)  2,294   8,882   11,176   4,843   (24,719)  (19,876)  713��  (33,700)  (32,987)
Money market accounts  11,766   (166,570)  (154,804)  49,650   16,737   66,387   (917)  (89,366)  (90,283)  11,766   (166,570)  (154,804)
Savings deposits  (160)  (1,228)  (1,388)  (386)  (627)  (1,013)  42   (468)  (426)  (160)  (1,228)  (1,388)
Time deposits  68,778   (124,619)  (55,841)  40,328   48,925   89,253   23,009   (123,628)  (100,619)  68,778   (124,619)  (55,841)
Federal funds purchased and securities sold under repurchase agreements  (11,306)  (43,081)  (54,387)  17,548   2,464   20,012   (17,948)  (16,795)  (34,743)  (11,306)  (43,081)  (54,387)
Other borrowed funds  22,420   (32,777)  (10,357)  4,888   8,076   12,964   (3,127)  (31,739)  (34,866)  22,420   (32,777)  (10,357)
                          
Total interest expense  92,211   (401,975)  (309,764)  114,322   84,457   198,779   5,902   (286,715)  (280,813)  92,211   (401,975)  (309,764)
                          
Net interest income $70,945   (142,150)  (71,205)  79,370   (56,942)  22,428  $(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 Federalfederal income tax rate of 35%, in adjusting interest on tax-exempt loans and investment securities to a taxable-equivalent basis.


F-71F-77

Management’s Discussion and Analysis ­ ­ (SYNOVUS LOGO)

Non-Interest Income
 
Non-interest income consists of a wide variety of fee generating services. Total non-interest income was $435.2$410.7 million in 2008, up 11.9%2009, down 1.6% compared to 2007.2008. Total non-interest income for 20072008 was $389.0$417.2 million, up 8.2%12.3% over 2006. Table 92007. The following table shows the principal components of non-interest income.
Table 98  Non-Interest Income
(In thousands)
                        
 2008 2007 2006  Years Ended December 31, 
(In thousands) 2009 2008 2007 
Service charges on deposits $111,837   112,142   112,417 
Service charges on deposit accounts $117,751   111,837   112,142 
Fiduciary and asset management fees  48,779   50,761   48,627   44,168   48,779   50,761 
Brokerage and investment banking revenue  33,119   31,980   26,729   28,475   33,119   31,980 
Mortgage banking income  23,493   27,006   29,255   38,521   23,493   27,006 
Bankcard fees  53,153   47,770   44,303   36,139   35,283   30,393 
Net gains (losses) on sales of investment securities available for sale  45   980   (2,118)
Net gains on sales of investment securities available for sale  14,067   45   980 
Other fee income  37,246   39,307   38,743   31,200   37,246   39,307 
Increase in fair value of private equity investments, net  24,995   16,497   6,552   1,379   24,995   16,497 
Proceeds from sale of MasterCard shares  16,186   6,304   2,481   8,351   16,186   6,304 
Proceeds from Visa IPO  38,542   —   — 
Proceeds from redemption of Visa shares  —   38,542   — 
Gain from sale of Visa shares  51,900   —   — 
Other non-interest income  47,795   56,281   52,441   38,719   47,716   56,268 
              
Total non-interest income $435,190   389,028   359,430  $410,670   417,241   371,638 
              
 
Service charges on depositsdeposit 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 the previous year, and $112.1 million in 2007, a decrease of 0.2% from 2006.2007. Service charges on deposit accounts consist of non-sufficient funds (NSF) fees (which represent approximately two — thirds60.9% of the total)total for 2009), account analysis fees, and all other service charges. NSF fees decreased by $6.4 million$321 thousand or 8.2% over 2007.0.5% from 2008. Account analysis fees were up $8.3$4.8 million or 55.1%20.7% from 20072008 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 down $2.1up $1.4 million or 11.4%8.5% compared to 2007.2008. The declineincrease in all other service charges was largely duedriven by improvement in pricing strategies implemented through Project Optimus.
Synovus anticipates that changes to continued market emphasisRegulation E, which are effective beginning in 2010, will have a negative impact on NSF revenues. These changes limit the ability of checking accounts with no monthly service chargea financial institution to assess an overdraft fee for paying ATM and one-time debit card transactions that overdraw a decline in check-related fees.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 the prior year, and $50.8 million for 2007, an increase of 4.4% over 2006.2007. The decrease in fiduciary and asset management fees for 2009 from 2008 overis 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. The increase for 2007 over 2006 is primarily due to an increase in managed assets in 2007 compared to 2006.
 
At December 31, 2009, 2008 2007 and 2006,2007, the market value of assets under management was approximately $7.61 billion, $7.39 billion $9.56 billion and $8.80$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, decreased 22.7% and increased 8.7% from December 31, 2007 and 2006, respectively. The decline in 2008 was primarily due to lower equity valuations. Assets under management consist of all assets where Synovus has investment authority. Assets under advisement were approximately $3.19 billion, $3.38 billion, $3.53 billion, and $3.82$3.53 billion at December 31, 2009, 2008 2007 and 2006,2007, 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 2007 decreased 4.2% and decreased 7.8% from December 31, 20072008 and 2006,2007, respectively. Total assets under management and advisement were $10.80 billion at December 31, 2009 compared to $10.77 billion at December 31, 2008 compared toand $13.09 billion at December 31, 2007 and $12.63 billion at December 31, 2006.2007. 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 ­ (SYNOVUS LOGO)

 
Brokerage and investment banking revenuewas $33.1$28.5 million in 2008,2009, a 3.6% increase over14.0% decrease from the $32.0$33.1 million reported in 2007.2008. Brokerage assets were $4.01$3.98 billion and $4.08$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 2007, respectively.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.
 
Total brokerage and investment banking revenue for 2007 was $32.0 million, up 19.6% over 2006. The increase in revenue was primarily driven by our retail brokerage unit. Synovus began to integrate the retail brokerage sales force into the bank structure during 2006 with the unit fully integrated in


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

2007. This resulted in accelerated revenue growth following this re-organization.
Mortgage banking incomewas $23.5$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. MortgageTotal 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 continued slow-down in residential housing during 2008. The 2008 results includeincluded a $1.2 million increase in mortgage revenues due to the adoption of the SEC Staff Accounting Bulletin (SAB) No.SAB 109, “WrittenWritten Loan Commitments Recorded at Fair Value through Earnings.”
Total mortgage banking income for 2007 was $27.0 million, a 7.7% decrease from 2006 levels. Total mortgage production volume was $1.43 billion in 2007, down 5.5% compared to 2006.
 
Bankcard feestotaled $53.2$36.1 million in 2009, an increase of 2.4% over the previous year, and $35.3 million in 2008, an increase of 11.3% over the previous year, and $47.8 million in 2007, an increase of 7.8%16.1% from 2006.2007. Bankcard fees consist of credit card merchant and 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% over the previous year, and $15.5 million in 2007, an increase of 6.3% from 2006.2007. The increase in debit card interchange fees for 2009 and 2008 was primarily driven by an increase in volume. Credit card fees were $32.9$14.7 million in 2009, a decrease of 2.4% compared to 2008, and $15.1 million in 2008, an increase of 2.0%1.1% compared to 2007, and $32.3 million in 2007, an increase of 8.6% compared to 2006.2007.
 
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.
 
ProceedsGain from sale of Visa IPOsharesrepresentstotaled $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 gain onin 2008. This represents the redemption of a portion of Synovus’ membership interest in Visa, Inc. as a result of Visa’s initial public offering (thethe Visa IPO).IPO. For further discussion of Visa, see the section titled “Visa Initial Public OfferingShares and Litigation Expense.”
 
Other non-interest incomewas $47.8$38.7 million in 2008,2009, compared to $56.3$47.7 million in 2007.2008. The main components of other operatingnon-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 ­ (SYNOVUS LOGO)

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 $1.47$1.46 billion, up $625.5$625.7 million or 74.5%75.4% over 2007. Excluding changes in the Visa litigation accrual, the charge for impairment of goodwill, and restructuring charges, non-interest expense increased $184.1 million or 22.9% over 2007. Table 10 summarizes this data for the years ended December 31, 2008, 2007 and 2006.
Table 10  Non-Interest Expense
(In thousands)
             
  Years Ended December 31, 
  2008  2007  2006 
 
Salaries and other personnel expense $458,927   455,158   450,373 
Net occupancy and equipment expense  124,444   112,888   100,269 
FDIC insurance and other regulatory fees  25,161   10,347   8,796 
Foreclosed real estate  136,678   15,736   3,294 
Losses on impaired loans held for sale  9,909   —   — 
Visa litigation (recovery) expense  (17,473)  36,800   — 
Goodwill impairment  479,617   —   — 
Professional fees  30,276   21,255   20,001 
Restructuring charges  16,125   —   — 
Other operating expenses  201,957   187,910   181,800 
             
Total non-interest expense $1,465,621   840,094   764,533 
             
 
Total salaries and other personnel expenseincreased $3.8$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 $11.6$11.5 million, or 10.2%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 the Company.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. The increase in FDIC


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

insurance and regulatory fees is substantially the result of expense recognized in 2008, following full recognition of credits associated with the FDIC insurance assessment.
 
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 ­ (SYNOVUS LOGO)

 
Losses on impairedother loans held for salewere $9.9 million. For further discussion, see the section titled “Impaired“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 Initial Public OfferingShares 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 98 to the consolidated financial statements.
 
Professional feesincreased $9.0$9.2 million, or 42.4%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 Corporation is discussed in further detail in the section titled “Commitments and Contingencies.”“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 $14.0$12.7 million, or 7.5%9.2%, over 2007. The largest expense category increase was from third party processing services, which increased $10.1 million, or 26.3%, in 2008 as compared to 2007.
The efficiency ratio (non-interest expense dividedlargely driven by the sumprovision for losses on unfunded commitments of Federal taxable equivalent net interest income and non-interest income excluding net securities gains and losses) was 96.53% for 2008 (64.94% excluding goodwill impairment charges) compared to 54.45% in 2007. The net overhead ratio (non-interest expense less non-interest income — excluding net securities gains and losses divided by total average assets) was 3.03% for 2008 compared to 1.43% in 2007.$8.8 million.
 
2007 vs. 2006
Non-interest expense increased $75.6 million, or 9.9%, in 2007 over 2006. Excluding the Visa litigation expense of $36.8 million, total non-interest expense increased $38.8 million or 5.1% over 2006.
Total salaries and other personnel expenseincreased $4.8 million, or 1.1%, in 2007 compared to 2006. Total employees were 7,385 at December 31, 2007, up 196 or 2.7% from 7,189 employees at December 31, 2006. In addition to merit and promotional salary adjustments, this category was also impacted by total performance-based incentive compensation which was approximately $25.0 million in 2007, a $38.3 million or 60.5% decrease from 2006 levels.
Net occupancy and equipment expenseincreased $12.6 million, or 12.6% during 2007, driven by the net addition of 19 branches in 2007. Rent expense increased by approximately $4.5 million and repairs and maintenance increased by $2.1 million in 2007 as compared to 2006.
FDIC insurance and other regulatory feesincreased $1.6 million, or 17.6% in 2007 over 2006.
Foreclosed real estate costsincreased $12.4 million, or 377.7% over 2006 due primarily to losses and expenses associated with higher levels of foreclosed real estate.
Visa litigation (recovery) expensewas $36.8 million in 2007. During 2007, Synovus recognized litigation expenses of $36.8 million associated with indemnification obligations arising from Synovus’ ownership interest in Visa.
The efficiency ratio (non-interest expense divided by the sum of federal taxable equivalent net interest income and non-interest income excluding net securities gains and losses) was 54.45% for 2007 compared to 51.18% in 2006. The net overhead ratio (non-interest expense less non-interest income - excluding net securities gains and losses divided by total average assets) was 1.43% for both 2007 and 2006.
Trading Account Assets
Synovus assists certain commercial customers in obtaining long-term funding through municipal and corporate bond issues and in certain situations provides re-marketing services for those bonds. During the three months ended September 30, 2008, Synovus purchased approximately $80.9 million of bonds issued by its customers, including $55.8 million in corporate bonds and $25.1 million in municipal bonds, that were sold


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

back prior to their maturity and could be immediately remarketed. Subsequently, Synovus has tendered substantially all of these bonds back to the respective trustees. Approximately $4.3 million of tendered bonds remained in the trading account portfolio at December 31, 2008. The remainder of the trading account assets portfolio is substantially comprised of mortgage-backed securities which are bought and held principally for sale and delivery to correspondent and retail customers of Synovus. Trading account assets are reported on the consolidated balance sheets at fair value, with unrealized gains and losses included in other non-interest income on the consolidated statements of income. Synovus recognized a net gain on trading account assets of $710 thousand for the year ended December 31, 2008 as compared to a net gain of $465 thousand for the year ended December 31, 2007, and a net gain of $1.5 million for the year ended December 31, 2006.
ImpairedOther 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 impairedother 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.loans. The value of the loans or pools of loans is primarily determined by analyzing the underlying collateral of the loan and the external salesmarket prices for the portfolio.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.
 
TheAt December 31, 2009 and 2008, the carrying value of impairedother loans held for sale was $36.8 million and $3.5 million, atrespectively. All such loans were considered impaired as of December 31, 2009 and 2008. There were no impaired loans held for sale at December 31, 2007. During the year ended December 31, 2008,2009, Synovus transferred loans with a cost basis totaling $72.7$225.8 million to the impairedother loans held for sale portfolio. Synovus recognized charge-offs totaling $22.1$89.2 million on these loans, resulting in a new cost basis for loans transferred to the impairedother loans held for sale portfolio of $50.6$136.6 million. The $22.1$89.2 million in charge-offs were estimated based on the estimatedprojected sales price of the portfolio through bulk sales.loans. Subsequent to their transfer to the impairedother loans held for sale portfolio, Synovus recognized additional write-downs of $3.2$6.7 million and recognized additional net losses on sales of $9.9$1.7 million. The additional write-downs were based on the estimated sales proceeds from pending liquidation 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. GainsSubsequent 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 salesales and any subsequent adjustments to the value, are recorded as foreclosed real estate expense, a component of foreclosed real estatenon-interest expense.
 
The carrying value of other real estate was $246.1 million, $101.5$238.8 million and $25.9$246.1 million at December 31, 2008, 2007,2009 and 2006,2008 respectively. During the twelve months ended December 31, 2008,2009, approximately $435.1$664.5 million of loans and $1.5$1.7 million of impairedother loans held for sale were foreclosed and transferred to other real estate. The increase in other real estate during the year ended December 31, 2008 is the result of negative migration in credit quality, the declining value of real estate in certain parts of Florida and the excess supply of residential real estate in the Atlanta area. During the years ended December 31, 2009, 2008, 2007 and 2006,2007, Synovus recognized foreclosed real estate costs of $354.3 million, $136.7 million, and $15.7 million, and $3.3 million, respectively. Other real estateThese costs recognized during the year ended December 31, 2008 include $47.5 million in losses resulting from the liquidationprimarily consist of other real estate through bulk sales and auctions, $18.2 million in net losses resulting from other sales, $50.6 million in additional write-downs duecharges related to declines in


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

fair value or reductions in estimated realizable value subsequent to the date of foreclosure, $16.7 million in carrying costs associated with other real estate, and $3.7 million in legal and appraisal fees.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. At December 31, 2008, approximately $3.1 billion of these investment securities were pledged as required collateral for certain deposits, securities sold under repurchase agreements, and FHLB advances. See Table 1211 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


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

relatively constant level for most of 2008. Significant declines in market rates late in2009, though the year led Synovus to modestly shorten the durationsize of the portfolio.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 compared to 3.49 years at December 31, 2007.2008.
 
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. Governmentgovernment agencies and Governmentgovernment 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, 2008,2009, all of the collateralized mortgage obligations and mortgage-backed pass-through securities held by Synovus were issued or backed by Federalfederal agencies.
 
As of December 31, 20082009 and 2007,2008, the estimated fair value of investment securities available for sale as a percentage of their amortized cost was 104.0%103.6% and 100.7%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 as of December 31, 2008. As of December 31, 2007, the investment securities available for sale portfolio had gross unrealized gains of $40.6 million and gross unrealized losses of $14.5 million, for a net unrealized gain of $26.1 million. Shareholders’ equity included net unrealized gains of $92.1$67.1 million and $16.0$92.1 million on the available for sale portfolio as of December 31, 20082009 and 2007,2008, respectively.
 
During 2008,2009, the average balance of investment securities available for sale increaseddecreased to $3.73$3.35 billion compared to $3.60from $3.61 billion in 2007.2008. Synovus earned a taxable-equivalent rate of 4.99%5.08% and 4.90%5.03% for 20082009 and 2007,2008, respectively, on its investment securities available for sale portfolio. As of December 31, 20082009 and 2007,2008, average investment securities available for sale represented 11.9%10.52% and 12.4%11.57%, respectively, of average interest earning assets.
 
The calculation of weighted average yields for investment securities available for sale in Table 1211 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 Federalfederal 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 1110  Investment Securities Available for Sale
(In thousands)
         
(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 
         
 
             
  December 31, 
  2008  2007  2006 
 
U.S. Treasury and U.S. Government agency securities $1,557,214   1,945,381   1,770,570 
Mortgage-backed securities  2,072,413   1,430,323   1,275,358 
State and municipal securities  123,281   164,556   196,185 
Other investments  139,240   126,714   110,244 
             
Total $3,892,148   3,666,974   3,352,357 
             


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Management’s Discussion and Analysis ­ ­ (SYNOVUS LOGO)

Table 1211  Maturities and Average Yields of Investment Securities Available for Sale
(Dollars in thousands)
                
 December 31, 2008  December 31, 2009 
 Investment Securities
  Investment Securities
 
 Available for Sale  Available for Sale 
 Estimated
 Average
  Estimated
 Average
 
(Dollars in thousands) Fair Value Yield 
 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  —   — 
     
U.S. Treasury and U.S. Government agency securities:        
Total $121,589   1.80%
     
U.S. Government agency securities:        
Within 1 year $249,131   4.53% $272,286   4.94%
1 to 5 years  577,287   5.02   337,472   3.93 
5 to 10 years  534,357   5.19   289,978   4.77 
More than 10 years  196,439   5.59   27,890   5.24 
          
Total $1,557,214   5.07  $927,626   4.71%
          
State and municipal securities:                
Within 1 year $13,936   6.59  $8,503   6.72%
1 to 5 years  52,029   7.14   38,556   7.14 
5 to 10 years  45,916   7.15   26,090   6.97 
More than 10 years  11,400   6.90   9,652   6.79 
          
Total $123,281   7.06  $82,801   7.00%
          
Other investments:                
Within 1 year $250   3.88  $—   —%
1 to 5 years  997   6.83   80,810   1.59 
5 to 10 years  1,800   9.50   900   — 
More than 10 years  5,900   6.93   4,145   6.30 
          
Total $8,947   7.34  $85,855   1.80%
          
Equity securities $130,293   4.05  $9,981   3.43%
          
Mortgage-backed securities $2,072,413   5.02 
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 $263,317   4.64  $306,037   4.59%
1 to 5 years  630,313   5.20   553,179   3.79 
5 to 10 years  582,073   5.36   316,968   4.93 
More than 10 years  213,739   5.51   41,687   5.71 
Equity securities  130,293   4.26   9,981   3.43 
Mortgage-backed securities  2,072,413   5.02 
Government agency issued mortgage-backed securities  1,873,980   4.94 
Government agency issued collateralized mortgage obligations  86,903   4.92 
          
Total $3,892,148   5.08% $3,188,735   4.71%
          


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Management’s Discussion and Analysis ­ ­ (SYNOVUS LOGO)

 
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.


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

Portfolio Composition
 
The loan portfolio spreads across five southeastern states with diverse economies.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 Georgia banks representdecline in loan balances was driven by reduced demand in the commercial loan portfolio as commercial customers have a majority with 52.6%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 consolidatedtotal loan portfolio. South Carolina represents 15.2%, followed by Alabama with 14.4%, Florida with 13.0%, and Tennessee with 4.8%.
The commercial loan portfolio consists of commercial and industrial loans and commercial real estate loans. TheseDriven by lower demand, charge-offs, and asset dispositions, total commercial loans are granted primarily on the borrower’s general credit standing and on the strength of the borrower’s ability to generate repayment cash flowsdeclined by $2.38 billion or 10.1% from sales of real estate or from other income sources such as rental income from commercial real estate. Real estate construction and mortgage loans are secured by commercial real estate as well as 1-4 family residences, and represent extensions of credit used as interim or permanent financing of real estate properties.December 31, 2008.
 
Total commercial real estate loans, at December 31, 2008 were $12.18 billion or 43.6%which represent 41.3% of the total loan portfolio. 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 onin Table 23,12, 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 loanportfolio. 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, and 2007 includes loanswith the greatest decline in the Atlanta market totaling $2.83 billionmarket.


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Management’s Discussion and $3.06 billion, respectively, of which $1.28 billionAnalysis­ ­ (SYNOVUS LOGO)

Table 14  Residential Construction and $1.69 billion, respectively, at each year end are 1-4 family property loans.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, 20082009 were $23.57$10.70 billion, down $544.5 million or 84.4%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 total loan portfolio. Included inborrowers, most of which have guaranty arrangements. Synovus concentrates on small to middle market commercial and industrial lending, and the commercial category atportfolio is disbursed throughout the southeast. At December 31, 2008 are $4.522009, $4.58 billion inof 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, 20082009 were $4.38$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 ­ (SYNOVUS LOGO)

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, 2008,2009, Synovus had 4536 loan relationships with total commitments of $50 million or more (including amounts funded). The average funded balance of these relationships at December 31, 20082009 was approximately $62$74 million.
 
Table 15  Five Year Composition of Loan Portfolio Growth
 
                                         
  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%
                                         
At December 31, 2008, total loans outstanding were $27.92 billion, an increase of 5.4% over 2007. Average loans increased 7.4% or $1.86 billion compared to 2007, representing 86.6% of average earning assets and 79.4% of average total assets. Growth in the commercial and industrial loan portfolio was 7.0% compared to a growth rate of 2.3% for the commercial real estate portfolio. The retail portfolio grew by 9.7% with most of the growth driven by home equity lines and small business loans.
 
* Loan balance in each category, expressed as a percentage of total loans, net of unearned income.
Synovus provides credit enhancements in the form of standby letters of credit to assist certain commercial customers in obtaining long-term funding through taxable and tax-exempt bond issues. Under these agreements and under certain conditions, if the bondholder requires the issuer to repurchase the bonds, Synovus is obligated to provide funding under the letter of credit to the issuer to finance the repurchase of the bonds by the issuer. Bondholders (investors) may require the issuer to repurchase the bonds for any reason, including general liquidity needs of the investors, general industry/ market considerations, as well as changes in Synovus’ credit ratings. Synovus’ maximum exposure to credit loss in the event of nonperformance by the counterparty is represented by the contract amount of those instruments. Synovus applies the same credit policies in entering into commitments and conditional obligations as it does for loans. The maturities of the funded letters of credit range from one to fifty-nine months, and the yields on these instruments are comparable to average yields for new commercial loans. Synovus has issued approximately $1.6 billion in letters of credit related to these bond issuances. At December 31, 2008, approximately $500 million was funded under these standby letters of credit agreements, all of which is reported as a component of total loans. As of February 26, 2009, approximately $294 million has been funded subsequent to December 31, 2008 related to these bond repurchases, bringing the total amount of funding related to these bond repurchases to $794 million..
Total commercial real estate loans increased by $277.4 million, or 2.3% from year-end 2007. Market conditions resulted in a net decrease in 1-4 family property loans. The investment properties portfolio increased by 20.6%, or $932.1 million, over the prior year. Approximately $195 million of the increase was driven by the aforementioned funded


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Management’s Discussion and Analysis ­ ­ (SYNOVUS LOGO)

letters of credit. Additionally, a lack of exit capabilities in the market place with commercial mortgage backed securities (CMBS) has increased the duration of the investment properties portfolio.
 
Commercial and industrial loans increased by $748.9 million or 7.0% from year-end 2007. Approximately $205 million of the increase was driven by the aforementioned funded letters of credit. Commercial, financial, and agricultural loans increased $454.2 million or 7.1% over 2007. Owner occupied loans increased $294.7 million or 7.0% from year end 2007.
Retail loans increased by $386.5 million or 9.7% from year-end 2007. Real estate mortgage loans grew $274.2 million, or 8.5%, driven by growth in home equity loans. Home equity loans, our primary retail loan product, increased $180.4 million or 11.7% compared to a year ago. Our home equity loan portfolio consists primarily of loans with strong credit scores, conservative debt-to-income ratios, and appropriate loan-to-value ratios. The utilization rate (total amount outstanding as a percentage of total available lines) of this portfolio at December 31, 2008 and 2007 was approximately 61% and 58%, respectively. These loans are primarily extended to customers who have an existing banking relationship with Synovus.
In addition to home equity lines, retail real estate mortgage also includes $1.76 billion in mortgage loans at December 31, 2008. Mortgage loans grew by $93.8 million or 5.6% from year end 2007. These loans are primarily extended to customers who have an existing banking relationship with Synovus.
Table 17table below shows the maturity of selected loan categories as of December 31, 2008.2009. 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 Table 17the 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


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Management’s Discussion and Analysis ­ ­ (SYNOVUS LOGO)

Table 13  Loans by Type
(Dollarsproperties, and $266.2 million of loans and ORE properties which are primarily comprised of owner occupied commercial and 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 thousands)
                 
  2008  2007 
  Total Loans  % *  Total Loans  % * 
 
Multi-family $570,131   2.0% $452,163   1.7%
Hotels  984,205   3.5   614,979   2.3 
Office buildings  1,003,407   3.6   953,093   3.6 
Shopping centers  1,066,848   3.8   834,025   3.2 
Commercial development  875,747   3.1   961,271   3.6 
Other investment property  961,570   3.4   714,296   2.7 
                 
Total investment properties
  5,461,908   19.4   4,529,827   17.1 
                 
1-4 family construction  1,615,378   5.8   2,238,925   8.4 
1-4 family perm/mini-perm  1,416,838   5.1   1,273,843   4.8 
Residential development  2,124,059   7.6   2,311,459   8.8 
                 
Total 1-4 family properties
  5,156,275   18.5   5,824,227   22.0 
                 
Land acquisition
  1,559,183   5.6   1,545,933   5.8 
                 
Total commercial real estate
  12,177,366   43.5   11,899,987   44.9 
                 
Commercial, financial, and agricultural  6,874,904   24.6   6,420,689   24.2 
Owner-occupied  4,521,414   16.2   4,226,707   16.0 
                 
Total commercial & industrial
  11,396,318   40.8   10,647,396   40.2 
                 
Home equity  1,724,062   6.2   1,543,701   5.8 
Consumer mortgages  1,761,756   6.3   1,667,924   6.3 
Credit card  295,055   1.1   291,149   1.1 
Other retail loans  603,003   2.2   494,591   1.9 
                 
Total retail
  4,383,876   15.8   3,997,365   15.1 
Unearned income
  (37,383)  (0.1)  (46,163)  (0.2)
                 
Total loans, net of unearned income
 $27,920,177   100.0% $26,498,585   100.0%
                 
* Loan balance in each category expressed as a percentage of total loans, net of unearned income.


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Management’s Discussionproblem assets during the first and Analysis­ ­ (SYNOVUS LOGO)

Table 14  Five Year Compositionsecond quarters of Loan Portfolio
(Dollars in thousands)
                                         
  December 31, 
  2008  2007  2006  2005  2004 
  Amount  % *  Amount  % *  Amount  % *  Amount  % *  Amount  % * 
 
Commercial:                                        
Commercial, financial, and agricultural $6,874,904   24.6  $6,420,689   24.2  $5,874,204   23.8  $5,268,042   24.6  $5,064,828   26.0 
Owner occupied  4,521,414   16.2   4,226,707   16.0   4,054,728   16.4   3,685,026   17.2   3,399,356   17.5 
Real estate — construction  7,336,943   26.3   8,022,179   30.3   7,517,611   30.5   5,745,169   26.8   4,574,364   23.5 
Real estate — mortgage  4,840,423   17.3   3,877,808   14.6   3,595,798   14.6   3,392,989   15.9   3,315,863   17.0 
                                         
Total commercial  23,573,684   84.4   22,547,383   85.1   21,042,341   85.3   18,091,226   84.5   16,354,411   84.0 
                                         
Retail:                                        
Real estate — mortgage  3,485,818   12.5   3,211,625   12.1   2,881,880   11.8   2,559,339   12.0   2,298,681   11.8 
Retail loans — credit card  295,055   1.0   291,149   1.1   276,269   1.1   268,348   1.3   256,298   1.3 
Retail loans — other  603,003   2.2   494,591   1.9   500,757   2.0   521,521   2.4   612,957   3.1 
                                         
Total retail  4,383,876   15.7   3,997,365   15.1   3,658,906   14.9   3,349,208   15.7   3,167,936   16.2 
                                         
Total loans  27,957,560       26,544,748       24,701,247       21,440,434       19,522,347     
Unearned income  (37,383)  (0.1)  (46,163)  (0.2)  (46,695)  (0.2)  (48,087)  (0.2)  (41,951)  (0.2)
                                         
Total loans, net of unearned income $27,920,177   100.0  $26,498,585   100.0  $24,654,552   100.0  $21,392,347   100.0  $19,480,396   100.0 
                                         
* Loan balance in each category, expressed as a percentage of total loans, net of unearned income.
Table 15  Loans by State
(Dollars in thousands)
                 
     December 31,
  December 31,
 
  December 31, 2008  2007  2006 
     As a % of
  As a % of
  As a % of
 
     Total Loan
  Total Loan
  Total Loan
 
  Total Loans  Portfolio  Portfolio  Portfolio 
 
Georgia
 $14,663,865   52.6%  52.5%  52.8%
Atlanta  5,287,116   18.9   19.9   19.8 
Florida
  3,631,524   13.0   13.6   13.9 
West Florida  2,864,358   10.3   10.8   11.2 
South Carolina
  4,245,765   15.2   15.0   14.5 
Tennessee
  1,348,649   4.8   4.8   4.3 
Alabama
  4,030,374   14.4   14.1   14.5 
                 
Consolidated
 $27,920,177   100.0%  100.0%  100.0%
                 


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

Table 16  Residential Construction and Development Loans by State
(Dollars in thousands)
                 
  December 31, 2008 
     % of Total
       
  Residential
  Residential
  Residential
  % of Residential
 
  Construction
  Construction
  Construction
  Construction
 
  and
  and
  and
  and
 
  Development
  Development
  Development
  Development
 
  Portfolio  Portfolio  NPL  NPL 
 
Georgia
 $2,080,950   55.6% $387,500   79.3%
Atlanta  1,085,868   29.0   220,145   45.0 
Florida
  406,855   10.9   50,070   10.2 
West Florida  299,345   8.0   45,560   9.3 
South Carolina
  756,313   20.2   12,612   2.6 
Tennessee
  122,242   3.3   10,384   2.1 
Alabama
  373,077   10.0   28,448   5.8 
                 
Consolidated
 $3,739,437   100.0% $489,014   100.0%
                 
Table 17  Loan Maturity and Interest Rate Sensitivity
(In thousands)
                 
  December 31, 2008 
     Over One Year
  Over
    
  One Year
  Through Five
  Five
    
  Or Less  Years  Years  Total 
 
Selected loan categories:                
Commercial, financial, and agricultural $3,767,395   2,540,582   566,927   6,874,904 
Real estate-construction  5,382,418   1,790,999   163,526   7,336,943 
                 
Total $9,149,813   4,331,581   730,453   14,211,847 
                 
Loans due after one year:                
Having predetermined interest rates             $1,853,369 
Having floating or adjustable interest rates              3,208,665 
                 
Total             $5,062,034 
                 
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 banksbank’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, and first quarter of 2008, 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


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

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 nonperformingnon-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 in the following paragraph.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 consideringloss factors for commercial loans are based on internal default data experience because this was the lower inherent riskfirst 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 retail portfolio and lower than expected charge-offs.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.


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

Accordingly, these loss factors are reviewed periodically and modified as necessary.
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 theimprecision 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.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. Accordingly, Synovus has determined the impairment on these loans based upon fair value estimates (net of selling costs) of the respective collateral. 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 19.20.
 
Total net charge-offs were $469.2 million$1.46 billion or 1.73%5.37% of average loans for 20082009, compared to $117.1$469.2 million or .46%1.71% for 2007.2008. 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 $247.5$623.4 million or 52.7%42.7% of total net charge offscharge-offs for 2008.2009. Net charge offs in these categories also increased by $198.7$375.9 million from 20072008 levels, representing 56%37.9% of the total increase of $352.1$991.0 million in consolidatedtotal net charge offs for the year. The West FloridaSouth Carolina market and Atlanta market represented $52.7$83.9 million and $106.9$265.0 million, respectively, of the total residential construction and development net charge-offs for 2008.2009. 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 compared to $6.1 million in 2007.2008.


F-90

Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

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
 
As noted previously, during 2007 and 2008 Synovus implemented certain refinements to its allowance for loan losses methodology, specifically the way that loss factors are derived.


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

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. While these changes did not have a significant impact on the total allowance for loan losses or provision for losses on loans, the changes did impact the amounts allocated to each component of the portfolio.
Table 2021 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 64.91%60.66% at December 31, 2008,2009, compared to 107.46%65.00% at December 31, 2007. The decline in the coverage2008. This ratio is impacted by the increase in 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 (excludingexcluding collateral-dependent impaired loans for which there is no related allowance for loan losses),losses, which was 197.10%124.7% at December 31, 2008,2009, compared to 337.49%192.8% at December 31, 2007.2008. 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 1819 Allowance for Loan Losses Allocated toNon-performing Loans
 
(Dollars in thousands)
                
 December 31,  December 31, 
(Dollars in thousands) 2009 2008 
 2008 2007 
Non-performing loans, excluding collateral dependent impaired loans which have no allowance $303.6  $108.9 
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 $68.5  $20.5   161.9   68.5 
Allocated allowance as a % of loans  22.6%  18.8%  21.0%  22.6 
 
Collateral-dependent impaired loans which have no allowance at December 31, 20082009 (because they are carried at fair value net of selling costs) totaled $618.2$784.6 million, or 67.1%50.4% of non-performing loans. Synovus has recognized net charge-offs amounting to approximately 24%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 $126.7$114.3 million or 1.8%1.9% of loans in the respective category at December 31, 2008,2009, compared to $94.7$126.7 million or 1.5%1.9% at December 31, 2007.2008. The increasedecrease in the allocated allowance is primarily due to a decline in loan growthbalances of 5.4%$629.4 million from the previous year-end andyear-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.migration in this loan category.
 
At December 31, 2008,2009, 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 up 111.6% from $116.8 million in 2007.2008. As a percentage of commercial real


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

estate construction loans, the allocated allowance in this category was 3.4%5.9% at December 31, 2008,2009, compared to 1.5%3.4% the previous year-end. The increase is primarily due to negative credit migration in the 1-4 family construction and residential development portfolios within the Atlanta and West Florida markets.land acquisition category. As a percentage of total loans, the allowance for loan losses in this category was 26.3% of total loans,6.3%, compared to 30.2%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 declineincrease in this category was related to negative loan migration, with approximately half of the allocated component as a percentage of total loans is primarily dueincrease attributed to the increase in impaired loans which have been written down to fair value.investment real estate category.
 
The unallocated allowance is .22%0.32% of total loans and 10.1%at December 31, 2009. This compares to 0.22% of the total allowanceloans at December 31, 2008. This compares to .14% of total loans and 10.3% of the total allowance at December 31, 2007. The increase in the unallocated allowance during 20082009 is primarily due to the macroeconomic downturn.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.standards and results of Parent Company loan reviews.


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Management’s Discussion and Analysis ­ ­ (SYNOVUS LOGO)

Table 1920  Allowance for Loan Losses – Summary of Activity by Loan Type
(Dollars in thousands)
 
                                        
 December 31,  December 31, 
 2008 2007 2006 2005 2004 
(Dollars in thousands) 2009 2008 2007 2006 2005 
Allowance for loan losses at beginning of year $367,613   314,459   289,612   265,745   226,059  $598,301   367,613   314,459   289,612   265,745 
Allowance for loan losses of acquired/divested subsidiaries, net  —   —   9,915   —   5,615 
Allowance for loan losses of acquired subsidiaries, net  —   —   —   9,915   — 
Loans charged off:                                        
Commercial:                                        
Commercial, financial, and agricultural  95,186   35,443   44,676   38,087   30,697   242,843   95,186   35,443   44,676   38,087 
Owner occupied  11,803   1,347   2,695   2,603   613   67,347   11,803   1,347   2,695   2,603 
Real estate — construction  311,716   61,055   3,899   1,367   383   913,032   311,716   61,055   3,899   1,367 
Real estate — mortgage  28,640   13,318   4,795   3,972   2,532   153,741   28,640   13,318   4,795   3,972 
                      
Total commercial  447,345   111,163   56,065   46,029   34,225   1,376,963   447,345   111,163   56,065   46,029 
                      
Retail:                                        
Real estate — mortgage  20,014   6,964   3,604   4,393   2,327   79,016   20,014   6,964   3,604   4,393 
Retail loans — credit card  13,213   8,172   8,270   11,383   7,728   20,854   13,213   8,172   8,270   11,383 
Retail loans — other  5,699   4,910   4,867   5,421   6,688   15,773   5,699   4,910   4,867   5,421 
                      
Total retail  38,926   20,046   16,741   21,197   16,743   115,643   38,926   20,046   16,741   21,197 
                      
Total loans charged off  486,271   131,209   72,806   67,226   50,968   1,492,606   486,271   131,209   72,806   67,226 
                      
Recoveries on loans previously charged off:                                        
Commercial:                                        
Commercial, financial, and agricultural  9,219   7,735   7,304   3,890   5,334   12,321   9,219   7,735   7,304   3,890 
Owner occupied  397   119   185   331   712   1,817   397   119   185   331 
Real estate — construction  2,673   1,713   132   50   172   10,140   2,673   1,713   132   50 
Real estate — mortgage  1,035   471   729   152   114   3,632   1,035   471   729   152 
                      
Total commercial  13,324   10,038   8,350   4,423   6,332   27,910   13,324   10,038   8,350   4,423 
                      
Retail:                                        
Real estate — mortgage  1,138   894   527   511   521   1,846   1,138   894   527   511 
Retail loans — credit card  1,557   1,669   2,130   1,828   1,612   1,161   1,557   1,669   2,130   1,828 
Retail loans — other  1,057   1,554   1,583   1,799   1,255   1,514   1,057   1,554   1,583   1,799 
                      
Total retail  3,752   4,117   4,240   4,138   3,388   4,521   3,752   4,117   4,240   4,138 
                      
Recoveries of loans previously charged off  17,076   14,155   12,590   8,561   9,720   32,431   17,076   14,155   12,590   8,561 
                      
Net loans charged off  469,195   117,054   60,216   58,665   41,248   1,460,175   469,195   117,054   60,216   58,665 
                      
Provision for losses on loans  699,883   170,208   75,148   82,532   75,319   1,805,599   699,883   170,208   75,148   82,532 
                      
Allowance for loan losses at end of year $598,301   367,613   314,459   289,612   265,745  $943,725   598,301   367,613   314,459   289,612 
                      
Allowance for loan losses to loans, net of unearned income  2.14%  1.39   1.28   1.35   1.36   3.72%  2.14   1.39   1.28   1.35 
                      
Ratio of net loans charged off to average loans outstanding, net of unearned income  1.71%  0.46   0.26   0.29   0.23   5.37%  1.71   0.46   0.26   0.29 
                      


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Management’s Discussion and Analysis ­ ­ (SYNOVUS LOGO)

Table 2021  Allocation of Allowance for Loan Losses
(Dollars in thousands)
 
                                                                                
 December 31,  December 31, 
 2008 2007 2006 2005 2004  2009 2008 2007 2006 2005 
 Amount % * Amount % * Amount % * Amount % * Amount % * 
(Dollars in thousands) Amount % * Amount % * Amount % * Amount % * Amount % * 
Commercial:                                                                                
Commercial, financial, and agricultural $126,695   24.6  $94,741   24.2  $74,649   23.8  $83,995   24.6  $77,293   25.9  $137,031   24.1  $126,695   24.2  $94,741   24.2  $74,649   23.8  $83,995   24.6 
Owner occupied  39,276   16.2   29,852   16.0   38,712   16.4   34,000   17.2   22,609   17.4   72,002   18.1   39,276   16.1   29,852   16.0   38,712   16.4   34,000   17.2 
Real estate — construction  247,151   26.3   116,791   30.2   73,799   30.5   55,095   26.8   47,596   23.5   379,618   20.5   247,151   26.1   116,791   30.3   73,799   30.5   55,095   26.8 
Real estate — mortgage  80,172   17.3   41,737   14.7   40,283   14.6   40,108   15.9   46,973   17.1   216,840   20.8   80,172   18.0   41,737   14.6   40,283   14.6   40,108   15.9 
                                          
Total commercial  493,294   84.4   283,121   85.1   227,443   85.3   213,198   84.5   194,471   83.9   805,491   83.5   493,294   84.4   283,121   85.1   227,443   85.3   213,198   84.5 
                                          
Retail:                                                                                
Real estate — mortgage  27,656   12.5   27,817   12.1   6,625   11.8   6,445   12.0   5,335   11.8   34,860   13.2   27,656   12.5   27,817   12.1   6,625   11.8   6,445   12.0 
Retail loans — credit card  11,430   1.0   10,900   1.1   8,252   1.1   8,733   1.3   8,054   1.4   15,751   1.2   11,430   1.0   10,900   1.1   8,252   1.1   8,733   1.3 
Retail loans — other  5,766   2.2   8,017   1.9   9,237   2.0   8,403   2.4   7,086   3.1   6,701   2.2   5,766   2.2   8,017   1.9   9,237   2.0   8,403   2.4 
                                          
Total retail  44,852   15.7   46,734   15.1   24,114   14.9   23,581   15.7   20,475   16.3   57,312   16.6   44,852   15.7   46,734   15.1   24,114   14.9   23,581   15.7 
                                          
Unearned income      (0.1)      (0.2)      (0.2)      (0.2)      (0.2)      (0.1)      (0.1)      (0.2)      (0.2)      (0.2)
Unallocated  60,155       37,758       62,902       52,833       50,799       80,922       60,155       37,758       62,902       52,833     
                                          
Total allowance for loan losses $598,301   100.0  $367,613   100.0  $314,459   100.0  $289,612   100.0  $265,745   100.0  $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.
 
NonperformingNon-performing Assets and Past Due Loans
 
NonperformingNon-performing assets consist of loans classified as non-accrual, restructured, 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. Loans may be restructured as to rate, maturity, or other terms as determined on an individual credit basis. 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.
 
NonperformingDuring 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 increased $727.8with 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 to $1.17 billion at December 31, 20082009, compared to year-end 2007. The nonperforming assets as a percentage of loans ratio increased to 4.16% as of December 31, 2008 compared to 1.67% as of year-end 2007. The increase in nonperforming assets was driven by residential real estate. Total nonperforming loans increased $579.6$1.2 million or 169.4% over year end 2007. 1-4 family property loans represent 58.6% of total nonperforming loans at December 31, 2008. Additionally, land acquisition loans represent 11.4% of total nonperforming loans at December 31, 2008. Nonperforming loans within the 1-4 family property and land acquisition portfolio sectors are concentrated in the Atlanta and West Florida markets, which together represent 40.2% of total nonperforming loans at December 31, 2008. At December 31, 2008, nonperforming2009, 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 West Florida market totaled $147.5 million while nonperforming loanscurrent economic environment and Synovus’ efforts to work with creditworthy customers to find solutions that are in the Atlanta market totaled $352.5 million. West Floridabest interest of both the customer and Atlanta represent 29.2%Synovus. Restructurings are primarily in the form of our total loan portfolioextension 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.
During the three months ended 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, 2008, Synovus continued2009 compared to refine its4.15% as of year-end 2008. The increase in non-performing assets disposal strategy. In addition to individual bank teams aggressivelywas driven


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Management’s Discussion and Analysis ­ ­ (SYNOVUS LOGO)

identifyingprimarily by investment properties, mainly hotels and liquidatingresidential real estate. Total non-performing loans increased $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 Synovus formedat December 31, 2009 showed a separate non-bank subsidiary, Broadway Asset Management, Inc. (BAM), to purchase,significant increase from time to time, certainthe prior year, total new non-performing assets from its subsidiary banks and centrally managehave declined for each of the liquidationlast three quarters in 2009. Synovus presently anticipates stabilization of these assets. During this time, BAM acquired approximately $500 million non-performing assets and identified approximately $150 million of these assets for liquidationasset balances in the near term. The $150 million identified for liquidation is comprisedterm and improvement in on-boarding of foreclosednon-performing assets of approximately $67 million and impaired loans of approximately $83 million, which will be transferredin 2010. In addition, Synovus continues to other real estate and sold upon foreclosure. Additional write-downs of approximately $50 million were recognized on the identified assets during the three months ended December 31, 2008 to reflect the estimated proceeds from liquidation.aggressively manage its non-performing asset portfolio through its asset disposition strategy.
 
Provision expense for the three monthsyear ended December 31, 20082009 was $363.9 million,$1.81 billion, an increase of $212.5 million$1.11 billion compared to the prior quarter.year. The Atlanta market accounted for $120.7$410.4 million of the total provision expense, while the West FloridaSouth Carolina market accounted for $35.7$347.3 million of the total provision expense.
 
Other real estate totaled $246.1$238.8 million at December 31, 2008,2009, which represented a $144.6$7.3 million increase over year end 2007.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 $173.4 million72.1% of the total.other real estate total at December 31, 2009. The Atlanta and West FloridaSouth Carolina markets represented $144.4 million54.4% of other real estate at December 31, 2008.2009.
 
As a percentage of total loans outstanding, loans 90 days past due and still accruing interest were .14%0.08% at December 31, 2008.2009. This compares to .13%0.14% at year-end 2007.2008. 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 $830 million$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, 2008.2009. 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 ­ ­ (SYNOVUS LOGO)

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 
 
Table 21  Nonperforming Assets and Past Due Loans
(Dollars in thousands)
 
                     
  December 31, 
  2008  2007  2006  2005  2004 
 
Nonperforming loans $921,708   342,082   96,622   82,175   80,456 
Other real estate  246,121   101,487   25,923   16,500   21,492 
Impaired loans held for sale  3,527   —   —   —   — 
                     
Nonperforming assets $1,171,356   443,569   122,545   98,675   101,948 
                     
Net charge-offs $469,195   239,793   134,465   63,813   117,055 
Net charge-offs/average loans  1.71%  1.18   0.99   0.95   0.46 
Loans 90 days past due and still accruing interest total outstanding $38,794   33,663   34,495   16,023   18,138 
                     
As a % of loans  0.14%  0.13   0.14   0.07   0.09 
                     
Total past due loans and still accruing $362,538   403,180   365,046   377,999   270,496 
As a % of loans  1.30%  1.46   1.33   1.39   1.02 
Allowance for loan losses $598,301   367,613   314,459   289,612   265,745 
                     
Allowance for loan losses as a % of loans  2.14%  1.39   1.28   1.35   1.36 
                     
As a % of loans and other real estate:                    
Nonperforming loans  3.28%  1.29   0.39   0.38   0.41 
Other real estate  0.88   0.38   0.11   0.08   0.11 
                     
Nonperforming assets  4.16%  1.67   0.50   0.46   0.52 
                     
Allowance for loan losses to nonperforming loans  64.91%  107.46   325.45   352.43   330.30 
                     
(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, 2008,2009, that would have been recorded if the loans had been current and performed in accordance with their original terms was $96.8$145.0 million for the year ended December 31, 2008.2009. Interest income recorded on these loans for the year ended December 31, 20082009 was $52.2$67.3 million.
Table 22  Nonperforming Assets Ratio by State
             
  December 31, 
  2008  2007  2006 
 
Georgia
  5.28%  1.70   0.37 
Atlanta  8.61   3.06   0.87 
Florida
  5.52   4.12   0.46 
West Florida  6.65   5.11   0.50 
South Carolina
  1.68   0.55   0.27 
Tennessee
  2.62   0.63   0.63 
Alabama
  1.86   0.71   0.45 
             
Consolidated
  4.16%  1.67   0.50 
             


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Management’s Discussion and Analysis ­ ­ (SYNOVUS LOGO)

Table 23  Composition of Loan Portfolio and Nonperforming LoansNon-performing Assets Ratio by State
 
                 
  December 31, 2008  December 31, 2007 
     Nonperforming
     Nonperforming
 
  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
  Nonperforming
  Loans
  Nonperforming
 
Loan Type
 Outstanding  Loans  Outstanding  Loans 
 
Commercial Real Estate
                
Multi-family  2.0%  0.4   1.8%  0.5 
Hotels  3.5   1.0   2.3   — 
Office buildings  3.6   0.8   3.6   1.8 
Shopping centers  3.8   0.4   3.2   0.2 
Commercial development  3.1   2.7   3.6   2.3 
Other investment property  3.4   1.0   2.6   1.3 
                 
Total Investment Properties
  19.4   6.3   17.1   6.1 
                 
1-4 family construction  5.8   28.0   8.4   30.8 
1-4 family perm/mini-perm  5.1   5.6   4.8   10.0 
Residential development  7.6   25.1   8.7   23.3 
                 
Total 1-4 Family Properties
  18.5   58.7   21.9   64.1 
Land Acquisition
  5.6   11.4   5.8   10.4 
                 
Total Commercial Real Estate
  43.5   76.4   44.8   80.6 
                 
Commercial, Financial, Agricultural
  24.6   11.4   24.3   12.2 
Owner-Occupied
  16.2   8.1   16.0   3.6 
                 
Total Commercial and Industrial Loans
  40.8   19.5   40.3   15.8 
                 
Home Equity  6.2   0.9   5.8   1.1 
Consumer Mortgages  6.3   2.9   6.3   2.0 
Credit Card  1.1   —   1.1   — 
Other Retail Loans  2.2   0.3   1.9   0.5 
                 
Total Retail
  15.8   4.1   15.1   3.6 
Unearned Income
  (0.1)  —   (0.2)  — 
                 
Total
  100.0%  100.0   100.0%  100.0 
                 
         
  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 2324  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 
             


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

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.
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 ­ (SYNOVUS LOGO)

The following table shows the composition of the loan portfolio and nonperformingnon-performing loans classified by loan type as of December 31, 20082009 and 2007.2008. 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 43.5%41.3% of total loans and is diversified among many property types. These include commercial investment properties, 1-4 family properties, and land acquisition. CommercialAs shown in the table below, commercial investment properties as shown in Table 23, represent 19.4%22.4% of total loans and 43.6%54.3% of total commercial real estate loans at December 31, 2008. 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 25%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 
                 


F-99

Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

 
Deposits
 
Deposits provide the most significant funding source for interest earning assets. Table 24The following table shows the relative composition of deposits for 2009 and 2008. See Table 6 for information on average deposits, forincluding average rates paid in 2009, 2008, 2007, and 2006. Refer to 2007.
Table 25 for the maturity distribution28  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 of $100,000 or more. These larger deposits represented 34.5% and 29.5% of total deposits atdeposits) 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 2007, respectively. 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


F-89F-100

Management’s Discussion and Analysis ­ ­ (SYNOVUS LOGO)

deposit base. Timefacilitating the placement of deposits, over $100,000 at December 31, 2008, 2007, and 2006 were $9.89 billion, $7.35 billion, and $7.10 billion, respectively. Interest expenseof third parties with insured depository institutions or the business of placing deposits with insured depository institutions for the years ended December 31, 2008, 2007,purpose of selling interests in those deposits to third parties, and 2006, on these large denomination(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 was $332.4 million, $364.2 million,among its separately-chartered bank subsidiaries. At a consolidated level, Synovus includes and $299.7 million, respectively.
In 2008,reports Synovus continued to focus on growing in-market® Shared Deposit product balances held throughout its bank subsidiaries as core deposits, particularly through the shared deposit products which allow the customer to access a higher level of FDIC insurance through our multi-bank organization. Core deposits (total deposits excluding national market brokered money market and time deposits) grew 5.1% from December 31, 2007 to December 31, 2008. Core deposit growth for the year was primarily due to growth in time deposits of $1.97 billion, which was partially offset by a decline of $983 million in money market accounts. From December 31, 2006 to December 31, 2007, core deposits grew 0.2%.
 
Because of our multiple charter structure, Synovus hasDue to the ability to offered certain shared deposit products that have helped to drive core deposit growthsignificant turmoil in financial markets during the second half of 2008. At December 31, 2008, Synovus’ Shared CDnational market brokered deposits became more attractive to financial market participants and Money Market accounts offer customersinvestors 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 unique opportunity to access up to $7.8 million in FDIC insurance by spreadingsecond half of 2008, but has reduced its dependence on funding from these products through normal run off during 2009. National market brokered deposits across its 31 separately-chartered banks. Shared productswere $5.04 billion at December 31, 2008 were $1.74 billion, an increase of $1.57 billion2009 as compared to $6.34 billion at December 31, 2007.2008.
Average deposits increased $1.68 billion or 6.8%, to $26.50 billion in 2008 from $24.82 billion in 2007. Average interest bearing deposits, which include interest bearing demand deposits, money market accounts, savings deposits, and time deposits, increased $1.65 billion or 7.7% from 2007. Average non-interest bearing demand deposits increase $30.54 million or 0.9% during 2008. Average interest bearing deposits increased $2.15 billion or 11.2% from 2006 to 2007, while average non-interest bearing demand deposits decreased $108.8 million, or 3.1%. See Table 7 for further information on average deposits, including average rates paid in 2008, 2007, and 2006.
Table 24  Average Deposits
                         
(Dollars in thousands) 2008  % *  2007  % *  2006  % * 
 
Non-interest bearing demand deposits $3,440,047   13.0  $3,409,506   13.7  $3,518,312   15.4 
Interest bearing demand deposits  3,158,228   11.9   3,125,802   12.6   3,006,308   13.2 
Money market accounts  7,984,231   30.1   7,714,360   31.1   6,515,079   28.6 
Savings deposits  452,661   1.7   483,368   1.9   542,793   2.4 
Time deposits under $100,000  2,979,079   11.2   2,940,919   11.8   2,791,759   12.3 
Time deposits $100,000 and over  8,484,823   32.1   7,147,434   28.9   6,404,391   28.1 
                         
Total average deposits $26,499,069   100.0  $24,821,389   100.0  $22,778,642   100.0 
                         
* Average deposits balance in each category expressed as percentage of total average deposits.
Table 2529 Maturity Distribution of Time Deposits of $100,000 or More
     
(In thousands) December 31, 2008
 
3 months or less $2,656,101 
Over 3 months through 6 months  2,111,422 
Over 6 months through 12 months  3,251,541 
Over 12 months  1,865,728 
     
Total outstanding $9,884,792 
     
     
(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 Andand 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


F-90

Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

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 the Company,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 ourSynovus’ 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.


F-101

Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

 
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 2008, the financial markets experienced severe stress with many markets experiencing previously unseen levels of illiquidity. Lack of properly functioning markets and a significant decline in economic activity led2009, the Federal Reserve Bank continued to implement sizable decreases in the targeted Federal Funds rate. This rate, which began the year at 4.25%, was reduced in several steps with the final decrease bringing the targeted range to 0% to .25%. Synovus entered 2008 in a moderately asset sensitive position with limited expected impact on net interest in modestly changing interest rate environments. The unexpected frequency and magnitude of rate decreases during the year resulted in a moreprovide significant impact on net interest income. Significant competitive pressures on deposit pricing as well as many deposit types reaching implied floors were primary contributorsliquidity to the pressure on netmarkets 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 income.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 26,30, 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 3.9%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 had 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
Table 26  Twelve Month Net Interest Income Sensitivity
 
    
 Estimated change in Net Interest
    
Change in
 Income Estimated change in Net Interest Income
Short-Term
 As of
 As of
 As of
 As of
Interest Rates
 December 31,
 December 31,
 December 31,
 December 31,
(In basis points)
 2008 2007 2009 2008
+ 200
 3.9% 1.5% 2.5% 3.9
+ 100
 0.9% (0.1)% 0.9  0.9
Flat
 — — —% —
- 100
 — (1.5)%
- 200
 — (2.7)%


F-91

Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

 
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. The primaryThese instruments utilized by Synovus 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 2007 was $1.84 billion and $2.76 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


F-102

Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

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 limitsseeks 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, 20082009 and 20072008 is shown in Table 27.the table below. The fair value (net unrealized gains and losses) of these contracts has been recorded on the consolidated balance sheets.
 
During 2008,2009, a total of $1.3 billion$843.9 million in notional amounts of interest rate contracts matured, $75.0 million were called, and $377.5$350 million were terminated. A total notional amount of $1.8$1.3 billion matured in 20072008 and $185$377.5 million were terminated. Interest rate contracts contributed additional net interest income of $42.3$47.4 million and a 1415 basis point increase in the net interest margin for 2008.2009. For 2007,2008, interest rate contracts contributed an increase in net interest expenseincome of $4.2$42.3 million and a 114 basis point decreaseincrease to the net interest margin.
Table 2731  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, 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 
                             
December 31, 2007                            
Receive fixed swaps:                            
Fair value hedges $1,957,500   4.97%  4.87%  25  $20,349   (2,268)  18,081 
Cash flow hedges  800,000   8.06   7.25   34   32,340   —   32,340 
                             
Total $2,757,500   5.87%  5.56%  28  $52,689   (2,268)  50,421 
                             
* Variable pay rate based upon contract rates in effect at December 31, 2008 and 2007
                             
     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 our 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, such as borrowings from third parties. Synovus believesdeposits. Management must ensure that its


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Management’s Discussionadequate liquidity, at a reasonable cost, is available to meet the cash flow needs of depositors, borrowers, and Analysis­ ­ (SYNOVUS LOGO)

liquidity position is enhanced by our current capital cushion, our significant core deposit base,creditors. Management constantly monitors and our positive credit ratings, which work to both mitigate the extent to which we need to apply our liquidity to reserves and other uses, and to improve our ability to gain access to important sourcesmaintains appropriate levels of liquidity other than from Synovus’ ongoing business operations.
The Synovus Asset Liability Management Committee (ALCO), operating under liquidityso as to provide adequate funding sources to meet estimated customer deposit withdrawals and funding policies approved by the Board of Directors, actively analyzes and manages Synovus’ liquidity position in coordination with the subsidiary banks. These subsidiaries maintain liquidity in the form of cash, investment securities, and cash derived from prepayments and maturities of both their investment andfuture loan portfolios.requests. Liquidity is also enhanced by the acquisition of new deposits. TheEach of the 30 subsidiary banks monitormonitors deposit flows and evaluateevaluates 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 ourthe deposit base. In the event asset quality declineddeclines significantly from its current level, the subsidiary banks’ ability to grow and retain deposits could be diminished, which in turn could reduce our liquidity.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


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

and Analysis, Synovus intends to transition from 30 subsidiary 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’ strong reputation inbanks also generate liquidity through the national deposit markets provides an additional source of liquidity. This reputation allowsmarkets. These subsidiary banks to 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 Federal Home Loan Bank System.FHLB. At year-end 2008,December 31, 2009, most Synovus subsidiary banks had access to incremental funding, subject to available collateral and Federal Home Loan BankFHLB credit policies, through utilization of Federal Home Loan BankFHLB advances.
 
CertainIn addition to bank level liquidity management, Synovus subsidiary banks have access to overnight federal funds lines with various financial institutions, which can be drawn upon for short-termmust manage liquidity needs. These lines are extended at the ongoing discretion of the correspondent financial institutions with Synovus’ credit rating being a primary determinant in the continued availability of these lines. Should Synovus’ credit rating decline to aholding company level below what is considered to be investment grade, these lines’ availability would be significantly diminished. For this reason, Synovus does not believe that being overly dependent on this funding source represents prudent liquidity management. During the second half of 2008, a period of significant financial market stress, our subsidiary banks’ utilization of this funding source was reduced in order to provide greater ongoing liquidity flexibility. As an additional short-term liquidity source, selected Synovus banks maintain collateralized borrowing accounts with the Federal Reserve Bank.
The Parent Company requires cash for various operating needs including dividends to shareholders, (including dividends on the Series A Preferred Stock), business combinations, capital infusions into subsidiaries, the servicing of debt, and the payment of general corporate expenses.expenses, and the payment of dividends to shareholders. The primary source of liquidity for the Parent Company isSynovus consists of dividends and management fees from the subsidiary banks. Due to limitations resulting primarilybanks, which are governed by certain rules and regulations of various state and federal banking regulatory agencies. Dividends from lower earningssubsidiaries in 2008,2009 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 market conditions and increases in expenses and fixed costs (including dividendsthe public markets for bank holding companies, together with the dividend payments on the Series A Preferred Stock)Stock and other obligations and expenses of Synovus’ holding company, will likely continue to put additionalfurther pressure on liquidity. The Parent Company also enjoys
Synovus’ holding company has historically enjoyed a solid reputation and credit standing in the capital markets and historically has historically had the abilitybeen able to raise substantial amounts of funds in the form of either short or long-term borrowings. Maintaining adequate credit ratings is essential to Synovus’ continued cost-effective access to these capital market funding sources. Givenborrowings or equity issuances, including the public offering executed in September 2009 as part of the Capital Plan. However, given the weakened economy, and current market conditions, especially the current inability of nearly all publicSynovus’ recent financial services companies to access the public capital markets,performance, and related credit ratings, there iscan be no assurance that the Parent Company will, if it chooses to do so,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 satisfactory, if at all. 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 the foreseeable future. Table 28 sets forth certain information about contractual cash obligations at December 31, 2008.Synovus
The consolidated statements of cash flows detail cash flows from operating, investing, and financing activities. Cash provided by operating activities was $834.8 million for the year ended December 31, 2008, while financing activities provided $3.01 billion. Investing activities used $4.01 billion of these amounts, resulting in a net decrease in cash and cash equivalents of $158.3 million. Cash of $210.5 million was retained by TSYS as a result of the tax-free spin-off of TSYS to Synovus shareholders on December 31, 2007.


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Management’s Discussion and Analysis ­ ­ (SYNOVUS LOGO)

or its subsidiary banks increase as the result of regulatory 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 2832 Contractual Cash Obligations
 
                    
 Payments Due After December 31, 2009 
                     1 Year or Less Over 1 - 3 Years 4 - 5 Years After 5 Years Total 
 Payments Due After December 31, 2008 
(In thousands)
 1 Year or Less Over 1 - 3 Years 4 - 5 Years After 5 Years Total                     
Long-term debt $588,000   684,105   317,173   460,852   2,050,130  $620,923   416,610   212,013   460,764   1,710,310 
Capital lease obligations  533   760   879   4,626   6,798   366   820   933   4,146   6,265 
Operating leases  20,458   39,070   36,682   136,087   232,297   20,487   39,834   35,587   125,788   221,696 
                      
Total contractual cash obligations $608,991   723,935   354,734   601,565   2,289,225  $641,776   457,264   248,533   590,698   1,938,271 
                      
 
Capital Resources
 
Synovus has always placed great emphasis on maintaining a strongsolid capital base and continues to exceedsatisfy 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. Synovus historically has had the ability to generate internal capital growth sufficient to support the asset growth it has experienced. Total shareholders’ equity of $3.8 billion represented 10.58% of total assets at December 31, 2008.
As noted in the section titled “Cumulative Preferred Stock,” Synovus received proceeds of $967,870,000 from the sale of preferred stock and warrants to the U.S. Treasury as part of the government’s Capital Purchase Program. For regulatory capital purposes, the preferred stock issued to the Treasury is treated the same as noncumulative perpetual preferred stock as an unrestricted core capital element included in Tier 1 capital. Accordingly, the increase in regulatory capital and respective ratios at December 31, 2008 compared to December 31, 2007 is due primarily to the Treasury Department’s Capital Purchase Program.
 
The regulatory banking agencies use a risk-adjusted calculationfollowing table presents certain ratios used to aid them in their determination of capital adequacy by weighting assets based on the credit risk associated with on- and off-balance sheet assets. The majority of these risk-weighted assets for Synovus are on-balance sheet assets in the form of loans. Approximately 9.9% of risk-weighted assets are considered off-balance sheet assets and primarily consist of letters of credit and loan commitments that Synovus enters into in the normal course of business. Capital is categorized into two types: Tier I and Tier II. 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 in theby federal banking regulations. The regulatory agencies definecapital 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 bank as one thatif it has a total capital ratio of 10% or greater, a Tier 1 capital ratio of 6% or greater, a leverage ratio of at least 5%, a Tier I capital ratio of at least 6%, or greater, and a total risk-basedis not subject to any written agreement, order, capital ratio of at least 10%. At December 31, 2008, Synovus and all subsidiary banks were in excess of the minimum capital requirements with a consolidated Tier I capital ratio of 11.22% and a total risk-based capital ratio of 14.56%, compared to Tier I and total risk-based capital ratios of 9.11% and 12.66%, respectively, in 2007 as shown in Table 29.
In addition to the risk-based capital standards, a minimum leverage ratio of 4% is required for the highest-rated financial holding companies that are not undertaking significant expansion programs. An additional 1% to 2% may be required for other companies, depending upon their regulatory ratings and expansion plans. The leverage ratio is defined as Tier I capital divided by quarterly average assets, net of certain intangibles. Synovus had a leverage ratio of 10.28% at December 31, 2008 and 8.65% at December 31, 2007, significantly exceeding regulatory requirements.
Table 29  Capital Ratios
(Dollars in thousands)
         
  December 31, 
  2008  2007 
 
Tier I capital:        
Shareholders’ equity $ 3,787,158   3,441,590 
Less: net unrealized gains on investment securities available for sale  (92,069)  (16,024)
Less: net unrealized loss on available for sale equity securities  (1,288)  — 
Less: net unrealized gains on cash flow hedges  (37,185)  (15,415)
Disallowed intangibles  (60,986)  (547,278)
Disallowed deferred tax assets  —   (6,862)
Other deductions from Tier 1 Capital  (9,474)  (4,464)
Deferred tax liability on core deposit premium related to acquisitions  6,534   8,776 
Qualifying trust preferred securities  10,158   10,235 
         
Total Tier I capital $3,602,848   2,870,558 
         


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Management’s Discussion and Analysis ­ ­ (SYNOVUS LOGO)

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 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.
 
         
Tier II capital:        
Qualifying subordinated debt $667,752   750,000 
Eligible portion of the allowance for loan losses  403,876   367,613 
         
Total Tier II capital  1,071,628   1,117,613 
         
Total risk-based capital $4,674,476   3,988,171 
         
Total risk-adjusted assets $32,106,501   31,505,022 
         
Tier I capital ratio  11.22%  9.11 
Total risk-based capital ratio  14.56   12.66 
Leverage ratio  10.28   8.65 
Regulatory minimums (for well-capitalized status:)        
Tier I capital ratio  6.00%  6.00 
Total risk-based capital ratio  10.00   10.00 
Leverage ratio  5.00   5.00 
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
 
Table 30The table below presents stock price information For The Years Endedfor the years ended December 31, 20082009 and 20072008 based on the closing stock price as reported on the New York Stock Exchange. The stock prices shown below for 2008 reflect the adjustment of the trading price of Synovus common stock after giving effect to the spin-off of TSYS on December 31, 2007
Table 3034 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 High Low         
Quarter ended December 31, 2008
 $11.50   6.68  $11.50   6.68 
Quarter ended September 30, 2008
  11.60   7.56   11.60   7.56 
Quarter ended June 30, 2008
  12.84   8.73   12.84   8.73 
Quarter ended March 31, 2008
  13.49   10.80   13.49   10.80 
2007        
Quarter ended December 31, 2007 $28.94   22.54 
Quarter ended September 30, 2007  31.47   26.42 
Quarter ended June 30, 2007  33.31   30.70 
Quarter ended March 31, 2007  33.39   30.61 
 
As of February 13, 2009,5, 2010, there were approximately 22,18822,338 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 3034 displays high and low stock price quotations of Synovus common stock which are based on actual transactions.
 
Dividends
 
Synovus (and its predecessor companies) has historically paid cash dividends on its common stock in every year since 1891. As a result of the TSYS spin-off, Synovus adjusted its cash dividend so that Synovus shareholders who retained their TSYS shares would initially receive, in the aggregate, the same cash dividends per share that were paid before the spin-off. Accordingly, Synovus adjusted its quarterly cash dividend forto the three months ended March 31 and June 30, 2008 to $0.17 per share, respectively. On September 10, 2008, Synovus announced thatholders of its Board of Directors had voted to reduce its dividend by 65% to $0.06 per share to further strengthen Synovus’ financial position by preserving its capital base. Dividends per share for the three months ended September 30 and December 31, 2008 were $0.06 per share. Dividends per share for the year ended December 31, 2008 were $0.46 per share.common stock. Management closely monitors trends and developments in credit quality, liquidity, (including dividends from subsidiaries, which are expected to be significantly lower than those received in previous years), financial markets and other economic trends, as well as regulatory requirements regarding the payment of dividends, all of which impact Synovus’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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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

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 $0.01 per share, to further enable Synovus to preserve its capital base.
The table below presents information regarding dividends on Synovus common stock declared during the years ended December 31, 2009 and 2008.
Table 35 Dividends
Per Share
Date Declared
Date PaidAmount
2009
December 15, 2009
January 4, 2010$.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, 2008January 2, 2009$.0600
September 10, 2008October 1, 2008.0600
June 9, 2008July 1, 2008.1700
March 10, 2008April 1, 2008.1700
Issuer Purchases of Equity Securities
 
Synovus’ participation in the Capital Purchase Program restricts its ability to increase the quarterly cash dividends payable on Synovusrepurchase 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 pay a quarterly cash dividend of more than $0.06 per shareredeem, repurchase or make any distribution onacquire its common stock. In addition, the Federal Reserve Board also has supervisory authority that may limit Synovus’ ability to pay dividends understock or other equity or capital securities, other than in connection with benefit plans consistent with past practice and certain other limited circumstances. Based on guidance issued by the Federal Reserve Board on February 24, 2009, Synovus must consult with the Federal Reserve Board prior to declaring and paying any future dividends.
 
Table 31 presents information regarding dividends declaredIn 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 yearsthree months ended December 31, 2008 and 2007. The dividends shown below for 2008 reflect the adjustment of the dividends declared on2009. Synovus common stock after giving effect to the spin-off of TSYS on December 31, 2007.


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Table 31  Dividends
Per Share
Date DeclaredDate PaidAmount
2008
December 9, 2008
January 2, 2009$.0600
September 10, 2008
October 1, 2008.0600
June 9, 2008
July 1, 2008.1700
March 10, 2008
April 1, 2008.1700
2007 
November 30, 2007January 2, 2008$.2050
September 15, 2007October 1, 2007.2050
May 24, 2007July 2, 2007.2050
March 8, 2007April 2, 2007.2050
does not have a publicly announced share repurchase plan in place.
 
Commitments and Contingencies
 
Table 3236 and Note 1211 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. In the pending regulatory matter described below, loss contingencies are not reasonably estimable in the view of management, and, accordingly, a reserve has not been established for this matter. 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 the pending regulatory matterthose 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 $2.4


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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, 2008,2009, 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


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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, is a memberand 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 Visa USA network. On October 2, 2007, the Visa organization of affiliated entities completed a series of restructuring transactions which resulted in the combination of certain of Visa’s affiliated operating companies,federal securities laws, including Visa USA into Visa, Inc. Visa’s 2007 restructuring was part of a series of steps toward Visa, Inc.’s planned initial public offering (IPO), which was completed on March 25, 2008. Visa, Inc. used substantially all of the IPO proceeds for redemption of a portion of Visa members’ interests and establishment of an escrow fund for judgmentsand/or settlements of certain Visa USA related litigation (the “covered litigation”).
As a result of Visa’s reorganization, Synovus exchanged its membership interest in Visa USA for an equity interest in Visa, Inc. The equity interest was initially comprised of Class USA shares, which were subjectpurported exposure to atrue-up process based on performance against projections for the trailing four quarters reported in Visa’s final and effective registration statement onForm S-1. Subsequent to thetrue-up process, Class USA shares were converted into Class B shares, which are subject to transfer restrictions until the latter of (a) the third anniversary of the effective date of Visa’s IPO, or (b) the date on which all of Visa’s covered litigation (as defined above) has been resolved.
Synovus has assigned no value to its Visa shares. Upon completion of the Visa IPO, Synovus recognized a gain of approximately $38.5 million upon the redemption of Class B shares by Visa, and will subsequently recognize a gain subject to market value of Visa’s Class A shares upon release from transfer restrictions on the remainder of its Class B shares. The amount and timing of potential future gains is not determinable at this time.
Prior to Visa’s October 2, 2007 restructuring, Visa USA members approved Visa’s restructuring plan, including its retrospective responsibility plan, which included confirmation, by Visa USA members, of their obligation under Visa USA bylaws to indemnify Visa, Inc. for potential future settlement of, or judgments resulting from the covered litigation. Synovus’ indemnification obligation is limited to its membership proportion of Visa USA. On November 7, 2007, Visa announced the settlement of its American Express litigation, and disclosed in its annual report to the SEC onForm 10-K for the year ended September 30, 2007 that Visa had accrued a contingent liability for the estimated settlement of its Discover litigation. Accordingly, during 2007, Synovus recognized a contingent liability in the amount of $36.8 million as an estimate for its membership proportion of the American Express settlementSea Island lending relationship and the potential Discover settlement,impact of real estate values as well as its membership proportion of the amount that Synovus estimates will be required for Visaa threat to settle the remaining covered litigation. Following completion of its IPO, Visa announced that it had deposited $3.0 billionSynovus’ credit, capital position, and business, and failed to establish an escrow fund for payment of judgmentsand/or settlements of the covered litigation. Synovus reduced its contingent liability for the Visa litigation by approximately $17.4 million for its membership proportion of the amount deposited to the litigation escrow. On October 27, 2008, Visaadequately and timely record losses


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Management’s Discussion and Analysis ­ ­ (SYNOVUS LOGO)

announcedfor impaired loans. The plaintiffs in the settlementSecurities Class Action seek damages in an unspecified amount.
On November 4, 2009, a shareholder filed a putative derivative action purportedly on behalf of its Discover litigation,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 subsequentlyexecutive 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 December 19, 2008, deposited $1.1 billionbehalf 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 litigation escrow. Synovus adjusted its accrual for Visa litigation for its membership proportionindividual 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 final Discover settlementpurported Securities Class Action and Shareholder Derivative Lawsuits and cannot currently reasonably determine the subsequent deposit toprobability of a material adverse result or reasonably estimate a range of potential exposure, if any. Although the litigation escrow. The amountultimate outcome of Synovus’ contingent liability for the Visa litigation was approximately $19.3 million at December 31, 2008. The timing for ultimate settlement of all covered litigation is not determinablethese lawsuits cannot be ascertained at this time.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 Federalfederal funds purchased and securities sold under repurchase agreements, the principal components of short-term borrowings.
Table 3236  Short-Term Borrowings (Dollars in thousands)
 
                        
 2008 2007 2006 
(Dollars in thousands) 2009 2008 2007 
Balance at December 31 $725,869   2,319,412   1,582,487  $475,062   725,869   2,319,412 
Weighted average interest rate at December 31  .68%  3.81   4.97   0.53%  0.68   3.81 
Maximum month end balance during the year $2,544,913   2,767,055   1,986,919  $1,580,259   2,544,913   2,767,055 
Average amount outstanding during the year $1,719,978   1,957,990   1,578,163   918,736   1,719,978   1,957,990 
Weighted average interest rate during the year  2.24%  4.75   4.62   0.42%  2.24   4.75 
 
Income Tax Expense
 
Income taxes based on incometax benefits from continuing operations wereamounted to $172.0 million for the year-ended December 31, 2009, up from a benefit of $77.7$80.4 million in 2008 down fromand an expense of $184.7$182.1 million in 2007, and $230.4 million in 2006.2007. The 2009 effective income tax rate was 11.8%10.7%, 35.0%,compared to 12.2% and 35.7%,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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Management’s Discussion and 2006, respectively.Analysis­ ­ (SYNOVUS LOGO)

resulting in a total valuation allowance of $443.3 million at December 31, 2009. The changeincome tax expense of discontinued operations is reflected as a component of “income from discontinued operations, net of taxes and non-controlling interest” in the effective incomeconsolidated statement of income. The deferred tax rate from 2007assets and valuation allowance pertains to 2008 was primarily attributable to the goodwill impairment charge taken in 2008 that is not deductible for tax purposes.continuing operations. See Note 2223 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. Federalfederal jurisdiction and various state jurisdictions, and is subject to examinations by these taxing authorities until statutory examination periods lapse. Synovus’ U.S. Federalfederal 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. Federalfederal 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 2002.2006. 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.
 
In the normal course of business, Synovus is subject to examinations from various income tax authorities. These examinations may alter the timing or amount of taxable income or deductions or the allocation of income among tax jurisdictions. During the twelve months ended December 31, 2008,2009, Synovus incurred an increasea decrease in the amount of unrecognized income tax benefits of $0.9$0.7 million. This increasedecrease was primarily due to increases in uncertainstate statute expirations and state income tax positions.
audits and notices being settled. The total liability for uncertain income tax positions under FIN 48 at December 31, 20082009 is $6.2$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.
 
Synovus continually monitors and evaluates the potential impact of current events and circumstances on the estimates and assumptions used in the analysis of its income tax positions, and, accordingly, Synovus’ effective tax rate may fluctuate in the future
Inflation
 
Inflation hasA 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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necessarily change at the same time or magnitude as the inflation rate. Said changes could adversely impact Synovus’ financial position and profitability. Synovus has been ableattempts to maintain a high level of equity through retention of an appropriate percentage of its net income. Synovus deals withmitigate 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 currentsuch 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 $967,870,000$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.


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Management’s Discussion and Analysis­ ­ (SYNOVUS LOGO)

In connection with dividend payments to 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 subsidiary banks, certain rules and regulationsremaining shares of the various state and federal banking regulatory agencies limit the amount of dividends which may be paid. Due to limitations resulting primarily from lower earnings in 2008, Synovus expects that dividends from subsidiaries will be significantly lower than received in previous years.
Issuer Purchases of Equity Securities
Synovus’ participation in the Capital Purchase Program restricts its ability to repurchase itsVisa Class B common stock. Prior to December 19, 2011, unless Synovus has redeemedAdditionally, during 2009, the Series A preferred stock orParent Company received proceeds of $65.8 million from the Treasury has transferred the Series A preferred stock to a third party, the consentsale of the Treasury will be required for Synovus to redeem, repurchase or acquire its common stock or othercertain private equity or capital securities, other than in connection with benefit plans consistent with past practice and certain other limited circumstances.
The following table sets forth information regarding Synovus’ purchases of its common stock on a monthly basis during the three months ended December 31, 2008:
Table 33  Issuer Purchases of its Common Stock
                 
           Maximum
 
           Number of
 
        Total Number of
  Shares That
 
  Total
     Shares Purchased
  May Yet Be
 
  Number
     as Part of Publicly
  Purchased
 
  of Shares
  Average Price
  Announced Plans
  Under the Plans
 
Month
 Purchased(1)  Paid per Share  or Programs(2)  or Programs 
 
October 2008  192,513  $11.35   —   — 
November 2008  —   —   —   — 
December 2008  —   —   —   — 
                 
Total  192,513  $11.35   —   — 
                 
(1)Consists of delivery of previously owned shares to Synovus in payment of the exercise price of stock options.
(2)Synovus does not currently have a publicly announced share repurchase plan in place.
investments.
 
Recently Issued Accounting Standards
 
In December 2007,June 2009, the FASB issued SFAS No. 141R, “Business Combinations.”166, Accounting for Transfers of Financial Assets — an amendment of FASB Statement 140. SFAS 141R166 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 definitionsobjective of bothparagraph 9 of SFAS 140 is to determine whether a business combinationtransferor 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 business. All business combinations will be accounted for under the acquisition method (previously referred to as the purchase method). This standard defines the acquisition date as the only relevant date for recognition and measurement of the fair value of consideration paid. SFAS 141R requires the acquirer to expense all acquisition related costs. SFAS 141R will also require acquired loans to be recorded net of the allowance for loan losses on the date of acquisition. SFAS 141R 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.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 business combinations during fiscal years beginning after December 15, 2008.interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Early application is prohibited. Synovus has not determined the impact that SFAS 141R will have on its financial position and results of operations and believes that such determination will not be meaningful until Synovus enters into a business combination.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in consolidated financial statements — An Amendment of ARB No. 51.” SFAS 160 requires noncontrolling 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 noncontrolling interests and a separate schedule that shows the effects of any transactions with the noncontrolling interests on the equity attributable to the controlling interest. The provisions of this statement are effective for fiscal years beginning after December 15, 2008. This statement should be applied prospectively except for the presentation and disclosure requirements which shall be applied retrospectively for all periods presented. Synovus does not expectis currently evaluating the impact of SFAS 160 on its financial position, results166, but does not presently expect that the provisions of operations or cash flows to be material.
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — An Amendment of FASB Statement No. 133.” SFAS 161 changes 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. The provisions for this statement are effective for fiscal years beginning after November 15, 2008. The impact to Synovus will be additional disclosure in SEC filings.166
In June 2008, the FASB’s Emerging Issues Task Force (EITF) reached a consensus on EITF IssueNo. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities”(EITF 03-6-1).EITF 03-6-1 requires that unvested share-based payment awards that have nonforfeitable rights to dividends or dividend equivalents are participating securities and therefore should be included in computing earnings per share using the two-class method.EITF 03-6-1 is effective for financial statements issued in fiscal years beginning after December 15, 2008, and


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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 those years. When adopted, its requirements are applied by recasting previously reported EPS data (includingthat first annual reporting period, and for interim financial statements, summaries of earnings, and selected financial data.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 ASUEITF 03-6-12009-15, 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 to be material.flows.
 
In November 2008,December 2009, the FASB’s Emerging Issues Task Force (EITF) reached a consensus on EITF IssueFASB issued ASUNo. 08-6,2009-16, “Equity Method Investment Accounting Considerations”(EITF 08-6).EITF 08-6 addresses questions aboutConsolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. This ASU incorporates SFAS 167 into the potential effect of SFAS 141R and SFAS 160 on equity-method accounting under Accounting Principles Board Opinion 18, “The Equity Method of Accounting for Investments in Common Stock” (APB 18). The EITF will continue existing practices under APB 18 including the use of a cost-accumulation approach to initial measurement of the investment. The EITF will not require the investor to perform a separate impairment test on the underlying assets of an equity method investment, but under APB 18, an overall other-than-temporary impairment test of its investment is still required. Shares subsequently issued by the equity-method investee that reduce the investor’s ownership percentage should be accounted for as if the investor had sold a proportionate share of its investment, with gains or losses recorded through earnings.EITF 08-6 is effective prospectively for fiscal years beginning after December 15, 2008, which is the same effective date of SFAS 141R and SFAS 160.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 ofEITF 08-6 on its financial position, results of operations or cash flows to be material.flows.


F-100F-113

Non-GAAP Financial Measures­ ­ (SYNOVUS LOGO)

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.


F-114

Non-GAAP Financial Measures­ ­ (SYNOVUS LOGO)

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.


F-115

Non-GAAP Financial Measures­ ­ (SYNOVUS LOGO)

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.


F-116

Summary of Quarterly Financial Data (Unaudited) ­ ­ (SYNOVUS LOGO)

 
Presented below is a summary of the unaudited consolidated quarterly financial data for the years ended December 31, 20082009 and 2007.2008.
 
                 
  Fourth
  Third
  Second
  First
 
(In thousands, except per share data) Quarter  Quarter  Quarter  Quarter 
 
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(1)  151,351   93,616   91,049 
                 
(Loss) income before income taxes
  (741,845)(1)(2)  (64,332)  21,401   124,642 
                 
Net (loss) income
  (635,410)  (40,121)  12,099   80,994 
                 
Net (loss) income available to common shareholders
 $(637,467)  (40,121)  12,099   80,994 
                 
Basic earnings per share:
                
(Loss) income from continuing operations
 $(1.93)  (0.12)  0.04   0.25 
                 
Net (loss) income
  (1.93)  (0.12)  0.04   0.25 
                 
Diluted earnings per share:
                
(Loss) income from continuing operations
 $(1.93)  (0.12)  0.04   0.24 
                 
Net (loss) income
  (1.93)  (0.12)  0.04   0.24 
                 
2007                
Interest income $553,787   572,317   564,492   547,899 
                 
Net interest income  286,685   290,839   288,475   282,949 
                 
Provision for losses on loans  70,642   58,770   20,281   20,515 
                 
Income from continuing operations before income taxes  79,832   125,838   166,864   155,140 
                 
Income from continuing operations  53,142   83,577   105,809   100,407 
                 
Income from discontinued operations, net of income taxes and minority interest  28,717   51,366   56,941   46,346 
                 
Net income $81,859   134,943   162,750   146,753 
                 
Basic Earnings per share:                
Income from continuing operations $0.16   0.26   0.32   0.31 
                 
Net income  0.25   0.41   0.50   0.45 
                 
Diluted earnings per share:                
Income from continuing operations $0.16   0.25   0.32   0.30 
                 
Net income  0.25   0.41   0.49   0.45 
                 
                 
  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 loan lossesfuture asset dispositions of $363.9$200.0 million during the fourthsecond quarter of 2008.2009. For further discussion of the provision for loan losses and the associated negative migration in credit quality,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,” “Allocation of the Allowance for Loan Losses,” and “Nonperforming Assets and Past Due Loans.”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 98 to the consolidated financial statements and the section titled “Goodwill Impairment” in Management’s Discussion and Analysis.


F-101F-117

THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” ITEMS 1.1 THROUGH 1.18 AND “FOR” ITEMS 2 AND 3.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE PROPOSALS LISTED BELOW.
1. To elect the following 18 nominees as directors:
                                             
    For Against Abstain       For Against Abstain       For Against Abstain       For Against Abstain
                                             
1.1 Daniel P. Amos o o o  1.6  Elizabeth W. Camp o o o  1.11  Mason H. Lampton o o o  1.16  Philip W. Tomlinson o o o
                                             
1.2 Richard E. Anthony o o o  1.7  Gardiner W. Garrard, Jr. o o o  1.12  Elizabeth C. Ogie o o o  1.17  William B. Turner, Jr. o o o
                                             
1.3 James H. Blanchard o o o  1.8  T. Michael Goodrich o o o  1.13  H. Lynn Page o o o  1.18  James D. Yancey o o o
                                             
1.4 Richard Y. Bradley o o o  1.9  Frederick L. Green, III o o o  1.14  Neal Purcell o o o  2.  To ratify the appointment of KPMG LLP as Synovus independent auditor for the year 2009. o o o
1.5 Frank W. Brumley o o o  1.10  V. Nathaniel Hansford o o o  1.15  Melvin T. Stith o o o  3.  To approve the compensation of Synovus’ named executive officers as determined by the Compensation Committee. o o o
 
   
  

VOTE BY INTERNET -www.proxyvote.com


SYNOVUS FINANCIAL CORP.
POST OFFICE BOX 120
COLUMBUS, GA 31902-0120
 
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   Date 
Shareholder sign hereDateSYNOVUS FINANCIAL CORP.  
               
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” ITEMS 1A THROUGH 1R AND “FOR” ITEMS 2, 3 AND 4.

The Board of Directors recommends you vote FOR the following proposals:

1.  To elect the following 18 nominees as directors:

ForAgainstAbstain
  1A.  Daniel P. Amos  o   oo   
             
        1B.Richard E. Anthonyooo
Co-owner sign here
   Date   Co-owner sign here   Date
1C.James H. Blanchardooo
1D.Richard Y. Bradleyooo
1E.Frank W. Brumleyooo
1F.Elizabeth W. Campooo
1G.Gardiner W. Garrard, Jr.ooo
1H.T. Michael Goodrichooo
1I.V. Nathaniel Hansfordooo
1J.Mason H. Lamptonooo
1K.Elizabeth C. Ogieooo
1L.H. Lynn Pageooo
1M.J. Neal Purcellooo
1N.Kessel D. Stelling, Jr.ooo
1O.Melvin T. Stithooo
1P.Philip W. Tomlinsonooo
ForAgainstAbstain
1Q. William B. Turner, Jr.ooo
1R. James D. Yanceyooo
2.To amend Article 4 of the Articles of Incorporation to increase the number of authorized shares of common stock.ooo
3.To approve the compensation of Synovus’ named executive officers as determined by the Compensation Committee.ooo
4.To ratify the appointment of KPMG LLP as Synovus’ independent auditor for the year 2010.ooo
CERTIFICATE OF OWNER
INSTRUCTIONS: Please provide the required information. THIS CERTIFICATE MUST BE SIGNED TO BE VALID.
All owners should sign. If you do not complete and sign this Certificate of Owner, your shares covered by this Proxy
will only be voted on the basis of one vote per share.
5A.
Are you the owner, in all capacities, of less than 1,139,063 shares of Synovus Common Stock?
Yes
o		No
o		  
             
5B.If your answer to Question 5A was “yes”, please complete the following: I have read the Description of Voting Rights in the Proxy Statement and certify that I meet one of the requirements set forth therein for my shares covered by this Proxy to be entitled to ten votes per share.  oo  
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BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.
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the day prior to annual meeting day.

SYNOVUS FINANCIAL CORP.
Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Shareholders
The Proxy Statement and the 2008 Annual Report to Shareholders are available at:
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
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M19111-P89545, Z51832




SYNOVUS FINANCIAL CORP.
POST OFFICE BOX 120, COLUMBUS, GEORGIA 31902-0120
20092010 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 23, 200922, 2010
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
By signing on the reverse side, I hereby appoint Thomas J. Prescott and Liliana C. McDaniel as Proxies, each of them singly and each with power of substitution, and hereby authorize them to represent and to vote as designated belowon the reverse side all the shares of common stock of Synovus Financial Corp. held on record by me or with respect to which I am entitled to vote on February 13, 200912, 2010 at the 20092010 Annual Meeting of Shareholders to be held on April 23, 200922, 2010 or any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED. IF THIS PROXY IS SIGNED AND RETURNED AND DOES NOT SPECIFY A VOTE ON ANY PROPOSAL, THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
The Board of Directors is not aware of any matters likely to be presented for action at the 20092010 Annual Meeting of Shareholders other than the matters listed herein. However, if any other matters are properly brought before the Annual Meeting, the persons named in this
Proxy or their substitutes will vote upon such other matters in accordance with their best judgment. This Proxy is revocable at any time prior to its use.
By signing on the reverse side, I acknowledge receipt of NOTICE of the ANNUAL MEETING and the PROXY STATEMENT and hereby revoke all Proxies previously given by me for the ANNUAL MEETING.
IN ADDITION TO VOTING AND SIGNING THE PROXY, YOU MUST ALSO COMPLETE AND SIGN THE CERTIFICATION BELOWON THE REVERSE SIDE OF THIS CARD TO BE ENTITLED TO TEN VOTES PER SHARE.
CERTIFICATE OF BENEFICIAL OWNER
   To the best of my knowledge and belief, the information provided herein is true and correct. I understand that the Board of Directors of Synovus Financial Corp. may require me to provide additional information or evidence to document my beneficial ownership of these shares and I agree to provide such evidence if so requested. 
INSTRUCTIONS: Please provide the required information. THIS CERTIFICATE MUST BE SIGNED TO BE VALID.
If you do not complete and sign this Certificate of Beneficial Owner, your shares covered by the
Proxy on the reverse side will be voted on the basis of one vote per share.
 
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No
A.Are you the beneficial owner, in all capacities, of more than 1,139,063 shares of Synovus Common Stock?PLEASE COMPLETE AND SIGN THE CERTIFICATION
If you answered “No” to Question A, do not answer B or C. Your shares represented by the Proxy on the reverse side are entitled to ten votes per share.		oo
B.
If your answer to Question A was “Yes”, have you acquired more than 1,139,063 shares of Synovus Common Stock since February 13, 2005 (including shares received as a stock dividend)?
If you answered “No” to Question B, do not answer Question C. Your shares represented by the Proxy on the reverse side are entitled to ten votes per share.ON THE REVERSE SIDE OF THIS CARD
 oo
C.If you answered “Yes” to Question B, please describe below the date and nature of your acquisition of all shares of Synovus Common Stock you have acquired since February 13, 2005 (including shares acquired as a result of a stock dividend). Your response to Question C will determine which of the shares represented by the Proxy will be entitled to ten votes per share.





To the best of my knowledge and belief, the information provided herein is true and correct. I understand that the Board of Directors of Synovus Financial Corp. may require me to provide additional information or evidence to document my beneficial ownership of these shares and I agree to provide such evidence if so requested


Address Change/Comments
(Mark the corresponding box on the reverse side)



(Continued and to be marked, dated, and signed on the other side)





5FOLD AND DETACH HERE5

IF YOU DO NOT VOTE BY PHONE OR OVER THE INTERNET, PLEASE VOTE, DATE AND SIGN ON THE REVERSE SIDE, CERTIFY YOUR SHARES ABOVE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
Please sign exactly as your name appears on this Proxy. When shares are held by joint tenants, both must sign. When signing in a fiduciary or representative capacity, give your full title as such. If a corporation, please sign in full corporate name by an authorized officer. If a partnership, please sign in full partnership name by an authorized person.
You can now access yourSynovus Financial Corp.account online.
Access your Synovus Financial Corp. shareholder account online via Investor ServiceDirect® (ISD).
The transfer agent for Synovus Financial Corp. now makes it easy and convenient to get current information on your shareholder account.
•
View account status•View payment history for dividends
•
View certificate history•Make address changes
•
View book-entry information•Obtain a duplicate 1099 tax form
•Establish/change your PIN
Visit us on the web at http://www.bnymellon.com/shareowner/isd
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
www.bnymellon.com/shareowner/isd

Investor ServiceDirect®
Available 24 hours per day, 7 days per week
TOLL FREE NUMBER: 1-800-370-1163


ChooseMLinkSM for fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on toInvestor ServiceDirect® at www.bnymellon.com/shareowner/isd where step-by-step instructions will prompt you through enrollment.